There is a debate quietly raging about the future of the solar power industry in the months and years ahead. While some feel the current economic situation will impede the growth of solar, many believe that the eight year extension of investment tax credits for solar will create the incentives needed for solar energy to grow across the U.S., even in states where the industry has not been very active. Another big plus is the commitment of President-Elect Barack Obama to renewable energy. Obama wants 25% of U.S. energy to be from renewable energy by 2025 and he plans to invest $150 billion in renewable energy over 10 years to create 5 million new green jobs. Even in scenarios where some priorities are pushed off to a later date to deal with the economy first, tackling clean energy would stimulate the economy now as well as providing a lasting benefit for the future.
The solar boom is not just for big businesses. All of this also creates the opportunity for the creation of small entrepreneurial businesses that install solar systems or participate in the solar boom in other ways.
Solar photovoltaic panels will provide one component of the solar future, with companies like Suntech helping to make it happen. Suntech is one of the world’s largest solar companies, with production capacity steadily growing. As part of Suntech’s move into the U.S. market, industry veteran Roger Efird joined Suntech in 2006 as the President of Suntech America. Suntech has also opened a joint venture called Gemini Solar Development Company to focus on utility scale projects in the U.S., and is moving to greatly expand its share in the U.S. market for photovoltaic (PV) solar. I had the opportunity to speak with Roger Efird at the Solar Power International 2008 conference where we talked about the prospects for solar in the U.S. and the opportunities for solar entrepreneurs:
Glenn Croston (GC): How is Suntech doing?
Roger Efird (RE): We have pretty much been doubling our revenues and manufacturing capacity annually since being founded and as of about a year ago we became the world’s largest manufacturer of solar modules. They came to the U.S. and opened their first operations about 3 years ago and have both crystalline and thin film technologies, so they’re very active players in both traditional technologies and in what might be considered future trends of solar. I don’t think there’s a company better positioned to take advantage of the expected boom in solar energy.
GC: What kind of growth do you see ahead for solar?
RE: Solar in the U.S. has been growing at 30-35% a year, and with the investment tax credit passed, the optimistic view is for 60% growth. Navigant consulting is projecting 60% growth in 2009. There are a few things in this package that just passed that are going to spur the growth.
One is that the extension of the tax credits for eight years, long enough for companies like Suntech to invest in our infrastructure. One or two years is not long enough to make a heavy investment, but eight years is.
The second thing driving growth is that for the residential market, the cap on the credit at $2000 has been removed. For the average American home this makes the tax credit go from $2000 to $10000. That’s a big increase in the tax credit for residential and we have to believe the residential market will grow dramatically as a result of that.
GC: In the past the solar market was mostly concentrated in California. Will this now expand now across U.S.?
RE: There are a number of states that have an incentive program at the state level that was not large enough to stimulate solar growth, but with the new credit they will. North Carolina, Maryland, Pennsylvania, and maybe a dozen states will now have viable residential solar industries. The Mid-Atlantic region and the Northeast will see a big boost because most of those states have a solar program that has been up and running for a while, and this will boost those state programs to viability.
Even in states with practically no solar, where the word ‘solar’ has never been used in their legislature, the 30% tax credit will spur the early adopters who love high tech, have high income, want to make a statement, and want to go green.
The rule of thumb has been that if a system will not pay for itself in 10 years then you will not have the ability to build a viable market. For commercial systems the rule of thumb is a system needs to pay for itself in 7 years to be viable. Now a lot of states move inside that 10 year window.
Another action taken in this U.S. move was with the utilities. Since 1978 utilities have not been able to take a tax credit of any kind for the installation of photovoltaic systems, but now that has been changed. At the far end of the spectrum are the huge solar farms, the big multi-megawatt utility owned generating plant. This big solar farm business has been very slowly emerging. Now with this change in the law it will emerge rapidly.
GC: Is power from solar thermal, concentrated solar power, cheaper than from photovoltaic systems?
