Financing a Clean Energy Economy

Financing a Clean Energy Economy – Opportunities and Risks for Businesses & Investors

Opportunities in a clean energy economy

*“The race for renewable energy has passed a turning point. The world is now adding more capacity for renewable power each year than coal, natural gas, and oil combined…

The shift will continue to accelerate…” (BNEF) 1

* Costs for electricity from solar and wind are plummeting and are now lower in some markets than electricity from coal or natural gas and still dropping (NYT) 2

* Some U.S. utilities are choosing solar and wind, reasoning that fixed prices for renewables protect ratepayers from price hikes 3

* Worldwide, last year, $329 billion was invested in renewables 4

* “{M]ore than half the world’s annual investment in clean energy is coming from emerging markets instead of from wealthier nations..” 5

* Businesses can save substantial amounts of money by reducing energy use. 6

* “Green mutual funds, invested in companies with exceptional environmental credentials, now outperform ‘black’ funds – which invest in fossil fuels – by more than 14% over the period 2012 to 2014.” 7

*.”. a look at profits and losses….made clear,[that] companies and investors that shun sustainable, low-carbon assets stand to lose a lot of money” (UN Investor Summit) 8

Acknowledging risks in using fossil fuels and making changes

* “Budget experts are also starting to see rising costs on the federal balance sheet. …disaster relief…Vulnerability of nation’s roads, bridges and waterways due to rising sea levels and changing weather pattern….U.S. military installations & operations are also threatened…” (Budget committee hearing) 9

* Climate change will have, ‘specific, measurable impacts on our nation’s current assets and ongoing economic activity…By not acting to lower greenhouse gas emissions today, decision-makers put in place processes that increase overall risks tomorrow” 10

* The U.S. government subsidizes the use of fossil fuels four times more than it subsidizes clean energy (Tax committees) 11

* U.S subsidies for fossil fuel, if you include… environmental damage like local air pollution, health costs, and other externalities, is estimated for 2015 at $5.3 Trillion or about $1800/person/year (IMF) 12

* The International Energy Agency (IEA) recommends phasing out fossil fuels subsidies and increasing renewable subsidies. 13

* People who invest money for others – for pensions, countries, and institutions should assess and monitor the impacts of climate change on investments and invest in clean energy, (Mercer) 14

* “350 global institutional investors representing over $24 trillion in assets have called on government leaders to provide stable, reliable and economically meaningful carbon pricing that helps redirect investment commensurate with the scale of the climate change challenge, as well as develop plans “to phase out subsidies for fossil fuels.” (Ceres) 15

* “Let’s remove the barriers … that protect the monopolies and allow consumer choice and freedom” 16

* “solar energy is cheap, plentiful and offers a monopoly-busting solution to generating electricity “ 17 (Dooley)

Footnotes:

  1. http://www.bloomberg.com/news/articles/2015-04-14/fossil-fuels-just-lost-the-race-against-renewables
  2. http://nyti.ms/1MZGIke
  3. http://www.utilitydive.com/news/utility-scale-solar-booms-as-costs-drop-challenging-gas-on-price/406692/

4 http://www.bloomberg.com/news/articles/2016-01-14/renewables-drew-record-329-billion-in-year-oil-prices-crashed

  1. http://www.bloomberg.com/news/articles/2015-11-23/leapfrogging-to-solar-emerging-markets-outspend-rich-countries-for-the-first-time
  2. Improvements in energy efficiency earned 196% payback over 2 to 3 years for S&P500 companies reporting to the Carbon Disclosure Project (CDP) https://www.cdp.net/CDPResults/3-percent-solution-report.pdf
  3. http://www.business-school.ed.ac.uk/about/news/2320   Also “the six major renewable investment funds yield between 5.5% and 7% – attractive returns in the current market. http://bit.ly/1mCJoNJ
  4. http://bit.ly/1mCJoNJ   Guardian article referring to Jan 2016 UN Investor Summit on Climate Risk with 500 global investors representing an estimated $22tn in assets

