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Special Alert: Net Metering in Texas at Jeopardy!

Yesterday, the Public Utility Commission of Texas (PUCT) released a proposed rule in its net metering proceeding. Unfortunately, what started out in legislation as an incentive program for on-site generation is turning into a set of rules that may make it very disadvantageous for Texans to self-generate renewable on-site generation. The PUCT’s proposed rule goes to great lengths to make sure that Texas utilities (TDUs) are compensated for all line charges associated with on-site generation and for whatever metering the TDUs choose to install, including up to two IDR meters on systems over 50 kW. On the other hand, the proposed rule refuses to provide any guarantee that a distributed generation (DG) owner will receive any compensation or credit for energy delivered to the grid. In IREC’s opinion, in the practice of over 35 states and under U.S. code, this is not metering. (IREC is the Interstate Renewable Energy Council)

The PUCT’s net metering proceeding will produce two related rules. The proposed rule released yesterday deals with metering and is being decided on an expedited basis. The PUCT has scheduled an open meeting for March 26^th for interested people to comment on the proposed rule. On the same day, comments will be due on the remaining portion of the net metering rules. Although both are important, the open meeting will be taking up key issues that are key to determining what net metering will mean in Texas. IREC calls on supporters of on-site generation to attend this meeting and voice their concerns. Go to http://www.puc.state.tx.us/calendar/calendar.cfm for more information.

The following summarizes the contents of the proposed rule and the proposed order that accompanies the proposed rule:

Most disturbing, the proposed order determines that netting over a billing period is not consistent with H.B. 3693, the legislation that set the net metering proceeding in motion. This is quite ironic considering that net metering is universally understood as netting over a billing period. According to the proposed decision, “net metering” has various applications in other markets and often refers to “retail roll backs” or “banking” whereby a meter runs backwards. Because H.B. 3693 does not include these concepts and stipulates that metering must be capable of measuring in-flows and out-flows, the proposed order reasons that net metering as it is universally understood is not what the legislature had in mind for Texas. This reasoning ignores comments by IREC and others that meter readings for in-flows and out-flows can be netted to accomplish net metering and that this is in fact the way net metering is accomplished in many states. The commission appears to have been convinced by the utilities that H.B. 3693 can’t possibly call for net metering unless it states that meters should spin forwards and backwards.

The commission also concludes that “[a]bsent the ability to quantify out-flows, there is no basis for the DRGO and REP to determine when the energy is made available and arrive at the time value of this energy in the wholesale market.”  The commission appears to misunderstand its own market. An end of month out-flow reading does not provide any information as to when energy was put on the grid. Nevertheless, the commission uses this as further justification that under H.B. 3693 “it is not sufficient merely to quantify the difference between in-flows and out-flows.” Ignoring the fact that IREC and others have agreed that in-flows and out-flows should be measured, but also netted, the commission nevertheless concludes that a requirement that out-flows be measured is proof that net metering isn’t consistent with H.B. 3693 and therefore no netting should occur.

Following this illogical and seemingly result driven reasoning, the commission concludes that the proposed rule should not include the term “net metering service” because “use of the them ‘net metering service’ could be confusing.” IREC agrees. Use of the term “net metering” in the proceeding’s title has confused IREC into thinking that the proceeding would result in net metering rules.

Also in the proposed order, the commission determines – without providing any justification – that the term “out-flow” and “surplus electricity” are synonymous when used in H.B. 3693 and therefore the commission will use the term “surplus electricity” in instead of the term “out-flow” in the rule. The result is that DG owners will not have to be paid or credited anything for energy put on the grid. This flies in the face of H.B. 3693, which uses the term “out-flow” in the metering section and “surplus electricity” in the retail settlement section. It is a tenant of statutory interpretation that when the legislature uses different terms, it is assumed that the legislature means different things. Ignoring this tenant, the commission’s interpretation substitutes the term surplus electricity for the term out-flow, which had the undesirable effect of suggesting that the legislature was referring to out-flows.