RE: Several people have asked me if I see us competing with CSP (Concentrated Solar Power) systems. And the answer is no. CSP takes some pretty large economies of scale. They are viable at a certain size, in terms of megawatts. We’re not going to compete -- there’s going to be a rule of thumb. Up to a certain size, photovoltaic will be the best alternative, but for larger systems, CSP will be. It’s going to be a matter of what the customer wants. If he wants more than 20 megawatts, maybe CSP, while smaller sites would be PV.
GC: And for distributed power?
RE: That’s where PV has no competition. You can’t put concentrated solar on someone’s roof. PV has no competition in distributed generation, comparing PV to the retail rate in this market. The only viable route on rooftops is PV. In terms of what technology has the most secure future, I think its PV. If the market goes to large solar farms, we’re in, and with residential systems we’re in.
GC: How will the credit crunch affect the solar market?
RE: The residential market for PV systems will probably not be affected. Early adopters are upper middle class who do not borrow, do not need home equity for the system. They have disposable income and spend it on solar
On the other side of the fence, for the large utility scale installations, there’s is a debate going on, because it will be harder getting money and getting financing. On one hand that’s true and on the other hand it’s not. There are two theories and one says we’ll be hurt and the other says we won’t. If you’re going to large financial institutions for money it’s going to be hard right now. A lot of the funding for these projects is from private financing though.
If you’re a private investor suddenly solar is going to look better than ever. Where before the returns on solar investments maybe did not look so great compared to other investments, suddenly we’re looking a whole lot better than everybody else. And the risk for investment in these projects is incredibly low. The jury is still out though.
GC: Even if you’re hurt, if you’re coming down from 60% annual growth to maybe 30-40% growth, it’s still pretty good.
RE: How many industries consider 25% growth a bad year? I’ve been in solar for 25 years, and I know historically it’s been somewhat economy proof, all over the world. Even if the economy is down, the solar business seems to be okay. Maybe it will see 15% growth instead of 30%.
GC: What is the long term impact of government incentives on the growth of the solar market?
RE: We need stable incentives. Germany has a solar market 8 times the size of the U.S. market, because they have a long term incentive program and stability, and that market has grown and grown. The U.S. has been different, with incentives going up and down and up and down.
We have something similar now, like Germany. The U.S. is by far the largest consumer of energy. Today about 10% of the solar business in the U.S., but we are going to be the biggest market for solar and the general feeling of the industry is that this rapid growth for solar begins immediately.
GC: What is the opportunity for entrepreneurs who want to get into the solar market?
RE: I think the residential business is going to explode fasting than the rest of the market. If I was going to start something, that’s where I would start it.
In my vision of the solar dealer I think of the guy who lives within a few miles of where you are, and he’s the Carrier air conditioning guy. He lives in your community and has as customer base of a few thousand people he has sold systems to and services them. He’s got experience with electrical work, and experience with mechanical engineering. He’s accustomed to getting up on a roof and he has a warehouse, tools, trucks, front office, secretary, and a database of customers who are happy with his work. And he has a son that is getting out of college and has a degree in environmental engineering.
That is the profile of someone who could be a dealer for solar systems, where it fits in with what he does now, covering thousands of homes. If I’m a homeowner and looking for a solar system, I want somebody I know, who will be around in the future, 5-10 years down the road. I would imagine just like that HVAC guy who sells you an annual maintenance agreement, he can do the same for solar. You can say the same thing about a small electrical contractor and maybe a roofing contractor if he brushes up electrical work.
Another thing about the solar industry is that it has so much potential in terms of job creation. It is estimated that just PV solar will create 450,000 jobs, and this does not even consider the removal of the cap on the tax credit. When Obama’s on the TV talking about the economy being driven by green jobs and businesses, I believe that’s absolutely true.
The Opportunity Green 2008 conference held at UCLA November 8-9 lived up to its name.The green leaders there had many backgrounds and perspectives, but one message they shared in common was that going green is more than just a challenge for business.It is an opportunity as well, and a big one at that.