9.Budget Committee Hearing 2014 chaired by Sen Patty Murray

//www.budget.senate.gov/democratic/public/index.cfm/2014/7/the-costs-of-inaction-the-economic-and-budgetary-consequences-of-climate-change-opening-statement-of-chairman-murray

  1. Risky Business A Climate Change Assessment for the U.S. (co-chairs: Henry Paulson, Michael Bloomberg, Tom Steyer) http://riskybusiness.org/report/overview/executive-summary
  2. The Joint Committee on Taxation $30bn for oil, coal and gas related . $6.2 bn for efficiency and clean energy related. Estimates Fed Tax Expenditures 2012-2017

https://www.jct.gov/publications.html?func=startdown&id=4503

  1. http://www.imf.org/external/pubs/ft/survey/so/2015/NEW070215A.htm
  2. https://www.iea.org/Textbase/npsum/WEO2015SUM.pdf
  3. http://www.mercer.com/insights/focus/invest-in-climate-change-study-2015.html

Statement by 350 institutional investors handling $24Trillion in funds

  1. http://www.ceres.org/press/press-releases/world2019s-leading-institutional-investors-managing-24-trillion-call-for-carbon-pricing-ambitious-global-climate-deal
  2. http://www.theguardian.com/us-news/2015/dec/06/debbie-dooley-tea-party-solar-energy-florida-environment
  3. Debbie Dooley, co-founder of tea party and green tea party https://www.climaterealityproject.org/blog/debbie-dooley-changing-how-conservatives-think-about-clean-energy
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Living building home

Check out this gorgeous Oregon ‘living building’ home. Huge windows look out on green meadows and forests, but its 3500 square feet of indoor space is expected to use only $50 a year in energy bills.  It uses solar panels, of course, but also has super insulation, heat-recovery ventilation, a roof overhang and window shades to control heating and cooling.  Eric Lemelson consulted with Green Hammer and worked with construction company, Hammer and Hand to create his home.

http://on.wsj.com/18IbY2p

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Power in Ocean Breezes

North America’s first offshore wind turbine has just been launched, a prototype for gathering data. The full size floating  turbines will be nearly as tall as the Washington Memorial, and will be tethered 20 miles offshore where winds are stronger. Within 50 miles of the US shoreline there is enough wind energy to power the entire US several times over.

Developed at the University of Maine, the turbines will be made of composite material that won’t rust. They will be connected to an underwater power cable that will take power to thousands of homes.

The turbine, called Volturnus, will be competing for  funding with Norwegian energy company Statoil that has already tested floating wind turbines in the North Sea.  A turbine industry in Maine would create thousands of jobs and bring millions in private investment.

Businesses Profit from City Solar

Lancaster CA has just updated its building code. Starting in 2014, all new single-family homes will have to include a solar system of at least 1.0 kW. The Republican mayor of Lancaster, R. Rex Parris, says the city wants to be the first to produce more electricity from sunlight it uses.

The city bought and installed solar panels on the roofs of 25 Lancaster schools that are now paying 35% less for electricity. Other solar installations have gone up on city hall, an arts center, stadium, and parking lots. There is a plan to create electric storage potential with more electric vehicles and batteries.

To get a permit to install solar in Lancaster takes 15 minutes.

 http://www.nytimes.com/2013/04/09/us/lancaster-calif-focuses-on-becoming-solar-capital-of-universe.html?pagewanted=2&_r=0

Solar Competition in a Darwinian Marketplace

Arno Harris, CEO of Recurrent Energy, a developer of large utility solar projects was asked by Russell Gold, energy reporter with the WSJ about bankruptcies among solar energy companies.

This was his response.

“Nobody wants to see that kind of trouble, we think about jobs lost, it’s extremely painful. However, you have to put it in context. This is fundamentally a very exciting transformation This is an industry that in the last 10 years has taken the cost of solar panels from $5 per watt to around $.50 per watt.  As result of this transformation, it has moved solar power from one of the most expensive sources of electricity to one of the second or third least expensive sources of electricity.

