Renewable Energy Memo

August 31, 2009

Renewable Energy Around the Web: August 31, 2009

Filed under: American Recovery and Reinvestment Act, Around the Web, CleanTech investing — Tags: , , , , — Jonathan B. Wilson @ 6:00 am

Our weekly compilation of renewable energy news and information from around the Web.

Sixteen Days and Counting

Interested taxpayers have sixteen days to submit their preliminary applications for Section 48C tax credits for qualified advanced energy projects.

The American Recovery and Reinvestment Act allocated approximately $2.3 billion in tax credits for qualified advanced energy projects, defined to include projects that are intended to manufactured advanced energy property.    (Refer to our white paper for details on the application process or register for our free webinar on the topic on September 2, 2009).

Although the preliminary application is only two pages long and permits a summary of the project in no more than 300 words, the formal application (due October 16, 2009) is quite lengthy.  The formal application requires a “project information memorandum” of not more than 30 pages (12 point font, single-spaced) excluding appendices.

One of the more challenging aspects of the formal applicable is the requirement that the applicant calculate the “attributable annual manufacturing capacity” (or “AAMC”) to the proposed QAEP.  The theory behind this calcualtion is that each project be rated to determine how much “bang for the buck” society will receive for the dollars of tax credit extended.  So, to make this rating possible, DOE wants to know the dollar value of energy to be produced by the devices produced by the QAEP so that it can compare that value (the AAMC) against the dollars of tax credits for which the applicant is seeking certification.  In theory, the DOE will be able to rank all of the applicant projects by AAMC per dollar of tax credit, giving priority to those projects producing the highest quantity of value per dollar of tax credit.

That’s a great theory but the quantity and variety of variables that contribute to the calculation of AAMC are extreme and there is relatively little time in which to complete the process.  In addition, because no one has ever done this before, there will likely be great variation in the methods and data employed by applicants to justify their respective projects. 

Under the DOE’s guidance, released on August 15, 2009, the DOE will take the applications submitted by October 16th and produce a ranking of qualifying projects to the Treasury by December 16, 2009.  That’s only 60 days to review, validate and prioritize what could be hundreds or even thousands of projects.  (In its OMB estimate of the hours of paperwork required the DOE estimated that it would receive 1,000 complete applications). 

Project developers need to be actively engaged with their accountants, lawyers and advisors if the hope to participate in this initial round of applications for Section 48C credits.

The California Reverse-Auction Proposal

California is proposing to implement a reverse-auction process to determine the price investor-owned utilities will pay for new solar projects in that state.  The proposal is believed to be the first of its kind and has the merit of implementing a market process to determine price while simultaneously acting to stimulate new investment in a renewable sector.

Xtreme Power Plans Plant in Michigan

Texas-based Xtreme Power is planning to convert a deserted Ford Motor Company plant in Wixom, Michigan into a manufacturing facility for its energy-storage systems. 

Xtreme Power says it will build a manufacturing plant for its power-storage systems in Wixom, Michigan, northwest of Detroit, with the help of a state incentives package estimated to be worth more than $200 million.  Michigan officials say Xtreme might hire as many as 2,500 workers between late 2011 and 2014 and generate another 10,000 supplier-related jobs in the area.

Xtreme Power, which employs about 90 people, makes battery-based energy storage systems for power utilities, wind farms and large manufacturing companies.  Its systems, which rely on lead-acid batteries, recharge overnight, creating energy that can be used during the day, when demand for power is higher.

Clairvoyant Energy of Santa Barbara, California, also will receive incentives to use part of the Wixom plant to produce solar panels. Overall, the companies could invest up to $725 million in the project and create 4,300 direct jobs.  “The Wixom project has the potential to make Michigan a national destination for renewable energy products,” said a spokeswoman for Michigan Governor Jennifer Granholm.

PECO Proposal to Buy Solar RECs Approved

The Pennsylvania Public Service Commission approved a proposal by PECO Energy Co. to begin purchasing renewable energy certificates from developers of solar power facilities. 

The ruling allows the Philadelphia utility to begin buying alternative-energy credits to comply with a law that forces utilities to derive a gradually increasing portion of their power from renewable-energy sources.

PUC chairman James H. Cawley commended Peco “for taking the initiative to kick-start the process.” The state’s Alternative Energy Portfolio Standards Act requires electrical utilities to buy 18 percent of their power from alternative-energy sources by 2020.

