Solar Energy

Texas Changes the Goal(s)

April 28, 2015 12:09
by Tricia Caliguire
Some say you can't go back, but last week, I did go back -- to Austin, Texas, where I went to law school. Things changed -- the east side has been gentrified, the traffic is horrendous, and Molly Ivins is gone – and are much the same – including that having the legislature in session makes for some interesting headlines.

Climate Change | Renewable Energy | Solar Energy | solar finance

Florida’s Solar Conundrum

March 31, 2015 09:40
by Marshall McLean
Despite ranking third in the nation for rooftop solar potential, the "Sunshine State" is 13th in cumulative solar capacity installed (dreary New Jersey is 3rd). This is the result of a state without a renewable energy portfolio standard (RPS) that does not permit power purchase agreements (PPAs) (Florida is one of only five states that explicitly prohibits anyone other than the big utilities from selling power). Depending on whom you ask, Florida's lack of solar infrastructure is either caused by the "monopoly" held by the State's big power companies, or the simple viewpoint that solar is a silly alternative when you compare cost to the comparatively cheap prices from more conventional generation sources. Well, the debate is scheduled to be settled soon... Environmentalists in Florida are pushing for a constitutional amendment initiative to place solar choice on the November 2016 ballot. The purpose of the ballot proposal is to expand solar choice by removing barriers that limit solar ownership models. If approved, the ballot measure would allow homes and businesses to install solar and sell excess energy they generate back into the grid. Curiously enough, much of the focus on this particular ballot proposal has been on the unlikely alliances that are now supporting the measure. Tea Party conservatives and aggressive libertarians (who advocate for free-market principles through energy choice) find themselves aligned with fundamental environmentalists and progressive liberals (who advocate for cleaner energy solutions). Opponents of course oppose taxpayer subsidies and consumer mandates. Regardless of one's viewpoint, an amendment permitting third-party sales in Florida will immediately result in a tremendous boom to the Sunshine State's solar industry. If that road is opened, expect a sea of solar developers to begin canvasing I-95 for opportunities from the Panhandle to the Keys.

Climate Change Effects | Renewable Energy | Solar Energy | Utilities | Florida | renewable portfolio standard | solar finance

Community Solar - A New Path in Illinois

March 5, 2015 11:55
by Tricia Caliguire
This week, the Chicago Tribune reports that the Citizens Utility Board (CUB) and the Environmental Defense Fund (EDF) filed a petition with the Illinois Commerce Commission (ICC) to require Commonwealth Edison Company (ComEd) to offer its customers the opportunity to participate in a three-year "community solar" pilot program. Just to get the players straight: ComEd is a regulated electric utility which services close to four million customers in northern Illinois. The CUB is the statutory representative of Illinois utility customers in all proceedings before the commission and federal agencies regulating the utility industry. (These organizations are more often called consumer or ratepayer advocates). On its website, EDF describes itself as a non-profit environmental advocacy and research organization whose mission is to "preserve the natural systems on which all life depends." The ICC is the state agency directed by statute to balance the interests of consumers and service providers "to ensure the provision of adequate, efficient, reliable, safe and least-cost public utility services." Community solar is also known as "shared renewables," "solar gardens" or, sometimes, "virtual net metering." Essentially, in a community solar program, multiple electric utility customers invest in a solar project and share in the financial proceeds, whether that is from the sale of excess power to the grid and/or renewable energy credits, based on their level of investment. Most, if not all, of the customers will not actually be physically connected to the solar facility. The benefits of community solar include reducing the level of investment required of the host residence or business and providing a means for all electric customers to experience the economic (and intrinsic) benefits of solar, even those who would otherwise be unable to install solar on their own residences or businesses (e.g., rented properties; shaded or otherwise unsuitable roofs). On the other hand, the soft costs of marketing and administering a program to multiple small investors can be significant, reducing those economic benefits. Community solar has also met resistance with regulators; while working in government, I heard concerns about soliciting of consumers, particularly seniors, to "go green" without hosting a solar system. (An Arizona solar company was recently fined for deceptive sales tactics, including targeting of senior citizens and making false claims about potential savings, though not related to a community solar product.) Electricity pricing can be confusing for consumers, even when dealing with their local utilities. Regulators are still sorting through the complaints and litigation resulting from the large numbers of electric and gas customers who switched to third-party suppliers over the past couple years, enticed by low natural gas prices and what they thought were fixed-price contracts, but who then faced bills two and three times higher than "normal" as a result of price hikes during the polar vortex events of 2013-14. The other major challenge for community solar has been to bring the utilities on board. Solar, like any form of distributed generation, will reduce the utilities' revenues. Here is where the Illinois proceeding may pave the way for community solar programs nationwide. In any such proceeding, the utility will be able to argue for recovery of administrative costs and fixed distribution costs, as well as for a return on the company's investment. In a twist on traditional community solar, California utility PG&E will begin later this year to offer its customers a stake in solar energy purchased from facilities within the PG&E service territory. Customers will see the extra costs of the solar energy they consume, plus related program costs, with a credit for standard generation that is avoided, on their monthly bills. And, avoiding a frequent criticism of subsidized clean energy programs, the rate structure ensures that customers who don't participate in the program will not share in the costs.

