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Dreaming the Impossible Dream:

A Regional SREC Market for the Northeast

While it would be natural to think of strong solar resources as being the major driver for the installation of solar, that is not the case. The major drivers are: (1) high electricity rates; and (2) strong policy incentives. Which is why Germany is the world’s solar leader, despite solar resources that are about as dismal as Alaska’s.

It’s also why the Northeast could become a national solar powerhouse. As a region, the Northeast (including the nine New England and five Middle Atlantic states) has some of the nation’s highest electricity rates and many of its states have enacted — or are in the process of enacting — innovative solar incentives. New Jersey, in particular, has become a national solar leader as a result of its widely imitated solar program, which rewards businesses and homeowners that generate solar energy with Solar Renewable Energy Certificates (SRECS), performance-based financial instruments representing the environmental benefits of solar that are purchased by utilities in order to meet state-mandated requirements for solar electricity generation.

These state-mandated requirements, called Renewable Portfolio Standards (RPSs), when implemented in connection with SREC markets, are the most effective incentive for solar. In order to promote the implementation of solar, the RPS in many states includes a “solar carve-out,” which stipulates that a certain amount of electricity be generated from solar. In the Northeast, five states — Delaware, New Jersey, Maryland, Massachusetts and Pennsylvania — have implemented SREC markets as a means of meeting solar carve-outs; two others, Connecticut and New York, are considering them. While still a relatively new concept, SREC markets are expected to grow nationwide from approximately 520 MW in 2011 to nearly 7,300 MW in 2025, according to the National Renewable Energy Laboratory.

The major reason behind this anticipated growth is that the states recognize that solar is good for business. Solar helps businesses compete by reducing operating costs. Many businesses that install solar are able to offset most, if not all, of their electricity load, resulting in savings of tens or even hundreds of thousands of dollars annually. Solar also serves as a hedge against future rate increases, which are a given considering the Northeast’s overburdened distribution systems and outdated generation facilities. The financial benefits of solar have spurred the installation of commercial solar in states with strong incentives. New Jersey, for instance, has surpassed sunny California as the nation’s leader in commercial solar installations. Also, because solar production is greatest during periods of peak demand — i.e. during the day — the widespread installation of solar also helps utilities cope with increased demand during these periods, thus contributing to grid reliability.

The Northeast needs the economic shot in the arm that solar can provide. Since the loss of its industrial base in the mid-20^th century, the region has lagged behind the rest of the nation in economic development as a result of its older demographics, high cost of doing business and inadequate and congested infrastructure. The widespread implementation of solar could give the region a competitive edge, not only nationally, but globally as well. Just as Germany is betting on its commitment to solar to stimulate economic development, so can the Northeast. German Chancellor Angela Merkel believes her country’s transition to a renewable energy economy will bring opportunities in the form of “exports, developing new technologies and jobs.” Similarly, solar could become the catalyst that turns the Northeast into a renewable energy powerhouse. The Northeast could become the nation’s “renewable energy belt,” just as the energy-rich states that supply the nation’s gas and oil are its “energy belt.”

In order for this to occur, however, there has to be long-term stability and transparency in the SREC markets: businesses and investors are discouraged by incentives that are here one day and gone the next, or SREC values that bounce all over the place. Innovative new policies also need to be implemented to promote solar in sectors ignored by existing policy initiatives. Finally, holdouts such as Maine and New Hampshire have to get on board. Much of this is already happening. Recognizing the need to iron out the kinks in New Jersey’s groundbreaking solar legislation, policymakers recently enacted a solar “resurrection bill” to address some of the problems. New policy initiatives such as virtual net metering, which promotes solar in the public, multi-family and other sectors, are also being enacted. Finally, the holdout states will soon have stronger incentives to implement SREC-type incentives once electricity rate hikes associated with upgrading the grid that are now in the works take effect.

Although these achievements are commendable, it will take regional cooperation to get to the next level. The Northeast needs to promote a regional SREC market by doing away with fractured, state-specific regulations and replacing them with a single, unified SREC market. Eliminating geographic barriers to SREC trading will create a consistent, long-term SREC market that will accelerate regional investment in solar. While this might seem as daunting a task as getting the European Union countries on board with regard to fiscal policy, the major requirement — the commitment of many of the region’s states to an SREC market — has already been accomplished. Moreover, the precedent for such a regional initiative exists in the form of the Regional Greenhouse Gas Initiative, a cooperative cap-and-trade effort to reduce greenhouse gas emissions among nine of the 11 New England and Middle Atlantic states.

