Be Prepared for Expensive Disputes Unless You Develop a Thoughtful Plan in Advance

Last week I spoke as part of a panel at the annual BuildingsNY trade show in New York City.  Together with three other lawyers, we addressed one of the most important (and potentially valuable) issues facing building owners today:  The benefits and pitfalls of LEED certification and energy efficiency retrofits to reduce energy costs and lower environmental impacts by running greener, more efficient buildings.

My good friend Stan Alpert led off the discussion with a few examples of litigation over LEED certification.  In one lawsuit, an energy efficiency consultant alleged that the U.S. Green Building Council (USGBC), which manages the LEED certification process, is fraudulently misleading consumers and fraudulently misrepresenting energy performance of buildings certified under its LEED rating systems.  The suit also alleged that LEED is actually harming the environment by leading consumers away from using proven energy-saving strategies.

That lawsuit was dismissed, but not on the merits.  The court found that the plaintiff lacked "standing" to bring the suit because he did not compete directly with USGBC and could not establish that he had suffered competitive harm.  So, while the decision was a victory of sorts for the USGBC, it did not settle the questions raised about the legitimacy and effects of LEED certification.

Stan pointed out that LEED certification has traditionally focused on the building as designed, and has not required any ongoing monitoring of building energy performance to establish whether or not the design is actually generating energy and cost savings.

My part of the panel discussion picked up on that point and focused on the nitty-gritty details of actually measuring and quantifying changes in energy consumption and costs as a result of either designing a more efficient building or retrofitting an existing building with new technologies.  The best known methods for accomplishing this task are found in the International Performance Measurement and Verification Protocol (IPMVP).

The single most important aspect of a Measurement & Verification (M&V) plan is establishing an accurate and reliable baseline.  This requires detailed data about not only energy consumption, but also the use, occupancy and operation of the facility, as well as other factors that affect energy consumption.  For example, we all understand intuitively that changing weather conditions will impact energy usage in a building.  Less obvious are some of the operational aspects of buildings.  Changes in electrical loads, repairs to or replacement of equipment, additional usable square footage, higher or lower occupancy levels or hours of operation can all have significant impacts on energy consumption.

If all the variables affecting building energy performance are accounted for in the baseline energy consumption measurements, then M&V becomes an easy process.  Simply measure post-retrofit energy consumption adjusting for all the same variables and you can calculate the difference in energy consumption and costs.  If you do not account for all the variables in the baseline, however, any later disputes can become very expensive.  Without an accurate baseline, you will either not be able to prove whether the savings exist, or you will have to engage in very expensive computer modeling of the building to establish the baseline.  That modeling could cost 10% of the total project cost or more.

Scott Feldman of software (and sustainability) giant SAP followed with an awe-inspiring presentation on a LEED Platinum building designed and built by SAP in Pennsylvania.  Rather than give you mere snippets of this amazing building, I encourage you to view the PowerPoint Slides, which include slides presented by all four speakers.

Gail Wisner concluded our panel discussion with an overview of low-cost ways to reduce energy costs in multi-family housing.  Gail also provided an overview of the many financial incentives available to building owners for energy efficiency projects.  I highly recommend her slides as well.

John Howley
New York, New York
 
 
While tensions increase over Iran's nuclear ambitions and fears that it will create nuclear weapons, neighboring countries in the Middle East are making big plans for a nuclear future with little notice.  Recently, Enercon Services, Inc. -- a highly respected nuclear engineering and management services firm -- opened an office in Abu Dhabi, United Arab Emirates, in anticipation of growing demand for nuclear engineering expertise in the region. 

Saudi Arabia is planning an entire new city devoted to nuclear power and renewable energy with the goal of reducing by half the crude oil and natural gas it burns now to generate electricity.  In just the past few months, Saudi Arabia signed agreements with both China and France to develop its peaceful nuclear power capabilities.  A number of other countries in the region are looking to develop new nuclear power programs as well. 

Ironic, isn't it, that countries with much of the world's oil reserves are actively looking at alternatives such as nuclear and renewables.  Why?  Simple.  They know better than anyone else that nuclear and renewables are essential to any country that wants to improve their energy security, create jobs in new sustainable energy industries, and reduce carbon emissions that contribute to global warming.

John J.P. Howley
Woodbridge, New Jersey


 
 
San Diego Gas & Electric has signed long-term contracts to purchase 300 megawatts (MW) of renewable energy from wind and solar sources.  The regulated utility company provides electricity and natural gas service to 3.6 million consumers in San Diego and southern Orange counties.