The market for solar alternative-energy credits has been “very thin and very illiquid” because the laws requiring utilities to buy solar power are only starting to kick in, according to Mike Freeman, senior originator of Exelon Generation Co. L.L.C., the wholesale power arm of Peco’s parent company, Exelon Corp.

Peco’s planned purchase of 80,000 credits over 10 years – each credit represents one megawatt-hour of power, or about as much as a residential customer would consume in a summer – should provide a strong signal to solar builders about the value of their projects, which will assist long-term financing.

First Michigan Biomass-Powered Gasification Plant

Biomass Magazine reported on what is believed to be the first biomass-powered gasification plant in the State of Michigan. 

The report indicated that Heat Transfer International has nearly completed the installation of a gassification plant in Howard City, Michigan, that will become the state’s first gasification plant and the world’s first hot air turbine powered by biomass, according to Pat Dickinson, a business developer for HTI.

The plant will convert turkey litter at Sietsema Farm Feeds into a syngas that will be used to provide the heat and electricity needed to produce turkey feed.

HTI is a designer and manufacturer of SALT retorts, which Dickinson explained are starved-air/low-temperature biomass gasification systems. “We have a technology that converts biomass, through a thermal process, into synthesis gas,” he said. “The syngas is sent to a chamber where it is combusted—much like natural gas or propane—and is then used to make heat, which can be converted into steam, power or hot water; any commodity that is desired.”

Dickinson said unique aspect of the soon-to-be commissioned system at Sietsema Farm is that the air turbine will produce power from poultry litter without the use of steam or an internal combustion engine. “We don’t have to worry about trying to clean the gas to run it through a reciprocating engine,” he said. “The heat we produce off the gasification process is sent through our patented high-temperature ceramic heat exchanger technology, which sends clean, hot air to the turbine. So many times people are looking for—especially for smaller power systems—a half megawatt or a megawatt of power. If they want to make power, they have to make high-pressure steam and use a steam turbine. We don’t have to go through that process, or have a high-pressure boiler to make power.”

August 29, 2009

California to Reverse-Auction Solar Power

Filed under: Energy Blog — Tags: — Jonathan B. Wilson @ 2:46 pm

In a first-of-its-kind move, the California Public Service Commission is proposing to require its investor-owned utilities to hold reverse auctions to determine the price they will pay for power from newly-developed solar generators between 1 and 20 MW.  (NY Times coverage) 

Rather than have the PSC stipulate rates for solar power, the staff proposal, filed on Thursday, would require a series of auctions among the investor-owned utilities to determine the rate they would pay until such time as 1,000 MW of power had been installed.

According to Adam Browning, the executive director of Vote Solar, a San Francisco advocacy group, the reverse auction proposal fills a big hole in California’s renewable energy program – photovoltaic projects that generate between one and 20 megawatts and can be built quickly and plugged into the existing transmission grid.

“With this program I think you’ll see a lot of photovoltaic systems on otherwise unusable land, like railroad rights-of-way or wastewater plants that have lots of roof space,” said Mr. Browning. “One other advantage of this type of policy is that it guarantees that only the people who make good business decisions are going to get these contracts.”

Developers were generally positive towards the proposal. “Such an approach is very likely to spur a large volume of PV projects in the state,” wrote Arno Harris, the chief executive of Recurrent Energy, a San Francisco-based solar developer, in an e-mail message.

An additional advantage to the proposal is that it would begin to develop data on the rates paid for solar power — data that is not available today because most large solar projects negotiate confidential power purchase agreements. 

“One of the things this is likely to do is create some real valid data about the cost structure of distributed power plants,” said Julie Blunden, vice president for public policy at SunPower.

Others expressed concern that the auction process might favor large developers or large projects to the detriment of smaller projects.

While the proposal remains to be implemented, it is a novel and creative way of solving the problem of introducing government stimulus without undercutting the competitive market.  As the NY Times piece notes, the Spanish solar market crashed last year when solar capacity hit the ceiling allocated by the government for incentives.  Once the incentives were gone, the value of solar fell to the floor.  A similar problem exists in any government-backed incentives program that artificially inflates the value of a particular good.

California’s auction proposal encourages solar development but allows the market to set the price, thereby eliminating the risk of artificially inflating the price.

August 26, 2009

Residential Solar Competes with Big Utilities

Filed under: Energy Blog, Uncategorized — Tags: — Jonathan B. Wilson @ 6:35 am

From 2006 to 2008 residential homeowners added 522 MW in solar power to the grid while utility companies added only 96 MW.

