Clean Energy Group Blog

The Growing Pains of Small Wind: Part II

Tue, 24 Jan 2012 00:00:00 -0500

2011 was a tough year for small wind incentive programs. Over the past 12 months, California, Oregon, New Jersey, Wisconsin, and Minnesota all experienced some kind of suspension or significant reduction of their incentives for wind turbines. While fluctuating incentives often have been the norm for clean energy, it’s usually because of the “on again, off again” nature of public funding. What was significant about the belt-tightening of several of these programs was that they were tied to technology concerns, not budget. California and New Jersey suspended their programs in response to illegitimate product claims and reliability concerns, and they aren’t alone in their worries.

Fortunately, the distributed wind industry has begun to respond, and the outlook for 2012 is improving. Work by organizations such as the Interstate Turbine Advisory Council (ITAC) and the Small Wind Certification Council is helping to ensure that the experiences of California and New Jersey aren’t repeated.

Inexperience and Naiveté

In California, things went awry when DyoCore, a small turbine manufacturer making highly optimistic power and production claims, brought itself to the attention of the California Energy Commission’s (CEC) Emerging Renewable Program. When the majority of customer incentive applications turned out to be tied to this turbine, and the company’s overzealous power claims were resulting in incentives that covered almost 100% of the project costs, the CEC suspended the program to reassess their program requirements.

As I discussed in a previous post, overzealous and unverified production claims are regrettably common in the world of small wind. Product certification and rigorous oversight has become an obvious necessity. However, the California example points to another, more elemental weakness within the small wind industry: the inexperience and instability of a large number of the small wind businesses now in existence in the U.S.

This situation may best be summed up in DyoCore’s response to the CEC’s complaint. In their statement, DyoCore explained that their mistakes were “committed out of inexperience and naiveté,” and continued on to say that this was “the first and only experience DyoCore has had with wind generation of electricity and its only attempt at manufacturing any product and placing it into commerce.”

While DyoCore’s frankness is laudable, this underscores one of the many problems with a small, emerging market that is flooded with over 650 products. Only a small handful of the businesses have the experience, expertise, production scale or financial backing necessary to be successful.

State and federal clean energy programs are eager to see small wind succeed. After all, wind turbines offer one of the very few non-solar options for homeowners and small businesses to generate their own clean and independent energy. We all want small wind to work, and we want it now. But in the case of small wind, patience and good policy is a virtue. At present, the market is not self-governing enough for public incentive programs to take a hands-off approach. Equipment vetting, siting standards, and other criteria that promote good performance are necessary at this early stage of the technology. With small wind, as with parenting, sometimes you have to provide more guidance and oversight than you’d like.

Solutions through Collaboration

Fortunately, states do not have to go it alone. The Interstate Turbine Advisory Council (ITAC), a recently formed collaboration of state, local, and utility wind incentive providers that is being coordinated by Clean Energy States Alliance. Participating incentive programs are sharing notes and experiences on everything from incentive rates to policies. Together, these clean energy funds are helping one another build and deliver effective wind incentive programs.

Currently, the members of ITAC are building on the foundation of certification that has been laid by organizations like the Small Wind Certification Council to evaluate and identify small and mid-sized wind turbines that meet the performance, reliability, and durability expectations of incentive programs. As a group, these state clean energy programs can be a much more powerful force for influencing the evolution of the small wind market.

Hopefully, the day will soon come when the small wind industry will be able to police itself and deliver a quality, reliable product without heavy public oversight – just as the solar and large scale wind industry has over time. Until then, public clean energy programs will be working together to accelerate the maturation of the small wind industry.

Funding Growth: State Clean Energy Funds Can Help Invent the Future

Thu, 12 Jan 2012 00:00:00 -0500

These are tough times for the dream of clean energy and green jobs. Washington is again gridlocked and failing to act on clean energy economic development. Deficit politics and partisanship are pervasive and meanwhile the imperfect framework of federal financial and tax incentives made available through the 2009 stimulus law and elsewhere is starting to expire.

No wonder so many wise people are so worried about how the next phase of American clean energy industry growth will be financed and the next generation of cleantech technology deployed.

And yet, one source of action lies hidden in plain sight. With federal clean energy activities largely on hold, a new paper we released yesterday as part of the Brookings-Rockefeller Project on State and Metropolitan Innovation argues that U.S. states hold out tremendous promise for the continued design and implementation of smart clean energy finance solutions and economic development.

Specifically, we contend that the nearly two dozen clean energy funds (CEFs) now running in a variety of mostly northern states stand as important actors in American cleantech and offer at least one partial response to the failure of Washington to deliver a sensible clean energy development approach.

To date, over 20 states have created a varied array of these public investment vehicles to invest in clean energy pursuits with revenues often derived from small public-benefit surcharges on electric utility bills. Over the last decade, state CEFs have invested over $2.7 billion in state dollars to support renewable energy markets, counting very conservatively. Meanwhile, they have leveraged another $9.7 billion in additional federal and private sector investment, with the resulting $12 billion flowing to the deployment of over 72,000 projects in the United States ranging from solar installations on homes and businesses to wind turbines in communities to large wind farms, hydrokinetic projects in rivers, and biomass generation plants on farms.

In so doing, the funds stand well positioned -- along with state economic development and other officials -- to build on a pragmatic success and take up the challenge left by the current federal abdication of a role on clean energy economic development.

Yet here is the rub: For all the good the funds have achieved, project-only financing -- as needed as it is -- will not be sufficient to drive the growth of large and innovative new companies or to create the broader economic development taxpayers demand from public investments. Also needed will be a greater focus on the deeper-going economic development work that can help spawn whole new industries.

All of which points to the new brand of fund activity that our paper celebrates and calls for more of.

In recent years, increasingly ambitious efforts in a number of states have featured engagement on at least three major fronts somewhat different from the initial fund focus: (1) cleantech innovation support through research, development, and demonstration (RD&D) funding; (2) financial support for early-stage cleantech companies and emerging technologies, including working capital for companies; and (3) industry development support through business incubator programs, regional cluster promotion, manufacturing and export promotion, supply chain analysis and enhancement, and workforce training programs.

These new economic development efforts -- on display in California, Massachusetts, New York, and elsewhere -- show the next era of state clean energy fund leadership coming into focus. States are now poised to jumpstart a new, creative period of expanded clean energy economic development and industry creation, to complement and build upon individualistic project financing.

Such work could not be more timely at this moment of federal gridlock and market uncertainty.

Along these lines, then, our paper advances several recommendations for moving states more aggressively into this new period of clean energy economic development. We suggest that:

States should reorient a significant portion (at least 10 percent of the total portfolio) of state CEF money to clean energy-related economic development
States, as they reorient portions of their CEFS to economic development, should better understand the market dynamics in their metropolitan regions. They need to lead by making available quality data on the number of jobs in their regions, the fastest-growing companies, the critical industry clusters, gaps in the supply chain for those industries, their export potential, and a whole range of economic development and market indicators
States also should better link their clean energy funds with economic development entities, community development finance institutions (CDFIs), development finance organizations and other stakeholders who could be ideal partners to develop decentralized funding and effective economic development programs

In addition, we think that Washington needs to recognize the strength and utility of the CEFs and actively partner with them:

The federal government should consider redirecting a portion of federal funds (for instance, from federal technology support programs administered by the Department of Energy and other programs meant for federal-state cooperation) to provide joint funding of cluster development, export programs, workforce training, and other economic development programs through matching dollars to state funds that now have active economic development programs, and to provide incentives to states without such programs to create them
The federal government should create joint technology partnerships with states to advance each state's targeted clean energy technology industries, by matching federal deployment funding with state funding
The states and the federal government, more generally, should look to "decentralize" financing decisions to local entities with street knowledge of their industries, relying on more "development finance" authorities that have financed traditional infrastructure and now could finance new clean energy projects and programs.

In sum, our new paper proposes a much greater focus in U.S. clean energy finance on "bottom up," decentralized clean initiatives that rely on the states to catalyze regional economic development in regions. Such an approach -- which reflects the emergence of an emerging "pragmatic caucus" in U.S. economic life -- is currently demanded by federal inaction. However, it might also be the smartest, most durable way to develop the clean energy industries of the future without the partisan rancor and obtuseness that has stymied federal energy policy. State clean energy funds -- having funded thousands of individual projects -- bring significant knowledge to bear as they focus now on building whole industries. For that reason, the funds' transition from project development to industry creation should be nurtured and supported.

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A copy of the full report, "Leveraging State Clean Energy Funds for Economic Development," can be found at http://www.brookings.edu/papers/2012/0111_states_energy_funds.aspx

See an interview with Mark Muro on the report on EE TV: http://www.eenews.net/tv/2012/01/12/

A New Norquist Pledge? On Clean Energy, Get Your Facts Straight

Wed, 04 Jan 2012 00:00:00 -0500

Grover Norquist has helped to paralyze the federal government on tax policy, and now he wants to bring gridlock to the many job-creating successes of state clean energy policy. His recent article in Politico calling for the end of state renewable energy requirements is a sad and uninformed mix of factual errors, pure ideology, and a tin ear for the politics of the issue.

The most egregious of Norquist’s many falsehoods about the complexities of state energy policy are noted here.

