Renewable Energy

July 5, 2022

Environmental Justice and Renewable Energy

According to a March 2022 survey by the Pew Research Center, a majority of Americans favor the U.S. taking steps to become carbon neutral by 2050, with 69% calling for the U.S. to prioritize the development of alternative energy, such as wind and solar, and 31% calling for the U.S. to phase out the use of fossil fuels completely. But what is environmental justice, and what relationship does it have, if any, to renewable energy?

Defining Environmental Justice

To the U.S. Environmental Protection Agency (EPA), environmental justice is the “fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations and policies.” On Earth Day 2022, President Biden announced that environmental justice is about “addressing the disproportionate health, environmental, and economics impacts that have been borne primarily by communities of color – places too often left behind.” The disproportionate impact of environmental harms and ills felt by minorities and people of color forms the driving force and crux of the environmental justice movement that continues to shape federal, state, and local policy in the U.S. today.

A Transition in Reocognizing Environmental Justice

Regulatory agencies, such as the EPA, have not always recognized the disproportionate impact. Notably, a former assistant administrator for solid waste and emergency response of the EPA stated in 1987 that the “EPA deals with issues of technology, not sociology.” [1] Systemic racism in environmental policy has meant that, historically, the formulation of such policy has been premised on notions that “environmental protection is colorblind,” and that the EPA is a “science agency,” not an agency that deals with social issues. Additionally, the eventual recognition of environmental justice has led to what some scholars have referred to as “procedural justice” that solely consists of “more community involvement” and “box-checking exercises” but with “no changes in outcomes.” [1]

However, a transition is taking place to move beyond these box-checking exercises to collect quantitative and qualitative environmental justice data and display them in a transparent, digestible manner. For example, environmental justice mapping tools CalEnviroScreen and EJSCREEN combine numerous indicator data sets and assist in generating insights about environmental risk and impact that are “critical for decision-making purposes” and shed light on “systemic inequities” and “unfair treatment”—the disproportionate impact on low-income communities and people of color, among others. [1] In turn, there has been a call for climate solutions that address social and economic inequities and distribute the benefits, and one such solution is renewable energy.

Environmental Racism

Deploying renewable energy in these historically burdened and under-served communities comes against a backdrop of being subject to environmental racism through redlining and the intentional siting of harmful incinerators, landfills, chemical plants, refineries, and fossil fuel extraction beside these communities. Combined with a lack of resources to hire lawyers to challenge the granting of permits or violation of standards, these communities were left with little to no choice. This situation reflects a concept now known as environmental blackmail, where poor people are forced to choose between unemployment and a job that may threaten their “own health, their families’ health and the health of their community.” [2] One example of this depleted level of citizen power includes Cancer Alley in Louisiana, where nearly “every household has someone that has died from cancer.”

Equitable Deployment

But is renewable energy the solution? Yes, with strings attached. Renewable energy must be deployed equitably, and this means not harming the same communities and minorities that have been disproportionately subject to environmental harm emanating from siting facilities that are detrimental to human health and communities. Without acquiring consent or participation from communities affected by the adverse effects of renewable energy, these communities will remain in a cycle of abuse that capitalizes on their poor health and cheap labor. [3]

For example, as wind turbines grow in size, alongside their corresponding effects, it must be asked what impact these will have on the communities that are integrated into—forcefully or consensually. In practice, this means not only assessing effects on the aesthetic pleasure of the landscape or potential damage to a local ecosystem, such as loss to avian creatures, but also wind turbine syndrome, which has been known to cause “nausea, vertigo, tinnitus, sleep disturbance, and headaches.” [3] As previously mentioned, engaging local communities in a meaningful manner can generate positive community and environmental change. In turn, environmental hazards can be minimized and distributed fairly in proportion to benefits, and protective environmental regulations can be established and enforced with the same vigor for all communities.

One other solution, created from the bottom-up, is the establishment of community energy choice organizations, otherwise referred to as community choice aggregations or community choice energy. These organizations seek to remove the middle-man—the investor-owned utilities—and run community-scale renewable energy projects that decentralize power and reinvest profits from renewable energy generation into local communities. [3] Examples of re-investment include the development of further renewable energy projects, electrification of local bus networks, energy efficiency programs, scholarships for students, and the implementation of electric vehicle charging stations.