Inevitably, a part of that process is going to be the creation of a very Darwinian, challenging environment, in which those who cannot keep up with the cost structure necessary to stay competitive are going to get restructured, fall by the wayside, get reabsorbed.

We have to put this event in that context.  There are numbers of solar manufacturers demonstrating they do have cost structures that work in today’s prices. So that means that this industry can continue to deliver solar electricity at increasingly competitive costs.”

http://on.wsj.com/16NdWOg

Free Investment Advice from an Expert

Jeremy Grantham, Chief Investment Strategist for GMO, an Management Firm that oversees more than $100 billion in investments, announced his opposition to the Keystone Pipeline in an interview with Charlie Rose Mar 11, 2013. Grantham is known for having predicted the last several financial crises.

Grantham says that climate change is a numbers issue; the rise of .8oC in temperature is obvious, we can see spring arriving earlier, and know that it took additional carbon in the air to make that happen. Grantham continues, explaining the problem with continuing to burn fossil fuels is that we can only emit 565 gigatons of carbon into the air before world temperatures reach “2oC which is considered the boundary, below which we might limp our way through.” But in fuel reserves there is five times that much, “enough to cook our goose and guarantee our grandchildren starve to death in floods and all.”

Every previous human civilization expanded, then met limits of available resources and collapsed. Grantham describes two gifts that our civilization has that give him hope. The first is our ability to limit birth rates, and the fact that when people get richer, they choose to have fewer children. A shrinking population puts less pressure on finite resources.

The second gift is alternative energy technology, solar, wind, geothermal, new grid, and batteries which give us the ability to “move fairly seamlessly” to using the renewable resource of energy from the sun which never runs out. “If you can capture the sun’s energy, you can keep civilization going.”

Then he added, “Science will not guarantee to save us it will only give us a possible out.”

Listen to the interview at :

http://www.charlierose.com/view/interview/12812

Wind, Water, and Sunlight Power a Plan for a Better Economy

‘We can’t afford a green energy economy” is a myth, obvious to people who are paying attention to the hyper expensive effects of a planet-scorching fossil fuel economy.

However, now a group of scientists, headed by Mark Z. Jacobson of Stanford have crunched the numbers and laid out a serious plan for a transition to an affordable energy infrastructure in New York State that uses primarily wind, water and sun. It does not require that we ‘live in trees and eat bugs’. To the contrary, it reduces our energy costs, creates millions of jobs, improves public health and costs less than the side effects of continuing to burn fossil fuels.

The report is Examining the Feasibility of Converting NY State’s All-Purpose Energy Infrastructure to One Using Wind, Water, and Sunlight  2013  Mark Z Jacobson, Robert W Howarth, Mark A Delucchi et al.

This plan calls for electricity to be generated by solar, wind, geothermal and some hydro and wave technology.  It calls for batteries and hydrogen fuel cells in cars, trucks, buses, locomotives and ships. For heating and cooling buildings, it uses ground source heat pumps and heat exchangers.

The investment in new energy infrastructure would increasingly develop low-carbon technologies and by 2020, all new investment would be in these systems, The savings would help us phase out old fuel dependent systems by 2050.

Since renewable electricity is several times more efficient than fossil fuel combustion, losing very little energy to waste heat, the plan reduces electric usage.  

It would stabilize energy prices bringing electric rates down   from $.18/kWh to $.13/kWh, create millions of new jobs, reduce air pollution and improve public health.

The transition would help us deal with what Jacobson describes as “the epic environmental and ecological costs we all pay for our current energy supply,”  a “Fiscal Energy Cliff.” See Interviews and story on the report in Huff post.

 

http://www.huffingtonpost.com/stacy-clark/mark-z-jacobson-renewable-energy_b_2859518.html

http://www.stanford.edu/group/efmh/jacobson/Articles/I/NewYorkWWSEnPolicy.pdf