A 189 MW wind farm under construction near Rosamond, California will provide 100 MWs of SDG&E's renewable energy under a 20 year contract with Manzana Wind LLC, a subsidiary of Iberdrola Renewables, Inc.  When completed later this year, the wind farm will include 126 wind turbines on 4,600 acres of land.  It will reduce greenhouse gas emissions by the equivalent of removing 21,500 cars from the road.

The other 200 MWs of new renewable energy will be supplied by the Mount Signal Solar project in Imperial Valley, California under a 25 year power purchase agreement with a subsidiary of 8minutenergy Renewables.  The electric output of this solar project will be transmitted over SDG&E's 117-mile Sunrise Powerlink transmission line that is currently under construction and expected to be completed later this year.

John J.P. Howley
Woodbridge, New Jersey


 
 
The world's largest molten salt solar power plant reached a major milestone this week when the tower was completed by SolarReserve, the U.S. developer of the large-scale solar power project.  The 540-foot solar power tower is a critical part of the company's 110 megawatt (MW) Crescent Dunes Solar Energy Plant near Tonopah, Nevada.

When completed, the Crescent Dunes Plant will be the nation’s first commercial-scale solar power facility with fully integrated energy storage and the largest power plant of its kind in the world.  The molten salt technology used in the plant, which was developed in the U.S., has the ability to store energy for 10-15 hours.  As a result, this new power plant will be able to deliver electricity on demand, just as coal, natural gas or nuclear fueled plants do but without emitting any harmful pollution or hazardous materials.

The Crescent Dunes project is jointly owned by SolarReserve, ACS Cobra, a worldwide leader in the engineering and construction of power plants and solar thermal facilities, and Santander, a global financial services and banking leader. ACS Cobra’s Nevada-based affiliate, Cobra Thermosolar Plants Inc., is the general contractor for the project and is utilizing Nevada and regional subcontractors to perform the work.

Construction of the facility began in September of 2011 and currently has over 100 workers on site.  Construction is expected to peak at more than 600 jobs on site during the 30-month construction period and is estimated to create more than 4,300 direct, indirect and induced jobs at companies throughout the U.S. that provide engineering, equipment supply and manufacturing, transportation and other value-added services. The plant is expected to be operational by the end of 2013.

John J.P. Howley
Woodbridge, New Jersey


 
 
The inaugural Vail Global Energy Forum (VGEF) will be held March 3-4, 2012 in Beaver Creek, Colo. The Vail Valley Foundation, in conjunction with Stanford University's Precourt Institute for Energy (PIE) and Precourt Energy Efficiency Center (PEEC), are hosting the event to address the world's energy challenges and solutions.

The VGE is dedicated to the search for sustainable solutions to one of the most pressing issues of our era – how to produce enough clean, cost-efficient energy from reliable sources to power our global economy while we “bridge” the transition to the breakthrough renewable energy solutions of the future.  The forum will examine the combined challenges of energy supply, energy security and the impacts of energy use that will shape energy transitions now underway and in the decades to come.

Colorado Governor John Hickenlooper will deliver the keynote remarks.  Other participants will include George P. Shultz, former U.S. Secretary of State, Secretary of the Treasury and Secretary of Labor and now Distinguished Fellow of Stanford's Hoover Institution; Senator Mark Udall of Colorado, Member of the Senate Committee on Energy and Natural Resources. 

Also attending are Dr. Dan Arvizu, Director of National Renewable Energy Laboratory (NREL) for the U.S. Department of Energy —the primary laboratory for the study of energy efficiencies and renewable energy technologies in Golden, CO.

Others include Jeffrey Ball, former Environment Editor of The Wall Street Journal; Tom Petrie, Vice Chairman, Bank of America Merrill Lynch; Dr. Ernest Moniz, Director of the Energy Initiative at MIT; Dr. Burton Richter, Nobel Laureate in Physics, Senior Fellow at Stanford; Dr. Nathan Lewis, Director, Lewis Research Group at Caltech; Gregory Ebel, President and CEO of Spectra Energy; Tom Siebel, Founder of Siebel Systems; Bert Valdman, Senior Vice President, Strategic Planning, Edison International; Dr. Franklin M. Orr, Director, Precourt Institute for Energy at Stanford; Dr. James Sweeney, Director, Precourt Energy Efficiency Center at Stanford; Dr. Sally Benson, Director, Global Climate and Energy Project, at Stanford. 

The event is open to the public. Tickets are $100 for GA and $175 for a "Signature Package." VGEF tickets are available by phone at (888) 920-ARTS(2787) or online at www.vilarpac.org. For information, call VPAC (970) 845-TIXS (8497) or visit www.vailglobalenergyforum.com.