Conclusion: A Just Renewable Energy Transition

Overall, renewable energy—as fantastic as it might appear—is not a solution in and of itself. Environmental justice remains very relevant in deploying renewable energy, and local communities must be meaningfully engaged before decisions are made. Where communities do not or cannot create bottom-up organizations like community energy choice organizations, they ought to be brought into decision-making processes that can benefit businesses, government, and citizens alike. And there is evidently bipartisan support for renewable energy, with a majority of Democrats and Republicans supporting the expansion of solar panel farms (84%) and wind turbine farms (77%), according to a Pew Research Center survey in 2021.

The deployment of renewable energy does not need to be an all-or-nothing approach. Instead, by ensuring sufficient stakeholder and community engagement, the U.S. can enhance its prospects of a just and sustainable transition to a low-carbon economy—to achieving carbon neutrality by 2050 and meeting public demand for renewable energy. This transition to a low-carbon economy will also ideally fulfill the EPA’s goals of environmental justice, which means that everyone enjoys the “same degree of protection from environmental and health hazards” and has “equal access to the decision-making process to have a healthy environment in which to live, learn, and work.” The means to achieve this shared vision for the future is already here and is underway, but it must be done equitably to ensure the benefits and hazards of renewable energy are shared.

[1] Lee, C. 2021. “Confronting Disproportionate Impacts and Systemic Racism in Environmental Policy.” Environmental Law Institute: pages 2-4, 10.

[2] Bell, K. 2014. “The Causes of Environmental Injustice.” In Achieving Environmental Justice: A Cross-National Analysis. University of Bristol: Policy Press, chapter 3, page 34.

[3] Ottinger, G. 2013. “The Winds of Change: Environmental Justice in Energy Transitions.” Science as Culture 22(2): 222-229.

June 11, 2018

California’s Bold Solar Energy Vision

By Joseph Nyangon
How California’s New Rooftop Solar Mandate Will Build Additional Value for Its Customers

*Luminalt solar installers Pam Quan (L) and Walter Morales (R) install solar panels on the roof of a home on May 9, 2018, in San Francisco. (Credit: Justin Sullivan / Getty Images).*

The boldest new plan yet to increase electricity generation from noncarbon-producing sources has been announced by California. Highly regarded as a trendsetter and vanguard of progressive energy policies, California became the first state to require solar power installed on all new homes. The requirement makes rooftop solar a mainstream energy source in the state’s residential market. Adopted by the California Energy Commission (CEC) as an update to the state’s 2019 Title 24, Part 6, Building Energy Efficiency Standards [1], the solar mandate obligates new homes built after Jan. 1, 2020 to include photovoltaic (PV) systems.

These standards represent a groundbreaking development for clean energy. Single-family homes and multifamily units that are under three stories will be required to install solar panels. The biggest impact may prove to be the incentive for energy storage and the expected uptake in energy efficiency upgrades which could significantly cut energy consumption in new homes.

But not everyone is celebrating. Critics warn that the requirement could drive up home prices overall, further exacerbating already high housing costs in the state. For instance, in a letter to CEC, Professor Severin Borenstein of the Haas School of Business at UC Berkeley warned that such a plan would be an “expensive way to expand renewables” to achieve clean energy goals [2]. But in its order, CEC argued that the new rooftop solar mandate would save homebuilders and residents money in the long-term and cut energy-related greenhouse-gas emissions in residential buildings.

Few solar firms, homebuilders, efficiency experts and local governments fully understand the significance of the mandate. Buildings-to-grid integration experts speak of “turning residential solar into an appliance,”—the merging of rooftop solar, home energy management, energy storage, and data analytics into the next generation of high-performance buildings that is expected to usher in a new era of sustainable development.

How could this new solar mandate help improve grid management so that these ‘new power plants’—clusters of buildings integrated into the grid—can respond quickly to load signals like water heating or home entertainment and thereby contribute to better system reliability? Of course, there are a lot for stakeholders to grapple with between now and 2020 as they come up with compliance solutions to address these opportunities. But this gap, especially, poses a significant challenge in how the new California’s Title 24 codes will affect the clean energy industry.

On the delivery side, First Solar Inc.—a U.S. panel manufacturer—and Sunrun—the largest U.S. residential-solar installer—could be major beneficiaries of the new building codes considering their established market positions in the state. The U.S. Energy Information Administration’s Annual Energy Outlook 2018 puts the mid-point estimate of installed solar capacity required to meet the state’s ambitious ‘50% by 2030’ renewable portfolio standard (RPS) target at around 32 GW (Figure 1). California currently has an installed solar capacity of 18.6 GW, indicating that it has only until the beginning of the next decade to find technical, business, and policy solutions to realize a 50% increase in installed PV capacity. Considering that the core elements of the requirements are now technically locked in, greater cooperation with solar industry players is needed for the success of this bold energy vision.

