June 9, 2012 19:48
"Now I'm as excited about renewables as anybody. But they're a niche play." We excerpt this from a terrific interview of Southern Company CEO Tom Fanning by Joseph Rago of the Wall Street Journal (The Natural Gas Skeptic, WSJ, June 9-10, 2012). It resonated because we spent all day Thursday at the Solar Summit sponsored by City University of New York. New York City is jumping into solar power with both feet, head over heels and at a fever pitch. It is no longer just the Big Apple. If NYC has its way, it will be the Big PV Cell as well. You have that right. This is not sunny Florida or Arizona, but New York City, at 40 degrees North latitude. But it is not the latitude that matters. It’s the attitude, which is striving to enable the largest rooftop community in the country, according to Tria Case, the University Sustainability Director at CUNY.
At the Solar Summit CUNY unveiled its plan for SMART NY (Solar Market Analytics, Roadmapping, and Tracking NY). With 30 sponsoring City and State organizations, buy-in is not a problem. In a nutshell, SMART NY is going to streamline the adoption of solar in NYC. Impediments to permitting net metering will be overcome. A "Solar Portal" is being put together, which provides one-stop shopping online for agency permitting. One speaker commented that last year it took about 12 months to get a solar project permitted; now it is seven months and the goal is 100 days. A major component of SMART NY is the adoption of IBM's Intelligent Operations Center which will provide and integrate the data that flows out of the City's buildings and Solar Empowerment Zones.
Data is a key part of NYC's program. Lots and lots of data. Ariella Maron, Deputy Commissioner for Energy Management, explained what they do with it. The City has a lot of buildings: 2730 of them over 10,000 sq. ft. And it benchmarks all of its buildings. In the November 2011 Energy Benchmarking Report the City learned that it was just a tad better than the norm: 51.4% of its buildings are at or better than average under the USEPA's Energy Star Portfolio Manager (a benchmarking standard). With the data, it then tracks building performance leading to the identification of cost-effective retrofits. Real-time data (see IBM above) is used to inform operational decisions and better manage peak loads. The next steps include prioritizing audits and retrofits for large buildings greater than 50,000 sq. ft. According to Ms. Maron, the City has realized $42 million in energy savings from completed and active projects (although it was not explained what it cost to achieve those savings).
So why do lawyers care how the City's buildings are doing? Because they are the practical benchmark for all the non-governmental buildings in NYC (many more than 2730). And non-governmental buildings in NYC (and likely elsewhere) have great interest in pursuing solar. Here are three: enhancement of the building investment, tax abatement and mandatory energy conservation.1. The City enacted an ordinance permitting solar structures to exceed the limits on a building's envelope. Assuming solar adds value, in one fell swoop the City increased the value of thousands of properties in the City.2. A tax abatement of 5% of solar expenditures up to $62,500 per year for four years is available. This 20% incentive is down from 35% originally. It presently expires in 2013. 3. The NYC Energy Conservation Code, sets standards for building energy performance by requiring that all alterations, regardless of their percentage impact on the building, comply with the code. It is obvious that one ignores these rules at one's peril. But even in jurisdictions where similar rules are not enacted, knowing what the landscape could look like certainly matters.
Will it matter? One of the striking things about the Summit was the candor with which everyone acknowledged that solar power does not make economic sense. A deputy mayor even commented that it was not cost-effective. Another speaker pointed out that prices needed to fall by a factor of 4. So why is NYC so ardent? One reason is that solar power is coincident with peak power needs. On the hottest summer days, when the air conditioners are running full blast, solar panels are providing their maximum, potentially obviating the need for more peaking plants.
Clean air was another benefit. There simply aren't any emissions, whether of SOx, NOx, mercury, or greenhouse gases.
And there is the benefit of reliability. If the grid goes down, the 700,000 New York rooftops that are suitable for solar panels could make a big difference. These kinds of benefits, while difficult to quantify monetarily, are no less real. And notwithstanding renewable energy's "niche play," they bring NYC's vision closer to Mr. Fanning's views: "You don't pick one stock" (Southern is maintaining generation assets in coal, and nuclear, and natural gas, and renewables where it can; it is not casting its lot with natural gas). One of the stocks NYC is currently picking is solar.