Regulation | Solar Energy | Utilities

Executory Forward SREC Contracts - What Exactly Does This Mean?

March 3, 2014 20:25
by J. Wylie Donald
What happens to the payment for a solar renewable energy credit (SREC) when the payor closes its doors?  Maryland citizens are finding out the hard way.  The promises made to some of them are turning up empty. Here are the details.  Greenspring Energy was a promising solar installation company.  As it describes itself:  "Greenspring Energy offers a unique combination of high-quality solar energy systems and the best energy saving products and services in the marketplace today. Created to help people effectively and permanently reduce their utility bills, Greenspring Energy’s products and services will allow you to: Reduce your utility bills with innovative energy saving products, Produce your own energy with solar systems, Take advantage of federal, state, and local incentives to go solar, Increase the value of your property, Reduce your carbon footprint.”  It was a good business model. Following its founding in 2007, Inc. reports it had revenues of $10.5 million in 2010 and 40 employees the next year. Its website boasts 2011 Inc. 500.  Then something happened.   Jamie Smith Hopkins of the Baltimore Sun reports that Greenspring Energy closed its doors at the end of January this year.  Its employees received rubber checks.  And its customers, promised recurring payments for the SRECs associated with the electricity generated from their solar equipment, were likewise burned.  This is not a particularly unexpected outcome.  Entities regularly enter bankruptcy and their creditors take a beating.  The solar industry is no different.  In fact, one website compiled a list of dozens of “Deceased Solar Companies” through early 2013.   But what is not getting a lot of play (or even any) is the effect of a bankruptcy of the SREC provider.  It is probably safe to say that most SREC transfers are the subject of executory contracts, long-term contracts where the provider agrees to transfer the SRECs accompanying its future electricity generation for some future consideration.  In bankruptcy, such contracts may be assumed, or not, at the discretion of the bankruptcy trustee.  11 U.S.C. § 365.   Except, however, where such contracts are forward contracts.  E.g., Master Solar REC Agreement  (NJ BPU 2014) (“Buyer and Seller each acknowledge that it is a “forward contract merchant” and that all transactions pursuant to this Master Agreement constitute “forward contracts” within the meaning of the United States Bankruptcy Code.”).  In that case, the trustee’s right to reject or assume the executory contract does not exist.  11 U.S.C. § 556.  So there is some complexity here.  And it gets worse.  The SREC does not exist but for the generation of 1 MWh of electricity, even if the SREC is sold separately from that electricity.  It is not difficult to conceive of a situation where the value of the contract for the sale of electricity is going in the opposite direction of the value of the SREC contract.  Suppose the bankruptcy trustee has the right to suspend electricity generation, even if it does not have the right to walk away from the SREC contract.  Does an SREC contract have any value if there is no generation? To our knowledge, SRECs (and RECs as well) have not been tested in the furnace of bankruptcy.  We will be interested in seeing how that turns out. 

Renewable Energy | Solar Energy | Utilities

The Top 6 at 12: Highlights of the Top Climate Change Legal Stories in the Second Half of 2013