First, Norquist misleadingly implies that renewable portfolio standards (RPSs, i.e., requirements on utilities to include renewable energy in their electricity supply mix) are a stealth strategy imposed by liberal legislators who came into power in 2006 and 2008. In reality, more than two-thirds of state RPS laws were enacted before the 2006 election, through bipartisan efforts of both Republican and Democratic governors and state legislators. These state leaders sought to increase clean energy technologies, industries, and jobs in their states by setting goals for the amount of clean energy power that would be generated. Moreover, when citizens in Colorado and Missouri―one blue and one red state―were asked to vote for RPS laws by ballot, they overwhelmingly said yes. In total, 29 states, plus D.C. and Puerto Rico, have RPS policies in place; another eight states have renewable goals.

So the liberal conspiracy theory is just wrong; rather, this represents a strong, bipartisan effort.

Second, Norquist suggests that RPS laws represent the use of outdated command-and-control “mandates” as if they interfere with some imaginary free market in energy. The truth is that most states in the US have regulated utility monopolies that build nuclear, coal, oil or renewable power plants. For decades, state regulators have mandated, through legal proceedings, the kind of power plants that get built – whether coal, nuclear, oil, gas or renewable. There is simply no free market in clean energy to speak of in the United States, although there should be. Today, almost all state energy decisions are the result of mandates of one kind or another.

Calling out renewable electricity standards as unfunded mandates might make for good theater in Washington. Saying it in the context of the state energy decision-making framework just shows a complete lack of understanding of how energy policy works in the United States.

Third, Norquist either does not understand or misinforms his readers by saying that renewable portfolio laws dramatically raise electricity rates. This is not a true picture of the actual results. The state of Minnesota recently required all its electric utilities to carefully study and report on the rate impacts of the state’s RPS. Eight of the fourteen utilities concluded that the RPS had had little or no impact on rates. All but one of the other six utilities indicated that the rate impacts were modest—well short of Norquist’s inflated numbers and in line with bringing on any other new investment. More strikingly, New York found that its RPS actually led to a reduction in retail electricity rates. Why? Because renewable energy projects that were built ended up suppressing electricity prices at times when electricity use is at its peak. Finally, states with RPS laws have strong cost caps in place to ensure that ratepayers are protected if renewable energy procurement costs are unreasonable.

Blaming RPS standards rather than a range of other factors for electricity price increases just shows ignorance of a complicated issue.

Fourth, Norquist’s most exaggerated claims blame significant job losses on renewable energy development. Leaving aside the fact that those claims are based on his inflated numbers for electricity rate increases, he ignores the many jobs that are created when renewable energy facilities are constructed locally, and when businesses grow to manufacture the equipment for those facilities, as well as plan, install, and operate them. A recent study from the Brookings Institution showed that clean energy jobs are among the fastest growing sectors in this depressed economy in the last decade.

That is why many state Governors—both Republican and Democratic—continue to support and defend policies to promote and implement renewable energy. Companies around the country employ many tens of thousands of people in good-paying jobs because of state RPS laws, clean energy incentives, and economic development support. Getting rid of those laws and incentives will result in thousands of employees losing jobs. What’s more, many of these employees work for companies, such as electrical contractors and construction firms, hit hard by the housing recession, and now stand to benefit from investment in an emerging energy sector.

Once again, real facts matter in this debate. A new, comprehensive census of Massachusetts’ clean energy industry found that more than 64,000 people—1.5% of the total workforce—are now employed in clean energy jobs. The number of these workers grew by 6.7% between 2010 and 2011, compared to 1% for the rest of the state’s economy, and it is expected to grow another 15% in the coming year. These are good paying jobs in many sectors of the economy. They have resulted because of the state’s strong clean energy laws and programs.

Unfortunately, facts seem of little interest to Norquist. In the end, he makes his intentions clear. He just wants to stir up new Republican governors to end renewable energy laws for political reasons.

However, the states are smarter and more sophisticated than Washington insiders like Norquist when it comes to understanding the value of clean energy. Governors are directly accountable to their constituents for job creation and energy security, and they see how clean energy can help.

Take the case of Ohio. New Republican Governor Kasich first said he would roll back the state’s renewable energy laws in his campaign. That was before many segments of the business community expressed their strong support for those laws. Today, Ohio is the number two state in the nation in wind component and solar panel manufacturing. Thousands of Ohio residents are employed in solar and wind industries, in large part due to the state’s renewable requirements. Governor John Kasich now appears to support the state’s renewable laws, although he says he might include other technologies in the law’s scope to bring even more jobs to the sector. “They’re trying to get me to say we don’t need renewables here. Of course, we need renewables,” Kasich said.

Governor Kasich is not alone. Texas passed one of the most aggressive RPS laws in the country under Governor George W. Bush, creating a robust wind industry, and the law is still going strong under Governor Rick Perry. This past July, Republican Governor Scott Walker in Wisconsin signed a revised RPS law that adds new sources to the renewable mix. In Arizona, the state’s Supreme Court recently turned back legal challenges by a conservative think tank whose losing lawyer, Clint Bolick, oddly complained that the heavily Republican legislature “has been cowed by the solar industry into submission.” The law continues to be enforced by Republican Governor Jan Brewer.

In the end, Norquist is not only wrong on his facts, but late to the game. Many of these laws have been in place for a decade or more with job-creating results. These laws have become popular with new businesses and the public because they have worked. Governors of both parties have listened to their in-state businesses and shown smart economic sense in the face of superficial repeal efforts.

Maybe before Norquist writes another article on states and clean energy, he should take this pledge:"When I write about clean energy, I promise to get my facts straight."

The Growing Pains of Distributed Wind

Tue, 13 Dec 2011 00:00:00 -0500

The small and mid-scale wind industry is in a unique place in its development: it’s past the stage of an emerging market, but not-yet-fully fledged. And as many states have been discovering, this phase of the industry is full of growing pains. It can be difficult to balance our high expectations for renewable energy with the realities of emerging markets. This is certainly true for smaller-scale wind turbines, when the more mature market for utility-scale projects has become cost competitive with traditional fossil fuel energy and an internationally recognized symbol for renewable energy.

However, the untapped potential of small wind is compelling. According to the American Wind Energy Association 2010 U.S. Small Wind Turbine Market Report, the U.S. market for small wind turbines under 100 kW grew 26 percent in 2010. There was an almost eight-fold increase in annual installed capacity and more than a twelve-fold increase in annual revenues compared to just five years ago.

At the same time, several state incentive programs temporarily suspended their wind programs this year, with a few still on hold. So, why the sudden disconnect between a clearly growing market for small wind and the state clean energy programs that have helped spur that growth? This blog will be the first in a series exploring current challenges for small and mid-scale wind, and the ways the industry is working to overcome them.

Public perception

In many ways, the current challenges of the small wind industry can be traced back to the expectations and imagery formed by the utility-scale wind market.

When American’s think of “windpower,” two distinct images usually come to mind: rolling hills dotted with large-scale wind farms, or a quaint, mechanical windmill beside a rustic farm. When you say “small wind,” most people come up with a hybrid version of the two ends of the wind development spectrum. Physically, they expect a smaller version of a utility-scale turbine, which would be pretty accurate. Functionally, they expect primetime technology that has been perfected by utility wind giants such as Vestas and GE, with the DIY approachability of an old-fashioned windmill. But that simply is not the reality.

Designing and building a reliable, solidly-performing small wind turbine is not just a matter of scaling down a big turbine. Utility-scale turbines are designed for harvesting a very different, higher elevation and stronger wind resource than a small turbine. The more turbulent, lower speed winds found 60 to 140 feet above ground (the typical tower height range of a smaller-scale wind turbine) are much more challenging to harness than those 200 to 450 feet up. So, while small wind turbines may be simpler than their large counterparts, the resource they have to work with and their design objectives are, in fact, more challenging.

The fundamental difficulty of designing a good small wind turbine has not deterred many well-intentioned inventors from trying their hand at wind turbine design. And since dabbling in wind turbine design doesn’t require enormously large upfront capital expenditures for infrastructure and equipment, as do photovoltaics or fuel cells, the barrier to entry for new turbine developers is relatively low. This accessibility, typically viewed as an asset for promoting innovation, actually has proven to be a disadvantage for the small wind industry.

Too much of a good thing

According to allwindturbines.com, there are over 650 models of small wind turbines being manufactured by more than 200 companies. The majority of these projects are severely underdeveloped with no testing, no third-party review of their safety, performance or engineering, and no data to demonstrate that they will work as advertised. A startling number of manufacturers make exaggerated energy production claims about their products that exceed the theoretical limit for power that can be harvested from the wind. Unfortunately, due to the tendency of the public to believe that small wind turbine science is simple, most people assume that anything that looks like a wind turbine will produce results as powerful and reliable as a utility-scale product; and they make their purchasing decisions accordingly, with sometimes less than satisfactory results.

To address this misperception, state incentive programs have attempted to help consumers successfully navigate the proliferation of questionable turbines by applying performance standards or equipment criteria – often citing a list of incentive-eligible turbines. While a list of program-approved equipment seems like an obvious answer to the problem, it can be a tough solution for states to implement. Many lack the resources to perform a robust review, or feel listing should be handled by the industry at a national level. Others fear the risk of appearing to recommend particular products – that is, picking winners and losers. For some state clean energy programs, a restricted list of eligible equipment feels at odds with a state’s desire to support technology innovation and entrepreneurship. As a result, only a few states have implemented a wind turbine list to protect consumers and ensure reliability, while others have either piggybacked on those lists (the list managed by NYSERDA is particularly popular) or stood on the sidelines.

