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photo: Sungevity

I wrote this post for Grist, where it first appeared.

On Tuesday, the Federal Housing Finance Agency effectively shut down an innovative green financing program called Property Assessed Clean Energy, or PACE, by restricting the ability of homeowners to take out loans to install solar panels and make other energy efficiency improvements.

Now the United States Treasury Department has piled on. A new Treasury directive tells the nation’s banks how to enforce the FHFA rules. The move could pose new problems for homeowners who have PACE loans, and complicate efforts to get the program back on track.

Homeowners repay PACE loans through an annual assessment on their property taxes. On Tuesday, the Treasury Department told banks that if a homeowner has a home equity line of credit, the amount of money available should be lowered to account for the loan liability. The Treasury also said homeowners could be required to put their PACE payments in an escrow account.

After Fannie Mae and Freddie Mac, the government chartered mortgage finance giants, raised concerns about PACE in May, some lenders declined to refinance mortgages that carried PACE liens.

Owners of commercial properties who hold PACE loans may need to put up additional collateral to back up the loan, according to the Treasury Department letter.

Cisco DeVries, president of Renewable Funding, an Oakland, Calif., company that designs and administers PACE programs for local governments, said he wants to make sure PACE loans for commercial owners won’t be curtailed.

“We believe PACE commercial can go ahead as it has always required lender consent when a commercial mortgage is in place,” he wrote in an email. “We just want to make sure we don’t run into an unexpected problem as we move forward.”

Some municipalities sell bonds to finance energy-efficiency loans for homeowners. But they may find that harder to do under the Treasury Department directive, which warned banks to move cautiously when underwriting such bonds.

I reported in the The New York Times on Tuesday that the Federal Housing Finance Agency had rejected the Obama administration’s offer of a two-year guarantee against any PACE-related mortgage losses Fannie or Freddie might suffer.

Now in a move that PACE proponents say adds insult to injury, the Treasury Department is advising banks to get local governments to insure them against any losses from the program if homeowners default on their mortgages.

Among those not amused by the FHFA action was California Gov. Arnold Schwarzenegger.

“The FHFA’s bureaucratic breakdown threatens one of California’s most promising new engines of job creation in this struggling economy,” Schwarzenegger said in a statement. “FHFA’s action threatens thousands of new sustainable jobs in California, especially in the hard-hit construction industry, while denying homeowners the opportunity to reduce monthly energy costs and add equity to their homes.”

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In Sunday’s New York Times, I have an update on the controversy surrounding Fannie Mae and Freddie Mac’s blocking of the PACE solar loan program:

Two government-chartered mortgage finance companies are unlikely to accept loans on homes that are part of a special program that lets homeowners repay the cost of energy improvements through a surcharge on their property tax bills, according to Energy Department officials.

The Obama administration has allocated $150 million in stimulus money to support the financing technique, called Property Assessed Clean Energy, or PACE, and 22 states have authorized such programs. In a separate stimulus effort, President Obama on Saturday announced nearly $2 billion in loan guarantees for solar energy production.

Through the PACE program, loans to install solar panels and make other energy improvements would be repaid through 20-year special assessments on property tax bills and secured through a lien.

On May 5, Fannie Mae and Freddie Mac, which buy and resell most home mortgages, notified lenders that such liens could not take priority over a mortgage but did not offer guidance on how to handle such loans. The uncertainty has frozen many PACE programs and led some energy companies to furlough workers.

On Friday, Cathy Zoi, an assistant secretary at the Energy Department, called officials in Boulder County, Colo., to inform them that the administration had been unable to persuade the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, to accept mortgages with PACE liens.

The liens, like other property tax assessments, would be paid first if a homeowner defaults.

“She said in light of the circumstances we should look at other ways of financing energy efficiency with the stimulus money,” said Ben Pearlman, a commissioner in Boulder County.

“We’re very concerned,” Mr. Pearlman said. “It’s a powerful program and a powerful idea. We need to find an easy way for people to make those investments.”

Those homeowners who already carry energy liens on their property may find it difficult to refinance their mortgages. In Sonoma County, Calif., some lenders have declined to issue new loans for homes with such liens unless the assessment is paid off.

Ms. Zoi also called Cisco DeVries, president of Renewable Funding, a company in Oakland, Calif., that devises and administers PACE programs for local governments. “She indicated that the agencies had decided not to accept the liens and the administration needed to begin contingency planning on what to do with stimulus funding allocated for PACE,” Mr. DeVries said.