December 31, 2013 21:01
by J. Wylie Donald
2013 has drawn to a close; here is our take on the top six climate change legal stories in the last six months.  1.  Climate Change Assessments - Blockbuster legislation may have been evaded once more but that has not stopped those in the trenches. Assessments of climate change risk are becoming more routine. For example, the September 2013 Record of Decision for the Gowanus Canal Superfund Site required assessment of “periods of high rainfall, including future rainfall increases that may result from climate change” in implementing certain aspects of the cleanup remedy.  Another example was provided by the Department of Housing and Urban Development, which in November required in its second round of community block grants for disaster relief that prospective grantees consider in their Comprehensive Risk Analysis “a broad range of information and best available data, including forward-looking analyses of risks to infrastructure sectors from climate change and other hazards, such as the Northeast United States Regional Climate Trends and Scenarios from the U.S. National Climate Assessment, the Sea Level Rise Tool for Sandy Recovery, or comparable peer-reviewed information."  Even the Nuclear Regulatory Commission looked at climate change with regard to its September draft generic environmental impact statement for the long-term continued storage of spent nuclear fuel.  2.  Low Carbon Fuel Standards - In Rocky Mountain Farmers Union v. Corey the Ninth Circuit reversed several district court rulings limiting under the “dormant Commerce clause” the California Air Resources Board’s Low Carbon Fuel Standard.  Although the Commerce clause of the Constitution, U.S. Const., art. I, § 8, cl. 3. “does not explicitly control the several states,” it "has long been understood to have a ‘negative’ aspect that denies the States the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce.’” Rocky Mountain at 31 (citation omitted). California’s Low Carbon Fuel Standard supported carbon dioxide emission reduction “by reducing the carbon intensity [i.e., the amount of carbon dioxide emitted per unit of energy produced] of transportation fuels that are burned in California.”  It thus potentially burdened producers of ethanol in the Midwest and petroleum producers outside California, but that did not matter.  Specifically, the court held that the LCFS was not facially impermissibly discriminatory in favor of ethanol, was not improperly extraterritorial and did not discriminate against petroleum fuels.  Accordingly, California is still on its path to a reduction in the carbon intensity of its fuels by 10% by 2020, as mandated by the 2006 Global Warming Solutions Act. 3.  The Cost of the Grid - On November 14, the Arizona Corporation Commission ruled that Arizona's net metering program should spread the cost of maintaining a reliable grid among all of Arizona Public Service's customers, including its rooftop solar customers. Up to that point rooftop solar customers were paid for the electricity they provided to the grid at retail rates, without any adjustment for the cost of the grid. The Commission concluded that this resulted in a "cost shift" from customers that were paying for the grid, to rooftop solar customers, who weren't.  APS put on a good case demonstrating that rooftop solar customers were substantially benefitting from the grid by drawing power at night, during cloudy weather and during the periods of daylight when solar power production did not exceed the customer's needs. Many have criticized solar power as unfairly subsidized. In Arizona at least, one of those subsidies is being addressed. 4.  New Carbon Dioxide Emission Standards - Following over 2.5 million comments, EPA rescinded its proposed rule governing carbon dioxide emissions from new coal-fired power plants.  In its place it proposed on September 20 a rule setting CO2 emission standards for new large natural gas power plants (1,000 lbs/MW-hr), new small natural gas power plants (1,100 lbs/MW-hr), and new coal-fired power plants (1,100 lbs/MW-hr).  From our perspective, the most significant facet of this new rule is that it actually will apply to plants that are being built.  The withdrawn proposed rule only applied to new coal plants, which EPA concluded would not be built anyway before 2030.  Equally significant, as pointed out in EPA’s news release  on the proposal, is that “EPA has initiated outreach to a wide variety of stakeholders that will help inform the development of emission guidelines for existing power plants.” 5.  The Fifth Assessment Report of the Intergovernmental Panel on Climate Change – The IPCC’s Working Group I issued The Physical Science Basis, its part of the Fifth Assessment Report.  Working Groups II and III will publish in 2014.  Among other things WG I concluded:  "Unequivocal evidence from in situ observations and ice core records shows that the atmospheric concentrations of important greenhouse gases such as carbon dioxide, methane, and nitrous oxides have increased over the last few centuries."  "The temperature measurements in the oceans show a continuing increase in the heat content of the oceans.  Analyses based on measurements of the Earth's radiative budget suggest a small positive energy imbalance that serves to increase the global heat content of the Earth system.  Observations from satellites and in situ measurements show a trend of significant reductions in the mass balance of most land ice masses and in Arctic sea ice. The ocean's uptake of carbon dioxide is having a significant effect on the chemistry of sea water."  But if one remains skeptical, this consensus view of the world’s leading climate scientists should not cause one alarm, the climate change skeptics have not thrown in the towel.  For example, according to one website, “climate science as proclaimed by the IPCC is a morass where what is scientific knowledge cannot be easily separated from speculation and what is wrong.”  One won't find seafarers plying the Northern Sea Route in the skeptic camp, however.  Russia logged a record year of transits in 2013 (over 200), up from just 4 in 2010.  6.  Climate Change Liability Lawsuits - For the first time since 2005, when Comer v. Nationwide Mutual Insurance was filed, there is no climate change liability lawsuit on the docket anywhere. All have been defeated. Comer was the last to succumb, with its opportunity to file a petition for certiorari expiring on or about August 14.  The IPCC Fifth Assessment establishes climate change is not going away, but we will have to wait to see if anyone is going to attempt to make someone pay for it.