Solutions on the horizon

Having an inconsistent or state-specific approach to qualifying wind turbines is confusing to the market and inefficient for the manufacturers and the clean energy funds. Furthermore, it is not the best way to ensure that products are being well vetted in a transparent and fair way. Fortunately, solutions are in the works. In 2010, small wind industry members implemented a new standard for small wind turbines. The standard was accompanied by a certification program that will provide consistency in labeling and verification that tested products meet the standard. Once certification is widely adopted, it should greatly help stabilize the market for small turbines.

In addition, several state clean energy programs have collaborated with Clean Energy States Alliance (CESA) to create a new Interstate Turbine Advisory Council, or ITAC. The Council is in the process of creating a unified list of turbines that fit the performance, durability, and customer support expectations of state incentive programs. Participating state and utility programs pool their knowledge and resources to collectively evaluate turbines. This information goes beyond just engineering and test data from a single testing site. ITAC considers operational history, customer experiences, dealer feedback, past warrantee support, marketing claims and business structure. The end result is the development and maintenance of a national list of wind turbines that states have helped to create and that they can feel confident in referencing for determining incentive eligibility.

ITAC is an example of what can be done when states and industries work together to address major market challenges facing emerging renewable energy technologies. Hopefully, by supporting one another, state programs can determine the best ways to support the distributed wind market in effective and sustainable ways as the industry grows to maturity.

Clean Energy Scale Up: Do It Like We Did Bridges and Roads

Mon, 05 Dec 2011 00:00:00 -0500

How can the world finance a massive scale up of clean energy technologies?

To date, neither the necessary funds nor any convincing mechanisms to produce the funds have come from the public- or the private-sector. Such financial commitments have been made all the more difficult in the current financial crisis, with historic budget deficits in OECD countries.

The fact of the matter is that the level of capital needed is available, but only if new, conventional investors are brought into the clean energy space on terms that are within their investment parameters. New approaches are required in order to access, attract, and direct these new funds to build a clean energy infrastructure.

Clean Energy Group (CEG) has prepared a new report for the International Energy Agency/RETD on this question, which was released today, as global climate discussions are underway in Durban. See http://www.cleanegroup.org/assets/Uploads/111205-FINANCE-RE-Final-Report.pdf.

The report finds that a fundamental task for public finance and policy is to improve the clean energy investment risk-to-reward ratio needed to entice private investors. The risk-to-reward ratio is a comparison of how much money an investment could lose compared to its profit potential. To encourage private investors to direct capital into clean energy technologies, governments have an important role to reduce the risks associated with clean energy technologies (technical, institutional, policy) and, at the same time, increase the profit potential of these investments.

Investors have different comfort levels that match the wide range of risks and rewards. Venture capitalists take on high risk for the expectation of high returns. On the other hand, institutional investors, such as pension funds, look for lower-risk investments with reliable lower returns—for example, infrastructure bonds.

In order to better align these conventional investor needs with the funds that are required for financing large-scale deployment of renewable energy projects, some questions need to be answered:

Which policies can influence clean energy infrastructure investments to perform like (or better than) traditional infrastructure, industrial, and municipal bonds?
What kinds of policies will reduce risk and generate competitive returns for clean energy?
Are existing investment institutions sufficient or should new institutions help restore investor confidence where it has been eroded by a history of changing or short-term policies?

The solution is unlikely to be action to simply to scale up more of the same public subsidies—an unviable option with many countries facing unprecedented national deficits. Rather, a possible alternative path forward could come from combining existing support mechanisms with new public finance measures that are now used to finance infrastructure like roads, bridges, and other public infrastructure projects.

The major task for governments and the private sector is to conceive of the clean energy challenge as an infrastructure-building exercise for the next thirty to fifty years. This challenge will require many tools that were employed by industrial economies over the last century to build out the existing transportation, telecommunication, and energy infrastructure systems that dominate today.

These infrastructure systems relied on at least four kinds of targeted public and private approaches to achieve their unprecedented dominance.

Economic development policies to address and link the many actors throughout the economic system, using: “innovation economics” to create incentives, overcome institutional barriers and build the case for a large scale technological transition
Financial innovation and mechanisms that made it possible for a diverse range of private investors to obtain safe and predictable returns because of public interventions that reduced investor risk and created stable investment environments, and thereby made trillions of dollars in capital available for major infrastructure investments.
Technology innovation strategies that drove cost reductions and performance improvements in new technologies and crucial enabling technologies that created and supported the integration of new infrastructures into mainstream society.
Enabling energy policies that mandated investments in infrastructure created a stable investment demand that gave investors confidence to invest based on a predictable, long-term returns horizon.

The paper also recommends that electric utilities must step us to be engines of technology innovation. To date, electric utilities have done little innovation. In the US, state renewable mandates have forced them to acquire power from renewable technologies like wind and solar. But those laws have generally moved the dial for conventional, commercial renewable technologies.

What is needed to address climate is new innovation in second generation technologies, in new markets like offshore wind and for new technologies like energy storage. To do that, we need new laws to mandate utility investment s in technology innovation and new ways to reduce technology risk for those investments. CEG has written about these utility recommendations before (see http://www.cleanegroup.org/publications/resource/weathering-the-storm-public-funding-for-low-carbon-energy-in-the-post-financial-crisis-era). And a new book by MIT professor Richard Lester (“Unlocking Technology Innovation”) also advocates the need to reform electric utilities as a means to unlock climate innovation.

In short, an economic and infrastructure systems-approach made it possible for societies to scale up major technological transitions throughout history. It is the way built infrastructure becomes culturally dominant.

It is also the way that clean energy and all its institutional frameworks must evolve for them to achieve scale and technological dominance.

Energy Innovation - All the Angles

Thu, 10 Nov 2011 00:00:00 -0500

On November 17th, several groups hosted an important conference on energy innovation in Washington, DC. Sponsored by Clean Energy Group, Information Technology and Innovation Foundation, Breakthrough Institute, Clean Air Task Force, the Bipartisan Policy Commission, World Resources Institute, New England Clean Energy Council, Arizona State University and Third Way, “Energy Innovation 2011” covered the issues around energy and innovation from a number of critical perspectives.

The speakers list is a who’s who of leading thinkers on energy and innovation. They discussed what is needed to bring about energy cost reductions, create new business models, develop key policies, and address climate change. The speakers and topics included:

Arun Majumdar, Acting Under Secretary of DOE who will talk about ARPA-E and the agency’s innovation programs.
Vice Admiral Denny McGinn, president of ACORE, who will talk about defense capabilities and clean energy.
Letha Tawney of WRI, who has written extensively about how innovation works in practice and how it should be applied to clean energy.
Rob Atkinson, the president of ITIF, who has put a strong intellectual foundation in economics behind new efforts to promote energy innovation.
Jesse Jenkins of Breakthrough who is a lead author of many reports outlining key strategies for energy innovation in a competitive world market for clean energy.
Black Simmons, the VP of Sandia labs, will talk about energy breakthroughs as will Sam Thernstrom of Clean Air Task Force.
Peter Rothstein of the New England Energy Council will discuss emerging efforts to create industry clusters around the country.
Armond Cohen of Clean Air Task Force will talk about the role of China in commercializing new innovative clean energy technologies around the world.

I served on a panel talking about the role of states in the clean energy innovation ecosystem.

The panels were moderated by leading journalists, including Marc Gunther of Fortune, Bryan Walsh of TIME, Alexis Madrigal of The Atlantic, Carol Davenport of National Journal, and Monica Trauzzi of E&ETV.

UPDATE: Video from this event has been posted on the ITIF website at http://www.itif.org/media/energy-innovation-2011#video. Mr. Milford's panel is on the fifth video in the list.

Power Outages and Natural Disasters: Which Ones are Avoidable?

Wed, 02 Nov 2011 00:00:00 -0400

Another storm and millions lose power. It’s a familiar story, in this era of more severe and unusual weather events.

But while natural disasters can’t be prevented, the power outages that follow them can be, with smarter use of more modern technology.

Nearly three days after the unusually early snowstorm in the Northeast that brought over two feet of snow, three million people are still without electricity. Governors in New Jersey, Connecticut, and Massachusetts have declared a state of emergency. Connecticut’s extensive power outages broke the record set by Hurricane Irene this past August. On Monday, October 31^st, 764,000 were still without power and 20% of the state’s cell towers were down.

Powerful storms routinely disrupt electric transmission lines, occasionally destroy transportation infrastructure, pose a threat to nuclear reactors, and disrupt coal and natural gas infrastructure. Facilities such as hospitals, 911 call centers, and supermarkets need reliable electric generation to provide critical support in emergency situations. Homes and businesses are left without water, cooling and heating, and communication. The failure to install reliable backup power systems at critical facilities represents a serious weakness in emergency response infrastructure.

Unfortunately, little has been done to update many of our nation’s most critical facilities’ backup technologies. Our nation’s backup power systems rely mainly on 19^th century technologies, namely diesel generators.

Conventional diesel generators often lie dormant for long periods of time, causing them to be more susceptible to mechanical failure. Moreover, these emergency generators rely on fuel—and as we’ve experienced in recent storms, fuel cannot be pumped when a gas station loses electricity or when snowstorms block roadways. A 2003 New York City blackout report stated that a small percentage of emergency generators ceased to operate, either from failing to initiate power generation, mechanical failure, or from exhausting their fuel supply. Just two months ago, Connecticut reported that 30% of its gas stations were without power following Hurricane Irene. The stations had gas, but ironically, not the power to pump it.