Figure 1: AEO 2018 estimate of renewable energy generating capacity and emissions in California (2016-2050)

Here are suggestions of what needs to be done to succeed. The provision of today’s electricity services is fundamentally dependent on its transmission, distribution, and storage (TD&S) systems; these functions include business activities that support construction, operation, maintenance and in this case, overhaul California’s electricity infrastructure [3]. According to the 2018 U.S. Energy and Employment Report (USEER), national employment in TD&S including retail service was approximately 2.35 million in 2017, with nearly 7% growth expected in 2018, mostly in manufacturing, construction, installation/repair, and operation of TD&S facilities [4]. Using these national figures as rough benchmarks for job generation, the new solar building mandate represents a major growth opportunity for the solar industry. However, there are transmission implementation challenges that could occur in the future. Orders 890 and 1000 by the Federal Energy Regulatory Commission (FERC) require transmission providers to treat demand resources comparably with transmission and generation solutions during transmission planning. Which means that a clarification is required of whether onsite generation under Title 24 would count toward compliance with FERC’s orders.

With proper distribution and transmission planning coupled with the fact that new homes will have better efficiency overall, California could reap significant benefits from the solar mandate and pioneer in mainstreaming non-wire alternative business models associated with solar distributed generation systems [5]. Deferring and reducing costs to capacity upgrades for distribution and transmission under a distributed utility regime, is one example. For this reason, California regulators would need to anticipate and address compliance issues that could result during the implementation period, such as concerns regarding flexibility measures, the estimated number of homes that would comply with the codes, and year-on-year market bottlenecks that may occur without a rapid change in business models. Further greater stakeholder engagement and partnerships with the building industry, universities and research organizations will be needed to track progress on single–family and multi-family solar development.

Another key step is to improve the revenue model for all generation technologies to reconcile with long-term contracts. In recent years, as solar power grew in the Western Electricity Coordinating Council region, and particularly in California, future prices of solar electricity became uncertain. Today’s electricity prices are set based on the variable cost of the marginal technology. Because technologies like rooftop solar, once built have near-zero marginal costs, this could put downward pressure on long-term electricity prices. Good news for customers and the economy! But payment for TD&S may be of risk. States have been solving this problem by implementing long-term fixed pricing systems, either through power purchase agreements (PPA) or capacity mechanisms, which carry the full-price risk of the technology. California (and New York) has proposed new revenue models that balance the pace of improvement in technology cost and revenue returns [6]. Still, further adjustments to the revenue model may be required in the future.

The logic behind California’s solar mandate is to reposition the market so that the bulk of generation will increasingly come from customer-sited equipment. This is significant: rooftop solar is one of the most effective customer-sited solutions for accelerating a decentralized grid and greening our electricity supply. Apart from the anticipated long-term cost-reductions to the grid, we can infer that CEC may have been guided by the growing market potential of rooftop solar when crafting the new building code energy-efficiency standards. As to the question of the economic viability of the standards to the grid, a detailed study is needed to take into account direct and indirect impacts.

Recently, there has been mention of the mounting problem widely known as the “duck curve”—that is, the sun shines only during the day which means that the solar energy cannot meet the system’s demands when the sun goes down or cloud cover disrupts solar energy system output. This phenomenon can force utilities to ramp up non-solar generation, thereby undermining some of the benefits of a low-carbon strategy. This concern raises a question: What happens to the value of solar energy produced as new additional capacity grows? Over-generation? Because retail competition is still limited in volume to support the anticipated market growth under the new standards, the value of the additional solar generation could decline. Furthermore, the grid would need to be prepared to anticipate and handle any over-generation. CEC is aware of the duck curve problem and included a compliance credit for energy storage in the Title 24 codes to address the issue. But this may not be enough. Options for maximizing on-site solar use should be sought as capacity grows. In addition, while greater electrification of buildings is noteworthy for the utility business model, without offering incentives to residential solar producers, for instance, in the form of affordable construction materials that socializes costs overall ratepayers and introduces new products and services that guarantee long-term profitability, the latest round of CEC building codes could raise significant grid management issues and market uncertainties thus exacerbating the duck curve problem. In brief, the role of utilities in interconnecting these ‘power plants’ and managing any over-generation issues will become more critical.