The proposed rule also rejects IREC’s argument that TDUs should be required to install the lowest cost metering capable of measuring in-flows and out-flows consistent with H.B. 3693. Instead, the proposed rule specifies that TDUs may provide up to two interval demand recorders (IDR meters) for systems over 50 kW, despite the fact that a second IDR recorder would be redundant and unnecessary. For customers below 50 kW, a TDU may, at its discretion, install one or two meters of undetermined type with all cost to be paid by the DG owner. The proposed rules even suggest that a TDU may have discretion to install up to two meters for DG customers even if they do not want to measure energy delivered to the grid. This is particularly distressing given that DG owners may not be paid anything for energy put on the grid.

As an additional gift to the utilities, the commission will allow TDUs to assess line charge on all in-flows as opposed to netting in-flows and out-flows as is done in net metering programs in many other states. Despite the fact that H.B. 3693 is completely silent on this issue, the proposed order dismisses IREC’s argument for TDU charge netting as inconsistent with H.B. 3693.

 Maybe its time to let the PUC know how important net metering is to the future of Texas and renewable energy

PUC Commissioners

Barry Smitherman Chairman

Julie Caruthers Parsley Commissioner

Paul Hudson Commissioner

paul.hudson@puc.state.tx.us
barry.smitherman@puc.state.tx.us
julie.parsley@puc.state.tx.us

Written by Philip Proefrock
Tuesday, 18 March 2008

Lots of people are getting excited about all the various technologies for using biofuels of one sort or another as a replacement for fossil fuels, and they may present a short-term option. But looking at the various kinds of energy production that are possible gives some insight into the best directions to promote in terms of developing long-term efficient energy production.

A study cited on EV World makes a comparison between different crop- and direct-production methods of generating energy in terms of miles per acre per year, with some eye-opening information.

At the bottom end of the scale is soybean biodiesel, which can provide only 2,400 miles per acre per year. Corn ethanol is more than six times as efficient, yielding 18,000 miles per acre per year. But because of the relatively slow rate of production from plant-based fuels, these options far fall below the productivity of directly produced energy.

The same acre can produce 10 times as much energy from wind as it can from corn ethanol, 180,000 miles per acre per year. But both corn ethanol and wind power pale in comparison with solar photovoltaic, which can produce more than 2 million miles worth of transport per acre per year.

This is not to completely dismiss biofuels out-of-hand. The cost of an acre’s worth of solar PV arrays is far more than 100 times more expensive than planting an acre of corn. Many biofuels can be produced on marginal lands that are ill-suited for solar. And cellulosic ethanol can even be produced from waste, effectively making it a zero land-use fuel. And presumably the comparisons are based on sites that are optimal for each mode of generation. A site that is highly suitable for harvesting wind energy may not be a good site for growing corn, and vice versa.

The infrastructure and the existing “car parc” (the entire fleet of all vehicles in the country) is also going to take decades to turn over to the point where a significant proportion of the vehicles on the road are electric vehicles. Both a mix of energy sources and regionally appropriate choices need to be part of a comprehensive energy plan. But this offers a useful comparison that suggests where the best allocation of resources should be focused in terms of long-range planning for our energy future.

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Biofuels versus Solar
Lutz’s identification of ‘electric’ car technology as the top priority program at GM may prove prescient if 2006 turns out to be the year world crude oil production peaked. Assuming we are in for a gradual, but steady decline in oil production over the coming decade, the focus on electric drive and related energy efficiency technologies will be critical in more ways than we may think.

With the declining availability of once vast reserves of ancient sunlight we’ve been pulling out of the ground at breakneck speeds, future generations are going to have to rely increasingly on the available sunlight that falls on the planet each day either in the form of biomass-based fuels (biodiesel and ethanol) or on electricity generated by the wind or directly from sunlight.