While there is no source of electricity that is completely immune from natural disasters, clean energy technologies such as fuel cells, if properly designed, can be more reliable and safer. Smaller, on-site, distributed generation, clean energy technologies produce power directly at the source and can operate independently when the grid fails or when fuel cannot be delivered. While these technologies are not fail-safe, they can provide more reliable power and run at full capacity to power critical electrical loads.

There are many options for backup power in electrical outages; each system is different in its ability to generate power. Whether for your home or commercial application, traditional backup power is provided through battery systems or combustion-based generators. The main challenge for all conventional backup power technologies is providing sufficient power for an extended period. Solar (PV) with battery backup or fuel cells can provide long-term reliable clean electricity. A PV system is the more affordable option for home owners, while fuel cells are a more cost-effective alternative for larger-scale applications.

When integrated with a battery energy storage system, PVs can provide continuous electricity supply on cloudy days or at night. Similarly, PV systems can power critical infrastructure in remote locations. In 2010, Xcel Energy provided funding to the West Central Telephone Association for remote PV telecommunication power kits.

Fuel cells, in particular, are well-suited for critical applications. Most backup power systems address applications requiring less than 5 kW. At this range, battery-powered generators can provide full power for 15 minutes (see http://www1.eere.energy.gov/femp/pdfs/hydrogenfc_tir.pdf). Fuel cells operate at much higher efficiencies (40%-50% for electric conversion; 80% for CHP) than coal-based technologies (operating at 30-35% electrical efficiency), enabling fuel cells to provide power longer than conventional generators.

Critical infrastructure applications for fuel cell technology include a recent installation at Whole Foods Market in Glastonbury, CT. While much of the surrounding area lost power during Hurricane Irene and the October snowstorm, a backup generator and a fuel cell kept the store’s coolers running and enabled the store to reopen its doors after both storms, providing much needed food and water to area residents. Similarly, in September’s California blackout, Albertson’s market continued to operate by a natural-gas powered fuel cell. Other critical energy fuel cell installations include the largest in the nation—Verizon’s 911 call center in Long Island, which operates as a grid-independent first responder station.
Despite these encouraging investments and critical application installations, state and federal governments have been slow to enact public policy requiring more reliable systems.

State legislatures should expand power protection to require the immediate installation of newer, reliable clean power technologies in critical facilities. States and the federal government can lead the way by installing on-site clean energy generation systems at public buildings, emergency shelters, first responder stations, and other critical infrastructure. Moreover, states should be providing long-term incentives to promote and support renewable energy installations in homes and at critical facilities. (Clean Energy States Alliance recently published compendium of short briefing papers for policy makers covering the use of fuel cells in critical power applications and in supermarkets, among other topics; see http://www.cleanenergystates.org/assets/2011-Files/Hydrogen-and-Fuel-Cells/CESA-Fuel-Cells-Brifing-Papers-for-State-Policymakers-Aug2.pdf.)

Until incentives and policies support the widespread use of reliable on-site clean energy technologies, emergency response systems will remain vulnerable to failure and public safety will continue to be threatened by natural disasters. Federal and state governments must take steps to stronger, more reliable emergency management and homeland security. Clean energy is a critical step in reliable power in emergency situations.

(Photo Credit: Connecticut Light and Power; http://outage.cl-p.com/outage/outagemap.aspx on 10.30.11)

Crowd Sourcing Climate Tech—Where is DOE?

Mon, 17 Oct 2011 00:00:00 -0400

Why is it that the Defense Department is more innovative than the Department of Energy on technology development? Recent moves by DOD put it further ahead of DOE, which should be playing catch up with DOD to use more modern innovation strategies to promote clean energy technologies.

The latest, very clever move by DOD is to use “crowd sourcing” to create new defense technologies. As a blogger at the Talking Points Memo puts it:

At first glance it seems like a fairly routine military tech project: DARPA, the Defense Advanced Research Projects Agency, is developing a miniature unmanned air vehicle that can be carried into the field in a rucksack and sent out to a remote urban location, where it will find a spot from which to perch and transmit surveillance video.

The technology for this vulture-like “Perch and Stare” device is within reach, but DARPA has taken a rather extraordinary approach to getting the concept into production.

Rather than contracting out with domestic research institutions or defense industry companies, DARPA has extended a welcome mat to everyone around the world through an elaborately crowd-sourced competition called UAVForge, which launched last May.

As most know by now, crowd sourcing refers to tapping the global brain to come up new products and ideas. Rather than rely on the same old contractors or consultants, a company or an agency reaches out through the Web to find new ideas from around the world, often from experts who would never have thought about the problem.

Crowd sourcing also is referred to “collective intelligence” or the “wisdom of the crowds.” At a basic level, it means that simply bringing the smartest, similar people together from one company or one agency won’t be the best way to solve the problem.

This has been the old way of doing things, and is generally still the DOE approach to innovation – give money to national labs or groups of university experts in one or two places and hope for genius results.

This new open innovation approach is based on reaching a “diverse” crowd, not the same old experts, no matter how smart they may be. “Crowd sourcing shows that breakthrough solutions more reliably come from a diverse enough set of minds to go at the question from different angles without the bias inherent in like-thinking people.” And this crowd must be qualified and not too big or too small. But doing it is the way that new companies are developing new products all the time.

That is the brilliance of this DOD DARPA approach, according to a DARPA representative.

The objective is to facilitate the exchange of ideas among a loosely connected international community united through common interests and inspired by innovation and creative thought.

He added: “We seek to lower the threshold to entry for hobbyists and citizen scientists, hoping to yield greater innovation, shorter timelines, better performance and more affordable solutions.”

So where does the DOE stand on these new technology innovation strategies? You would think that it would be out in front to develop new technology solutions to climate change, with advances in solar, wind and other clean energy problems, using the largest source of expertise – the world’s global brain.

But you would be wrong. For the last few years, CEG has tried to get DOE to use these new approaches to guide its technology development and commercialization strategies. We have gotten nowhere.

Now it is true that DOE has used various prize awards in some technologies like vehicles or lighting. These are nice, one off small experiments. But at DOE there is no systematic use of these innovation tools to better use its $5 billion research budget and turn it into cutting edge products.

It is too bad that the agency charged with developing our new energy future can’t even use today’s most modern technology innovation strategies. It is even odder still that the Defense Department and leading corporations get this, and show much more forward and creative thinking. But DOE is stuck in the good old days of Bell Labs, where a smart group of scientists hung out together and solved the problems of the world.

But that model went out the window with open source software and open innovation in the corporate world, more than a decade ago. Corporations now use global product development experts from around the world to make products quicker, cheaper and more customer-friendly.

Unfortunately, DOE is not the only climate technology agency behind the times. There is very little attention to this new wave of doing technology innovation at the international climate discussions.

But to get back home, we never think it is too late for the federal government to catch up with the rest of the world. But time is running out. As DOE battles on many fronts, it might figure out that it can’t solve all of our new clean energy problems using old strategies.

Maybe some top officials of DOE need to take a cab to the Pentagon and learn a few things about the future of technology innovation.

State Support for Clean Energy Jobs: A Way to Avoid Congressional Gridlock and Unlock the Job Creation Engine

Tue, 13 Sep 2011 00:00:00 -0400

Obama Should Look to States for Clean Energy Jobs: A Way to Avoid Congressional Gridlock and Controversies, and Unlock the Job Creation Engine at the Local Level.

The President’s speech to Congress on September 8th did not say anything explicitly about clean energy. But the provisions mentioned that might promote clean energy jobs were the federal infrastructure bank idea and the project to fix up our nation’s schools with energy efficient equipment, along with some others.

These projects are good starts, but there may be some ways to accomplish the same results without Congressional approval. I suggest a few here: all propose “leading from behind” the states, which have proven the consistent leaders and job creators on clean energy for the last decade.

First, while the national infrastructure bank is a good idea, it may have rough sledding in Congress. The Administration might consider an alternative: fund existing or new state-level infrastructure banks that finance conventional projects like roads but also new clean energy technologies.

According to FHA, 32 states and Puerto Rico have state-run infrastructure banks, which have distributed over $6.2 billion to 609 projects as of 2008. Most cover transportation but some include energy and water. If a new federal institution can’t work, fund state-level banks with more capital to expand their lending and job creating capacity.
Taking up on this theme, Connecticut was the first state to create a state-level green energy bank (modeled after the first national-level Green Investment Bank in the UK). The Connecticut green bank, managed by the Clean Energy Finance and Investment Authority (CEFIA), will start with an initial $50 million for state investment, which is expected to leverage multiples of private capital. Instead of creating a new federal institution, a federal program could send capital to state green banks that have more projects than they can finance, immediately creating new jobs.

Second, many states have created new economic development programs and policies for clean energy – the Administration could direct funds (reprogrammed or repurposed rather than new funds) to these states to expand their job creating programs without creating a new federal bureaucracy.

To date, over 20 states have created a varied array of these public investment vehicles to invest in clean energy pursuits with revenues often derived from small public-benefit surcharges on electric utility bills. Over the last decade, state clean energy funds have invested over $2.7 billion in state dollars to support renewable energy markets while leveraging another $9.7 billion in additional federal and private sector investment, with the resulting $12 billion flowing to the deployment of over 72,000 projects in the United States ranging from solar installations on homes and businesses to wind turbines in communities.
Many states have now moved beyond project finance to support active economic development programs, including cluster development, supply chain analysis, workforce training, and various forms of company investments. But this work is underfunded and they could do more to create jobs with additional support. This kind of local job creation for smaller companies is the typical engine of economic growth in the United States.
As part of any federal jobs program, the Administration should consider some form of matching state fund program to extend the reach of these state economic development programs in clean energy. This could be millions, not billions of dollars, again in repurposed or reprogrammed funds, which could perhaps be done without new congressional legislation.