Growth from the new solar mandate and steps taken to incentivize storage and energy efficiency upgrades may not produce profits for utilities in the short term. But adoption of the Title 24 codes offers utilities opportunities for greater electrification and enables them to search for cost-effective pathways to reduce carbon emissions. In a study of grid decarbonization strategies in California, Southern California Edison (SCE) found that a clean power and electrification path can provide an affordable and feasible approach to achieving the state’s climate and air quality goals [7]. While the cost of managing the grid is an important consideration for utilities like SCE, approval of the new solar mandate is an important reminder of the changing utility industry. Power companies are developing new ways to extract value from emerging distributed solar technologies and expand customer choices. The success of the Title 24 codes will depend to a significant degree on supportive regulation [8,9]. With billions of investments required for grid modernization to address the aging infrastructure issues, finding a sustainable operating model that enables utilities to recuperate costs through rates is fundamental. This is a long-term proposition and power companies should treat it as such.

Despite the challenges discussed above, California’s new Title 24 mandate represents the boldest and most inspiring building energy efficiency standards by any state to date [10]. No doubt the questions surrounding future electricity rates, grid management issues, retail competition, investments in TD&S, design of long-term contracting via PPA mechanisms, and the impact on housing prices require significant attention. But this solar mandate can be an unprecedented energy-problem solving strategy that turns every home into a power plant as solar becomes more mainstream.

Additional Resources
[1] Rulemaking on 2019 Building Energy Efficiency Standards: https://energy.ca.gov/title24/2019standards/rulemaking/
[2] Email response by Severin Borenstein regarding new building energy efficiency standards rulemaking to mandate rooftop solar on all new residential buildings: https://faculty.haas.berkeley.edu/borenste/cecweisenmiller180509.pdf
[3] Nyangon, J. (2015). Why the U.S. urgently needs to invest in a modern energy system. FREE. https://freefutures.org/why-the-u-s-urgently-needs-to-invest-in-modernizing-its-energy-infrastructure/
[4] The 2018 U.S. Energy and Employment Report was prepared by the Energy Futures Initiative (EFI) and the National Association of State Energy Officials (NASEO): https://static1.squarespace.com/static/5a98cf80ec4eb7c5cd928c61/t/5afb0ce4575d1f3cdf9ebe36/1526402279839/2018+U.S.+Energy+and+Employment+Report.pdf
[5] Nyangon J. (2017). Distributed energy generation systems based on renewable energy and natural gas blending: New business models for economic incentives, electricity market design and regulatory innovation [Ph.D. dissertation]. College of Engineering, University of Delaware. Google Scholar.
[6] Nyangon J, Byrne J. (2018). Diversifying electricity customer choice: REVing up the New York energy vision for polycentric innovation. In: Tsvetkov PV, editor. Energy Systems and Environment. London, UK: IntechOpen. pp. 3-23. Google Scholar
[7] The Clean Power and Electrification Pathway: An exploration of SCE’s proposal to help realize California’s environmental goals: https://www.edison.com/content/dam/eix/documents/our-perspective/g17-pathway-to-2030-white-paper.pdf
[8] Nyangon, J. (2015). Obama’s Budget Proposals for Clean Energy and Climate Investment. FREE. https://freefutures.org/obamas-budget-proposals-for-clean-energy-and-climate-investments
[9] Nyangon, J. (2015). Mobilizing Public and Private Capital for Clean Energy Financing. FREE. https://freefutures.org/mobilizing-public-and-private-capital-for-clean-energy-financing/
[10] Nyangon, J. (2014). International Environmental Governance: Lessons from UNEA and Perspectives on the Post-2015 Era. Journal on Sustainable Development Law and Policy 4: 174–202. Google Scholar

July 8, 2016

The Scale of the Energy Access Gap

By Benjamin M. Attia
Access to electricity is a key catalyst correlated with economic development.

The International Energy Agency (IEA) recently estimated that over 1.5 billion people do not have access to affordable electricity, representing one quarter of the world’s population [1]. In the absence of aggressive new policies and significant financing, it is estimated that that number will drop to only 1.3 billion by 2030 [1]. The United Nations’ (UN) Sustainable Energy for All (SE4ALL) initiative, which is working toward a goal of global universal energy access by 2030, estimates that approximately 600 million of these unelectrified people live in Sub-Saharan Africa [2]. This number is expected to rise to approximately 645 million by 2030 under a business-as-usual scenario due to expected explosive population growth [2, 3]. This widening gap of energy access is a complex and multidimensional problem and represents an important hindrance to economic development and social change in the developing world.