Where is the opportunity?For Tom Szaky, founder of Terracycle, the opportunity is in our garbage.Garbage is one of the few things we pay people to take from us, making it a low cost source of materials.Szaky founded Terracycle in 2002 putting worm poop fertilizer into old plastic soda bottles.Today, he is working with a variety of brands to take back their products and make something new out of them.Capri Sun juice pouches are being reborn as pencil cases and lunch boxes.Target bags are being given a new life as reusable shopping bags.Bare Naked granola bags are being refashioned into Bare Naked shower curtains.Consumers and businesses get involved to help return products to Terracycle, bringing them full circle.Szaky says “there is nothing that cannot be made out of garbage”, and he has a long list of partnerships in the works proving his point.“The opportunity to change the biggest companies is massively underserved and in massive demand,” Szaky commented, urging entrepreneurs to take their great green idea to these big companies.“There is the opportunity to go big. People say yes all the time.”
As the Director of Strategy of the green business incubator OZOlab, Rachel Simmons is looking for opportunities to solve problems that are already widely acknowledged in the media, making them ripe for change.OZOcar was founded in 2002, providing an eco-friendly town car service in New York.OZOcar provides transportation in fuel-efficient cars with first class service, addressing the need for cleaner transportation with a stylish and sustainable solution.Another business from the incubator, OZOwater, is developing a solution to the widely publicized environmental challenge of bottled water.The problem of bottled water is talked about everywhere, creating the opportunity for those who can address this need.For OZOwater the solution is about more than just providing bottles or filters.OZOwater is rethinking this $16 billion market by positioning their product as an eco-friendly beverage, and not just a filter.What people really want, after all, is something good to drink.
The opportunities are everywhere.Rick Ridgeway of Patagonia talked about the opportunities in our clothes, making them from more earth friendly materials, taking back old clothes, and giving back through 1% For the Planet.For Nike the opportunities are in our shoes.Mark Shaw of Rickshaw Bagworks is finding opportunities for fashionable bags like the Zero Messenger bags.
And the challenges for green products and services?There are plenty, particularly for green products to break out of their niche into broader and bigger markets.Early adopters will buy green products if they are more expensive but most people will not.One big challenge is price.
When asked about how consumers make decisions, panelists agreed that price is the most important feature.“Nobody is willing to spend more on products going green on a real mass scale,” Szaky said, framing the challenge for green businesses by saying that green products must be not just greener, but better and cheaper than the alternatives if consumers are going to adopt them in large numbers.Zem Joaquin, founder of Ecofabulous, said that consumers should not have to sacrifice to go green, that green products can be and need to look good and work well, in addition to being good for the environment.“We need to rethink how we go about this,” giving consumers what they want.She gave the example of early green products that were rough or unappealing.Rough, brown bed sheets were not big winners in the market, but if sheets are soft, colorful, feel good, look good, and are at a good price, and they just happen to be good for the planet as well, then people will buy them.
Josh Dorfman, author of “The Lazy Environmentalist” and founder of Vivavi, summed it up by saying “Selling green means framing the message in terms of personal self-interest”, providing products reflecting what the consumer values rather than a way of imposing green values on the consumer.We are not perfect, and neither are the things we buy but finger pointing and scolding consumers are not going to have the impact needed.Innovative businesses are making it happen by providing a positive and attractive alternative.Dorfman provided a new definition of sustainability, putting it this way, “To live as well as we possibly can while bringing our lives into balance with nature.”
The opportunities for green businesses are huge, and the challenges are significant as well, but nothing that can’t be overcome with the work of successful green entrepreneurs like these.“The challenge,” said Szaky, “is to transform the 99.9% not sitting in this room.”That’s a big challenge, and also a big opportunity.
Earlier this week, the day after President-Elect Obama’s historic election, I had the opportunity to participate in a panel discussing “What’s next for the green economy?” hosted by the Eco Investment Club. “What’s next?” seems to be the question on everybody’s mind as we all work to understand what this election means for the direction of our country, our economy, and our own individual lives in these challenging times.