For jobs creation, especially in clean energy where there is little federal bipartisan support, creating new federal agencies and programs may not be the answer.

In addition, relying on state experts who are closer to their markets and their companies might avoid some of the Solyndra controversies in the future. For decades, state officials have created policies and made or approved investments in energy technology and companies to build out the fossil fuel and nuclear energy infrastructure we now have. For a hundred years, through our heavily regulated, monopoly electric generation system, trillions of dollars of government directed support has gone to our network of energy technologies, utilities and companies.

Now that system is slowly moving toward clean energy. Unless electric generation becomes deregulated, a good experiment that largely stalled in the 1990s, state government will remain a big investor in that transition from a fossil fuel economy to cleaner energy technologies.

Future job creation in clean energy should respect, not ignore, these state level historical trends and institutional frameworks. The Administration might pay closer attention to this issue as well. For in conservative federalist fashion, additional Administration support for these states might avoid federal controversies and jumpstart the clean energy segments of the local economies with minimal delay.

Solyndra, Solar Panels and Supersonic Planes: What’s the Difference if One Fails?

Tue, 06 Sep 2011 00:00:00 -0400

Recently, the US government lost a few hundred million dollars on a new investment in a failed technology. But no one seemed to notice.

No, it was not the infamous Department of Energy’s multi-hundred million dollar loan guarantee to Solyndra, the now bankrupt California solar manufacturer and the latest Rorschach test about government support for clean energy. Many politicians criticized the government’s investment in that venture, while clean energy advocates defended the investment as an experiment worth making.

Rather, the silent failure was a $320 million public investment in a new glider aircraft made by the Defense Department’s advance research agency: DARPA. That new plane, the Falcon Hypersonic Technology Vehicle 2, crashed over the Pacific in early August. Built by Lockheed Martin, it was designed to deliver non-nuclear military strikes anywhere in the globe in less than an hour. The latest crash was not its first; it was the second failed flight experiment.

But after the repeated loss of the plane and a third of a billion in public dollars, the head of DARPA, the project’s main public investor, Regina Dugan optimistically said, “We’ll learn. We’ll try again. That’s what it takes.”

This isn’t the first time that a DARPA-funded project failed. A profile of DARPA a few years ago explained,

As former DARPA Director Charles Herzfeld noted in 1975, "When we fail, we fail big." Little has changed. According to (then) DARPA's current chief Piller, some 85%–90% of its projects fail to meet their full objectives. Still, Piller points out, DARPA "has been behind some of the world's most revolutionary inventions"… "the Internet, the global positioning system, stealth technology and the computer mouse."

DARPA's spectacular failure rate and noteworthy successes stem from its high risk ventures.

In contrast to the Solyndra backlash, after the news of this second DOD rocket failure and loss of hundreds of millions of dollars of public funds in that new technology, what did the critics say? Actually, nothing at all. Not one member of Congress openly criticized the latest DOD investment failure. Nobody said a word.

There was one reaction from a frequent writer about DARPA who praised its risk taking:

DARPA only undertakes projects that have a good chance of failing—projects that few others dare to take on. Projects like hypersonic flight. The failure is not surprising; permission to fail is what has enabled the agency's spectacular success over its 53-year history.

So, the obvious question is: why the over-the-top criticism of this failed clean energy investment but an odd silence in the face of Defense Department projects which also fail quite spectacularly, expensively, and more frequently?

Apart from the usual political antics during the presidential election season, there might be a simple and troubling answer. The country has a fifty-year political consensus about technological risk taking to protect national security. Public defense investments are sacrosanct and encouraged. DOD clearly picks winners, and then sometimes fails, while trying not to pick losers. It is what government investment is about, and has guided billions of dollars of Defense spending over the years. (We have written previously about the myth that government should not “pick winners and losers.”) At DOD, experimental failure is considered necessary to ultimate success.

But the same anti-government-investment politicians who go ballistic about one clean energy mistake fall mysteriously mute when multi-hundred million dollar DOD technology bets go wrong. No one rails that DOD is “picking winners and losers.” There is no criticism at all. Except in cases of graft and incompetence, that is pretty much how the system of public investment should work at DOD.

For clean energy technology, there is not yet a political consensus like the one for defense technology that allows for trial and error. In clean energy, there is no Washington agreement for assuming any risks for increased investments to achieve future market share, to protect our national security, and or address foreign competition. Many politicians do not consider military and clean energy investment as similar “public goods”—where the private sector won’t take the risk in new technologies, and the government must invest to serve larger national goals that do not always deliver adequate private investment returns.

When all is said and done, this lack of political consensus on clean energy is the only difference between losing hundreds of millions on a failed solar investment and losing hundreds of millions on a failed defense aircraft.

In defense, failed spending is part of learning for success; in clean energy, any failure is proof that the whole public enterprise is a bust. That political disparity makes no sense.

In these tough economic times, no one wants to see the government lose money on failed technologies or companies. But giving multiple and necessary defense failures a pass, while harshly criticizing one clean energy flop, is a dangerous double standard. It is the kind of political hypocrisy that the country cannot afford if it is to achieve national security and a strong clean energy future.

See also, Beyond Solyndra: Partnerships for Clean Energy, 9.19.11 by Mark Muro and co-authored by Lew Milford.

(Photo credit: DARPA/AP)

States Take the Lead in Supporting Marine Energy Technology

Thu, 18 Aug 2011 00:00:00 -0400

On Monday, August 15th, representatives from the Massachusetts Clean Energy Center, UMass Dartmouth, Massachusetts senate and the New England Marine Renewable Energy Center, marked the completion of the state's first in-ocean tidal turbine test. The Muskeget Channel Demonstration Project is a collaboration among Massachusetts state and local governments, universities and companies.

We write about it here to point it out as another example of state leadership in supporting new energy technology industries. This is the kind of leadership that federal officials should more fully support, work with and fund.

The Massachusetts Clean Energy Center (MassCEC) provided a $98,000 grant to support the project, which involves testing of Boston-based Free Flow Power’s underwater turbine technology. The energy from the turbine was captured by energy storage technology developed by another Boston-based clean energy company, FastCap Systems. Free Flow Power also has a demonstration project underway in the Mississippi River.

As UMass Dartmouth Chancellor Jean F. MacCormack said, the demonstration project is “a unique opportunity to demonstrate the capability of Massachusetts and New England as a leader in marine renewable energy development… [it] is an example of the public/private collaboration that is necessary to launch new industries and create new job opportunities… Massachusetts is uniquely positioned to establish a whole new industry with potential to address our energy needs, reduce our carbon footprint, and create thousands of jobs.”

Mass CEC supports these companies, among other clean tech companies, through demonstration grants and venture and growth capital investments.

They are just two of the many companies and researchers working in Massachusetts and New England in a growing “marine energy cluster” - including device developers Resolute Marine Energy and Ocean Renewable Power Company and testing facilities such as Alden Labs.

State support programs, in addition to financing available from MassCEC, include:

A lease application to Federal agencies to create a national offshore renewable energy innovation zone, located in federal waters south of Nantucket. The lease would allow state officials to establish a permanent test and demonstration area for energy technologies, as well as study effects on marine life.
State lawmakers are considering a bill that would expand state net metering laws to include hydrokinetic technologies.
Massachusetts has also developed an Oceans Management Plan, which has helped companies reduce permitting risk and uncertainty by identifying pre-selected development areas.

Other states, including Hawaii, Oregon, Alaska, Florida and New York are also leading the way in support for marine energy technologies- both to meet their environmental and energy goals and to create jobs and industries in their states.

*Photo: John Miller of the Marine Renewable Energy Center (MREC) addressed the crowd. Behind him are Senate President Therese Murray (left) and UMass Dartmouth Chancellor Jean MacCormack.

Thanks to Alexandra Adler, Massachusetts Clean Energy Center.

Group Buying the New Thing in Residential Solar – and Beyond?

Wed, 17 Aug 2011 00:00:00 -0400

Last year, Clean Energy States Alliance (CESA) gave Energy Trust of Oregon (ETO) a 2010 State Leadership in Clean Energy (or SLICE) Award for its Solarize Portland program. SLICE awards are made to CESA member programs or projects that are especially innovative and effective at incentivizing, promoting, or deploying clean energy technologies, and the distinguished panel of judges determined that Solarize Portland deserved to be recognized for its innovative model of incentivizing residential solar.

In their comments, the judges noted, “Portland might not have the most sunlight, but it’s been able to move ahead with a major solar initiative in Solarize Portland. This grassroots effort, facilitated with a partnership between the statewide nonprofit and local neighborhoods, moved ahead in a really short time, using a relatively modest subsidy to command a good price for residents. The model is potentially replicable by communities across the U.S., and is particularly important to study in light of declining state incentives and challenges to the PACE residential financing program.”

Since then, several other “Solarize”-type programs have popped up all over the U.S. (and beyond), in cities, states, and utility territories, and, based on their apparent success, these programs may be just the ticket to keep up the solar energy momentum in these times of diminishing state and federal incentives.

So what is so great about the Solarize model? For one thing, its marketing and promotion are usually community-led. For Solarize Portland, Energy Trust of Oregon (ETO) and the City of Portland took advantage of the existence of a strong network of neighborhood associations in Portland. ETO and the City worked with Southeast Uplift Neighborhood Coalition to directly engage citizens through grassroots outreach and education about solar options and costs, as well as providing free site assessments. The enrollment process was designed to be simple, and each step was facilitated by the project partners.