Five Star Consultants’ Ken Regelson recently did a study that examined these alternatives from the perspective of “yield in miles driven per acre of land per year.” The results are pretty amazing and fall in line with a similar study done in Germany and published in Photon International. See Drive Further on Sunlight.

Obviously, the most efficient way to move a vehicle when measured in use of land area is converting sunlight directly into electricity to run electric cars, everything else with the exception of biodiesel derived from algae, pales by comparison.

Dial in your driving and see what it really costs. You don,t want to miss this one.-Tim
(Click on picture)

By Solar Nation

January 4, 2008On the energy and environmental front, anyone following the presidential primaries today can make some fairly safe predictions about our sustainable future without even picking a winner from the thirteen major candidates. In its 2008 Voters’ Guide, the League of Conservation Voters has compared and tabulated the energy policies of all the presidential hopefuls (see tables below). The League doesn’t over-editorialize, but it’s clear from even an unbiased reading of their positions that the country will go in a diametrically different direction in 2009 depending largely on the party of the 44th president.

To compare the competing Democrats, one would think they were vying to establish which of them is the greenest one of all. And while this could be construed as one-upmanship at this point in the race, it’s also a good indication of how seriously each of them takes ‘green’ issues. They have all published detailed, thoughtful plans on how they would deal with the issues of energy independence and climate change, and what’s most encouraging about them is the extent to which they see the twin issues as interdependent. Here’s a simplified summary of their positions:

For the most part, Republicans also talk up a storm on energy independence, but somehow miss the connection to climate change mitigation. This leads them to interpret our energy future mostly in terms of new nuclear power plants, old coal, clean coal, liquid coal and business-as-usual in Detroit and the oil states. Examining their positions on the same seven issues listed above, we see a wider spectrum of responses, ranging from mildly supportive to insouciant to frighteningly hostile:

As can be seen, Governor Huckabee and Senator McCain lift themselves somewhat above their competitors with support for fuel efficiency and carbon emission limits, but with these exceptions noted, the Republican candidates seem to be sharing a generally reactionary platform. Candidate Ron Paul’s position on energy is perhaps scarier than most, as he does not appear to have given much thought to the seven major issues measured; on fuel efficiency and coal plants he has shown himself no friend to clean energy or the environment, while on the other five issues he hasn’t recorded any position whatsoever.

Giuliani’s and Thompson’s records show opposition to virtually everything beneficial to the environment, and support for continued use of coal in any form. And the campaign promise of the former governor of Massachusetts, Mitt Romney, to bring large-scale clean energy technology to market, clashes with his public opposition to the nation’s largest proposed offshore wind project off the coast of the Bay State.

Overall, the impression given by the campaign literature of GOP hopefuls is that the energy/environmental debate has not been worthy of serious thought, nor has it featured in their spoken rhetoric as much as immigration, healthcare or the Iraq war. Compared with some of the Democratic candidates’ meticulously crafted plans with their targets, pricetags and deadlines, the Republican contenders seem to be paying lip service to an issue they know does not excite the general public. And so far as government support for clean energies such as solar is concerned, most of them mention it only as afterthoughts to ideas for increased use of coal, drilling in the ANWR and building more nuclear plants, measures that may offset some fossil fuel imports but will exacerbate environmental problems already approaching crisis levels.

So in this exercise in crystal ball gazing, you could probably get just as accurate a result with a two-dollar snowglobe. With Huckabee and McCain, and to a greater extent with the six Democrats, there is a sense of recognition of the comparative importance of the energy issue. It’s the recognition that whereas we can survive not finding a perfect solution to some of the more emotionally charged issues in politics today, we can’t survive a failure to address effectively—and on a national scale—the interrelated issues of energy and environment.

It’s also difficult to escape the conclusion that, in the event of a candidate in the mold of Giuliani, Paul, Romney or Thompson being sworn in next January, the brotherly relationship between the oil & gas industry and Government that characterized the Bush Administration will become, if anything, measurably cozier.

