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The COP15 climate change meeting
starting December 7 in Copenhagen, Denmark is the 15th international
gathering of the Conference of the Parties (COP) under the United
Nations Framework Convention on Climate Change.
This summit is a major opportunity for the international community to take decisive multi-lateral action on reducing greenhouse gas (GHG) emissions. The primary thrust of COP15, according to United Nations organizers, is to stabilize the amount of GHG in the atmosphere at a level that prevents dangerous man-made climate changes in a way that allows ecosystems to adapt naturally without compromising food safety or hindering sustainable social and economic development globally.
Advocates of GHG reductions were originally hoping for the establishment of an ambitious, legally binding global emissions reduction agreement for implementation by 2012 when initial commitments of the Kyoto Protocol, an earlier international climate treaty that the U.S. refused to join, actually expire. President Obama will participate in international climate change talks on December 9 in Copenhagen, and he will be proposing an 83 percent reduction in GHG emissions by 2050 and a 17 percent reduction below 2005 levels by 2020. These figures parallel the American Clean Energy and Security Act legislation passed by the House in late June and reflect the Administration’s assumption that the Senate will authorize similar legislation in 2010, which would significantly facilitate the approval of an international treaty.
In contrast to many news reporting agencies, the general unwillingness and lack of interest of India and China in GHG emissions reductions and clean energy is not true, as President Obama has met with their leaders in advance in preparation for COP15, discussing potential proposals and inking several major clean energy partnerships that are part of the equation. What’s more, only one day after President Obama announced his upcoming visit to Copenhagen, China announced that it would slow its GHG emissions by 2020, mainly by increasing energy efficiency. Furthermore, the Chinese propose to reduce the amount of carbon emitted per unit of economic output by 40-45 percent compared to 2005 levels. In addition, India has previously indicated that they would announce their own emissions reduction plans after the U.S. offered its own official proposal.
However, states such as California are getting ahead of the curve, yet again. This state has been a historic leader in renewable energy in the U.S. and is currently leading the country, by far, in cleantech policy-making, R&D and deployment. Thus, it is developing its own GHG emissions reductions program as well. The California Air Resources Board released a draft rule creating a cap-and-trade system aimed at meeting California’s goal of reducing global warming emissions to 1990 levels by 2020. The measure is proposed to start in 2012 with 600 major pollution sources including power plants, refineries, and concrete factories.
Regardless of one’s opinion on the relationship between GHG emissions and global warming, clean energy is worth pursuing simply based on a country’s economic
and national security. High levels of dependence on GHG-intensive
foreign oil can contribute to severe economic decline based on price
levels, or stall military defense efforts, while an enhanced manufacturing base to support clean energy technologies such as renewable energy, energy-efficient products, smart grid, green building architecture, and electric vehicles, as China has demonstrated, bolsters a national economy. However, the recession has taken its toll on cleantech finance,
as the bank credit markets struggle to recover to pre-recession levels.
As a result, many companies inside and outside of the green arena have
been unable to obtain the necessary loans for expansion and creating
new jobs, as evidenced by the increasing unemployment rate in the U.S.
As the bank credit market began slowly improving earlier this year, an
initial indication was recognized in the solar energy space. In June,
SolarCity and U.S. Bancorp Community Development Corporation (USBCDC)
formed a partnership for small- and medium-scale solar finance deals
for homeowners and businesses across the U.S. The two companies created
a new $50 million tax-equity based fund to finance projects under
SolarCity's SolarLease program. This program, which was originally
supported by Morgan Stanley, who along with J.P. Morgan and Goldman
Sachs, have been leading the charge in recent years in this finance
area, allows homeowners and businesses
to purchase power from systems owned and installed by SolarCity through
a power purchase agreement (PPA). SolarCity is utilizing commercial tax
credits, which are applied towards customer financing. According to the
EPA, buildings account for 38 percent of CO2 emissions and 39 percent
of energy use in the U.S, and the greening of these structures with
solar lessens those percentages, aiding the country in meeting possible
international requirements.
According to RenewableEnergyWorld.com, the USBCDC fund was one of only two tax-equity funds initiated in the U.S. during the first half of 2009 that applied to residential solar projects and both of the funds were created in conjunction with SolarCity to finance solar installations. Earlier this fall, SolarCity and USBCDC increased the size of the fund two-fold to $100 million. SolarCity’s PurePower program in Oregon allows homeowners to pay the same rate they were previously paying for electricity from their utility company. In Oregon, PurePower pricing for a 3.5-kilowatt solar system, designed for a typical three or four-bedroom home, is approximately $30/month. This company is expanding into Arizona as well, while the city of Phoenix recently announced a new program of its own during the International Greenbuild Conference and Expo.
USBCDC, one of the nation's largest tax-credit investors, focuses on investments in tax-credit equity and the federal solar Investment Tax Credit (ITC). The layouts of USBCDC's tax equity fund deals include: direct investment, partnership flip models, and lease pass-through to sale lease-back structures. The return on investment is primarily derived from the tax credits; thus, most funds have short investment timeframes of about 5 years. A major boost to this field has been the cash grant in-lieu of ITC provision of the American Recovery and Reinvestment Act. Moreover, the conversion of the ITC to a cash grant has improved the tax-equity market with the entrance of new investors, and it is hoped that the cash grants are extended through 2012 for increased confidence and growth.
Financing at the customer level is a critical link for the enormous residential solar market opportunity at hand. However, in order to meet pending GHG emissions reductions and cap-and-trade restrictions at the industry level, enhanced financing options are also necessary for large-scale capital projects such as concentrating solar power facilities and solar farms, and the U.S. Department of Energy has been offering various programs through the Recovery Act as a result.
In any case, the development of a comprehensive U.S. smart grid infrastructure is essential for not only power delivery markets and consumers, but renewable energy sources, in order to optimally integrate them into thenation’s power grid system, whether it be for lessening GHG emissions or improving economic and national security.
For more info: A presentation on the overall scope of a national smart grid and its impact on Arizona and the clean energy industry will be given by this author at the EcoMonday green business professional society meeting in Phoenix, AZ on December 7; more information is available at this reference site.
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