Next, it lowers the technology cost, through the use of group buying power (think Groupon and Living Social). The project partners in Portland facilitated a competitive RFP process for a contractor based on set pricing tiers – i.e., once certain participation thresholds were met, progressively lower system costs were triggered. ETO also provided its standard solar incentives to the mix: at that time, $2.25/watt; and residents were also eligible for federal and state tax credits.

Finally, it is of limited duration. While the grassroots education and group buying method were designed to address the previously slow pace of solar installations in Portland (38 were installed in all of 2008), the limited enrollment period addressed another problem, identified in a 2007 market study: most Oregonians thought about installing solar for over two years before finally taking action. A good deal with a deadline seems to consistently motivate more takers than a good deal with no end in sight.

In just six months from its inception, Solarize Portland resulted in the installation of solar systems on 120 homes (more than three times the 2008 number). The 120 installations added 347 kW of new solar photovoltaic capacity, estimated to produce over344,500 kWh of electricity per year. And, buzz generated by the program had a spillover effect: it generated downward pressure on area PV system costs and contributed to a 320% increase in area non-Solarize installations during the project timeline.

The project’s success has led to subsequent Solarize efforts in four additional Portland neighborhoods, one in the rural city of Pendleton, Oregon, and another for employees of Columbia Sportswear Company. And the model is catching on country-wide.

As a direct result of Solarize Portland’s success (and, we’d like to think, of CESA members sharing their best practices and success stories at our biannual meetings), Massachusetts Clean Energy Center (MassCEC) – also a CESA member – launched Solarize Massachusetts this April, in collaboration with the Green Communities Division of the Massachusetts Department of Energy Resources (DOER). Solarize Massachusetts will target four towns across the state (selected by lottery): Harvard, Hatfield, Scituate, and Winchester, and will be targeted to both residents and businesses. The pilot program RFP sought bulk purchasing proposals from solar integrators, with tiered costs based on participation; MassCEC and DOER will work with the selected integrator(s) to provide education, site assessments, financing models, and installation services.

Other programs in the U.S. are demonstrating the program’s success at the municipal level. In the fall of 2010, Open Neighborhoods, an organization that connects neighborhoods with clean energy opportunities through social networking tools, launched the GoSolar campaign in the Los Angeles area to offer free solar assessments and group pricing to homes and businesses. Their 2010 campaign resulted in 200 solar installations at prices under $5.00/watt – on par with utility-scale solar installed costs – and they are proceeding with subsequent campaigns based on that success.

And in mid-July, the San Francisco Department of the Environment and the World Resources Institute launched the San Francisco pilot of Solar@Work, a program that helps companies implement solar projects by offering an up-front purchase, a solar lease, or loans, all offering group purchase system discounts of 10 to 15 percent.

Meanwhile, One Block Off the Grid (1BOG), in many respects the pioneer of solar group discounts, continues to aggregate group buying initiatives across the U.S. based on demand generated through their website; individuals (and I assume businesses) can enter their zip code and find out if there’s a solar group opportunity near them. (Also see Sunny Britain, which last week announced a similar program in the UK).

1BOG has found its niche, but the state- and city-supported initiatives of the Solarize type show great potential to motivate solar installations because of specific attributes, especially the way they partner with trusted institutions such as state energy offices, public works departments, and neighborhood associations. Pairing the national expertise of group buying facilitators and solar leasing companies with the local, city, or state brand, insight, and oversight is proving to drive demand for solar, which is in turn driving down system costs, demanding increases in manufacturer and installer accountability, and sparking healthy competition in the PV industry across the U.S.

So, what’s next? Which state will next take up the Solarize torch? When will it catch on with utilities? Who of the Fortune 500 will catch the wave of company-sponsored Solarize programs for employees? What other groups/clubs/organizations could act as facilitators for these efforts? Is it too far-fetched to think my local cooperative-owned grocery store will be rolling out group discounts for its customers? Apparently not.

Innovative programs such as Solarize that leverage available funds are proving to drive down solar costs in a major way, while keeping solar installers and manufacturers employed as the states and the industry watch the federal government cut back on solar deployment in favor of next-generation R&D and manufacturing initiatives. Let’s hope the former can keep up the momentum and bridge the gap until the latter is ready for prime time.

Photo © Energy Trust of Oregon, 2010.

Fuel Cells for Supermarkets

Fri, 12 Aug 2011 00:00:00 -0400

Supermarkets are turning out to be an important early market for stationary fuel cells. Supermarket companies that are using fuel cells either to power their stores or for forklifts at distribution facilities include Albertsons, Central Grocers, H.E. Butt Grocery Company, Price Chopper, Safeway, Star Market, Stop & Shop, Wal-Mart, Wegmans, and Whole Foods Market. State clean energy agencies that are interested in helping to bring fuel cell technology into widespread use would be well-served by explicitly supporting fuel cells for supermarkets as a key market niche.

The Appeal of Fuel Cells for Supermarkets

In recent decades, supermarkets have grown larger and some have moved to 24-hour operation, 7 days a week. Stores have added large banks of freezers and refrigerated cases, as well as sections where prepared foods are cooked and kept warm. These changes have not only significantly increased the electrical, heating, and cooling loads of supermarkets, but have made them well-suited to take advantage of the electricity and heat provided by fuel cells.

Fuel cells provide a constant supply of electricity, which is just what these new supermarkets need. The heat produced by the fuel cells can be used for a variety of purposes, from heating water to running absorption chillers for cooling the stores. Using both outputs is key to the economics of a supermarket strategy for fuel cells, and also yields significant greenhouse gas emission reductions and other environmental benefits. The total efficiency of supermarkets’ fuel cell systems can be quite high—often twice or more efficient as getting power from a central utility.

Because supermarket owners need to worry about the risk to the large inventory of cooled and frozen food during an interruption of power from the electric grid, they appreciate a fuel cell’s ability to keep operating during a blackout. With a fuel cell, a supermarket can remain open at a time when the surrounding community is vulnerable and in need of supplies.

Recent trends in fuel cell financing have made them more business friendly. Manufacturers and system integrators increasingly offer lease arrangements that reduce the up-front cost of an installation. Longer initial warranties and the option of purchasing an extended warranty reduce the risk to the supermarket company.

Reasons for State Agencies to Target Supermarkets

Fuel cells clearly have appeal for supermarkets, but why might state agencies want to give special attention to supermarkets? Most importantly, to commercialize a new technology, it makes sense to concentrate on a few niche markets where it can gain traction and become self-sustaining, rather than trying to spread the technology thinly over a small number of random installations in diverse settings.

The early installations among supermarket chains have created growing visibility for fuel cell technology within the industry. This is starting to stimulate other supermarket companies to want to learn about fuel cells and consider emulating the early adopters.

Beyond the essential starting point that fuel cells are a good match for the energy needs of supermarkets, there are other reasons why this is a promising niche:

Supermarket chains own multiple stores. As in the cases of Price Chopper and Whole Foods Market described below, a company that climbs the steep learning curve for the first installation can then take what it has learned and apply it to additional installations in other stores. Each new installation becomes easier and better adapted to the specific needs of the company.
Because of their many customers, supermarkets can educate large numbers of people about fuel cells through information panels and educational materials in those stores that have fuel cells.
Supermarket chains can use fuel-cell-powered forklifts and other materials handling equipment at their distribution centers, as well as stationary fuel cells at their stores.

Grants and other incentives from state agencies have been essential to make the initial fuel cell installations possible. Such support will continue to be important in the coming years. Through it, states can help to advance a promising clean energy technology, while helping important local businesses.

To read a just-released CESA briefing paper with case studies of four supermarket chains’ use of fuel cells, go to http://www.cleanenergystates.org/resource-library/resource/fuel-cells-for-supermarkets.

While fuel cells have had up and down cycles over the years, sellers are now finally focusing on niche markets that benefit from the many attributes of these technologies. This smart market strategy for supermarkets is a promising one, which policy makers should strongly support.

Debt Deal Puts States Back in the Clean Energy Driver's Seat

Tue, 02 Aug 2011 00:00:00 -0400

Debt Deal Puts States Back in Clean Energy Driver’s Seat

The recent debt ceiling deal announced this week means two things for clean energy. One, forget Washington as a source of significant new funding and programs for a long time. Two, look once again to the states to keep momentum on clean energy alive.

The first point is fairly indisputable. Virtually every energy commentator has lamented how future, severe cuts to energy and environmental programs are an inevitable result of this new deal. Billions of dollars will come out of most clean energy and environmental programs for the next ten years, probably permanently below last year’s continuing resolution budget levels. DOE and Interior and EPA will see big hits to their programs. Unrealistic dreams of a new carbon tax are finally being put to rest. The cuts could well come to various renewable incentive and tax credit programs.

The second point of returning to the states is the only realistic answer. As Washington conducts a slash and burn campaign to gut clean energy and environmental programs the states are acting more responsibly. Just as they did under some rough times in Washington from 2000 to 2008, the states once again are stepping up their clean energy game.

Connecticut is the first state in the country, under Governor Malloy, to create a new green infrastructure bank, something that Washington has been unable to do. In Virginia, Republican Governor Bob McDonnell recently signed several initiatives into law: one would create a Clean Energy Manufacturing Incentive Grant Program; another raises the net metering limit for homeowners; and two others create a means for voluntary contributions on electric bills to a fund that will use proceeds to fund solar systems at residences, businesses, and nonprofits.