John J.P. Howley
Woodbridge, New Jersey



 
 
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Now here's an interesting innovation.  A can that automatically cools your beverage, without electricity, just by pushing a button on the can.  That's what West Coast Chill claims happens when you push a button on a can of its energy drink.

An activation button on the can allows the beverage to drop 30 degrees within minutes.  The Chill Can does not require any energy and eliminates the need for any refrigeration.

The chilling process uses CO2 reclaimed from the atmosphere, and activated carbon ascertained from a renewable vegetable source.  The patented Microcool® technology won the EPA's Stratospheric Award.  West Coast Chill also plans to distribute recycling bins to recapture the cans for reuse in an effort to reduce their carbon foot print.

West Coast Chill Pure Energy Drink is scheduled to launch the end of the first quarter of 2012.  It will be available initially in certain selected convenience stores in Southern California and Las Vegas.

John J.P. Howley
Woodbridge, New Jersey




 
 
On the heels of President Obama's State of the Union Address, T. Boone Pickens praised the President for adopting much of what the legendary energy executive has been proposing in The Pickens Plan to promote U.S. energy independence.

The energy initiatives described in the President's annual address to Congress include incentives to move America's transportation sector to natural gas and away from imported petroleum products such as gasoline and diesel.  In his plan, Pickens has pushed for greater use of natural gas in transportation on the ground that continued dependence on imported oil is "a grave threat to America's national and economic security."

As Pickens points out, the President's "initiative" in this area is not exactly new.  Legislation to provide incentives to move the nation's transportation sector to natural gas has widespread bipartisan support in Congress, with more than 180 co-sponsors in the U.S. House of Representatives.  A similar bill in the Senate also has strong bipartisan support.

Regina Hopper, President and Chief Executive Officer of America's Natural Gas Alliance (ANGA), also praised the President's emphasis on natural gas as a solution to both environmental and national security concerns.  "We agree with the resident that American natural gas can play a pivotal role in our national security and in our economy," she said.  "For this reason it is a fuel that has great bipartisan appeal. Using American natural gas to meet more of our transportation needs makes us less reliant on countries that do not have our best interests in mind."

President Obama also called for a dramatic increase in the use of wind, solar and other renewables to generate electricity.  Wind and solar are also key pillars of The Pickens Plan that the energy executive announced in 2008. 

"I've accomplished my goal of achieving legislation and proposed policies to help solve the OPEC oil crisis," Pickens said. "The ball's now in Washington's court. What we need is leadership. Despite the political partisanship that divides Washington, I am hopeful and confident Congress will put America's best energy future first."

John J.P. Howley
Woodbridge, New Jersey


 
 
Remember when politicians told us not to worry about a housing bubble, and a few smart investors made huge profits by betting against them?  Well, it is deja vu all over again.  While the most vocal politicians argue today that renewable energy will never be viable, the smart money is betting that they are wrong again.

Warren Buffett is a major investor in the largest wind power portfolio in the United States, the largest electric vehicle (EV) manufacturer in China, and one of the the largest solar power plants in the world.  Munich Re, the largest reinsurance company in the world, has invested in a solar power company with 168 megawatts up and running and another 500 megawatts in the pipeline.  Other smart investors making big bets on sustainable energy include Kohlberg Kravis & Roberts (KKR) and Goldman Sachs.

The arguments supporting these massive investments in sustainable energy today are just as simple and logical as the arguments supporting bets against the housing market were in the recent past.  If you own a traditional power plant, your fuel costs for coal, natural gas, or oil will inevitably rise in price over the 50 to 100 year life expectancy of the power plant.  If, however, you invest in wind, solar and other forms of sustainable energy, your fuel costs will remain at zero for the next 50 to 100 years.  This creates a built-in cost advantage for sustainable energy that becomes ever more valuable every time fossil fuel prices increase.

So, who will benefit from the tremendous cost advantages of sustainable energy over time?  Again, we are facing a case of deja vu all over again.  The way we are headed right now, almost all the benefits of sustainable energy will go to a very small group of smart investors.  Here's why.

Let's assume that we meet our national goal of having 80% of our electricity generated by fossil fuels and 20% generated by renewable sources in the year 2020.  With that type of lopsided ratio, the market price for electricity will be heavily influenced by the cost of fossil fuels.  The relatively small contribution of renewable energy sources will not lower prices much for consumers.  As a result, the investors who own renewable energy power plants will reap outsized profits by selling electricity at prices that are driven by fossil fuel costs and producing that electricity with zero fuel costs.  The consumer will get very little price benefit from 20% renewable energy.