Carbon Dioxide | Climate Change | Regulation | Solar Energy | Utilities | Year in Review

Act II at the Obama EPA: Gina McCarthy (is predicted) To Take the Helm

February 28, 2013 21:43
by J. Wylie Donald
The President gave an indication of his environmental focus in his inaugural address, and then again in his state of the union speech. The focus would be on climate change.  Central to that focus would be the EPA Adminstrator, but that would not be Lisa Jackson who tendered her resignation at the end of 2012.  If Washington gossip is any guide, Ms. Jackson's replacement will be Gina McCarthy, the current head of EPA's Office of Air and Radiation. We went looking to see if we could draw a bead on where Ms. McCarthy might lead EPA.  We found a recent speech and it was directly on point. On February 21, Ms. McCarthy addressed an audience at the Georgetown Law Center at a conference on Climate Change and Energy Policy. (The conference was videotaped. Ms. McCarthy has the podium from about 4:50 to 5:30 if you are interested.)   Ms. McCarthy has a reputation of being something of a pragmatist. Her talk was consistent with that. A brief summary might be:  Climate change is here and we have to deal with it, but in addressing carbon dioxide there can be great benefits from doing so in the form of reducing pollution, increasing efficiency and empowering communities. Pollution reductions will come in at least three forms. First, if more renewable energy sources are developed, there will be less emissions. Second, if production and use is made more efficient there will be less emissions. Third, if production is focused on fossil fuels that emit less pollutants when burned (that is, not coal), there will be less emissions.  We note that this strategy is already at work.  The growth of wind and solar power has been meteoric.  Ms. McCarthy promoted electric cars, which are far more efficient than gasoline-powered ones (although she ignored compressed natural gas vehicles, which are low emission and have some compelling advantages over electric cars).  And we have covered before  the catastrophe for coal signaled by the proposed Standards of Performance for Greenhouse Gas Emissions for New Stationary Sources: Electric Utility Generating Units, which forecasts not a single new coal plant through 2030. Significantly, or perhaps not, she did not mention fracking and the phenomenal recent growth in natural gas production.  That was surprising.  A recent Harvard Magazine article  summarized the pollution and greenhouse gas effects of the natural gas bonanza:  The shift from coal to gas in the electricity sector has also yielded an environmental bonus—a significant reduction in emissions of CO2, because CO2 emissions per unit of electricity generated using coal are more than double those produced using gas. … [T]he U.S. Energy Information Administration (EIA) reported that domestic emissions of CO2 during the first quarter of 2012 fell to the lowest level recorded since 1992. An ancillary benefit of the coal-to-gas switch has been a significant reduction in emissions of sulfur dioxide, the cause of acid rain, because many of the older coal-burning plants selectively idled by the price-induced fuel switch were not equipped to remove this pollutant from their stack gases. Efficiency pervaded her remarks. A striking number is the $1.7 trillion she stated automobile fuel efficiency standards had saved consumers at the pump. But that is just the tip of the iceberg. EPA will help Americans make buildings, processes and communities more efficient.  According to Ms. McCarthy the EPA Climate Showcase Communities saved $19 million per year based in large part on efficiency. We are somewhat troubled by the “eye of the beholder” syndrome exhibited here.  Certainly consumers saved money at the pump.  But they spent more at the car dealer.  How did they fare overall?  The answer depends on how long they owned their car and the price of gas.  According to research in 2012 by TrueCar.com for the New York Times, at $4/gallon “[e]xcept for two hybrids, the Prius and Lincoln MKZ, and the diesel-powered Volkswagen Jetta TDI, the added cost of the fuel-efficient technologies is so high that it would take the average driver many years — in some cases more than a decade — to save money over comparable new models with conventional internal-combustion engines.”   Ms. McCarthy’s vision of empowerment is through information.  If building owners get the knowledge of how to make their buildings more efficient, they will  because it makes sense to do so.  If communities are provided the relevant information, they will make enabling smart choices.  Indeed, she closed on the importance of information, referencing three sources.  First, EPA has now been collecting information on greenhouse gas emissions for two years.  That information is publicly available.  People should look at this because it identifies the sources of the climate change problem.  Electric utilities are far and away the biggest emitters of greenhouse gases (which is to say, all of us are because, with rare exceptions, all of us use electricity generated with fossil fuels).   Second,  she touted the EPA’s 2012 report, Climate Change Indicators in the United States (18MB).  This is a valuable resource. Twenty-six “indicators” are assessed as to what they show about a world beset by climate change.  All are familiar with reduced ice sheets, reduced snowpack and higher average temperatures.  Less familiar is the documented increase in ragweed pollen season and retained ocean heat.  And the report is honest about what is not known.  Although 7000 Americans were reported to have died of heat-related illnesses in the last 30 years, trends have not been determined.  Although one might think that a hotter world would lead to more hurricanes, the data have not proven that yet. Last, Ms. McCarthy praised government research into adaptation and the various reports issued and to be issued. Some view agency heads in Washington as essentially valueless; talking heads, here today and gone tomorrow.  The bureaucracy was there when the new head arrived and will be there when the now old head leaves.  What this view misses is that the agency head can muster the agency’s resources in support of one initiative, argue for it on Capitol Hill, at the White House and in the press, and give the extra boost when the going gets rough.  Gina McCarthy was instrumental in building the northeast’s cap-and-trade program (the Regional Greenhouse Gas Initiative) in her native Connecticut.  Certainly, that idea on a national basis is percolating again.