Historically, the access gap since the initial commercialization of electricity has “consistently been between 1 and 2 billion people… as grid expansion has roughly paced global population” growth [4]. This suggests that the access gap is a reflection of a persistent lack of equity in distribution. In fact, in 1983, Krugmann and Goldemberg famously estimated that at 1983 global consumption levels, the “energy cost of satisfying the basic human needs” of every person on the planet was well within the available supply of energy resources [5, p. 60].

Today, the consumption and distribution inequalities are even more pronounced. In 2011, the average American consumed 13,240 kilowatt hours (kWh) per person per year, while the average Ethiopian consumed only 56 kWh [6]. Further, across all of Sub-Saharan Africa, annual per capita kWh use is one-sixth the load requirements of a relatively efficient American refrigerator [7]. Globally, the poorest three-quarters of the world’s population comprise less than ten percent of total energy consumption [8, p. 5].

The inequities that underline energy poverty and energy access are also fundamentally connected to climate change. Looking ahead, the world’s demand for electricity is estimated to increase by more than 70% by 2040, and the World Bank and IEA estimate that a doubling in installed energy capacity will be necessary to meet the anticipated growing demands of emerging markets [9], [10]. Despite the accelerating paradigm shift to low-carbon and renewable energy generation technologies, there is a paradoxical irony to the link between development and climate change which has left the poorest countries with the lowest contributions to greenhouse gas (GHG) emissions as the most vulnerable and most susceptible to the effects of climate change [11, p. 591, 12]. As markets evolve to value avoided GHG emissions [13, p. 215], reconciling the joint–and possibly conflicting– goals of development through universal energy access and combating climate change will accelerate, but at present, the inequity in energy access is only further exacerbated by the parallel inequities with respect to climate change adaptation measures.

Many scholars agree that access to electricity in itself is not fully sufficient to bring about the required economic and social development to break the cycle of poverty [14, p. 1058, 15, p. 2194]. It has also been widely settled that access to electricity is a key catalyst correlated with economic development and that a lack of electricity access is a key bottleneck to growth [16], see [17] for comprehensive rebuttal]. However, approaches for tackling the problems associated with energy poverty are often difficult to scale up because of the difficulties associated with navigating this uneven technical, sociocultural, agricultural, and institutional landscape, and, as will be demonstrated below, the multidimensionality of energy access inhibits scalability of any one catch-all solution.

The IEA estimates that 30% of those without access to electricity would best be served by grid extension, 52.5% would be best served by micro-grids, and 17.5% would best be served by stand-alone energy systems [3, p. 14]. There is a clear need for investment in rural electrification initiatives at all three levels and a clear gap in understanding routes and sinks for effective impact investing [3, p. 14]. National grid extension programs and firms selling small energy systems are generally much better funded than the community-scale solution of micro-grids, despite their significant potential market share and niche ability to provide scale benefits, rapid deployment, flexibility of business models, and energy storage, security, and reliability [3, p. 15]. The micro-grid space is rife with opportunity to build markets, innovate new business models, develop new financing mechanisms, and provide the sustainable development benefits of renewable electrification and increased economic potential.

As one development professional put it, “If rural [people] have power in their lives, they will have more power over their lives” [16]. Access to electricity is not the answer to the greater global problems of poverty and inequity, but can be a good place to start.