Now let's assume that 100% of our electricity will come from renewable sources in the year 2020.  Under this scenario, electricity prices will be set in a competitive market where all of the power producers having zero fuel costs.  Since all power producers will be competing against other power plants that also have zero fuel costs, the price consumers pay for electricity will drop (or at least not rise as quickly).

Can we really build enough renewable energy to make a difference over the next eight years?  Yes.  The United States has pulled off similar feats in the past, which is why we dominated the global economy in the 20th century.  In the seven years between 1938 and 1945, we built 663,000 military aircraft, 155 aircraft carriers, and 10 million tons of concrete runways in the course of winning World War II.  In the 1950's, we built more miles of highways than the rest of the world combined.  In the 1960's, it took us only eight years to develop the necessary technologies to put a man on the moon.  If we set our minds to it, we can produce more renewable energy, with zero ongoing fuel costs, than the rest of the world combined.  And if we do that, we will create a more competitive economy that is capable of creating more jobs and lower electricity costs for everyone, instead of a small renewable energy industry that creates higher profits for just a few.

Let me admit that I have oversimplified how electricity prices are set in competitive markets.  Yes, I know that electricity markets are incredibly complex, that we must take into account differences in costs and prices for base load vs peak power generation, that prices for renewable electricity must allow investors to recover their capital costs plus attractive profits, and that producing more renewable energy will require breakthroughs in storage technologies and/or significant investments in smart grids.

All I am saying is that we must not lose sight of the forest for the trees.  In the years leading up to the Great Recession, we allowed the complexities of derivatives markets to distract us from the simple fact that too many mortgages had been financed for people who could not afford them.  We must not let the complexities of electricity markets distract us from the simple fact that more renewable electricity will provide benefits for everyone, while small amounts of renewable electricity will only provide benefits for the few. 

Once we accept the simple fact that we must invest in more renewable energy, we can move on to the more complex question of how to get that done.  That's what FDR did when he led us to victory in WWII.  That's what Dwight Eisenhower did when he built the Interstate Highway System.  And that's what JFK did when he set us on course to put a man on the moon.

John J.P. Howley
Woodbridge, New Jersey


 
 
_A new report confirms what I have been saying for at least the past ten years.  That is, Energy Efficiency will improve our energy independence and reduce our Greenhouse Gas (GHG) emissions faster, cheaper, and by a greater amount than even the most optimistic projections for solar, wind, and all other renewable energy sources combined.

Titled "The Long-Term Energy Efficiency Potential:  What the Evidence Suggests," the new report is from the American Council on an Energy Efficient Economy (ACEEE).  The report outlines three scenarios under which the U.S. could either continue on its current path or cut energy consumption by the year 2050 almost 60 percent, add nearly two million net jobs in 2050, and save energy consumers as much as $400 billion per year (the equivalent of $2600 per household annually).

According to the ACEEE, America is thinking too small when it comes to energy efficiency, while also making the mistake of "crowding out" economically beneficial investments in energy efficiency by focusing on riskier and more expensive bids to develop new energy sources.

So why aren't we investing in Energy Efficiency?  Because it is difficult to make money in Energy Efficiency when energy prices are so low.  When the price of energy is low, then every BTU or KWH you save by becoming more energy efficient is worth very little.  As energy prices rise, every BTU or KWH saved becomes that much more valuable.

Just today, the New York Times reports that oil and gas companies are "flaring" or burning off natural gas at oil wells because the price of natural gas is so low right now that it is cheaper to waste the gas than to find a place to store it.  This is an incredibly inefficient use of resources.  The inefficiency has absolutely nothing to do with the state of technology.  The inefficiency is driven 100% by the low price of natural gas.  Why bother saving natural gas, when it is actually cheaper to waste it?

The other barrier holding back energy efficiency is the dispersion of benefits.  Unlike a power plant, where the owners of the plant can capture the lion's share of the economic benefits, the benefits of energy efficiency tend to be more dispersed and indirect.  According to the ACEEE, increased investments in energy efficiency would allow lower investments in power plants and other supply infrastructure, thereby substantially lowering overall energy expenditures on an economy-wide basis in the residential, commercial, industrial, transportation, and electric power sectors.  In plain English, the people who pay for increases in energy efficiency don't necessarily get all the benefits directly.

What we need -- and what the ACEEE urges -- are government policies that incentivize a longer-term and society-wide view to the issue of energy sustainability and independence.  And the new ACEEE report provides the data to back up the long-term benefits both to investors and to the health of the U.S. economy.