Those who may consider a regional SREC market an impossible dream should look back at how far we have come. As of Aug. 31, 2012 my home state of New Jersey had nearly 18,000 solar installations, compared to only 3 in 2001. In Germany, renewables now supply more than 25 percent of the nation’s energy. In order to get where you are going, you have to have a destination in mind. If we don’t look ahead to establishing a regional SREC market, we will never get there. — Stefanie Matteson

As President Obama noted in his “Blueprint for a Secure Energy Future,” which laid out his energy policy, a key to energy security is simple conservation. Although he has adopted an “all of the above strategy” toward boosting domestic energy production, which includes increased drilling as well as renewable energy technologies such as solar and wind, he has noted that “the easiest way to save energy is to waste less energy.”

That point was hammered home to me when my daughter recently moved out. Despite my constant hounding to turn off the lights, turn off the TV, turn off the computer, turn off the fans, stop standing in front of the open refrigerator, use cold water in the washing machine, etc., my reprimands fell on deaf ears — her deaf ears, and those of her small army of friends, who were trooping in and out all day and evening through the electric garage door, which was in continuous up and down motion. As many parents of teenagers and young adults can attest, it sometimes seemed as if I was spending all my time following her around the house turning off lights and appliances.

But despite the skirmishes over energy consumption, I was still absolutely floored when I got my June electric bill — the first after she had moved out. The household consumption for June was 616 kilowatt-hours, compared to 1,099 kilowatt-hours for May. In other words, the household’s electricity usage had been almost halved. The bill went from $174.15 to $85.04 – a monthly savings of $89.11, or 51 percent. To a penny-pinching single mother who is paying off college tuition bills, that’s a lot of money. I never calculated the difference after my son moved out, but if it was similar, which I suspect it was, I have probably reduced my electricity bill by two thirds or more. And the recent reduction would no doubt have been even greater had my daughter’s move occurred during the summer, since turning on the air conditioning unit and then leaving for the day seems to be her standard operating procedure.

Of course, I can’t really say that her departure has helped the national energy conservation effort, since she will no doubt continue to burn up kilowatt-hours elsewhere until the day arrives when she is the one who is paying the bills. But it does point out the stunning effectiveness of conservation as an energy-saving measure.

Now I’m eager to see what the difference is in my oil bill when cold weather rolls around.

– Stefanie Matteson

Antenna Group is the nation’s largest clean technology public relations firm, representing companies in sectors including renewable energy, energy efficiency, alternative fuels, energy storage, finance, waste management and water. Here, drawn from input provided by our client-partners, is Antenna’s list of the top 10 clean tech trends to watch in 2012. Judging from the changes that are in the offing, 2012 is shaping up to be a critical year in the transition to a cleaner, more energy-efficient world.