References
[1] “World Energy Outlook 2014,” Paris, France, 2014.
[2] SE4ALL, “Energy for all: Financing Access for the poor,” in Energy for All Conference, 2011.
[3] M. Franz, N. Peterschmidt, M. Rohrer, and B. Kondev, “Mini-grid Policy Toolkit: Policy and Business Frameworks for Successful Mini-grid Roll-outs,” EUEI Partnership Dialogue Facility, Escheborn, 2014.
[4] P. Alstone, D. Gershenson, and D. M. Kammen, “Decentralized energy systems for clean electricity access,” Nat. Clim. Chang., vol. 5, no. 4, pp. 305–314, 2015.
[5] H. Krugmann and J. Goldemberg, “The energy cost of satisfying basic human needs,” Technol. Forecast. Soc. Change, vol. 24, no. 1, pp. 45–60, 1983.
[6] C. Kenny, “If Everyone Gets Electricity, Can the Planet Survive?,” The Atlantic, 2015.
[7] “Power Africa Annual Report,” 2014.
[8] J. Tomei and D. Gent, “Equity and the energy trilemma Delivering sustainable energy access in low-income communities,” International Institute for Environment & Development, London, United Kingdom, 2015.
[9] “World Energy Outlook 2015 Factsheet,” Paris, France, 2015.
[10] R. K. Akikur, R. Saidur, H. W. Ping, and K. R. Ullah, “Comparative study of stand-alone and hybrid solar energy systems suitable for off-grid rural electrification: A review,” Renew. Sustain. Energy Rev., vol. 27, pp. 738–752, 2013.
[11] A. Yadoo and H. Cruickshank, “The role for low carbon electrification technologies in poverty reduction and climate change strategies: A focus on renewable energy mini-grids with case studies in Nepal, Peru and Kenya,” Energy Policy, vol. 42, pp. 591–602, 2012.
[12] J. Byrne, Y.-D. Wang, H. Lee, and J. Kim, “An equity and sustainability-based policy response to global climate change,” Energy Policy, vol. 24, no. 4, pp. 335–343, 1998.
[13] U. Deichmann, C. Meisner, S. Murray, and D. Wheeler, “The economics of renewable energy expansion in rural Sub-Saharan Africa,” Energy Policy, vol. 39, no. 1, pp. 215–227, 2011.
[14 A. Bhide and C. R. Monroy, “Energy poverty: A special focus on energy poverty in India and renewable energy technologies,” Renew. Sustain. Energy Rev., vol. 15, no. 2, pp. 1057–1066, 2011.
[15] B. Mainali and S. Silveira, “Financing off-grid rural electrification: Country case Nepal,” Energy, vol. 36, no. 4, pp. 2194–2201, 2011.
[16] D. Mans, “Back to the Future: Africa’s Mobile Revolution Should Inspire Rural Energy Solutions,” Huffington Post, 20-May-2014.
[17] L. A. Odarno, “Negotiating the Labrynth of Modernity’s Promise: A Paradigm Analysis of Energy Poverty in Peri-Urban Kumasi, Ghana,” University of Delaware, 2014.

April 6, 2015

The Green Cred of Bike Sharing Programs

A.L. Smith

The announcement that Philadelphia will be rolling out its new bicycle sharing program this spring gives me a minute to reflect on the pros and cons of this new type of transportation infrastructure. First off, a bit about the program.

The program will be implemented in two phases. The first is this spring and will consist of 60 docking stations and 600 bikes. Riders can either get a membership or pay per use at the fully-automated station when they return the bike. The stations will be located in the heavier trafficked part of the city and the second phase is planned no earlier than 2017 and will involve 650 more bike and docking station placement in parts of the city that lack other transportation options [1]. As far as cons go, I cannot think of many.

Though the cost for the first phase is over 14 million, planners anticipate being able to recoup that in the first two years [1]. I thought safety might be an issue since there are going to be more bicycles on city streets, but the study by Fuller, et al (2013), found that in the Montreal bike share program there were no greater numbers of accidents or near misses [2] and that city has over 4,400 bikes in its system [3]. I did find one definite con: people using a bike share were much more likely to ride without a helmet. In a study of the DC and Boston programs cited in Fishman, et al (2013), 80% of bike share riders were un-helmeted [4]. This fact could be a little worrying, but if there are no fewer accidents …Then again, it only takes one to put someone in a comma. Maybe those running a bike share program could find a way to include helmets with the rental.

The pros of a bike share program on first thought appear to be numerous. Biking promotes a healthy lifestyle, bike shares offer transportation alternatives and greater convenience, the programs reveal that a city is trying to accommodate all of its citizens and that it is thinking green. This last one is important to me – the only form of transportation more environmentally friendly is walking. Well, that is at least what I initially thought. It turns out that it not clearly the case.

In a study on the cost effectiveness of 7 San Diego transportation policies intended to abate greenhouse gas (GHG) emissions, biking policies proved to have the highest cost per ton of GHG abated by far [5]. In a study by the Fishman team (2014) of bike share programs in DC, Melbourne, London, and Minnesota, they found that vehicle miles traveled actually increased because of the balancing that had to be done to keep bikes from accumulating beyond docking capacity in some locations while other docking locations emptied out completely. Trucks hauled trailers carrying bikes from one docking station to another. The biggest problem with this practice was in London where few people used cars in the city anyway and where many people used the bikes to travel from the outskirts to the city’s center. Even for other cities in the study, it was found that bikes did not replace car trips as much as replace public transportation ridership or walking [6].