In addition to myself, the panelists included Scott Anderson (founder of the Green Skeptic), Oren Jaffe (co-founder of EcoTuesday), Jan Schalkwijk (CFA & Principal of JPS Global Investments), and Dave Iverson (Economist and Environmentalist). rior to the meeting, attendees had the opportunity to post questions about a variety of issues, and the questions revealed the anxiety people have about the economy and it’s impact on green businesses:
“Will consumers stick with Green during tough times?”
“Is investment in renewable energy too risky right now because of low oil prices?”
“Does carbon regulation (tackling climate change) cause real job creation?”
Obama has a lot on his plate, but the future health of our environment is one of the priorities he has repeatedly affirmed, including it in his speech last night. I believe that like many people he sees that dealing with these environmental issues is both a challenge and an opportunity for our nation and for businesses that lead the way.
He has stated his commitment to tackling climate change through a cap and trade system, and to establishing a national renewable energy portfolio standard. He has reaffirmed the opportunities that can be found for millions of green collar jobs providing renewable energy and energy efficient buildings. These are not easy issues, and will require a lot of work to bring to fruition, but I believe he means what he says.
Smart policy on the part of the new administration can drive the economy in the right direction, helping green businesses, the broader economy, and the environment. Environmentalists have been telling Americans for decades to drive smaller cars, with little success when oil was cheap. As soon as gas hit $4.50 a gallon, there were, for a time at least, millions of new environmentalists driving less and buying smaller cars.
By putting a price on carbon, we create the right incentives to shift the economy away from coal and other fossil fuels and toward renewable energy. It may not be easy, but it can be done, and has been done by others. Europe and Japan did not abandon fuel efficiency when oil was cheap, and as a result they are today way ahead of the US, with much more energy efficient economies. What happens to oil in the short term is hard or impossible to predict, but the long term trend is absolutely predictable. If we are in this game for the long term, then renewable energy is the way to go. The US needs consistent government policy that thinks of the long term impact on people and planet, as well as the economy.
Some feel that action on climate change is an expensive proposition and is unnecessary or not worth it, but taking action on climate change is one of the biggest business opportunities of our time. What if our businesses are developing new technologies for cheap renewable energy and low carbon living, and selling this to everyone else? Leaving things as they are, depleting natural capital and destroying ecosystem services, puts an unimaginable burden on future generations, an incalculably high cost down the road, far greater than the investment that we can make today to make it happen. If we take action and become leaders, the world will beat a path to our door, creating jobs, companies, etc.
Environmental issues like tackling climate change and providing clean energy are not the only challenges on Obama’s plate, and these problems will not be solved overnight. He will not solve these on his own. With his leadership, and the help and support of the people, we can face these issues together to create a healthy and green economy.
While the green building movement is making great progress most buildings still waste a great deal of energy, often through the roof. When the sun beats down on a roof it can heat up the rest of the building as well, making air conditioners pump the heat out again. Luckily we already have solutions available today for this problem, creating cool roofs using membranes, coatings, or other materials that reflect light and heat. Installing cool roofs can reduce roof temperatures as much as 100 degrees F, and businesses installing these cool roofs help people save money and do the right thing for the environment at the same time.
Providing further support for cool roofing, several states are starting to require cool roofing as part of their building standard. In California Title 24 building standards now require cool roofs on new commercial rooftops, and on significant repairs of existing rooftops. This requirement is being expanded in 2009 to start to include residential rooftops as well. The Cool Roof Rating Council helps test and certify cool roofing material, and provides information about the cool roofing industry.
Michael Magallanes is the VP of Sales for CCJJ LLC in specialty building materials, which produces Coat ‘N’ Cool coatings that reflect light and heat, keeping roofs cool. Applied like paint, their products come in a variety of colors and by keeping the roof cool they can also help roofs and HVAC equipment to last longer, providing further savings.
How can an entrepreneur get into the cool roofing market? Wait long enough and the cool roofing market will come to you. In California, this is already happening. As Magallanes says, when the government mandates cool roofing “most roofing contractors would automatically be in the cool roofing business whether they like it or not.” The list of states that require cool roofing in at least some buildings is growing, including requirements in Texas, Florida, Georgia, South Carolina and several others.