Carbon Emissions | Climate Change | Regulation | Renewable Energy | Solar Energy

Sunrise, Sunset - The Parable of the Two Solar Companies

November 7, 2012 19:27
by J. Wylie Donald
"A Rare Solar Success Story" trumpets the American version of The Wall Street Journal today in an article about LDK Solar, a Chinese solar wafer manufacturer.  We agree with "Solar" and "Story" but the rest of the headline does not match reality.  (In fact, the Asian version is a little less over-the-top:  "Despite Troubles, China's LDK Solar to Keep Humming.")     First, let's consider whether LDK Solar is rare.  As described in the article it has a $500 million government loan guarantee. That sounds like something we remember about Solyndra LLC. Second, it is embroiled in allegations about dumping and production overcapacity, which are attributes that beset all of the solar panel and component producers whether their subsidies are coming from Washington, Brussels or Beijing. Third, while it soared early, it is now struggling, as have many American and European solar  "darlings." Which segues nicely into the question of success. According to the article LDK Solar had a $609 million loss last year (down from a net profit a year earlier of almost $300 million) and its depositary shares have dropped 77%. For those with a visual bent, Barron's does a nice graphical presentation.   To stay afloat LDK Solar is renewing its loans, selling real estate and other assets, and accepting investment from state-owned funds.  The article concludes, "Analysts said LDK could fall into the arms of a larger, healthier company."  These are certainly not the terms we would use to describe a successful company. But every cloud has a silver lining, and the travails of LDK Solar and its brethren are a large part of the reason for the success of solar panel installers:  their raw materials, panels, are available at bargain basement prices. The current darling (number 10 on Fast Company's list of the 50 most innovative companies in the world) in this group is Solar City, which is imminently making its initial public offering to raise $200 million, although Superstorm Sandy has delayed that some.  What does Solar City do?  First and foremost, its people think.  They have thought deeply about how to build a successful business and reached a few unsurprising conclusions.  Consumers want to be "green" but do not want to be bothered with having to contact building inspectors, general contractors, panel manufacturers, lenders, warranty companies, and state and federal tax authorities; they want their solar contractor to handle it all.  Leasing to stable and economically secure individuals (i.e., not subprime borrowers) will generate a steady stream of revenue over the long-haul (typically 20 years).  Long-term maintenance contracts can do the same, and can also provide opportunities for continued marketing and sales to the consumer.  Tax credits, state rebates and leasing and maintenance revenue streams can be bundled together to form the asset base supporting an investment fund, which large institutional investors will invest in.  The investment fund can then be used to finance growth. If this sounds like a successful business model, it is (so far). Second, Solar City executes.  The foregoing ideas are the basis for its rocketing success in the last few years.  As stated in its S-1, It has raised almost $300 million dollars from private equity. Its revenues have grown year on year.  It has come to dominate the residential solar market.  It has just entered the commercial utility space with a 12 MW installation in Hawaii.  To sum it up, it is seeking "world domination."   Our point? Take heed of these two darlings, one now struggling, the other feasting on the struggler and its fellows.  Together they form a parable, not just for the solar market, but for the entire renewable energy space. We counsel our clients where government money is  ubiquitous, innovative technology rampant, competition cut-throat, and winners and losers can change overnight. The sun may rise and shine for our clients, but it also sets.  Our counsel should reflect that.