The residential solar market is booming, but that’s causing concern for traditional generation utilities, according to Newsweek.

“The disparity has utilities worried about loosing their grip on the country’s energy industry, and the $130 billion residential electricity market. In some cases, utilities are actually taking direct steps to thwart rooftop solar. Two weeks ago in Colorado, the state’s biggest utility, Xcel, tried passing a surcharge on homes and businesses using rooftop solar power. The rate hike would’ve generated $180 million, $55 million of which was slated to help fund Xcel’s newest coal-fired power plant, the Comanche Unit 3, due to come online this fall. The public went ballistic, and with pressure from Democratic Gov. Bill Ritter, the proposal was eventually shelved. In early July, New Mexico’s biggest utility, PNM, filed an official request to dramatically reduce incentives for businesses and homeowners to install solar panels, and is now fighting with state lawmakers over whether it has the right to exclusively own solar panels systems hooked up to its grid. ”

“During California’s last legislative session, Southern California Edison, which serves 13 million residents, pressured a Palm Springs assemblyman to pull a bill he’d introduced that would allow the city of Palm Desert to pay solar users for the excess power they generate.”

The Newseek articles reports that, “The Energy Policy Act of 2005 called for the addition of 10,000 megawatts of renewable energy on public lands by 2015, much of which was thought to be provided by big solar plants. But four years in, things are barely off the ground. The two biggest solar projects in the U.S., which are both in the Nevada desert and came online in 2007, combine to produce just 78 megawatts, 14 of which are used solely to power Nellis Air Force Base. Interior Secretary Ken Salazar says that by 2010, 13 utility projects will be under construction on public land in the Southwest, but that’s still years away from generating electricity. California has the country’s most aggressive renewable goal, mandating that 20 percent of its energy come from renewable sources by the end of 2010. Lawmakers are now pushing that to 33 percent by 2020. But at its current pace, it won’t come close to being met. None of Southern California’s four biggest utilities, Southern California Edison, San Diego Gas and Electric, Pacific Gas and Electric, and the Los Angeles Department of Water and Power, are on target largely, critics say, because they’re too focused on trying to make money off big centralized plants.”

August 25, 2009

The Gas Co. Deal with Primoris to Increase Renewables

Filed under: Uncategorized — Tags: , , — Jonathan B. Wilson @ 6:51 am

The Gas Co. (of Honolulu, Hawaii) announced yesterday that it has entered into a memorandum of understanding with Primoris Renewables of Lake Forest, California, to increase the renewable components in its gas supply.

The Gas Co. President and CEO Jeffrey Kissel said the companies will adapt the synthetic natural gas plant at Campbell Industrial Park in Kapolei to process agricultural products and landfill gas into biomethane, renewable diesel or similar products.

“Jointly with Primoris, we are adapting our unique synthetic natural gas technology to utilize agricultural feedstock, rather than petroleum, as we meet the needs of Hawaii’s residents and business for low-cost, clean gas energy,” Kissel said in a prepared statement. “With more than 60 years’ experience in the energy sector, Primoris is the ideal partner for us to adapt our hydrogen-based technology to reduce Hawaii’s dependence on foreign-sourced oil.”

August 24, 2009

Renewable Energy Around the Web: August 24, 2009

Filed under: Around the Web, Uncategorized — Tags: , , , , , , , — Jonathan B. Wilson @ 6:00 am

Our weekly compilation of renewable energy news and information from around the Web.

Qualified Advanced Energy Project Tax Credits

We covered the DOE’s guidance on QAEP (or Section 48C) tax credits and the application process now under way.  (Refer to our white paper for details on the application process).  We’re working on a free webinar on the topic on September 2, 2009. 

Solar Loses Some Shine

The Wall Street Journal reported on slumping sales at a number of solar companies due to the global recession.  It reported that the expiration of an incentive program in Spain also accounted for a dramatic drop-off in solar sales in that country.  In 2008, the WSJ reported, “Spain accounted for more than 40% of all new solar panel installation globally, installing 2.7 gigawatts — five times the 2007 figure — out of a global total of 5.6 gigawatts. According to Spain’s photovoltaic industry association, Asif, the country’s market was worth €16.38 billion ($23.24 billion). This year, with cuts to aid and a more complicated application process, there has been no new installation in Spain.”

The slump in global sales, however, has not reduced the marketing emphasis given to solar efforts, however, in the U.S. with Baker Roofing, Inc., one of the largest roofing companies in the U.S., announcing its formation of a “green” subsidiary that will focus on roof-top gardens and roof-top solar.   The company, based in Raleigh, NC, has completed a number of installations in 2009 and has a glitzy, separate website devoted to its green efforts.

