White House Releases “Skinny” Budget: Extreme Diet for Clean Energy and Innovation

The Trump Administration released today what is known as the “skinny” budget because of the lack of specifics, and, while this is more of a political statement than a political reality, it is clear that any program remotely related to climate or clean energy is recommended for the chopping block. Climate programs like the Global Climate Change Initiative and Green Climate Fund were expected targets, but also eliminated were popular programs like Department of Energy’s flagship ARPA-e initiative; TIGER grants for transportation innovations; the Low Income Home Energy Assistance and Weatherization Assistance Programs that pay for and reduce energy bills for low-income families; and Energy Star whose labels are ubiquitous at appliance retailers. Dozens more are slated for refocus, reduction or elimination.

Members of Congress on both sides of the aisle are saying this is “dead on arrival”, but a concern is that such a high number of programs across all sectors—not just climate and clean energy—are eliminated that it will be impossible to save them all and have the President still sign the final appropriations bills. In fact, the President has a great deal of leverage given that Congressional Republicans are eager to push to his desk both the healthcare repeal and tax reform. Congress, not the President, will pay the price for government inaction and shutdown in the 2018 mid-term elections.

So, what should we do as a community of clean energy and technology advocates and innovators? Since the agencies will be fighting against rather than on behalf of their own programs, it will be the job of Congress and all of us outside the government to stand up for our own federal government. Let’s figure out which programs have strong constituencies that Members of Congress are well-aware of and clearly support. We have to assume many of those will be restored. We find programs that industry has benefitted from and continues to engage in—and put those businesses to work being heard. The challenge will be identifying those programs that fall into the gap—that have clear benefits but not constituencies that can realistically fight for them—leaving them more vulnerable to deep cuts. Those are the programs we should be worrying about and that we will need to be more creative about supporting.

It will be critical to tell success stories, to engage everyone from grassroots to grass-tops and top brass, and to make the case that clean technology is good for the economy and for the transition into well-paying jobs in parts of the country that most need them. The private sector can’t do that alone; the federal government brain trust is crucial to enable research, development, and deployment partnerships that spur innovation and scale technology. Let’s work together to make sure the fiscal haircut does not include decapitation—that in the effort to reduce government spending we do not also diminish U.S. global leadership in clean energy.

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What Do the Results of the 2016 Election Mean For Clean Energy in DC?

Originally posted on 38 North Solutions blog.

The results of this week’s election are certainly a surprise and will impact the focus and direction of policymakers moving forward. As we look ahead, historically, Congress is most active when one party controls the House of Representatives, Senate and White House. We expect 2017 to follow this trend, particularly because Republicans campaigned, in part, on a message of fixing the gridlock that exists in Washington. As a result, the next two years are going to be busy and significant.

The 38 North Solutions team has a proven track record of working with legislators on both sides of the aisle and feels well positioned to help companies and organizations navigate this new period. The weeks and months ahead will clarify where the Trump Administration and Republican Congress will focus their attention, but here are our initial thoughts about what lies ahead:

Lame Duck, 114th Congress
Before the election, the prevailing assumption was that the end of this year (Lame Duck Session) of Congress would be especially busy as members from both parties try to clear the decks of any remaining pieces of legislation before the bipartisan-viewed wildcard of a Trump Administration assumes power. However, the overwhelming nature of Trump’s win, coupled with the fact that Senate and House Republicans performed better than expected, has diminished the appetite amongst Republican members to negotiate with Democrats and President Obama at the end of the year in any significant way. As a result, the opportunity for successful enactment of clean energy provisions like reinsertion of the technologies that were removed from the Investment Tax Credit last year has closed significantly. Funding for the federal government expires on December 9th, so Congress will have to address that before adjourning, but the likelihood that the ITC or any other policy provision gets attached is limited.