By getting into cool roofing today roofers can become well established in the growing market being created. Magallanes suggests “The best step to take is to be proactive and start using cool roof materials now to get in and stay ahead of the game. Join the Cool Roof Rating Council. Join the US Green Build Council (www.usgbs.org). Consider becoming a LEED AP through the USGBC. Build a green portfolio that will pay big dividends in the future.”
The benefits of cool roofs are significant, and another example of turning a problem into a rapidly growing opportunity for businesses to both do well and do the right thing.
It’s hard to believe, but after a long hard campaign the election is almost here finally, just a few days away. What will the results of the election mean for the green economy? Both Barack Obama and John McCain have said they support increased use of renewable energy and they have both proposed taking action to fight climate change. With such a flood of downbeat economic news though, some pundits have predicted that green initiatives will fall by the wayside, that even if climate change and renewable energy are worthy causes, we cannot afford them right now. And yet, both candidates maintain their outspoken support for renewable energy and action on climate change, and their continued commitment to taking action on these important issues. Can they be taken at their word?
Many competing pressures and influences will shape how well the next president can put his campaign pledges into action, but there is good reason to believe that they are not just paying lip service to these issues. The main reason is that they see the green economy is an opportunity to solve many of the problems we are facing. Both candidates see how decreasing our use of oil and coal and increasing our use of renewable energy can create millions of jobs, improve our security, and help the environment. They see this as an opportunity to make a difference in the future course of events on a global scale, and create a much brighter future. Rather than letting our current economic woes be the end of the green economy, the green economy can help turn around the rest of the economy. They see that it’s not just a matter of whether we can afford to take action, but whether we can afford not to.
Whoever wins, I think we will see a strong move by the government to support green initiatives. That is not to say the candidates are identical in their positions though. There are important differences between the candidates on energy and climate issues. Here is another analysis. Barack Obama favors a federal renewable energy standard of 25% by 2025, while John McCain wants to encourage the growth of renewable energy using other mechanisms. Both candidates support a cap and trade system to reduce greenhouse gas emissions, with John McCain targeting a 65% reduction in greenhouse gas emissions, and Barack Obama targeting an 80% reduction.
I already voted myself, although I’m not saying who for. You can guess if you want, but the important thing is to see for yourself who the stronger candidate is on these issues and then go cast your own green vote for a strong economy and a healthy world.
When we think of solar power the first thing that comes to mind is usually rooftop photovoltaic panels and utility-scale solar farms growing in the desert, but there is much more to solar power than this. Solar can also provide the perfect power source when the grid is unavailable or unreliable, and can be adapted readily for mobile power applications. To take advantage of this opportunity, companies are designing, producing and selling mobile solar systems for use in outdoor products, charging mobile electronics, emergency lighting, and for uses in regions with poor power quality or consistency.
Innergy Power Corporation designs, manufactures, and distributes a wide variety of products providing mobile solar power, including products like “Solar Binders” with integrated solar panels producing 15 or 22 watts of power, and the “Solarmonkey”, for charging power-hungry mobile electronics like smart phones and iPods. For emergency power solar also offers some strong advantages. Diesel generators providing backup power are noisy, polluting, and require a constant fuel supply, something that might not always be available in an emergency.
Mobile solar power systems such as Innergy’s Portable Solar Charging Station have many advantages as the primary power source, for many applications, where the grid is not reliable. Darrell Musick, President and CEO of Innergy Power, reports that their products attract the rapidly growing group of mobile phone users, many of whom live in parts of the world without reliable power from the grid. “Other needs are focused on our Portable Solar Charging Stations,” Musick said,” which will allow businesses and residents in markets with poor grid quality of power (Iraq, Nigeria, Turkey) to have a reliable sun powered way to run a wide range of devices. They are currently negotiating agreements with 17 potential distributors around the world.
The market for portable solar applications like these has grown steadily, in parallel with the growth of the rooftop solar market. Musick reports that Innergy “has seen significant increases in the demand for portable solar products over the past two years.” The potential range for portable solar applications remains huge, integrating not just solar power but also batteries for power storage into an expanding array of products. With expertise on the integration of solar and batteries into products, Innergy is also helping companies bring products to market through contract manufacturing.