Though the Fishman study (2014) brings out some interesting points, London was an outlier and the study only looked at these four cities. A study about the Denver bike share program showed that between 22% and 66% of trips with the share bikes replaced vehicle trips [7]. An interesting consideration that I did not see quantified in any of these studies was that the trips replaced were also the short ones that if a car was used would contribute greater GHG than average owing to the fact that cars burn gas inefficiently until they achieve operating temperature. Regardless, there are now at least 700 cities in the world that have a bike sharing program [6] and there is a whole lot more studying that can be done about these innovative transportation programs. For instance, do bike share programs increase the legitimacy of bicycle commuting and therefore encourage vehicle drivers to bike more even if they do not use the program? Does the presence of a highly visible bike share program increase the eco-consciousness of the public in other ways not related to transportation? There are a host of other questions that we could investigate and starting from the program’s inception in Philadelphia might be a good way to start.

Notes
[1] Brust, A. (April 25, 2014). Bike share not coming to Phila. till spring. Philadelphia Inquirer. Retrieved from: https://www.inquirer.com/philly/news/20140424_Bike-share_not_coming_to_Phila__till_spring.html.
[2] Fuller, D., Gauvin, L., Morency, P., Kestens, Y., & Drouin, L. (2013). The impact of implementing a public bicycle share program on the likelihood of collisions and near misses in Montreal, Canada. Preventive Medicine, 57(6), 920-924. doi:10.1016/j.ypmed.2013.05.028
[3] O’Brien, O., Cheshire, J., & Batty, M. (2014). Mining bicycle sharing data for generating insights into sustainable transport systems. Journal of Transport Geography, 34, 262-273. doi:10.1016/j.jtrangeo.2013.06.007
[4] Fishman, E., Washington, S., & Haworth, N. (2013). Bike share: A synthesis of the literature. Transport Reviews, 33(2), 148-165. doi:10.1080/01441647.2013.775612
[5] Silva-Send, N., Anders, S., & Narwold, A. (2013). Cost effectiveness comparison of certain transportation measures to mitigate greenhouse gas emissions in San Diego county, California. Energy Policy, 62, 1428-1433. doi:10.1016/j.enpol.2013.07.059
[6] Fishman, E., Washington, S., & Haworth, N. (2014). Bike share’s impact on car use: Evidence from the United States, Great Britain, and Australia. Transportation Research Part D-Transport and Environment, 31, 13-20. doi:10.1016/j.trd.2014.05.013
[7] Ramaswami, A., Bernard, M., Chavez, A., Hillman, T., Whitaker, M., Thomas, G., & Marshall, M. (2012). Quantifying carbon mitigation wedges in US cities: Near-term strategy analysis and critical review. Environmental Science & Technology, 46(7), 3629-3642. doi:10.1021/es203503a

April 4, 2015

Mobilizing Public and Private Capital for Clean Energy Financing

By Joseph Nyangon
Innovative financing, increased capital investment and technological improvement are catalyzing renewable energy growth.

A key driver of recent renewable energy gains is cost. As a mass market develops and the technology improves solar and wind power have become more competitive. Photo: Solar Panel Against Blue Sky, Deutsche Bank

The energy market in the United States is undergoing a dramatic transformation, driven by technological advancement, market dynamics, and better policies and laws—none of which was a decade ago. Venture capitalists made huge profits from the computing boom of the 1980s, the internet boom of the 1990s, and now think the next boom will happen on the back of energy. These past booms, however, were fed by cheap energy: coal was cheap; natural gas was low-priced; and apart from the events following the 1973 Arab oil embargo and the 1979 Iranian Revolution, oil was comparatively cheap. However, in the space of the past decade, all that has changed. New resource finds, primarily shale resources from states such as Texas, Oklahoma, North Dakota, and Pennsylvania, exert pressure on the prices of oil and gas. At the same time, there is a growing concern of negative externalities associated with these fossil fuels.

Hybrid vehicles are doing more to fulfill their technological promise. Wind-and-solar powered alternative no longer looks so costly by comparison to natural gas—whose low prices due to increased shale production have shaken up domestic and global energy markets recently. Coal remains relatively cheap, however, its extraction damages ecosystems by destroying ecological habitats. Additionally, combustion of fossil fuels pollutes the air by emitting harmful substances into the atmosphere, such as carbon dioxide, methane, and nitrous oxide that contribute to global warming.