Renewable Energy | Solar Energy | Utilities

Rio+20 Disappoints But Does Renewable Energy Need an International Treaty to Move Forward?

June 23, 2012 14:34
by J. Wylie Donald
Rio+20 wrapped up yesterday.  The moniker derives from the twentieth anniversary of the Earth Summit, the 1992 United Nations Conference on Sustainable Development, which was held in Rio de Janeiro.  This reprise was billed as “an historic opportunity to define pathways to a safer, more equitable, cleaner, greener and more prosperous world for all.”  The conferees focused on two themes:  “How to build a green economy to achieve sustainable development and lift people out of poverty, ... and how to improve international coordination for sustainable development." The agenda was dense, ranging from jobs to  energy, sustainable cities to food security and sustainable agriculture, and water and oceans to disaster readiness.  Some criticized this “all things to all people” approach.  We take a more pragmatic view:  “whatever works.” Unfortunately, it does not appear that much is working.  All that was agreed was that there would be more discussion in the future.  Criticism of the conference was uniform.  NPR panned it as “one of the biggest duds.”  The New York Times captured the disappointment of CARE (a political charade), Greenpeace (a failure of epic proportions) and the Pew Environment Group (a far cry from success). Even Sha Zukang, Secretary-General of the conference, could muster little positive to say:  "This is an outcome that makes nobody happy. My job was to make everyone equally unhappy," If the goal was another international agreement filled with platitudes that would accomplish nothing, that was not achieved.  But we would like to suggest that something positive may be coming.  We would like to focus on just one of the initiatives, Sustainable Energy for All (SE4ALL).  Conducted under the auspices of the United Nations, SE4ALL has three objectives: 1. Universal access to electricity2. Increased use of renewable energy3. Increased energy efficiency Over 1.3 billion people in the world do not have access to electricity for their homes and work. Electricity is enabling.  Whether for studying after dark, pumping irrigation water, eliminating wood/charcoal/dung stoves, or refrigerating medicine, the benefits of electricity are immediate and life-changing.  The program calls for innovation and investment, and policy choices that enhance innovation and investment. Renewable energy is part of the program for many of the reasons raised in this country:  job creation, reduction of greenhouse gas and pollutant emissions, insulation from price volatility, and increased energy security.  A justification not common to the domestic debate about renewable energy is also put forth.  Renewable energy can cut balance-of-payment imbalances, The program’s goal is to double the share of renewable energy in the world energy use portfolio by 2030. “Of the three objectives of Sustainable Energy for All, improving energy efficiency has the clearest impact on saving money, improving business results, and delivering more services for consumers.”  Thus efficiency improvements are the easiest point of entry for lifting more people out of energy deprivation for less money.  The program’s goal is to double the current rate of efficiency improvement by 2030. Is this all pie in the sky? Two vantage points suggest it is not.  First, the investment community very much supports the renewable energy sector.  Michael Liebriech, the CEO of Bloomberg New Energy Finance gave an interview at Rio+20 and made the point that he’s seen $1 trillion pour into the sector globally since 2004.  “My clients really don’t necessarily care about what’s happening in the negotiations. They’re concerned about what’s right in front of them. What would you rather trust, a decades-long process that hasn’t resulted in a whole lot of progress, or a trillion dollars in investment?”  Diplomats and governments should listen. Second, UN Secretary-General Ban Ki-Moon, who grew up without electricity, has explained why SE4ALL is a program worth putting forward:  "Widespread energy poverty condemns billions of people to darkness, to ill health and to missed opportunities ....”   One can imagine him continuing:  “I had seen first-hand the grim drudgery and grind, which had been the common lot of … generations of … farm women. I had seen the tallow candle in my own home, followed by the coal-oil lamp. I knew what it was to take care of the farm chores by the flickering, undependable light of the lantern in the mud and cold rains of the fall and the snow and icy winds of winter. … I could close my eyes and recall the innumerable scenes of the harvest and the unending punishing tasks performed by hundreds of thousands of women, growing old prematurely, dying before their time, conscious of the great gap between their lives and the lives of those whom the accident of birth or choice placed in the towns and cities.”   Except that is not the Secretary General, it is Senator Frank Norris, the champion of the Rural Electrification Act of 1936, which literally turned the lights on across much of rural America.  Rural electrification was a good idea then, as millions can attest.  And it is a good idea now.  The trick today is how to wed the developing renewable energy sector, with the billions of dollars of investment being made, to an electrification program for 1.3 billion people.  A distinction here that will make electrification easier than it was in the 1930s, is that many renewable energy sources (solar, wind, tidal) by their nature can be utilized without investment in large power distribution networks.  If SE4ALL is about innovation and investment, it seems eminently achievable.