Examples of potential large-scale energy efficiency savings identified by ACEEE include the following:
  • Electric Power.  Our current system of generating and delivering electricity to U.S. homes and businesses is an anemic 31 percent energy efficient. That is, for every three units of coal or other fuel we use to generate the power, we manage to deliver less than one unit of electricity to our homes and businesses. What the U.S. wastes in the generation of electricity is more than Japan needs to power its entire economy. What is even more astonishing is that our current level of (in)efficiency is essentially unchanged in the half century since 1960, when President Dwight D. Eisenhower spent his last year in the White House.
  • Transportation.   The fuel economy of conventional petroleum-fueled vehicles continues to grow while hybrid, electric, and fuel cell vehicles gain large shares, totaling nearly three-quarters of all new light-duty vehicles in 2050 in the report's middle scenario. Aviation, rail, and shipping energy use declines substantially in this scenario through a combination of technological and operational improvements. In the most aggressive scenario, there is a shift toward more compact development patterns, and greater investment in alternative modes of travel and other measures that reduce both passenger and freight vehicle miles traveled. This scenario also phases out conventional light-duty gasoline vehicles entirely, increases hybrid and fuel cell penetration for heavy-duty vehicles, and reduces aviation energy use by 70 percent.  
  • Buildings.   In residential and commercial buildings the evidence suggests potential reductions of space heating and cooling needs as the result of building shell improvements of up to 60 percent in existing buildings, and 70-90 percent in new buildings. The ACEEE scenarios also incorporate advanced heating and cooling systems (e.g., gas and ground-source air conditioners and heat pumps and condensing furnaces and boilers), decreased energy distribution losses, advanced solid-state lighting, and significantly more efficient appliances.
  • Industry.  In the industrial sector, energy efficiency opportunities reduce 2050 energy use by up to half, coming less from equipment efficiency and more from optimization of complex systems. The ACEEE analysis focuses on process optimization in the middle scenario, but also anticipates even greater optimization of entire supply chains in the most aggressive scenario, allowing for more efficient use of feedstocks and elimination of wasted production.
Are such advances in energy efficiency realistic?

As the ACEEE report points out, the U.S. already has achieved considerable advances in the energy efficiency context and is poised to do more:  "The U.S. economy has tripled in size since 1970 and three-quarters of the energy needed to fuel that growth came from an amazing variety of efficiency advances—not new energy supplies. Indeed, the overwhelming emphasis in current policy debates on finding new energy supplies is such that emphasis on new supplies may be crowding out investments and innovations that can help to achieve greater levels of energy productivity. Going forward, the current economic recovery, and our future economic prosperity, will depend more on new energy efficiency behaviors and investments than we've seen in the last 40 years."

John J.P. Howley
Woodbridge, New Jersey



 
 
__A new report on the thin film solar market suggests that one of the most promising technologies has promised more than it has delivered.  The report from industry analyst firm NanoMarkets examines the developments and prospects for thin film solar panels made with Copper Indium Gallium (Di)selendine (CIGS) semiconductors.  CIGS semiconductors are used as light absorbing material for thin film solar panels.

According to the NanoMarkets report, CIGS has failed to be the printable high-efficiency, low-cost and flexible solar panel technology that was once hoped for by its advocates.  The report also notes that the Solyndra scandal in the U.S. has at its center a CIGS firm.  Yet despite all this, the CIGS industry has begun to ship panels in significant quantities.

The NanoMarkets report -- "CIGS Photovoltaics Markets-2012" -- will be released the week of January 30th.  Additional details about the report, including a table of contents, are available at: http://nanomarkets.net/market_reports/report/cigs_photovoltaics_markets_2012  The report is listed at pre-publication pricing through January 30th.

This is NanoMarkets' latest report analyzing the CIGS industry and its prospects for the future.   NanoMarkets has been covering the CIGS space since CIGS' earliest days, and this report examines the future of this important solar panel technology from both the standpoint of the technical and the commercial.  It does so with a background in which it seems likely that many of the subsidies that have helped solar in the past will fade away and that the world economy will not return to the strong growth of the last decade for quite some time.

Among the important technical aspects of CIGS that this report covers are the likely evolution of CIGS fabrication and encapsulation and how these factors factor into market expansion and cost reduction for CIGS.  Much of the report is also devoted to the role that CIGS will play in the building-integrated PV (BIPV market) and how flexibility and price parity with silicon solar panels could considerably improve the revenues generated by CIGS technology in the near future.

The report includes an eight-year forecast in volume and value terms of CIGS markets broken out by applications and product type.  It also includes a discussion of the leading firms active in this space and their product/market strategies.