Federal Legislation, 115th Congress
With a GOP-controlled House, Senate, and White House, we expect the new President to be able to pass energy legislation that could include PURPA and Federal Power Act reform. We will need to be vigilant to ensure that those provisions are not detrimental to clean energy technologies and applications, while mining opportunities to insert clean energy provisions into non-controversial legislation. There is no realistic scenario for passing a carbon tax, renewable portfolio standard, clean energy standard, or additional clean energy tax credits. In fact, we will need to work hard to shore up support for existing clean energy provisions to ensure that they are not repealed. On the positive side, innovation is key to growing the economy and jobs and we can continue to hammer those messages to energy policy and tax committee leadership. There may also be a path for additional transmission provisions that can increase build-out of infrastructure across the U.S., although we would not expect a large spending provision in any case.

Companies interested in advancing clean energy policy must not view yesterday’s election as an imperative to disengage in advocating before Congress. Rather, moving forward, we know that the Trump Administration has every intention of passing an aggressive legislative agenda next year. It is therefore critical that we continue to make the strongest case possible for policies that will continue to support an innovative energy economy.

Environmental Protection Agency
The Obama Administration’s landmark achievement regulating carbon dioxide emissions from power plants, known as the Clean Power Plan (CPP), is now in serious jeopardy. Because the CPP is a federal regulation, the Trump Administration can undertake steps to undo the policy without seeking congressional approval and we expect taking such action to be a priority. The good news is that the CPP has helped states to think strategically about how to move to a cleaner energy generation mix and investment in those technologies has shifted to support that movement. We believe that utility and corporate investment in clean energy will continue to grow. In addition, regulatory processes on clean energy in states will continue to move forward.

Department of Energy
Funding for specific programs within the agency may shift to more fossil and nuclear research and development funding and less renewables and energy efficiency funding. Less clear is how the Office of Electricity Delivery and Energy Reliability would be impacted, although Trump’s energy agenda includes grid modernization. It is hard to envision the Quadrennial Energy Review process continuing since this was a project led by Secretary Moniz.

Federal Energy Regulatory Commission
FERC is generally not considered political and the two vacancies are slotted for Republicans. We know at least one of those potential appointees and think that other credible nominees would likely come from regulatory and public policy arena. We will need to continue cultivating those relationships to ensure that wholesale markets for innovation will continue to be considered.

While yesterday’s result may not have been what we expected, it is the reality we face moving forward. We would be happy to set-up a time to meet to discuss specifically what the Trump Administration’s ascension may mean for your business and how we can work together to ensure that your interests are being adequately addressed in Washington.

The Future of Electricity: Clean and Bright

What happens when you bring together nearly two dozen energy leaders from across the globe into a room for several days of uninterrupted discussion on the Future of Electricity? Throw in jet lag for anyone not from United Arab Emirates, add a cocktail of fossil fuel interests along with renewable energy advocates, shake well in nearly 100 degree F heat, and one could not imagine consensus coalescing around almost anything. Surprisingly, perhaps, this group, convened by the World Economic Forum, agreed on a set of trends that indicate change is nigh in the electricity sector:

  • The world is increasingly electrified.
  • Renewable energy has the greatest capacity growth.
  • Clean energy enables growing universal access to electricity.
  • Energy security increases as a result of more indigenous clean electrification.
  • Distributed energy resource deployment is significantly increased.
  • Energy storage provides critical grid services.
  • Consumer engagement and choice shape future electric growth.
  • The price of electricity may increase briefly, then decrease, over time.
  • Regulation supports and accommodates these changes.

This transformation will not happen organically, however. The group also identified requirements to realize this transformation in our electric system:

  • Politic targets must be clear, transparent, and consistent.
  • Regulation should anticipate trends and create a climate for investment.
  • Power markets and platforms must be open for all participants.
  • Financing mechanisms should be clear and risk factors understood.
  • Business and monetization models must evolve.
  • Consumers must be allowed to participate.
  • Special provisions should be made for universal access.

It was affirming as a participant in this process to hear from others about the same policy hurdles I deal with every day in Congress, state legislatures, and regulatory bodies. My firm‘s public policy work, while mostly centered in the U.S., can be informed by policies that have been tried elsewhere with varying degrees of success. That the Global Agenda Council on the Future of Electricity could arrive at these principles and requirements should give us all a cogent road map to this transition. Read the full report here.

Omnibus Package: Sausage with Delicious Clean Energy Provisions

Post published on 38 North Solutions website here.