Climate Change | Legislation | Renewable Energy | Solar Energy | Sustainability

Bad Karma for Fisker Automotive: Of Loans and Lawsuits

February 21, 2012 19:59
by J. Wylie Donald
As if it wasn’t hard enough trying to displace the internal combustion engine as the motive force of the automobile, then this happens.  First the plug-in hybrid Chevy Volt’s battery starts catching fire.  Then battery-maker Ener1 files for bankruptcy protection.  Last Thursday, the electric vehicle arena acknowledged more bad news.  Fisker Automotive, maker of the electric sport coupe Karma and promisor of the Nina, issued a press release following a set of disquieting reports from various outlets.  The sour news:  “As a prudent business measure, project Nina has been temporarily put on hold until financing, either from the DOE or elsewhere, can be secured.” Fisker is the high end of electric vehicles.  Its “plug-in extended range” Karma sedan seats four and retails between $96,000 and $109,000.  It can do 0-60 in 7.9 seconds in full electric (Stealth) mode (the plug-in part).  But turn on its gasoline engine, which turns its electric generator, and you’re down to 5.9 seconds (Sport Mode) (the extended range part).  Motor Trend calls it “a sweetheart to hustle.” Nina is (was?) the more consumer-friendly version of a Fisker. It is to be (according to reports) a compact or midsize sedan, priced in the $40,000 range (after the $7,500 federal tax credit).  It is to be built in a refurbished GM plant in Delaware, which Fisker bought out of GM’s bankruptcy in 2009.  Predicted production levels were 100,000 vehicles per year.  That goal is currently not realizable. Fisker has raised a lot of money.  Besides over $850 million in private financing, in 2009 “Fisker Automotive closed a $529 million loan arrangement under the Department of Energy’s Advanced Technology Vehicles Manufacturing Loan Program for the development and production of two lines of plug-in hybrid electric vehicles. The project is expected to create about 2,000  jobs in Wilmington, Delaware.”   Times change.  In May, after providing $193 million to Fisker, DOE stopped lending because various milestones in Karma sales and production had been missed.  Or as Fisker put it in its recent press release:  “In May 2011 Fisker Automotive opted to stop taking reimbursements from the DOE while the company entered negotiations to implement more realistic and achievable milestones.” Fisker's financial difficulties are not being kept secret.  The tip of the proverbial litigation iceberg made its appearance earlier this month in the form of a lawsuit filed in California Superior Court: Wray v. Fisker Automotive Holdings et al. (Complaint attached below.)  In the suit Mr. Wray, an investor in Fisker and various Fisker investment entities, claims he was deceived into buying Fisker securities because he was unaware that a subsequent "pay to play" offering could require him to increase his investment or lose the beneficial position he had procured by virtue of his earlier contributions. Mr. Wray put over $200,000 into Fisker. In return he received preferred stock with various benefits such as "conversion price discounts", "anti-dilution protection", and "liquidation preferences." While risks of investing were disclosed, nowhere, it is alleged, did the offering memoranda inform Daniel Wray, or any other investor, that if he did not participate in future forced financing of Fisker, as Fisker and Advanced Equities [the broker/dealer] dictated, he would suffer a significant dilution of all of his earlier investments; conversion of the convertible preferred stock to common stock loss of all the rights, preferences and privileges that his ownership of preferred stock conferred, including liquidation preference, anti-dilution protection and initial public offering discounts/special conversion rights. Complaint ¶ 26. But on January 18, 2012 the broker/dealer wrote Mr. Wray (and presumably others) seeking money: "Due to Fisker's urgent need for equity capital, the Financing now contains a "pay to play" provision that requires all holders [of certain securities] to purchase Series D-1 Preferred Stock in an amount equal to at least 40% of such holder's aggregate dollar amount invested ...".  Id. ¶ 28.  Mr. Wray had slightly over $200,000 invested, and was now on the hook for another $83,922.32. In his complaint, Mr. Wray alleges breach of fiduciary duty, fraud, negligent misrepresentation, and various violations of the California Corporations and Business & Professions Codes, among other things. The greencarreports blog did a little investigating and is not overly sanguine about Mr. Wray’s chances on the merits.  We look at it from a different perspective.  We are not privy to Mr. Wray's thinking but his suit may be an astute way to buy time before committing to the next $80,000. If the DOE funding hurdles are cleared, or private sources come through, then the investment, particularly for one in preferred status, may be particularly fruitful. And if the big money is not forthcoming, then throwing good money after bad might be avoided.  In that case, Mr. Wray might not find himself alone on the tip of the iceberg any longer either. 20120207 Complaint, Wray v. Fisker Automotive Holdings, Inc..pdf (707.64 kb)