Since Innergy Power has almost 20 years of battery manufacturing experience it was a natural evolution to move into the design and manufacturing of EV batteries with targets ranging from eBikes to PHEVs. Innergy is one of the companies owned by ECOtality, and works closely with another ECOtality company, eTec, in developing EV batteries and EV charging solutions.
Using the sun as a free, reliable and inexhaustible source of energy remains a great solution for a broad range of products, and a powerful opportunity for many different businesses. The more the market grows, the more opportunities it opens up for new renewable energy products and sustainable growth.
The reports of the death of renewable energy are greatly exaggerated.
The crashing price of oil is driving some to predict the death of renewable energy, again. Oil costs less than half what it did just a few months ago, falling from $147 a barrel at its peak in July 2008 all the way down to $65 a barrel as of October 22. The price of natural gas has also declined. For the many families strapped for cash these days this provides welcome relief, particularly with the rest of the economic news so downbeat, but this relief is not without a downside.
Environmentalists have been saying for decades that we should drive smaller cars in the US with little to show for it. But when the price of gas hit $4.50 a gallon we were all environmentalists, driving less, connecting errands, carpooling, and buying smaller cars. In the first half of 2008 the US decreased oil consumption, something not seen for years. If the price of gas drops and we go back to our old habits, the danger is that we will wait until the next crisis before taking action again. The next time the price of oil goes up it might keep on going, as some thought it might this time.
With the price of oil and natural gas dropping, and the economy in the grasp of the credit crunch, some say that the booming renewable energy industry will slow or halt its growth. As natural gas became more expensive, it helped make wind and solar more competitive for power production. As the price of oil and natural gas falls, renewable energy is looking more expensive.
I don’t think renewable energy will be abandoned though, and here’s why.
For one, even at $70 the price of oil is still high compared to historical standards. It’s only low compared to where things were earlier in 2008. And OPEC is moving to cut production and stabilize prices, halting the slide.
Another factor is that the price of oil will not be this low forever. I’m not going to predict when it will happen, but I can easily predict that the price of oil will rise again. I haven’t a clue what the price of oil will do tomorrow or next week (nobody does), but it’s a virtual certainty that given time the price will move upward again.
You don’t need a crystal ball to tell what will happen to oil over the long term. The world’s oil reserves remain finite. Oil won’t last forever and it’s a question of when, not if, oil demand will outstrip supply and what will happen to the cost.
Another predictable long term trend is continued global development. While the US and other economies have slowed dramatically, the world economy will pick up again in the months and years ahead. Some expect China’s economy to continue growing steadily, if at perhaps a slightly slower pace at the moment. With this growth will come increasing oil use.
Given the size of our reserves, or the lack of it, the US cannot drill its way out of the current situation no matter where it drills, even if oil rigs are lined in ANWR, Miami and Malibu. As it turns out the rest of the world cannot drill its way out of the situation either.
We can breathe sigh of relief for now and worry about other things, putting the energy question off until the next time the price of oil and other fossil fuels spike. We can worry about climate change later, with the next catastrophic storm. Or citizens and government can work together to create and implement a sensible energy policy that we can all live with and that creates a healthier economy and environment for the long run. The extension of the tax credits for renewable energy is a big step in the right direction. Renewable energy will be an increasingly important and economically viable solution, helping both our economy and the environment.
At the Solar Power International 2008 Conference held this week in San Diego (October 13-16), the mood was very upbeat. With over 20,000 attendees expected at the meeting, it’s one of the largest solar events around and with the recent US Government extension and expansion of tax credits for renewable energy there was good reason for optimism. The 30% tax credit for renewable energy has been extended for eight years, and the previous cap on residential tax credits has been lifted, all of which should have a great impact on the market for solar, particularly for the residential market. Solar has already been growing at a blistering 40% a year, and even in the midst of the current anxiety about the economy and the stock market, almost everyone I talked with at the meeting expected the industry to continue growing rapidly in 2009.