Pending Legislation

When Congress returns from its Summer recess on September 8th it has alot of work to do.  There are at least three bills of keen interest to the renewable energy community, including:

* The Biodiesel Tax Incentive Reform and Extension Act;

* The American Renewable Energy Act; and

* The Cleaner, Secure, Affordable Thermal Energy Act.

The Biodiesel Tax Incentive Reform and Extension Act is an attempt to circumvent the “black liquor” controversy by converting the existing blender’s tax credit into a $1/gallon ethanol producer’s credit.  As previously reported, however, the bill would do nothing to extend the existing non-biodiesel alternative fuel producer’s credit that expires at the end of 2009. 

The American Renewable Energy Act would require 25% of all U.S. electric production to come from renewable sources by the year 2025, while the Cleaner, Secure, Affordable Thermal Energy Act would create tax credit incentives for both residential taxpayers and business taxpayers who converted heating oil furnaces into natural gas or biomass-burning furnacts.  You can follow pending legislation in the renewable energy space here. 

Lowering Costs for Cellulosic Ethanol

Corn-based ethanol producers are finding the times tough.  A relatively low-priced oil market has kept gasoline below $3/gallon and margins are thin.  Cellulosic ethanol producers have found it hard to attract the capital needed to build production-scale plants.

A new producer in Connecticut is planning a 15 MgY plant at a production cost of less than $1 per gallon.

Connecticut-based American Energy Enterprises Inc. plans to construct a commercial-scale ethanol production facility in New Milford, Conn., and according to company chairman Christopher Brown, will use wood waste to produce ethanol at a cost of 80 to 85 cents per gallon. The plant is expected to begin production in mid-2010 and will initially produce up to 15 MMgy. Once production commences, units will be added monthly to increase capacity until the plant reaches its full capacity of 80 MMgy to 100 MMgy.

A contributing factor to the company’s low production cost is its plan to acquire feedstock at no cost or, in some cases, at a profit. Brown said that tipping fees for wood waste at landfills and wood chip companies in the region range up to $60 per ton. American Energy will offer lower fees or take the wood waste for free. “We’re in good shape with the municipalities, the local tree groomers and handlers of that material, and some of the waste companies,” he said, adding that contracts are in place to supply the plant with triple its need for feedstock for the first five years. Brown said the option to ship feedstock by rail to the facility from over 100 miles away is available, but so far, the 1 million tons of feedstock required annually can be acquired from within a 15-mile radius of the plant.

Meanwhile, another struggling cellulosic ethanol project in Pike County, Kentucky, believes its one step closer to its $200 million target to break ground on a waste-to-ethanol plant there under the guidance of Agresti Biofuels.  Project sponsors are now said to be looking for private financing to fill out the needed funding.

August 21, 2009

Is Renewable Energy Safer?

Filed under: CleanTech investing, Renewable energy jobs, Uncategorized, wind — Tags: , , , , — Jonathan B. Wilson @ 7:05 am

The U.S. Occupational Safety & Health Administration (“OSHA”) today released a report claiming that renewable energy is safer than ‘conventional’ power generation and that switching to renewable power generation could save up to 1,300 lives each year.

The OSHA report said that renewable energies should improve the health of the 700,000 U.S. workers in the energy sector, citing researchers from the Medical College of Wisconsin.  Their research is published in the August 19 issue of JAMA, the journal of the American Medical Association. Steven Sumner, M.D. and Peter Layde, M.D., professor of population health and co-director of the Injury Research Center at the college, examined occupational health risks to workers in renewable energy industries compared to those in fossil fuel industries.

They pointed out the risk of workplace injury and death among energy workers is a hidden cost (or “externality”) of energy production.  Externalities of energy production include problems ranging from damage to the general environment to adverse health effects caused by pollution, injuries, and fatalties. Sumner and Layde concluded that wind and solar energy appear to lessen injury risks because the energy extraction phase is minimized or eliminated in wind or solar energy production. Biomass, comprised of biofuels, organic waste, and wood derived fuels, currently accounts for more than half of U.S. energy renewable consumption and does not appear to offer a significant safety benefit to U.S. workers relative to fossil fuels, they found.

“The energy sector remains one of the most dangerous industries for U.S. workers. A transition to renewable energy generation utilizing sources such as wind and solar could potentially eliminate 1,300 worker deaths over the coming decade,” Sumner said.