Here is somebody to breakdown the odds for you .

Friday, October 19, 2007

Not surprisingly, Austin Energy – the US’s greenest utility – had a significant hand in the development of this admirable program.

Austin Energy is also leading Plug-In Partners, the national grass-roots movement to enlist support from cities, states, utilities and organizations for the development of plug-in hybrid electric vehicles by obtaining pledges for fleet purchases, endorsements, rebate and incentive programs and citizen petition drives.

Mayor Wynn, his Council and his Task Force also deserve plaudits for setting standards the rest of the US would do itself proud to meet.

Austin leads way in energy efficiency; By 2015, code changes will reduce energy use by 65 percent in new homes
Kate Alexander, October 17, 2007 (Austin American-Statesman)

WHO
Austin, Texas, City Council (Mayor Will Wynn)

Austin, Texas: A little city big in New Energy.

WHAT
Austin’s leaders adopted efficiency standards for new homes as strict as any in the US.

WHEN
- The Council approved 4 rounds of building code changes by 2015, the 1st effective January 1, 2008.
- 1st round of improvements cost $1200 and return cost in 5 years.
- All improvement costs returned in 10 years.

Austin Energy Green Building Program 5 Star Rating residence

WHERE
Austin is Texas’ capital city. It is at the edge of the state’s southwest “hill country.” <More…>

You have to LOVE this .

by Jessica Kelmon
Oct 10, 2007

WASHINGTON– It’s a hot, sunny afternoon when Pat Green’s song “I love Texas” erupts on the National Mall, signaling success for a bunch of University of Texas at Austin students wearing Stetson-shaped hardhats who are building a full-sized, competition-ready house.  The team is celebrating power – their solar energy is up and running.

Their project – “The Bloom House” – is intended as a solution for people who want to be environmentally friendly but not at the expense of living the good life.

David Bowers, 26, of UT said his team’s goal is to make a party house that happens to be powered by the sun, which explains why there’s an ultra-mod hot tub with attached wok grill on the deck.  A flat-screen TV still sits on the porch because none of the interior décor was done when the power came on.  But it will be.  And if there’s time, they plan to put a see-saw out back.

The team is on deadline – buildings one of 20 solar-powered houses between the Capitol and the Washington Monument for public exhibition Oct. 12 – 20 in what’s being billed as the Solar Decathlon. Despite the competition, the UT team isn’t stressed. <More…>

Texas electricity market lures big investors

Buffett, Gates, Pickens bet that state’s market will bring hefty returns

By Edward Klump
BLOOMBERG NEWS
Tuesday, September 18, 2007

Warren Buffett, Bill Gates and T. Boone Pickens expect to profit from the rising electricity prices paid by the 23 million people of Texas.

Pickens plans a $10 billion wind farm that may become the world’s largest. Gates’ Cascade Investment LLC created a venture to build power plants in the region. Buffett is part of a $3 billion partnership that is building transmission lines.

Power sales in Texas are increasing 21 percent faster than the U.S. average, the North American Electric Reliability Corp. says.

The state’s electricity prices will rise 24 percent in a year, futures markets show. A shortage of power is likely because Kohlberg Kravis Roberts & Co. shelved $8 billion in new generators as part of its planned takeover of TXU Corp., the state’s biggest electricity producer. The grid may stop providing consistent supplies within two years, according to the Electric Reliability Council of Texas.

“It is a huge market that keeps growing,” said Barry Abramson, who helps manage $28 billion in assets at Gamco Investors. There’s also “the perception that regulators and government agencies are supportive of new power-plant development” in Texas, he said.

The presence of Buffett, Gates and Pickens may draw other investors to Texas, said Calvin Crowder, vice president of the proposed Buffett venture with American Electric Power Co., called Electric Transmission Texas.