Climate Change | Green Marketing | Solar Energy

Solyndra Takes the Fifth and Mascoma Prepares for an IPO: A Down-and-Up Day for Renewable Energy

September 26, 2011 19:50
by J. Wylie Donald
  It was a sobering moment Friday. Two executives of Solyndra LLC, after being honored by the President, receiving vast sums of money from investors, and earning kudos and accolades from industry and government,  asserted their Fifth Amendment right against self-incrimination and refused to testify before a congressional committee investigating the solar cell manufacturer's bankruptcy and potential improprieties in the procurement of loan guarantees.  We are not privy to the corporate planning but are comfortable stating that that was definitely not in the business plan. A more successful business model (for the moment anyway) appears to be that of cellulosic ethanol entrepreneur Mascoma Corporation, which on Friday filed its S-1 in anticipation of its IPO seeking $100 million in investment. As one blogger reported:  "the numbers continue to look strong, and the timelines continue to point toward commercial volumes of cellulosic ethanol in the 2013-14 time frame, at affordable prices."  We shall see.  Mascoma describes itself as follows:  "Using its proprietary consolidated bioprocessing, or CBP, technology platform, Mascoma has developed genetically-modified yeasts and other microorganisms to reduce costs and improve yields in the production of renewable fuels and chemicals."   While the holy grail is commercial success using any biomass resource, Mascoma is hedging its bets and touting application of its "bugs" to ethanol producers. It asserts that its "consolidated bioprocessing" is better than current processes and that it can help ethanol manufacturers produce more cheaply. This resort to established product lines is becoming a trend. An article in Scientific American, The False Promise of Biofuels by David Biello, reports that many in the biofuel area, where the lack of success in commercialization of biofuel applications has been discouraging, are seeking to use their proprietary technologies in other areas such as pharmaceuticals and cosmetics. Internet commentators draw parallels between Mascoma and Solyndra based on the government support each received. Frankly, we find it not much of an insight. Government support is an enticement for investors.  If you have it, it will be easier to locate private financing. If you don't, it is just the opposite.  Still, federal and state involvement is eye-opening.    Mascoma's S-1 reveals that it has yet to turn a profit over the past five years and in fact has lost almost $140 million so far. It has been able to do this with a little over $100 million in private investment, $30 million in debt and $34.5 million in revenue. Eighty-six percent of Mascoma's revenue in 2010 came from government sources, which is substantial; government grants exceed $65 million.  The Department of Energy has provided separate grants of $20 million and $4.3 million, New York's Energy Research and Development Authority and Michigan's Strategic Fund have contributed $14.8 million and $20 million, respectively, in return for facilities in each state. A few million ($6.3 MM) has come from the BioEnergy Science Center at UT-Battelle. And somehow, for less than a million dollars, the Province of Alberta has a commitment for the construction of a facility in Alberta.  We hesitate now as we write our conclusion, for fear of jinxing Mascoma. We hope and trust that the its economic trajectory is 180 degrees from that followed by Solyndra. But just in case, we offer this small bit of advice: pay close attention now to the D&O policy. The next shoe to drop for Solyndra and its officers and directors will be lawsuits alleging various forms of misfeasance as individuals and entities that were financially burned seek to shift their loss.  We could write much regarding D&O policies. It will suffice here to counsel for focusing on pursuing coverage extensions for government investigations and for a requirement of "final adjudication" in any species of fraud exclusion.  The market is reportedly soft (except for Chinese reverse mergers) and there is no time like the present to establish the most favorable coverage terms.  Stated differently, when your executives are taking the Fifth and the litigation sharks are circling is no time to be parsing your coverage.

Renewable Energy | Solar Energy

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