At the same time, Oregon and Massachusetts have created innovative new solar support programs (“Solarize Campaign”) that support communities and neighborhoods to use their collective purchasing power to help residents overcome the financial and logistical hurdles of going solar. The State of New Jersey is using its renewable portfolio program to support offshore wind and offering tax credits to build the associated supply chain to create local jobs and lower transmission investment costs.

Sure, some states are cutting back, or raiding some of their clean energy funds. But that is the rare exception. For the most part, we see steady state funding, and a renewed emphasis on the economic development benefits of clean energy programs, along with a raft of new economic development programs across the country. States are creating clean energy incubators, workforce training programs, technology innovation efforts and looking to major new projects like offshore wind to boost local manufacturing and employment.

So what gives with this schizophrenic state versus Beltway shift? It’s on old story. In Washington, the lowest common denominator policy prevails. The fossil fuel industry has enormous concentrated power to influence key lawmakers to do nothing on clean energy. It only takes a few no votes to kill federal legislation.

In the states, Governors of both parties tend to do what works, what creates jobs and brings in new industries. And for them, clean energy is the new nonpartisan economic driver. It is much harder for opponents to stop the spread of experimentation in 50 states.

This is clear from a recent study by the Brookings Institution that showed how renewable energy is one of the fastest growing industry sectors in the last ten years. It is perhaps the one bright spot in this bleak economy.

Governors get that story, and focus laser like on jobs. Unfortunately, some of our Washington politicians are now solely enamored of debt reduction and have forgotten the 16 million unemployed.

But the states have not. That is good news for clean energy. Now if only Washington understood how to work more with the states and ride that clean energy wave that is breaking outside the Beltway.

Clean energy jobs are growing much faster than the rest of the economy; state policies are at the center of that growth

Wed, 20 Jul 2011 00:00:00 -0400

Last week, our friends at the Brookings Institution Metropolitan Policy Program released an important report assessing the size and growth of the clean economy, “Sizing the Clean Economy: A National and Regional Green Jobs Assessment.” The research in this report provides an excellent start toward gathering the data on jobs, growth trends and geography needed to develop effective clean energy economic development policies.

While the authors’ definition of the “clean economy” goes far beyond renewable energy, the report does a great service to provide, for the first time, a detailed breakdown of specific clean energy sectors and growth trends.

The Brookings team found that today the total “clean economy” in the U.S.- defined as all industries that produce goods and services with an environmental benefit- makes up 2.7 million jobs. The renewable energy sector makes up only 5% of those jobs- but they followed similar and in many cases more impressive trends than the total clean economy. They are fast-growing, manufacturing- and export-intensive, and offer better-than-average pay to workers with modest education.

A key conclusion of the report is that these new energy sectors have had the highest growth rates over the past decade- higher than the rest of the clean economy and far greater than the economy as a whole - albeit from relatively low bases.

According to the report, from 2003 to 2010

“four of the five fastest-growing segments [of the clean economy] were in renewable energy. Solar thermal grew at a torrid pace, expanding by 18.4 percent annually over the seven years and adding 3,700 jobs. The wind power industry added 15,000 jobs, growing 14.9 percent per year. Solar PV added 12,286 jobs with 10.7 percent average annual growth. Moreover, biofuels, another renewable segment, added 9,300 jobs with 8.9 percent growth each year over the period.

Young, technology-heavy segments were also adding jobs at elevated rates each year over the period. For example, establishments involved in fuel cell production created roughly 3,500 jobs while those working in smart grid added 7,000, with annual growth of 10.3 and 8.6 percent respectively.

The takeaway: emerging, new companies in the clean economy had a substantially greater job creation impacts than their “non-clean” peers in the national economy.”

The clean energy sector is also more export intensive- seven of the top eight sectors were energy technologies: biofuels/biomass, electric vehicle technology, battery technology, wind, solar PV, and fuel cells. The most export-intensive “category” of sectors was renewable energy technologies, at $64,884 in exports per job, compared to only $20,129 for the aggregate clean economy.

The report also begins to look at why certain regions have seen such high growth- what policies are most important?

A key take away here (no surprise to us) is that state policy has been leading the way. And in the energy sector in particular, a number of state clean energy fund programs are highlighted as case studies.

The New York state Energy Research and Development Agency's (NYSERDA) energy and environmental technology energy incubator, iCLEAN, is noted for its success at driving the clean tech industry in the state.
The California Energy Commission’s Alternative and Renewable Fuel and Vehicle Technology Program, is also highlighted as a model for its loan guarantees and other financial instruments.
Boston, home to the Massachusetts Clean Energy Center, also ranked seventh among the 100 largest metro areas for employment in the alternative energy industry, with nearly 4,300 alternative energy jobs.

The report offers three overarching policy recommendations-

Foster demand for a vibrant domestic market
Ensure the availability of adequate finance
Promote innovation

These recommendations are a great start to thinking about clean energy in a new way – as an economic development opportunity. The key is to develop new and dedicated economic development programs, which go beyond funding individual projects.

Here at CEG and CESA, we are starting to work with states to share experiences with their new economic development programs in the clean energy space.

But that’s only a beginning. A new, national effort to bring together all the economic development and clean energy practitioners to work toward better and smarter policies is the next important step.

Offshore Wind and Economic Development: How Utility Law Could Help

Mon, 18 Jul 2011 00:00:00 -0400

It is hard to imagine a new angle on the beleaguered Cape Wind project. Everything from its rich opponents, to the Kennedys, to the local Indian tribes has been the subject of endless news stories.

But there is one item that deserves some attention – jobs and what the Massachusetts utility regulator’s decision to approve the project means for how any new energy technology can be built.

After an interminable struggle, the state’s utility commission approved part of the future power output from the project a few months ago. But in the press around the approval, the important rationale for the approval did not get nearly enough attention. It is never too late to point out an important point, so here goes.

That approval was a big deal because the cost of power (about 18 cents per kWh) is quite a bit more than the average cost of electricity in the state. To justify the purchase, there had to be compensating benefits. And that is why this decision is so important.

Under Massachusetts law, employment benefits are an explicit element to be used in rate case decision making. In this multi-hundred page decision, start at page 200 and read for about twenty pages to see how this is analyzed. You will see there were numerous studies showing job benefits and various other quantified and unquantified benefits—the analysis was used to offset the higher costs of the project as compared to commodity priced power. It’s very interesting to see how utility decision making is about much more than prices, it is now about jobs, environmental benefits, system reliability and regional impacts. Higher costs can be justified by economic development benefits.

Like the Cape Wind offshore wind project, any new technologies that might cost more to build—like marine power, or carbon capture and storage—state utility regulators will have to approve the higher costs. To do that, they must have good reasons to say yes.

In Massachusetts, that means jobs, as well as other factors. Like many states, a regulator must consider “employment benefits” when looking to approve or disapprove a new energy project. It is a little known part of utility law in most states.

In the Cape Wind case, the commission found that hundreds of new jobs in construction, maintenance and other areas would result from the project. And with this jobs creation justification, among others, approved the project and electricity rate.

This is an area that needs a great deal more work in the clean energy space. To get built, state regulators will have to approve emerging clean energy technologies, whose electricity output is likely to cost more in the early stages. To do that, they will need evidence to show that the countervailing benefits outweigh those higher costs. In addition to jobs, this could include environmental benefits, system reliability and regional economic impacts. Clean energy advocates should build the rate case, like in Cape Wind, with economic evidence.

Economic development benefits—new jobs—are likely to be the key to the approval of new clean energy technologies—at least in the near term.

Lighting Africa: A model that should be replicated in other clean energy technologies

Mon, 11 Jul 2011 00:00:00 -0400

Clean Energy Group has been advocating for new innovation strategies to accelerate clean energy technologies and markets for many years now (see "Moving Climate Innovation into the 21st Century: Emerging Lessons from other Sectors and Options for a New Climate Innovation Initiative"). We’re happy to report that one program, Lighting Africa, a joint International Finance Corporation-World Bank initiative, is demonstrating the successful application of these new innovation systems approaches to one of the most persistent energy access issues in the developing world: off-grid lighting. (See Lighting Africa case study in CEG's "Accelerating Climate Technologies" report for more information.)

Lighting Africa (LA) started with the simple goal: to catalyze the market for clean off-grid lighting, without providing subsidies for the technologies. Subsidies have a history of running out at crucial moments—and have in many cases actually undermined markets for new technologies. Instead, the LA team aimed to use public dollars strategically to incentivize private-sector innovation—to develop products that people wanted and could afford to buy without public support.

To do this, LA took a systems-analysis approach and identified a series of market gaps for off-grid lighting products that the private sector was unable to overcome:

Lack of market information and consumer knowledge of products
Low quality products spoiling the market
Lack of low-cost consumer and business finance
Policy and regulatory constraints

The team then created a series of targeted interventions to overcome these barriers. LA provides detailed market analysis to private lighting companies, product testing and certification, access to finance for consumers through local banks, and an online virtual network to link manufacturers and distributers. Lighting Africa acts as “bridge” or “matchmaker” for entrepreneurs and local and international businesses along the supply chain.

Early results are impressive. In the past 18 months, LA has spent less than US$9 million on its off-the-grid efforts, which have already brought better light to 950,000 people. Eight products have so far passed LA quality tests and are available in the African market, retailing between US$22 and US$97. Two hundred and fifty (250) retailers are now selling these quality approved products—up from 30 in less than a year.

With this rapid progress, reaching Lighting Africa’s initial goal of providing 2.5 million people with access to cleaner lighting by December 2012 is on track.