August 20, 2009

White Paper on Qualified Advanced Energy Project Tax Credits

Filed under: American Recovery and Reinvestment Act — Tags: , , , — Jonathan B. Wilson @ 9:53 am

As previously reported, the Department of Energy and the Treasury Department recently issued joint guidance on the application process for Qualified Advanced Energy Project (“QAEP”) tax credits.  We have published a white paper on the application process that is available on the Research page. 

Initial applications are due by September 14, 2009.

Please contact us at Editor(at)RenewableEnergyMemo.com if you have specific questions on the application process.

August 18, 2009

An Exclusive Interview with Eric Taub

Filed under: Emissions Cap and Trade, Thought Leader Interview — Tags: , , , — Jonathan B. Wilson @ 6:24 am

In the first interview of the series, we interview Eric Taub, the founder and Chief Executive Officer of Verus Carbon Neutral, the only aggregator of carbon credits in Atlanta, Georgia.

Before Eric founded Verus Carbon Neutral, he was a partner and portfolio manager at Juno Management of Atlanta. His career has taken him to London, New York, Mexico City and Chicago. Eric’s experience includes several years as Senior Vice President in portfolio management at Wachovia, Managing Director at SunTrust, Director of Emerging Markets at Bank of Montreal, and certification as a Chartered Financial Analyst.

You can find the complete interview here.

August 17, 2009

A Trillion Dollars for Renewable Energy

Filed under: CleanTech investing, Emissions Cap and Trade — Tags: , — Jonathan B. Wilson @ 3:12 pm

Congressman Ed Markey, co-sponsor of the epinomous cap and trade bill, said that passage of the Waxman-Markey bill would bring “a trillion dollars” in private investment into renewable energy.   Congressman Markey was touring the Alameda, California labs of Aurora Energy at the time.

Renewable Energy Around the Web: August 17, 2009

Filed under: Around the Web, Biofuels — Tags: , , , , — Jonathan B. Wilson @ 6:19 am

Our weekly compilation of renewable energy news and information from around the Web.

Guidance on Section 48C Credits

The Departments of Treasury and Energy issued joint guidance on the process for seeking over $2 billion in qualified advanced energy project tax credits.  The tax credits are aimed at manufacturers of renewable and clean energy equipment and projects.  Unlike the other tax credits programs, the qualified advanced energy project tax credits are limited to approximately $2.3 billion, so potential recipients of the credits must apply for them in advance and submit several rounds of qualifying information (lasting into March of next year) before they find out whether or not they may receive the tax credits.

Initial applications are due September 16, 2009.

Legislation in Australia

The Australian legislature took steps to introduce new legislation to encourage renewable energy after a bill that combined renewables with emissions cap and trade failed to pass.  Industry groups opposed the emissions reduction plan but there appears to be popular support for moves to encourage renewable energy.  Although Australia accounts for only 1.5 of global greenhouse gas emissions, its pollution, on a per capita basis, leads the world because the nation generates roughly 80% of its electricity from coal. 

 Garden State?

Renewable energy supporters in New Jersey celebrated a milestone last week as the state unveiled its 4,000th solar installation, making New Jersey the second largest adopter of solar power in the U.S. 

“New Jersey continues to be ahead of the curve on energy preservation, implementation of innovative approaches to energy efficiency and the use of renewable energy sources,” Governor Jon Corzine said.

This solar milestone was marked by a ceremonial celebration by the New Jersey Board of Public Utilities (NJBPU) on Tuesday at Birch Arms, a solar-powered, energy efficient housing program in Paterson.

“I also want to commend the BPU, the many representatives of environmental organizations, the solar industry, and the businesses and residents all across New Jersey who have been tireless advocates on behalf of solar development in our state and who share in this achievement,” added the Governor.

One program that the BPU has implemented in an effort to achieve its “Energy Master Plan” goals, is the Renewable Energy incentive Program (REIP). The company website states that it is “striving to use 30 percent of electricity from renewable sources by 2020.”

Green for Me but not for Thee

We covered the distinction between the tax incentives for biodiesel contained in S.B. 1589 (the Biodiesel Tax Incentive Reform and Extension Act) and those tax incentives that expire at the end of this year for alternative fuels that don’t meet the definition of “biodiesel.”  Producers of non-biodiesel alternative fuels will find themselves without any tax incentives after December 31, 2009 unless the existing blender’s credit is extended or legislators make room for non-biodiesel alternative fuels in a new tax credit program.

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