1. Energy efficiency goes retro – New construction has taken a massive hit over the last few years, resulting in fewer new green builds, but that hasn’t slowed retrofit demand for energy efficient devices. According to a report by McGraw-Hill Construction in 2011, 78 percent of building owners plan to retrofit existing properties with energy efficient improvements. Driven by the increased awareness in Property Assessed Clean Energy or PACE states (in which property owners can finance solar systems or energy efficiency retrofits through city loans that are paid back through property taxes over terms of 15 or 20 years), Obama’s Better Buildings Challenge and new financing models that make it simple for cities and property owners to do upgrades, expect to see energy efficiency finally claim its moment in the spotlight.
2. Cellulosic biomass comes online; drives U.S. manufacturing jobs – Imagine being able to turn a wide variety of biomass inputs including wood, agricultural waste and non-food crops into fuels, plastics, nutraceuticals (food products that reportedly provide health and medical benefits) and pharmaceuticals. That’s the promise of bio-based materials, which are expected to replace first-generation biofuels such as bioethanol and biodiesel, as well as a wide variety of synthetic chemicals. As strategics such as BASF Corp., DuPont and Dow Chemical Co. enter the cellulosic biomass game, watch for the number of U.S.-based biorefineries to dramatically increase.
3. Recycling finds its true potential – Many of us still remember the awareness campaigns that drove what are now highly successful changes in consumer behaviors with regard to recycling. As went paper, glass and plastics, so go consumer electronics and tires. A number of states already have legislation around recycling what consumers have deemed “waste” and are supporting efforts to renew those materials and give them second — and perhaps even third — lives. Watch for the big box, telecom, tire and asphalt sectors to pick up the sustainability baton for Recycling 2.0.
4. The EV market picks up speed, while Tesla, Fisker get some competition – While we’ve heard a lot about electric vehicles such as the all-electric Nissan Leaf and the gas-electric hybrid Chevy Volt, in fact there are precious few of these cars on the roads. But that’s expected to change in 2012 when a much wider selection of cars that require little or no gasoline will hit the market. Almost every major automaker — and some minor ones — plans to have at least one plug-in model on the market by the end of 2012. These include three models from the world’s leading seller of hybrids, Toyota — a plug-in hybrid version of the popular Prius, the all-electric Scion iQ EV and the 2012 RAV4 EV, an all-electric compact SUV. Also hitting the market in 2012 is the all-electric Ford Focus Electric, which will compete with the Nissan Leaf. Other EV models planned for 2012 include the four-passenger Mitsubishi i-MiEVc, and — for the luxury loving — the Rolls Royce 102EX, the Tesla Model S luxury sedan and the Fisker Karma luxury sports plug-in hybrid. Accompanying the EV rollout will be a dramatic expansion of the national car-charging infrastructure, with Pike Research, a clean tech market research firm, predicting more than 1.5 locations by 2017.
5. Smart meters reach critical mass – For decades, utilities have been forced to rely on customer reports to discover a power outage. This decidedly low-tech approach to reliability is now changing with the national deployment of smart meters that record the consumption of electric energy in intervals of an hour or less, communicate data back to the utility and allow consumers to better manage their electricity usage. And, the national deployment of smart meters is forging ahead: according to federal sources, the current penetration rate is 13 to 18 percent, with a penetration rate of more than 50 percent predicted by 2016.
6. Offshore wind takes root in the Northeast – While small wind continues to grow, the greatest potential for the significant generation of energy from wind lies with offshore wind. Much of the eastern seaboard is ideal for offshore wind as a result of the fact that the relatively shallow waters of the continental shelf make it easier to locate wind turbines far offshore where the winds are the strongest. A 25-megawatt wind farm off the coast of Atlantic City, N.J., which is expected to be the nation’s first, is now moving ahead, and the Garden State can look forward to the construction of larger offshore wind farms with the implementation of the nation’s first OREC, or Offshore Renewable Energy Certificate, a wind incentive similar to New Jersey’s innovative Solar Renewable Energy Certificate, or SREC, which propelled the state to second place nationally after California in solar capacity and inspired similar incentives in many other states.
7. Dropping balance-of-system costs nudge solar closer to grid parity – As a result of a dramatic decline in module prices (prices dropped approximately 40 percent in 2011 — a decline that is expected to continue through 2012), attention has shifted to solar balance-of-system (BOS) costs, a term that refers to costs other than those of the modules. While BOS costs include physical components such as inverters and racking, the largest share of BOS costs is for non-physical costs such as labor and permitting. These costs are also expected to decline in 2012 as a result of industry consolidation resulting from the expiration of the Section 1603 Treasury Grant Program. The solar boom stimulated by the grant attracted many small installers (the “two Chucks and a truck” phenomenon) who will be replaced in a maturing market by larger players who will bring improved operating efficiencies to the industry, nudging solar closer to grid parity.
8. Distributed solar continues to thrive – While debate continues on the role of utility-scale photovoltaic systems in the nation’s energy mix, the small- to mid-sized commercial solar segment has witnessed explosive growth, particularly on flat-roofed commercial buildings that are ideally suited to the deployment of solar. New Jersey, for instance, where strong solar incentives and high energy prices have contributed to a robust local solar industry, has now outpaced California as the nation’s top commercial solar market, thanks to a high concentration of such buildings. In addition to reducing electricity costs and providing a hedge against future rate increases, distributed — or “behind-the-meter” — solar also has the advantage of generating power at the site where it is used, thus increasing energy security and diminishing demand for utility infrastructure. The U.S. growth pattern in commercial solar is mimicking what has occurred in Europe, most notably in Germany, the world’s solar leader, where the German Solar Energy Industry Association estimated in 2009 that 80 percent of capacity was roof-based.
9. Grant-to-tax credit shift means more third-party ownership of solar systems – The introduction of the federal Section 1603 Treasury Grant Program as a substitute for a federal Investment Tax Credit in 2009 created a change in the form of ownership for most commercial solar systems. Prior to the implementation of the treasury grant, which covers 30 percent of the cost of solar, most commercial systems were owned, operated and maintained by third-party investors with the tax appetites to monetize the tax credit. These investors typically sold the power back to the host entities at reduced rates under a long-term contract called a Power Purchase Agreement, or PPA. In addition to requiring no capital outlay, the benefits for the host entities included a fixed rate, a smaller carbon footprint and a visible renewable asset. After the implementation of the Treasury Grant Program, the form of ownership shifted, with the majority of commercial building owners taking advantage of the immediate payback offered by the grant to install and operate the systems themselves. With the grant reverting to a tax credit in 2012, however, we can expect a shift back to third-party ownership.
10. Gas-to-liquids technologies go mainstream – Gas-to-liquids (GTL) technologies, which transform natural gas into liquid transportation fuels, went mainstream with the recent completion of Shell’s $19 billion Pearl GTL plant in Qatar, an Arab emirate. The world’s largest GTL plant will process about three billion barrels of diesel, jet fuel and synthetic oil over the course of its lifetime from the world’s largest gas field. The project, which will reach full production in 2012, will add almost 8 percent to Shell’s worldwide production, making it the company’s primary growth engine for 2012. The completion of the Pearl facility is a harbinger of things to come: GTL technology is expected to play an increasingly significant role in meeting energy demand in the United States, which has some of the world’s largest natural gas reserves. South Africa-based Sasol, which also has a GTL plant in Qatar, has announced plans to build a $10 billion GTL plant Louisiana. If it moves ahead, it would be the United States’ first GTL facility. Once viewed as not economically feasible, GTL technologies are gaining traction in the face of declining oil reserves, high oil prices and increased concern about energy security.