There is a lot more to solar than producing and installing photovoltaic panels. Many representatives of these businesses were present, of course, but the opportunities don’t stop there. The opportunities being developed by businesses include:
These are only a few examples of course. There are many other companies and business plans, with more joining the mix all the time. And what about the credit crunch? It’s hard to say that this, or any industry, will be completely unaffected and business is likely to slow for those dependent on home equity loans or credit from large banks. Many in the solar industry are finding though that the impact of these issues has not been great so far, or they are finding their way around these limitations. Wealthy investors are finding that financing solar systems, forming LLCs that buy solar installations, can produce a healthy return of as much as 15% with almost no risk.
If the solar business slows, producing only 20-30% growth, this is still a great rate of growth by any normal standard. Only time will tell what happens, but so much support for solar and so much room for long-term growth, the opportunity still looks tremendous.
With the news full of failing banks, dried-up credit and falling stock markets, it’s no shock that people are afraid about what’s ahead, entrepreneurs included. And yet even in the midst of all this, the opportunities ahead are bright for green businesses providing renewable energy.
Along with the bailout bill passed last week, known in government circles as the “Emergency Economic Stabilization Act of 2008”, Congress attached an extension and expansion of tax credits for renewable energy. The impact of the $700 billion bailout remains uncertain as this point, but the impact of these incentives for renewable energy is likely to be huge, helping to solve our financial problems, our climate problem, and our energy problems at the same time.
The bill provides for an eight year extension of renewable energy investment tax credits covering up to 30% of the cost of solar power projects for homes or commercial sites. The short time frame of these tax credits in the past, and their frequent expiration from year to year have created enough uncertainty to dampen long-term growth. Eight years is long enough to allow for long-term planning, and encourage long term growth.
Along with the extension of the credits, the $2000 cap on the tax credit for residential systems has been removed. With a residential system of $30000, the tax credit will be $9000 in 2009 rather than being limited to $2000 as before. While a large percentage of the solar market has been limited to states like California that have provided the most generous state-level subsidies, removing the cap will greatly expand the market for solar power across the country.
Distributors and installers will see opportunities expand nationwide. A study by Navigant Consulting found that extending these credits will create 440,000 jobs, contributing to the growth of green collar jobs, and these numbers did not include the removal of the cap. When I spoke recently with Gary Gerber, CEO of Sun Light & Power in the San Francisco area, he confirmed that business has remained strong despite economic events, and he expected the passage of this measure to bring still greater growth. Large producers of solar panels like Sharp Solar are also predicting a rosy future, and VC funded new solar companies like Solyndra are continuing to plow forward full-steam ahead, downturn or not.
Other renewable energy technologies will also benefit from the measures in the bill, including small wind, geothermal, fuel cells, and ocean energy from waves and the tides. The measure allows utilities to take advantage of the investment tax credit as well, removing another restriction, and allows clean energy bonds to be created to support the creation of renewable energy production.
As renewable energy continues to grow and its costs fall, it’s becoming increasingly competitive with power from other sources like coal. As Google says the goal is to make renewable energy cost less than coal. These tax credits will help to get us there. We're not out of the woods yet by a long shot, but it's time for some good news and the move to a green economy may help us dig our way out.
The financial crisis seems overwhelming, with dire warnings that things may still get worse, bailout or not. People are worried about what lies ahead for business, but believe it or not the news is not all bad. There are still plenty of opportunities for green businesses and careers helping us all use resources more wisely, wasting less and saving money. Even as the traditional un-green economy run into unprecendented challenges, going green holds bigger opportunities than ever.
In many ways the current financial crisis and the green movement are related. Many feel that the financial crisis was entirely predictable. It all started with the idea that we could take risky sub-prime mortgages, bundle them up, securitize them, and give them a quick rinse to wash the risk away. Turns out it does not work that way, and now that things are unravelling we’re all paying the price. The climate crisis is similar. The risk created by of dumping billions of tons of greenhouse gases in the air every day are known and they are severe, but most people still believe that nature will take care of this risk for us, washing it away.
