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Clean Break

By Tyler Hamilton

Jigar Shah thinks large when it comes to battling climate change.

That’s a good thing, because reducing humanity’s global greenhouse-gas emissions to a manageable level is a titanic problem needing equally enormous solutions.

Shah is the chief executive of Carbon War Room, a Washington, D.C.-based non-profit enterprise co-founded and funded by British-born billionaire Richard Branson.

His mission, as the organization’s name makes clear, is to wage a war against carbon emissions by harnessing the power of markets and entrepreneurs. The trick is to get massive amounts of private capital to flow in the right direction.

Government policy is nice and has a role to play, but in Shah’s words the real action we need will only come about “using greed as a force for good.” And incremental steps won’t cut it. In a world that tends to measure greenhouse-gas emissions by megatons, Carbon War Room is only interested in tackling gigatons.

In other words, go big and move fast or lose the war.

Time appears to be running out – and it’s not environmentalists issuing the warning these days. Fatih Birol, chief economist at the International Energy Agency, said this week “the door is closing” on our ability as a society to keep global emissions and temperatures to within manageable levels.

We already know that temperatures are on course to rise 2 degrees C no matter what we do. We have about five years, said Birol, to put the world on a course that will keep the thermometer from rising much further. “I am very worried,” the economist told the U.K.’s Guardian newspaper.

One area where Carbon War Room is moving fast and aiming at a large target is energy efficiency in buildings, which accounts for about 20 per cent of global CO2-equivalent emissions.

For example, Shah and his team helped bring together a consortium that is aiming to spend $650 million (U.S.), to start, on energy-efficiency retrofits in commercial buildings scattered throughout Miami, Fl. and Sacramento, Calif.

Their approach, revealed in September, builds on the creative financing model I wrote about in last week’s Clean Break column, only in this case it’s focused on commercial real estate.

The consortium is led by Ygrene Energy Fund, which reviews retrofit proposals and then passes them off to technology and engineering giant Lockheed Martin. Lockheed does the building audits, calculates the energy savings that could come from a retrofit, and provides all technology and services required to achieve those energy savings.

Energi Insurance Services reviews what Lockheed promises and insures the deal. To add an extra layer of security, HannoverRe further backs Energi’s insurance policy. The idea is that risk has been reduced so much that Barclays Capital, the financing partner in the consortium, is more than happy to fund it all.

Barclay’s gets paid back through a charge on the building owner’s property taxes that is collected by the municipalities over 15 or 20 years. If done right, that charge is less than the energy savings achieved through the retrofit. And it’s all done off-balance sheet, meaning it doesn’t add to a building owner’s debt load.

Miami and Sacramento love it, too. “They are going to generate 17,000 jobs, and they will see city revenues increase from a jump in building permit fees and sales tax revenues,” says Shah, in Toronto last week to speak at an industry conference.

Carbon War Room’s target is to see $300 billion (U.S.) in capital deployed in this way by 2020, and Shah is convinced a tipping point has already been reached.

“We have 65 cities on three continents begging us to deploy (this model) in their cities right now, and we’re moving as fast as we can,” says Shah, adding that pension funds and big institutional investors, having seen Barclays take the lead, are now coming to the table.

“There’s nothing anyone can do to stop it. It has irreversible momentum,” Shah says. “I’m ecstatic about it.”

That’s the power of aggregation, scale and thinking large. It can tap into massive pools of capital that one-off projects can’t touch.

Toronto has its own program in the works called Tower Renewal, which is aiming to see 1,200 residential apartment buildings in the GTA retrofitted at a cost of about $6 billion over 20 years.

The plan is to create an arms-length entity called Tower Renewal Corporation that would manage the program and arrange all financing. Project director Eleanor McAteer says the potential for energy savings, emissions-reduction and job creation is huge.

“Our approach would be very similar to what we’re reading about in Sacramento and Miami,” she says.

“We’ve had some general discussions with the financing marketplace and yes, there is a great deal of interest, but we need to have regulatory approval from the province before we can enter into any serious discussions.”

The city asked the province to make those regulatory changes in summer 2010. As the end of 2011 fast approaches there’s still no word from Queen’s Park.

So as momentum around the world for this kind of climate solution builds, Toronto is sitting and waiting for a simple action from the province that will come at no cost to taxpayers or ratepayers.

What’s the holdup Premier McGuinty?

Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies.

I said “most” items because solar thermal hot water systems got an even greater boost. The current rebate is $500 from the federal government, matched by a further $500 from Ontario. The feds increased its rebate dramatically to $1,250. So if Ontario matches, as it says it will, that will mean anyone who purchases and installs a residential solar hot water system will get $2,500 back. Not bad, considering you can get a system for as low as $6,000.

Expect more “thermal” and energy efficiency announcements from Ontario in the coming weeks. Here’s my article in the Star if you want some more details.