“There’s a very real opportunity in Texas to earn a reasonable return on investment in utility, and especially transmission utility, business,” Crowder said.

The spot price for electricity in Texas last week was more than $65 per megawatt-hour, and the price for delivery a year from now is $81.25. Power producers sell so-called forward contracts, or agreements to deliver electricity at a set price, to customers.

Buffett and his partner in February proposed building 1,000 miles of high-voltage transmission lines to distribute electricity from the nation’s largest collection of wind farms.

“Transmission business doesn’t provide extremely high returns, but it also does not have extremely high risk,” Crowder said.

The Hunt family of Dallas, through its Sharyland Utilities affiliate, said in February that it would build an 800-mile electric transmission loop in the Texas Panhandle.

“The cost recovery here is virtually guaranteed,” said Pat Wood III, the former chairman of the Federal Energy Regulatory Commission who is working with the Hunt family.

Hunter Hunt, son of billionaire Ray L. Hunt, helped found McAllen-based Sharyland in 1999. Ray Hunt is CEO at Hunt Oil Co.

Gates and Pickens are buying or constructing power-generating plants.

The cost of electricity for Texas’s industrial consumers was 25 percent higher than the national average, at 7.83 cents a kilowatt-hour in the first six months of 2007, compared with 6.25 cents nationally. For residential customers, the average was 12.4 cents, 19 percent higher than the U.S. average of 10.41 cents.

Texas has “the best market structure that I’ve seen in the United States,” said Jeff Sterba, chief executive at PNM Resources Inc., the owner of New Mexico’s biggest utility.

PNM and Cascade, an investment vehicle for Microsoft Corp. co-founder Gates, announced in November a joint venture to build and acquire power assets in Texas and other Southwest states. The venture has two plants in Texas and is involved with NRG Energy Inc. on a generator project in Baytown.

Mesa Power, controlled by Pickens, the Dallas hedge-fund manager who made his fortune in the oil industry, is planning a 4,000-megawatt wind farm in the Texas Panhandle. Mike Boswell, vice president at Mesa, said the project might begin delivering power in 2011.

The need for more power in Texas is greater than ever after KKR and TPG Inc. agreed to cancel eight of 11 planned coal-fueled generators as part of the $45 billion takeover of TXU announced in February. The pledge was needed to win support for the deal from environmentalists and mayors who were concerned about increasing pollution.

The main state grid operator, known as Ercot, said in June that the so-called reserve margin, a measure of surplus capacity, may drop below 12.5 percent, the minimum needed to maintain stable supplies, as early as 2009. The estimate for 2012 is 5.9 percent.

The losers include more than 23 million people in Texas and manufacturers such as Austin-based Dell Inc., the second-biggest maker of personal computers, and Nucor Corp., the Charlotte, N.C.-based steel producer.

For steelmakers, power is among the three top costs, along with raw materials and labor. Nucor has a recycling plant in Leon County, where power costs have climbed more than 80 percent since the retail electricity market was deregulated in 2002.

Nucor decided to build a sheet-steel plant in Arkansas rather than Texas because of the high cost of power.

Austin-based Temple-Inland Inc., the state’s largest forest-products business, pays almost twice as much for power at its East Texas operations as competitors in the Southeast, according to Tony Bennett, chairman of the Texas Association of Manufacturers and vice president of government affairs at Temple-Inland.

“It is going to become more and more critical that we get this cost under control,” Bennett said.

August 20, 2007 – The Citizenre Corporation is making solar electricity (photovoltaic, or “PV”) simple and affordable. Today Citizenre announced its finance team, providing the first look at how the company’s innovative business model works.

Citizenre’s groundbreaking “REnU” program lets households rent solar systems. Several forms of structured finance support the company’s activities. Guiding Citizenre is a team of distinguished experts, all experienced in the application of structured finance to the renewable energy industry:

Brown Rudnick Berlack Israels LLP Ronald S. Borod and Jonathan C. Black, both of Brown Rudnick’s structured finance practice, assist Citizenre in developing the Company’s corporate finance, real estate, vendor finance and banking relationships.