At West Coast Green on September 27, Al Gore talked about those responsible for greenhouse gas emissions, creating these “sub-prime carbon assets” loaded with risks for the environment, for the economy, and for all of us. Although the financial crisis is important today, the climate crisis and other environmental challenges are even larger long term issues. Nature is servicing our sub-prime carbon assets, and at some point this carbon debt will come due, with growing failure of the undervalued eco-systems services that nature provides. The question is whether we take advantage of the opportunity to act now, or, like the financial crisis, run into the wall and then try to pick up the pieces. Despite Kyoto and a great deal of talk, economies around the world have kept on pumping unprecedented levels of greenhouses gases into the atmosphere. The Arctic icecap melting has proceeded to an unprecedented extent in the last few years, and the carbon dioxide levels in the air continue to increase, despite predictions that slowing economies might slow down emissions. The climate continues changing more quickly than anyone thought possible.
There are solutions for climate change though, and the first steps are being taken to turn things around. Most people agree that harnessing market forces will be the best way to reduce climate change. If we use a cap and trade system to set limits on how much carbon dioxide can be emitted and provide carbon credits or allowances to polluters, the market will find the most cost effective solutions to bring emissions down. This is the approach taken in the Kyoto agreement created the mandatory carbon trading markets in Europe. Although there have been problems in the European carbon market, lessons learned are helping other carbon markets work better.
The main problem with the carbon market created by Kyoto was that it did not include the biggest polluters, particularly the US, China, India, and other developing countries. The US and China alone account for over half of the worlds greenhouse gas emissions and neither country signed the agreement. The next round of global discussions is underway, and the US Government may enact climate change legislation in the next few years, but several states and local governments are not waiting. They are taking action now and getting ahead of the game.
While most agree that a cap and trade system is the best way to address climate change, there is still vigorous debate whether to hand out carbon allowances or auction them off. By auctioning them off, the government might make significant money, something that could come in handy in times like these. A US carbon market created this way could make hundreds of billions of dollars a year for the government, money that could help offset other expenditures like investments in renewable energy, financing the energy efficiency improvements of millions of homes, or a $700 billion financial bailout.
One group taking action includes ten states in the Northeast and Mid-Atlantic regions that have formed the Regional Greenhouse Gas Initiative (RGGI) to tackle climate change, forming a mandatory carbon market. The RGGI has the goal of reducing greenhouse gas emissions from utilities, requiring them to reduce emissions or purchase carbon allowances to cover their emissions. The RGGI has just completed the first auction of carbon credits, earning the participating state governments $38.6 million, with the price of carbon in the auction at $3.06 per ton of CO2. The price of the credits was lower than originally hoped, due in part to lower than expected emissions because of the slowing economies. Some say that the reduction targets are not large enough, lowering the price of the allowances, but as with the European market things may take a little tuning to get the price of carbon right.
California is also creating a market though the California Global Warming Solutions Act of 2006 (AB32) to help fight climate change, and joining with six other Western states and four Canadian provinces in the Western Climate Initiative. If carbon markets grow to be worth hundreds of billions or even trillions of dollars a year, this creates opportunities for carbon entrepreneurs in many ways. Greening our economy and reducing our carbon footprint creates massive opportunities in the building industry, energy, transportation, farming, chemicals, manufacturing, services, and practically every part of the economy. Greening buildings may be one way to earn carbon credits, as described in this white paper by Donald Simon of the green law firm Wendel Rosen Black & Dean in Oakland, CA. We will need to capture methane even more agressively from pig farms and landfills. One way or another, the auto industry has the opportunity to sell more efficient, and less polluting cars. Valuing eco-systems services, and putting a price on carbon, creates opportunities throughout the economy for the innovators who make it happen.
Even as the traditional economy runs into big trouble the low carbon economy is just getting started. This is a time of great challenges and many people are afraid, but its also a time of great hope, hope that we can create a better, more sustainable world, and one full of opportunity for green businesses. The choice is ours.