After the program’s early success piloting its approach in Kenya and Ghana, LA has expanded to eight additional countries in Sub-Saharan Africa and India. LA’s quality assurance approach is already being implemented internationally.

Lighting Africa is now spinning out some of its work to a newly formed independent organization: the Global Off-Grid Lighting Stakeholder’s Association. The Association represents a unified industry voice dedicated to the development of clean off-grid lighting solutions. The association will support the expansion of off-grid lighting markets in developing countries outside of Africa. The association is an important first step in moving the Lighting Africa program towards a self-sustaining operation, and provides an “exit strategy” for the World Bank Group, which has served to jumpstart the off-grid lighting industry.

The Lighting Africa example demonstrates that individual firms cannot and should not “go it alone” to commercialize climate technologies in developing countries. The program underscores the need for an international public partnership to serve as a neutral broker to identify and fill gaps across the value chain, share international knowledge, enable relationship building, and respond to evolving market needs—actions that individual countries and private-sector developers cannot do on their own.

The model should be replicated for other clean energy technologies.

Extreme Weather and Power Outages: Distributed Clean Power Can Meet Emergency Needs

Wed, 06 Jul 2011 00:00:00 -0400

The tornadoes in the South and Midwest this spring, the recent unprecedented fires in the Southwest and the floods across the country once again showed how fragile our electric grid is and how dependent we are on it for our basic services. After the tornadoes in the South millions of homes and businesses were without electric power- transmission lines were down and the Tennessee Valley Authority shut down three nuclear reactors when power was cut to run the plants cooling system. The Arizona fire threatened major transmission wires that supply power to hundreds of thousands of people- damage to these wires would have meant rolling black out across the Southwest and Texas.

Power outages have serious impacts beyond individual inconveniences - the loss of electricity from severe weather disrupts emergency and communications systems of all kinds -- 911 call centers, cell phone service, as well as at shelters, police stations, hospitals and laboratories.

After the Alabama tornadoes, there were also reports of major gas shortages- not because stations couldn’t get gas but because they didn’t have power to pump the gas.

Right now, most electrical power comes from large central plants --nuclear, coal, oil or gas--delivered through miles of lines and above-ground poles. Tornados, hurricanes, flooding and other disasters can easily interrupt these vulnerable distribution and transmission networks, as happened across the South.

It doesn’t have to be this way. Distributed renewable energy systems can often withstand severe weather events and continue to operate when the grid is down- systems like solar panels and fuel cells. As far back as 1999, NREL recommended the widespread use of solar for emergency backup power, including gas stations.

Japan has been using solar in gas stations as backup for emergencies since the mid 1990s.

After a series of hard hurricane seasons in 2004 and 2005, when many communities were without power – and gas and supermarkets- for weeks. (Federal and state agencies spent millions distributing water and ice to residents.) Florida passed a law requiring gas stations to have backup power for the pumps and the cash registers.

It appears Alabama does not have a similar law.

Disaster relief experts have written about these solutions for years, but officials have been slow to act. Despite numerous examples of distributed renewable systems saving the day (and centralized conventional energy failing massively), when it comes to existing, central generation energy systems with their long lines, poles and transformers, most propose simply to rebuild them and hope for the best next time.

Hoping against Mother Nature is not a wise energy protection strategy. A more creative approach should be on the table: energy technologies that are smaller in scale, modern, cleaner and more reliable to power critical electrical needs.

Because this is about public safety and the protection of life, government should step in forcefully with a solution. After all these tragedies, it’s about time that federal and state government require these resilient, smaller technologies for key public safety power needs.

Some states are beginning to see these technologies as a basic foundation for emergency management and public safety. The NYPD Central Park Police Station is powered by an on-site fuel cell that kept the lights on during the 2003 blackout. A fuel cell at the Saint Francis Hospital in Hartford, Connecticut provides emergency power for some operating rooms. On-site renewable energy projects are in place at schools that serve as emergency shelters. The Governor’s residence in Pennsylvania uses photovoltaic for emergency backup power for critical state government communications. Other states have these technologies at mobile emergency command centers and wastewater treatment facilities.

But these small examples are not enough. Most federal and state government buildings have no such additional emergency power protection.

These new mandates can be tailored and flexible. They would cover only certain emergency power needs in critical facilities such as communications, information systems and emergency lighting, not entire buildings. They also should provide incentives for the private sector to increase power security in mission critical buildings like laboratories and hospitals. Homeowners too deserve financial support. New markets for these technologies could develop from these requirements, as well as new jobs for installers and others to maintain them.

The human and economic costs of depending solely on the energy status quo during times of natural emergencies are now painfully unacceptable. In the future, we should not rely on the same old energy systems that continue to fail when we need them most.

If states and the federal government take these necessary steps, stronger emergency management and homeland security with more resilient, cleaner energy might be one of the few good things to come out of these recurring natural tragedies.

Is the Fuel Cell Roller Coaster Heading Up or Down?

Wed, 22 Jun 2011 00:00:00 -0400

Few clean energy technologies have seen sharper swings in their perceived appeal and popularity than fuel cells. In the years surrounding the millennium, fuel cells appeared to be making rapid technical and economic progress. Many industry representatives, analysts, and policymakers predicted that fuel cells would soon provide cost-effective power for stationary applications and motor vehicles. Significant venture capital funding and government support flowed into the industry.

But the technical challenges to large-scale deployment of fuel cells proved to be greater than anticipated and many of the early installations turned out to be less reliable or cost-effective than predicted. Investors started to get cold feet and state-level policymakers turned their attention elsewhere.

After the spotlight shifted away, the fuel cell industry continued to make steady, but slow progress. Fuel cell companies become more realistic about the challenges they faced and those states that continued to support fuel cell development retained few illusions about how quickly the technology could be widely commercialized.

There is now increasingly solid evidence that those steady efforts are paying off. Fuel cells are on the upswing, even if less dramatically than the earlier millennial predictions for the industry. A report this month by Fuel Cells 2000 on State of the States: Fuel Cells in America (www.fuelcells.org/statereport.html) documents many promising developments:

Over the past year, more than 50 megawatts of stationary power have been either installed or purchased in the United States.
A competitive, self-sustaining niche for fuel cells has emerged related to folklifts and other materials handling equipment. Since early 2010, more than 1,500 fuel cell folklifts have either been deployed or ordered, and this trend should continue.
Many of the nation’s most important companies—including Coca-Cola, Walmart, and Whole Foods—have purchased fuel cells and are turning into repeat customers.
Additional states in all parts of the country, with bipartisan support, have taken steps that show that they view the fuel cell industry as important to economic development.

Last week witnessed the dramatic announcement that Bloom Energy would build a large East Coast factory in Delaware, creating 900 jobs. The Delaware state government is taking various steps, including qualifying natural gas fuel cells for the state’s renewable portfolio standard, to make this development a reality.

One of the significant factors helping fuel cells to gain traction in the marketplace is the increasing use of leases and other financial arrangements that require less up-front money on the part of purchasers. Along with improved warranties, these new financing approaches have shifted more of the performance and reliability risk from end-users to manufacturers and distributors. Although Bloom Energy has received the most attention for using a leasing model, other companies such as FuelCell Energy and UTC Power have also been experimenting with leasing programs.

So it increasingly appears that there is a solid foundation for future growth. Policymakers concerned about economic development have especially good reasons for considering how fuel cell technology can figure into their plans. For one thing, this is a domestic manufacturing industry in which the United States is the worldwide leader. In addition, unlike other clean energy technologies, there are few constraints on where fuel cells can be located. They provide baseload power and are a way for businesses and institutions to benefit from clean energy development.

Nevertheless, it remains unclear whether the roller coaster will keep heading upwards. Publicly traded fuel cell companies have yet to be able to turn a profit. Competitors could emerge in other countries or American companies could be lured away to Korea or some other place that offers stronger financial incentives than the US. But, for the moment, the fuel cell industry is on the rise.

Google’s Clean Energy Tax Strategy: Other Companies Should Follow Suit

Wed, 15 Jun 2011 00:00:00 -0400

The latest Google foray into clean energy could hold lessons for many other companies interested in clean energy investment.

It was announced a few days ago that Google has made what is reported to be a $280 million investment in SunCity, a company that leases solar panels to homeowners, thus eliminating a large up front capital cost. This leasing model has become an industry standard in solar and fuel cell projects. Bloom Energy, a much hyped fuel cell company, is using such a leasing model for its data center projects.

Once you dig a little deeper, this is not just a typical company investment. Rather, Google is reportedly setting up a “tax equity fund” that SunCity can tap to finance its projects. This is a way for Google to directly offset its corporate taxes with solar tax credits. It is most common for banks to be part of this kind of tax equity project finance to offset their profits- but with the financial crisis many banks pulled out of this market as they didn't have large tax liabilities. This is one of the first examples of a large corporation using this vehicle.

The lesson from this new financial device? Virtually any large company with a serious balance sheet and corporate taxes to pay could use such a solar tax equity vehicle. This approach could open up billions of dollars of new equity for clean energy companies.

One of Google’s top energy officials, Rick Needham, confirmed as much in a recent article.

Needham thinks that there is a lot of opportunity for other large corporations, especially other technology companies, to make investments in renewable energy. If Google sparks interest from such sources of capital in providing equity, particularly tax-driven equity, to renewables, the knock-on effect on yields could be truly transformative. Google’s ability to break the tax equity oligopoly could be a market-moving event.

A major push should be undertaken to bring this new approach to the larger corporate community.