Dan Leistikow, the Energy Department’s director for public affairs, confirmed the calls. “We expect to get more written guidance from the regulators this week,” he said on Saturday.

You can read the rest of the story here.

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This post first appeared on Grist.

Green tech is back in the green.

Global venture capital investment in green technology companies reached $4.04 billion in the first half of 2010, exceeding – slightly — the record set in the boom year of 2008, according to a preliminary report released Thursday by the Cleantech Group and Deloitte.

Venture investment in the second quarter rose to $2.02 billion, up 43 percent from the year-ago quarter. Investments in the first half of the year spiked 65 percent from the same period in 2009.

“There’s been a very clear resurgence in solar activity and that is largely responsible for the strong quarter,” Richard Youngman, the Cleantech Group’s head of global research, said on a conference call Thursday.

Solar captured $811 million, or about 40 percent, of green technology investment in the second quarter, according to the Cleantech Group, a San Francisco-based consulting and research firm. It defines the global market as consisting of North America, China, India, Israel and Europe.

Solyndra, a Silicon Valley thin-film solar panel maker, scored a $175 million investment while solar power plant builder BrightSource Energy took in $150 million.

It’s no coincidence that both companies have been the beneficiaries of the Obama administration’s push for renewable energy. Solyndra received a $535 million loan guarantee to build a new factory in the San Francisco Bay Area (which the president visited in May) and BrightSource was granted a $1.37 billion loan guarantee to get its first solar thermal power plant online.

Despite the recession, corporate America poured a record $5.1 billion into green tech companies in the first half of 2010, a 325 percent increase from a year ago.

“The significant strengthening of corporate and utility investment into the cleantech sector, relative to 2009, is very encouraging, given the key role they will play in enabling broader adoption of clean technologies at scale,” Scott Smith, partner, Deloitte’s U.S. clean tech leader in the United States, said in a statement.

Youngman warned not to read too much into the success this week of Tesla Motor’s initial public offering. Though the Silicon Valley electric carmaker’s share price accelerated some 40.5 percent on opening day, he pointed out that high-profile IPOs from Solyndra and Goldwind, a Chinese wind turbine maker, were pulled recently.

In fact, head east if you want to get in on a booming IPO market –12 of the 19 green tech offerings in the second quarter came from Chinese companies and raised $1.73 billion, or 75 percent of the total IPO take, according to the Cleantech Group.

The flip side, of course, is that the anemic IPO market in the United States also is driving venture capital investment as green tech firms are forced to raise private money.

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photo: Sonoma County

In Thursday’s New York Times, I write about how government-chartered mortgage giants Fannie Mae and Freddie Mac are derailing an innovative program called Property Assessed Clean Energy. PACE programs finance the installation of solar panels and energy efficiency upgrades and let homeowners repay the loans through a 20-year surcharge on their property tax bills.

SAN FRANCISCO — The Obama administration is devoting $150 million in stimulus money for programs that help homeowners install solar panels and other energy improvements, which they pay for over time on their property tax bills.

At the same time, the two government-chartered agencies that buy and resell most home mortgages are threatening to derail the effort by warning that they might not accept loans for homes that take advantage of the special financing.

The mixed messages have alarmed state officials and prompted many local governments to freeze their programs, which have been hailed as an innovative way to help homeowners afford the retrofitting of a house with solar panels, which can cost $30,000 or more before incentives.

“The thing that is maddening is that this is having a real-life impact with companies laying off people and homeowners in limbo as all these projects are stalled,” said Clifford Rechtschaffen, a special assistant attorney general in California.

Under the financing programs, a local government borrows money through bonds or other means, and then uses it to make loans to homeowners to cover the upfront costs of solar installations or other energy improvements. Each owner repays the loan over 20 years through a special property tax assessment, which stays with the home even if it is sold.

The technique, known as Property Assessed Clean Energy, or PACE, was pioneered by Berkeley, Calif., in 2008, and 22 states have authorized such programs, which are intended to make it easier and cheaper for homeowners to invest in energy efficiency. So far, only a few thousand people have used them.

But the Energy Department wants to promote the programs — and give an economic boost to companies that install energy systems — through the $150 million in stimulus funds, which are intended to help communities cover setup and administrative costs.

Fannie Mae and Freddie Mac, the government entities that guarantee more than half of the residential mortgages in the United States, have different priorities. They are worried that taxpayers will end up as losers if a homeowner defaults on a mortgage on a home that uses such creative financing. Typically, property taxes must be paid first from any proceeds on a foreclosed home.