The omnibus deal—PATH (Protecting Americans from Tax Hikes Act of 2015)–was sausage-making at its most intense, but the product should be palatable for most parties in clean energy. Extensions for renewables and efficiency tax credits were key sweeteners to lifting the oil export ban. In addition, clean energy R&D funding, reauthorization and increased funding for the Land and Water Conservation Fund, and climate change funds (Clean Technology and Strategic Climate Funds of Bank for Reconstruction & Development and Global Environment Facility) were included in the deal. While the solar and wind credits are phase-downs, the trajectory should provide much-needed certainty to renewable energy investors, developers, and consumers and will serve as a bridge to implementation of the Clean Power Plan, the longer-term market driver for clean energy in the U.S.

House and Senate leaders—McConnell (supported by Chairman Hatch of Senate Finance), Reid, Ryan, and Pelosi—were key to ensuring that this deal could pass their caucuses, and the White House provided additional feedback throughout the process to ensure the President would sign the resulting package. Because of vociferous opposition to lifting the 40-year oil export ban, the environmental community for the most part had to sit this fight out. The renewable energy industries, in particular solar whose credit did not expire until the end of 2016, had to carry much of the water on the renewable energy extenders. New allies were made, especially in the Republican Caucus, that allowed for greater bipartisan support than has been seen in a number of years.

Now, the renewable energy industries can turn their focus to state and local policies, siting and permitting issues, and compliance strategies for the Clean Power Plan.

Utility of the Future: or What to Think When Everyone Says Your World is Turning Upside Down

[Originally published in Energy Biz]

As the red-eye jet made its way toward the airport with dawn breaking, street lights still on and house lights coming on, I watched first the farms with long roads, then the small clusters of towns, then the vast suburban outreach of Washington, DC. I had been thinking a lot about the evolution of the electric grid. From above, one could see how electricity, whether urban or rural, connected all of these people and businesses into one enormous system, sometimes dense and sometimes sparse, but always on. Now the next generation of innovation is poised to change the way we think about and use this system.

Many of these innovations are more than just information flow—they are real energy resources like solar and energy storage, demand response, and energy efficiency—that affect both the operations and business of utilities. At a recent conference in Hawaii—a state that has been undergoing such tremendous and real-time alterations to their grid that I have likened it to changing the tires while the car is moving—state regulatory Commissioner Lorraine Akiba said, “The integrated grid of the future is one that requires strategic actions to realize the full value of central power and distributed energy resources.” [1]

Akiba touches the key here to the future of our utility model: integration. The term came up again at a recent energy storage conference in California when a utility representative said, “Our job is not to simply connect, but to integrate.” The integration will need to be both physical—which has always been the operating premise—but also digital. Moreover, this integration does not need to rely on a centralized system of power generation plants connected by long transmission lines, but rather can allow for disaggregation of flexible and distributed resources.

One case to watch is the New York REV proceeding[2] where utilities—already decoupled from generation—are being asked to become consumer-service platform providers. As the commission Chair Audrey Zibelman has said, “By fundamentally restructuring the way utilities and energy companies sell electricity, New York can maximize the utilization of resources, and reduce the need for new infrastructure through expanded demand management, energy efficiency, renewable energy, distributed generation, and energy storage programs.”[3] The key here will be whether the utilities will be able to perform all these services, operate their system, and remain cost-competitive at the same time.

Utilities that see this integration with disrupters as a business opportunity stand to benefit. As in the case of New York, utilities could start thinking of themselves as service providers or, at least, integrators. What the Federal Energy Regulatory Commission has done on the bulk-power side by allowing compensation for characteristics and services provided to the transmission side of the system, state regulators could do on the distribution grid by allowing compensation for a wider range of values.

Another potential construct–proposed in the REV proceeding with Jon Wellinghoff, former Chairman of the FERC and Jeff Cramer, one of my business partners—would be for distribution utilities to adopt what FERC put into place when it issued Orders 888 and 2000[4], enabling the creation of competitive wholesale markets and Independent System Operators. This would be a comparable system on the distribution side, or Independent Distribution System Operator (IDSO).[5] The IDSO would enable distributed energy resource integration, greater consumer choice and participation, and allow for a more efficient and transactive energy framework.