“We are delighted to serve as special counsel to Citizenre, helping to secure the company’s major funding for its Northeast manufacturing facility,” said Ron Borod, chair of Brown Rudnick’s structured finance practice. “Citizenre expects many forms of revenue – from PV rentals, franchise revenues and long-term equipment sales agreements, among others—that create an excellent foundation for securitization and structured finance.”

Brown Rudnick is one of the nation’s premier law firms in the development and application of structured finance to the renewable energy industry. The firm has teamed with both issuers and underwriters to use Asset-Backed Securities to make financing more available and more efficient for innovative renewable energy companies like Citizenre.

Structured Growth Partners “Citizenre is perfectly situated for structured finance by virtue of several unique ‘Best of Breed’ elements in its business model,” said Douglas R. Grossinger, President of Structured Growth Partners (SGP). “These result in a far lower cost of PV to its customers and can therefore be leveraged to derive funding for the company’s infrastructure and growth.”

SGP partners Grossinger and Mark Lundquist work in close collaboration with Citizenre and Brown Rudnick to raise finance for Citizenre’s manufacturing activities and in the structuring of power purchase agreements with creditworthy large customers.

Anthony Dixon serves as senior advisor to Citizenre’s finance team, drawing on his international perspective and 16 years experience in securitization, structured finance, and debt capital markets. Most recently Mr. Dixon was Managing Director in the Financial Institutions Debt Capital Markets group for Citigroup in London, where he raised over $4 billion for clients in the European, Asian and US debt markets. His securitization work has been recognized with the Asia Securitization Deal of the Year 1997 and the Japanese

Securitization Deal of the Year 2001. In describing the work of Citizenre’s finance team, Mr. Dixon said, “Citizenre has undertaken to reduce the cost of PV use for all customer categories. The company’s planned use of structured finance will help achieve that objective. It’s an exciting business model, an extremely capable team and a great time to be launching Citizenre”.

About Citizenre Corporation
Founded in 2005, Citizenre Corporation introduced its “solar made simple” residential rental model in late 2006. High-volume manufacturing, a national network of branded franchise installation companies, proprietary technology and innovative finance will enable Citizenre to achieve similar breakthroughs in cost and customer service for non-residential solar customers as well. Further announcements about Citizenre’s plans and achievements are expected throughout the fall. www.citizenre.com

About Brown Rudnick Berlack Israels LLP
Brown Rudnick’s Structured Finance Group provides legal services in all types of structured finance and securitization transactions. This group has special expertise – recognized internationally – in developing innovative structured finance products, derivatives and financing programs in the renewable energy and climate change space that are both cutting edge and commercially viable. For more information see www.brownrudnick.com.

Examples of the firm’s recent work in securing finance for renewable energy projects:

• In June 2006, Brown Rudnick counseled the European Bank for Reconstruction and Development (EBRD) in creation of its Multi-lateral Carbon Credit Fund (MCCF), the only carbon fund dedicated to countries across central Europe and central Asia. MCCF projects will span industrial energy efficiency, power plant and district heating renovation and renewable energy across all 29 EBRD countries.

• In June 2007, the firm announced completion by its client, a Portuguese diversified industrial group, of the first round of debt and equity financing for wind projects in Latin America. Overall, the $2 billion in projects will generate approximately 220 MW of power and will be completed by 2011.

About Structured Growth Partners
Structured Growth Partners has deep expertise in developing complex structured finance solutions for project finance and corporate growth capital. The firm is headquartered in Bala Cynwyd, PA (near Philadelphia) with affiliate partner offices in other US cities, and has developed a diverse deal flow involving United States and international business ventures. SGP utilizes its partners’ multidisciplinary backgrounds to accelerate client success through financing and strategic partner development in several industries, including renewable energy.