For more information on Antenna Group, please visit www.antennagroup.com.

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On the roof, I had the very intellectual job of ratcheting and wiring and carrying panels. I found out what a weeb is (email me at wei at antenngroup dot com if you want to know too) and I also found out that being OCD is a very good thing when arranging panels. No one wants crooked panels on their roof, and we made sure that everything was laid out just nice. We measured and placed the panels on the racks that had been drilled into the rafter, and proceeded to connect the cables together.

Being OCD

Ratcheting is fun!

Finally, after only 4 hours, it was done! Joe, our construction lead on the roof, stayed back to make sure everything was perfect, and then we all leaped down to take the requisite photos on the scaffolding, and to turn on the connection. It was extremely satisfying, especially when saw that we had beat the Google team, who was still up on their roof.

Here’s Joe on the roof, making sure our wiring isn’t going to lead to an explosion

While I’m not the world’s biggest fan of “Extreme Makeover: Home Edition,” I can appreciate the benefits the show provides for a variety of deserving families, as well as the boost a product can receive from being featured on it. So when I heard one of my clients, Akeena Solar, would be providing a featured solar system to a family in Southern California that was being highlighted on the show, I started getting excited. What could be better for a solar company than a little celebrity endorsement from none other than the well-tanned, well-groomed Ty Pennington with the well-spiked hair?

When I first heard the news a few months ago, the episode wasn’t set to air until the end of March. Immediately, Akeena crews hustled down to San Bernardino to install the system in what amounted to a matter of hours. It was then that I started paying a bit more attention to the show: nearly every weekend the builders featured a new green building element—bamboo floors, eco-friendly paint, energy efficient appliances, and lots and lots of solar systems. And each time the green element was explained, it seemed to become more and more…well, normal, to feature these types of products. They look great and are environmentally friendly, the designers said. They are quality products with real cost-savings benefits, the builders said. They just made sense, Ty said.

Installing Akeena's Andalay Solar Panels

Had going green become mainstream?

For a while, my public relations team was able to rely on the uniqueness of solar when pitching the media. We could leverage the story of that kooky family down the block who installed a solar system, watched their meter spin backwards and never paid the electric company more than $12. But that was because not everyone had a solar system; people weren’t accustomed to seeing silicon panels popping up on rooftops everywhere. Fast-forward a few months, and solar—while not reaching the point of widespread adoption by any means—is no longer unfamiliar. Journalists tell me that the latest installation isn’t big enough, it isn’t sexy enough, and it’s something they’ve already covered. During those lonely hours watching late-night television, green suddenly begins to work its way into the vocabulary of infomercials and QVC. And green guides everywhere are popping up telling consumers how to shop.

It’s still a long road for green products to be the default choice in consumer’s brains. But with millions of viewers tuning in each weekend to see how easily green elements can be incorporated into homes, it’s going to get a lot easier to be green.