CHP can provide an immediate solution to pressing energy problems. CHP is one of the most promising options in the US energy efficiency portfolio. It is not a single technology but a group of technologies that can use a variety of fuels to provide reliable electricity, mechanical power, or thermal energy at a factory, university campus, hospital, or commercial building—wherever the power is needed. CHP’s efficiency comes from recovering the heat that would normally be wasted while generating power to supply the heating or cooling needs of the user. By capturing and utilizing waste heat, CHP requires less fuel than equivalent separate heat and power systems to produce the same amount of energy services. Because CHP is located at or near the point of use, it also eliminates the losses that normally occur in the transmission and distribution of electricity from a power plant to the user.

The report finds that current CHP generating capacity in the United States exists at 3,300 sites and amounts to 85,000 megawatts, or nearly 9 per cent of total U.S. capacity. In 2006 actual electricity production amounted to 506 billion kilowatt-hours, or more than 12 per cent of total U.S. power generation. According to the report:

If the United States adopted high-deployment policies to achieve 20 per cent of generation capacity from CHP by 2030, it could save an estimated 5.3 quadrillion Btu (Quads) of fuel annually, the equivalent of nearly half the total energy currently consumed by US households. Cumulatively through 2030, such policies could also generate $234 billion in new investments and create nearly 1 million new highly-skilled, technical jobs throughout the United States. Emissions could be reduced by more than 800 million metric tons (MMT) per year, the equivalent of taking more than half of the current passenger vehicles in the US off the road. In this 20 per cent scenario, over 60 per cent of the projected increase in CO2 emissions between now and 2030 could be avoided.

Those who follow this and other greentech or climate blogs probably appreciate the potential of waste-energy recovery and the enormous contribution it could make to reduce C02 emissions, but it’s good to see the DOE coming out so strongly in favour of this option. Now, the challenge both in the United States and Canada is to convince politicians that this is low-hanging fruit that should be pursued immediately. If fact, any stimulus package should specifically include a focus on helping industry become more efficient by helping fund CHP projects.

The $42 million Toronto Energy Conservation Fund and the $20 million Toronto Green Energy Fund, created as part of the city’s climate action plan, make available zero-interest loans for projects that aim to make buildings more energy efficient or bigger users of green energy. Up to $1 million will be available for individual projects, on the condition that the funding represents no more than 49 per cent of total project costs. Both new and retrofit building projects, including those involving municipal buildings, are eligible.

It’s a great idea, particularly during the current credit crunch, and we need to see more of the same. In fact, the city might want to check out what’s going on in Berkeley, Calif., where residents can install solar panels and pay for them over 20 years through a line item on their property tax bill. A company called Renewable Funding is administering the program, which could apply to a range of renewable energy and efficiency measures.

Still, it would be good for provincial officials to read a new study out of the University of California, Berkeley, which found that aggressive energy-efficiency policies embraced by California between 1977 and 2007 created nearly 1.5 million jobs, far outstripping the 25,000 jobs such policies eliminated (hat tip to Joe Romm for the tip at Climate Progress, where he provides his own take on the study).

The New York Times also has a good story on the study here. It basically concludes that energy-efficiency programs helped consumers lower their electricity bills, which in turn led to the flow of more dollars into other products, such as groceries and new appliances. That created jobs at retailers, wholesalers, food processors and other businesses in the supply chain. The study’s author, economics professor David Roland-Holst, found that even though electricity rates had to be increased to pay for the programs the decrease in per-capita electricity demand still resulted in overall savings. Much of the economic growth created in the state was driven by stringent efficiency standards for large appliances, like air conditioners and fridges, and for homes and commercial buildings.

As Thomas Friedman writes in his new book Hot, Flat and Crowded, hype and celebrity may draw attention to green issues, “But they make a difference only if they are followed up by ‘revolutionary bureaucrats’ — men and women who write emissions and efficiency standards, and who, with the flick of a pen, can change how much electricity 50 million air conditioners consume or how much diesel a thousand locomotives guzzle in one year.” Friedman adds: “The more boring the work, the more revolutionary its impact.”

It’s something we all have to remember as we are tempted, amid a global financial crisis, to run and hide from necessary change. It’s not that bad, really. If you keep an open mind, you might come to realize that, hey, such policies are pretty damn smart. Provincial officials need to keep this in mind as their feet get cold.

It makes one wonder how much fuel could be saved if all cars — not just plug-in hybrids — had dashboard monitors showing instant feedback on fuel economy (i.e. MPG or 100 km/litre) and all drivers were required, as part of getting their license, to take a half-hour training course on eco-driving.

Certainly 15 per cent improvement in fuel economy is possible, according to the U.S. Environmental Protection Agency. If the U.S. uses close to 150 billion gallons of gasoline annually, and if every American practiced eco-driving and got the EPA-estimated 15 percent benefit in fuel economy, “more than 22 billion gallons of gas would be saved,” says Ford.

Obviously, some dogs just can’t be taught tricks. But providing this kind of training to corporate and vehicle fleets is a start. And some dogs do want to be taught tricks, so perhaps there’s a small business opportunity down the road for teaching one-hour eco-driving courses.

Drew DeGrassi, president of Pro Formance Group, which helped conduct the tests with Ford, says the opportunity for savings is real. At the same time, he doesn’t exaggerate the potential. “It’s not the end-all solution for America to obtain energy independence, but it is an important part of it.” Such training, combined with more efficient vehicles that run on electricity or alternative fuels, can go a hell of a long way.