In letters sent to mortgage lenders on May 5, Fannie Mae and Freddie Mac stated that energy-efficiency liens could not take priority over a mortgage. “The purpose of this industry letter is to remind seller/servicers that an energy-related lien may not be senior to any mortgage delivered to Freddie Mac,” wrote Patricia J. McClung, a Freddie Mac executive.

However, the agencies did not offer guidance to mortgage lenders on how to handle properties that carry the energy liens. Backers of the programs fear that mortgage lenders, who depend on Fannie and Freddie to buy their home loans, will now start demanding that the entire lien be paid off before issuing a new loan.

That is what happened to Deke DeKay of Healdsburg, Calif., when he sold a house in nearby Geyserville in May. Mr. DeKay, who had purchased the foreclosed home as an investment, put in new insulation and heating and cooling systems, financed by $11,000 from Sonoma County’s program.

“We thought this would be an interesting way of upgrading the home’s energy efficiency without adding to the purchase price,” Mr. DeKay said. “Then right before the close of escrow, the bank discovered this stuff Fannie Mae and Freddie Mae put out and refused to approve the loan without the assessment being paid off first.”

Now Mr. DeKay is worried about his own home, which carries a $25,500 lien for a five-kilowatt solar array installed last year. “If we ever want to refinance the house, it will be impossible for us to do that,” he said.

You can read the rest of the story here.

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photo: Todd Woody

This post first appeared on Grist.

The California Assembly has passed legislation that takes the first step to requiring that a percentage of electricity generated in the state be stored.

Electricity, of course, is the ultimate perishable commodity. If the bill is approved by the California Senate and signed by Gov. Arnold Schwarzenegger, it would apparently be the first time a state will move toward mandating that electricity generated by wind farms, solar power plants, and other intermittent sources be stored for use during peak demand.

That’s key if California is to meet its ambitious mandates to obtain 33 percent of its electricity from renewable sources by 2020.

“Electric energy storage is an emerging industry that offers the possibility to solve a number of major obstacles to the achievement of a sustainable electricity future,” according to an analysis of the legislation prepared by the California Public Utilities Commission in May. “It can effectively address problems such as the integration of intermittent renewables.”

Sponsored by Assembly member Nancy Skinner, a Berkeley Democrat, the bill has been watered down to make it palatable to the state’s utilities and regulators. It originally required the state’s utilities to obtain energy storage systems capable of providing at least 2.25 percent of average peak electrical demand by 2014. By 2020 the target would rise to at least 5 percent.

The latest version of the bill now wending its way through the state Senate requires the California Public Utilities Commission to open proceedings on energy storage and by October 2013 to adopt an initial target — if appropriate — for utilities to meet by the end of 2015.

California Attorney General Jerry Brown, the Democratic candidate for governor, is sponsoring the legislation, which is backed, not surprisingly, by the renewable energy industry and venture capitalists.

“It’s part of our bigger effort to deal with climate change,” Cliff Rechtschaffen, Special Assistant Attorney General, told me. “When we looked at how to develop renewables, the technology is here but stalled by lack of regulatory focus.”

Utilities spend billions of dollars building so-called peaker plants that operate just hours a year to supply electricity and avoid blackouts when demand spikes — say, on a hot day when everyone cranks up their air conditioners.

Such costs — and greenhouse gas emissions — could be cut or reduced if electricity stored from wind farms or solar power plants could be dispatched when demand rises.

A report prepared for the California Energy Commission and released this month concluded that adding gigawatts of wind and solar energy to the grid to meet renewable energy mandates would require “major alterations to system operations.”

Without storage, more natural gas power plants or hydroelectric facilities would need to be built to smooth out grid operations as increasing amounts of solar and wind energy comes online, according to the report prepared by Kema, an energy consulting firm.

“Storage can be up to two to three times as effective as adding a combustion turbine to the system,” the report stated.

The cost and feasibility of such storage systems is another matter, as it remains a nascent industry.

Most efforts focus on using batteries or mechanical systems like flywheels to store electricity. California utility PG&E has launched a pilot project to store electricity in the form of compressed air. Some developers of solar power plants intend to use molten salt to capture heat that can be released and used to drive an electricity-generating turbine after the soon goes down.

“This bill moves storage to the top of the regulatory agenda where it belongs,” says Rechtschaffe

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photo: eSolar

This post first appeared on Grist.

Amid all the hope and hype about the nascent solar boom under way in California, there’s long been an elephant in the room – transmission. Billions and billions of dollars must be spent to build and upgrade transmission lines to connect dozens of proposed solar power plants to the grid.