Yet another option might be that utilities and others could be compensated for increased efficiency, for decreased energy intensity, and for lower-carbon resources (especially as the EPA Clean Power Plan is finalized and states begin implementation). State RPSs already give utilities credit for renewables, and in decoupled constructs, utilities are given credit for efficiency programs. What could be new is a more holistic set of metrics—going beyond but not totally dissimilar from the Value of Solar model.[6] That new set of metrics could: take into consideration what we want out of our system; put rules in place to compensate for those services; incentivize entities to provide those services; and then allow all participants to compete to provide services. Utilities could be winners in that model, but so could consumers and innovators.

It would be helpful to have a national policy that sets goals and objectives for our electric grid that could be the basis for a new compensation model. But states can set their own policies, as California has, that drive innovation in resources that can help meet state goals. The impetus does not need to be limited to state leadership, either. Vision can come from utilities and innovators collaborating to offer a set of services that are presented to commissions and allow them to see (and compensate) myriad benefits of that integration.

To keep those lights on that dot the landscape, whether in clusters or singly, utilities can join forces with “disrupters” to ensure that everyone benefits from a cleaner and more efficient system. They key is to move beyond simple connection to integration.

Winding Down to Rev Back Up

As I sit at my kitchen counter listening to the needles drop off our fading Christmas tree like sleet landing on window panes, I wonder when Congress stopped absorbing water and began accepting the inability to thrive. It all still looks presentable, but with little productive outcome. So what’s a clean energy advocate to do? Perhaps stop lobbying Congress altogether and focus instead on business-to-agency and business-to-business interactions?

Perhaps there are enough laws and we need to focus instead on implementing what we already have on the books. In a way, that exercise makes us dig deep into our statutes to find out what we can get done without change. Take the EPA, for example. The agency will essentially be writing our climate legislation and calling upon clean energy innovation for solutions to our most pressing environmental issue. And the Federal Energy Regulatory Commission, my personal favorite. The FERC, along with other regulatory agencies like the Securities and Exchange Commission and Federal Communications Commission, can open up markets by interpreting statute and promulgating rules that allow new technology participation. The Small Business Administration can assist burgeoning industries in navigating and interpreting existing policy. Even the Internal Revenue Service can make rulings based on statute that open the doors of tax policy for clean technologies.

Because DC is the home to hundreds of trade associations, ensuring that entrepreneurs are connected to the most appropriate and helpful trade groups can be enormously beneficial. Introducing foundling endeavors to larger companies and executives who can serve as mentors and guides along the way to development and, eventually, IPO. Forming coalitions of start-ups that can create their own nucleus of power with the philosophy that rising tides help all boats.

Thing is, we still need Congress to step in from time to time. We need laws clarified and updated. We need provisions extended and renewed to prevent new industries from collapsing. We need foundational policy for new enterprises that never existed previously and have no guidelines for operation. We need affirmation that our publicly elected officials who represent constituents desperate for jobs and economic growth, are engaged and learning and paying attention to what is going on in front of their eyes and in their hometowns. We do need Congress to act on clean energy. Not for everything that happens, but in really important ways that can help our national competitiveness through local growth.

So I will continue to work with Congress–explaining complex technologies in terms that a layperson can understand; introducing them to their own voters who are also clean energy entrepreneurs; demonstrating that federal programs can have positive and direct consequences on our economy and environment; and convincing them that taking a stand on clean energy is more of a patriotic value than a political statement.

In 2014, then, you may see me walking the halls of the GSA or the Pentagon, Rayburn or Dirksen. Happy New Year!

Race to the Top: Who’s stuck at the bottom?

As a nation, we don’t like to admit that that we pick winners and losers. But we do—and, in most cases, for good reason. Some technologies or programs have a greater probability of success. Sometimes our national priorities change. Sometimes technology breakthroughs or new information comes to light that shift the focus.

If we believe the U.S. needs to significantly increase our investment in clean energy innovation and move the nation to a cleaner, more sustainable, and more prosperous future, I think we need some new thinking.

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