Oil spills, such as the 2010 Deepwater Horizon spill in the Gulf of Mexico and leakages at exploration and extraction points destabilize marine ecosystems, killing aquatic life. Utility firms seeking to avoid political and capital costs of the U.S. Environmental Protection Agency’s (EPA) Clean Power Plan and Mercury and Air Toxics Standard on existing plant performance have began to invest more in energy efficiency and low-carbon technologies that guarantee less harmful emissions. As a result, the industry is accelerating modernization of their generation fleet. These underlying factors, including innovative financing options, increased capital investment, and market incentives, have opened up a capacity gap from conventional plants and an opportunity especially for solar, wind, and other low-carbon technologies.

Innovative financing options: A key driver of recent renewable energy gains is cost. As a mass market develops and the technology improves solar and wind power have become more competitive. In California and New York, a surcharge paid by utility customers to help finance clean energy projects in the two states has generated substantial sums of money, which is being invested in energy efficiency and renewable projects. In Connecticut, the Clean Energy Finance and Investment Authority (CEFIA), a successor of Connecticut Clean Energy Fund (CCEF) has funded over $150 million of clean technology projects and awareness programs statewide.[1] As more states adopt these kinds of programs, they continue to subsidize investment in clean energy programs. Financing clean energy projects, nevertheless, continues to face stiff competition from non-renewable sources. The cost of fossil fuels is still relatively low, mostly because social costs and the price of ecological damage are not factored into existing market prices. Renewable energy development also continues to experience high transactions costs, such as in negotiating power-purchase agreements which can make them more risky to investors.

Capital costs: In the long run, however, real gross domestic product and carbon emissions are likely to be the primary drivers of clean energy consumption, because governments will try to prevent the price of energy from rising too fast or decreasing overly quickly as it can have negative effect on overall economic growth. Thus the price of fossil fuels could have only a small negative effect on the demand for clean energy. The main barrier to large-scale wind and solar projects is obvious—high upfront capital costs. Accordingly, some investors in certain parts of the country continue to demand high premium lending rates to offset the upfront capital risked up to fund clean energy projects than other conventional energy projects. At the same time, technology improvements, especially with regard to solar, and promising much lower future capital costs, which explains why solar energy is the fastest growing source of new energy simply in the U.S. and worldwide.²

Secondary effects: According to the Energy Information Administration (EIA) Short-Term Energy Outlook February 2015, utility-scale solar power generation in the U.S. will increase by more than 60% between 2014 and 2016, averaging almost 80 GWh per day in 2016.[2] Half of this new capacity will be built in California. The World Energy Outlook 2014 estimates a 37% increase in the share of renewables in power generation in most OECD countries by 2040.[3] However, growth in renewable energy generation in non-OECD countries, led by China, India, Latin America and Africa, will more than double, according to the report. A change in energy policy or regulations in these markets could have even wider secondary effects on energy supply: positive impacts on emission reductions, accelerated substitution effects, and improved cost-competitiveness of renewable energy.

Market incentives and carbon tax: In the absence of fossil-fuel subsidies, which in 2013 alone totaled $550 billion, renewable energy technologies would be competitive with fossil power plants.[4] The effect of fossil-fuel subsidies on renewable electricity generation is fourfold: they weaken the cost competitiveness of renewable energy; boost the incumbent advantage of fossil fuels; lower the costs of fossil-fuel-powered electricity generation; and make investment in fossil-fuel-based technologies favorable over renewable alternatives. For instance, a phase-out of coal subsidies could further limit new construction and use of least-efficient coal-fired plants, thus incentivizing investment in clean energy.

Finally, if new policy causes the marketplace to internalize the risks of climate change, there would be no need for renewable energy subsidies and mandates in order for these sources to reach market parity.

Notes
[1] Connecticut Clean Energy Finance and Investment Authority: https://www.ctcleanenergy.com/Default.aspx?tabid=62
[2] Energy Information Administration’s (EIA) Short-Term Energy Outlook February 2015: https://www.eia.gov/forecasts/steo/pdf/steo_full.pdf
[3] World Energy Outlook (WEO) 2014: https://www.iea.org/publications/freepublications/publication/WEO_2014_ES_English_WEB.pdf
[4] Ibid, WEO, p.4

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