Now that elephant has rolled over and squashed one project’s use of innovative solar technology. Last year, California utility PG&E signed a deal with NRG Energy, a New Jersey-based electricity provider, to buy power from a 92-megawatt solar farm called the Alpine SunTower to be built near the desert town of Lancaster, northeast of Los Angeles.

The power plant would deploy solar thermal technology developed by eSolar, a Pasadena startup founded by serial technology entrepreneur Bill Gross. NRG and eSolar earlier had inked a partnership to build 500 megawatts’ worth of solar farms. In January, eSolar reached an agreement with a Chinese company to supply technology for solar farms that would generate a massive 2,000 megawatts of electricity.

PG&E, however, submitted a letter recently to the California Public Utilities Commission  asking approval for a re-negotiated deal with NRG that has resulted in a downsizing of the Alpine SunTower project to 66 megawatts. And instead of deploying eSolar’s fields of mirrors that focus the sun on a water-filled boiler that sits atop a tower to create steam to drive a turbine, the power plant will generate electricity from photovoltaic panels like those found on residential rooftops.

The utility gave no reason for the technology switch. “NRG has not finalized the exact type of panels or the manufacturer of the panels,” a PG&E executive wrote in the letter. “Solar PV panels have been used in installations throughout the world, in both small and utility scale applications.”

However, when I contacted eSolar about the change, I received a joint statement from the company and NRG:

“NRG is returning the project to its originally proposed size to match the transmission capacity available to the project at this time,” it said. “Maintaining the project as previously announced would require waiting for additional interconnection studies and potential transmission upgrades that would delay the project delivery date.”

While solar panels are not as efficient as eSolar’s solar thermal technology in generating electricity, they are modular – meaning you can just keeping adding them to produce a desired amount of power or to match the transmission capacity in an area. ESolar’s power plants, on the other hand, are designed to be built in 46-megawatt units so there’s far less flexibility in scaling them up or down.

It’s too early to say whether this portends other switches from solar thermal to photovoltaic technology, especially as solar cell prices fall and California utilities scramble to meet a mandate requiring they obtain 20 percent of their electricity from renewable sources by the end of this year and 33 percent by 2020.

But the elephant is getting restless.

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photo: BrightSource Energy

In last Thursday’s New York Times, I wrote about French industrial conglomerate Alstom’s $55 million investment in BrightSource Energy, a California-based solar power plant builder:

Alstom, the French energy giant, has taken a $55 million stake in BrightSource Energy, a solar power plant builder backed by Google, Morgan Stanley and other investors.

The investment is part of a $150 million round raised by BrightSource in one of the biggest renewable energy deals of the year. The California State Teachers Retirement System also joined the latest funding round as did the existing investors VantagePoint Venture Partners, Morgan Stanley and Draper Fisher Jurvetson.

Based in Oakland, Calif., BrightSource has now raised more than $300 million. Alstom becomes one of the startup’s largest shareholders and will take a seat on the board, according to John Woolard, BrightSource’s chief executive. The French company makes turbines and other power systems for fossil fuel, nuclear and hydro power plants and operates a division that builds high-speed trains.

BrightSource has signed contacts to build solar thermal power plants in California that would generate some 2,600 megawatts. In February, the company obtained a $1.37 billion loan guarantee from the federal government to help finance the construction of its first project, a 392-megawatt power plant to be built in the Southern California desert by Bechtel.

Mr. Woolard said Alstom would help the company as it sought to develop more efficient solar power plants.

You can read the rest of the story here.

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photo: Alcoa

In The New York Times on Thursday, I wrote about how aluminum giant Alcoa has become the latest industrial behemoth to jump into the solar business:

Alcoa, the aluminum giant, is testing a new type of solar technology that the company said it believed will lower the cost of renewable energy.

The company has replaced the glass in parabolic troughs with reflective aluminum and integrated the mirror into a single structure.

Parabolic troughs focus sunlight on liquid-filled receivers suspended over the mirrors to create steam that drives an electricity-generating turbine. Parabolic trough technology has been in modern use in solar power plants since the early 1980s, but Alcoa executives said they saw an opportunity to refine the technology and get a foothold in the rapidly expanding renewable energy market.

“If you go out and look behind large parabolic troughs, you’ll find an elaborate truss structure,” said Rick Winter, a technology executive with Alcoa. “From our understanding of aerospace structures, we said if we can modify the wing box design used in aircraft and integrate a parabolic reflector, it would give us a light and stiff structure that would fundamentally affect the cost equation.”

An airplane’s wing box is a unit that integrates support structures and anchors a wing.

“Using aluminum and a wing box design we’re able to create the parabolic curve that we want in the structure itself,” said Scott Kerns, a vice president and general manager at Alcoa. “We can make the skin conform more or less to the way we want to concentrate the light.”

Current solar troughs use glass mirrors that are formed in the shape of a parabola and then attached to a support structure made of aluminum or steel. The executives said they estimate that the all-aluminum Alcoa parabolic trough, which is being tested at the National Renewable Energy Laboratory in Colorado, will cut the price of a solar field by 20 percent due to lower installation costs.

You can read the rest of the story here.

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Photo: BrightSource Energy

In The New York Times on Wednesday I write that California regulators have recommended approval of BrightSource Energy’s 392-megawatt solar thermal power plant, the first large-scale project in the state in two decades:

California regulators on Wednesday recommended that the state’s first new big solar power plant in nearly two decades be approved after a two-and-half year review of its environmental impact on the Mojave Desert.

The recommendation by the California Energy Commission staff comes three weeks after the United States Department of Energy offered the project’s builder, BrightSource Energy, a $1.37 billion loan guarantee to construct the 392-megawatt Ivanpah Solar Electric Generating System, or I.S.E.G.S.

The Sierra Club, Defenders of Wildlife and the Center for Biological Diversity favor solar energy projects but objected to building the BrightSource power plant in Southern California’s Ivanpah Valley, saying it would harm rare plants and animals such as the desert tortoise.

Other environmentalists argued that the project, which features thousands of mirrors that focus the sun on 459-foot-tall towers, would mar the visual beauty of the desert.

In an assessment filed on Tuesday, energy commission staff found that a smaller version of the project that BrightSource proposed last month would mitigate any damage to several protected plant species on the site.

Environmentalists, however, had said the downsized version of the power plant would not sufficiently protect rare species and continued to push for the project’s relocation to more disturbed land.

The energy commission staff determined the visual impact of the Ivanpah power plant could not be reduced but recommended that the commission’s board license the project due to “overriding considerations.”

You can read the rest of the story here.

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photo: Todd Woody

In an interview I did with green tech entrepreneur Bill Gross for Yale Environment 360, Gross talks about the future of solar energy, his relationship with Google, and how to avoid battles over building large solar farms in the deserts of the Southwest:

Bill Gross is not your typical solar energy entrepreneur. In a business dominated by Silicon Valley technologists and veterans of the fossil fuel industry, Gross is a Southern Californian who made his name in software. His Idealab startup incubator led to the creation of companies such as eToys, CitySearch, and GoTo.com. The latter pioneered search advertising — think Google — and was acquired by Yahoo for $1.6 billion in 2003.

That payday has allowed Gross to pursue his green dreams. (As a teenager, he started a company to sell plans for a parabolic solar dish he had designed.) Over the past decade, Gross has launched a slew of green tech startups, including solar power plant builder eSolar, electric car company Aptera, and Energy Innovations, which is developing advanced photovoltaic technology.

But it has been eSolar, backed by Google and other investors, that has been Idealab’s brightest light. In January, the company signed one of the world’s largest green-energy deals when it agreed to provide the technology to build solar farms in China that would generate 2,000 megawatts of electricity — at peak output the equivalent of two large nuclear power plants. And last week, eSolar licensed its technology to German industrial giant Ferrostaal to build solar power plants in Europe, the Middle East, and South Africa. Those deals followed eSolar partnerships in India and the U.S.

ESolar’s power plants deploy thousands of mirrors called heliostats to focus the sun’s rays on a water-filled boiler that sits atop a slender tower. The heat creates steam that drives an electricity-generating turbine. Last year, eSolar built its first project, a five-megawatt demonstration power plant, called Sierra, in the desert near Los Angeles.

This “power tower” technology is not new, but what sets the company apart is Gross’ use of sophisticated software and imaging technology to control the 176,000 mirrors that form a standard, 46-megawatt eSolar power plant. That computing firepower precisely positions the mirrors to create a virtual parabola that focuses the sun on the tower. That allows the company to place small, inexpensive mirrors close together, which dramatically reduces the land needed for the power plant and cuts manufacturing and installation costs.

“We use Moore’s law rather than more steel,” Gross likes to quip, referring to Intel co-founder Gordon Moore’s maxim that computing power doubles every two years.

You can read the interview here.

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