Non-technological evolution

One of the underappreciated aspects of our response to our energy and environmental challenges, at least underappreciated in the online portion of the infosphere, is the evolution of business models and public policy. These are critical elements in how our economy works, and they can potentially play a huge role in how quickly we develop and roll out the much sexier things like new, higher efficiency photovoltaic cells, algae biodiesel, wave and tidal generating plants, and all the other hardware we all love to obsess about. It’s truly amazing how many people forget the painfully obvious, that a breakthrough in a laboratory means precisely nothing unless and until that technology is scaled up and used in the (typically far less forgiving) real world.

One example of a non-technological breakthrough that I’ve mentioned before is the PPA (power production agreement). That’s a contract where some third-party company installs solar panels on your home or business at no cost, and you sign a long-term agreement that says you’ll buy electricity from the panels at a specified price. The company owns all the hardware, and is responsible for maintaining it. These arrangements are becoming very popular, especially in parts of the US that pay higher than average prices for electricity; the PPA price per kWh is often substantially less than the grid price, even without a price on carbon.

The PPA is a major breakthrough because it eliminates the two biggest hurdles small businesses and home owners face when considering adding solar panels: The first is the hassle factors of dealing with one or more contractors to figure out how large an installation is needed plus all the related details, all while trying not get ripped off, plus the need to file for federal and/or state rebates on the purchase price. For a lot of people who are so busy they barely remember to buy food, this is way too much bother, and pushing all the decisions off onto one company and signing one agreement greatly streamlines the process and removes the fear of making an enormous financial mistake.

The second benefit is the building owner doesn’t have to pay upfront for the hardware. Even with subsidies, a 4kw solar PV installation is still quite a chunk of change. Under a PPA there is no upfront money.

Combine PPAs with the reduction on solar PV prices from the continued roll out of thin film technology, and you have a recipe for the kind of mass adoption of PV that its supporters have dreamed of for decades.

Similarly, governments can use a feebate system to create a self-financing subsidy program to encourage the purchase of more fuel efficient vehicles. Under such a plan, vehicles that get less than X MPG pay a gas guzzler tax at purchase time, and those that get over Y MPG would get a rebate.[1]

In this context, a couple of articles I saw recently struck a hopeful note:

Affordable solar purchasing plans gather pace:

Municipalities are catching on to an innovative plan started by the City of San Diego to make solar panels more affordable to city residents, with a number of city governments expressing interest in the new financing scheme.

The San Diego Clean Generation Program, announced in December, will be the first of its kind in any major US city, according to San Diego’s Mayor, Jerry Sanders. Under the scheme, the city will pay for residential solar panels, which householders and businesses will then pay for over time through their property taxes.

The up-front capital cost of installing solar panels can total around $25,000 after installation fees, material costs and inverter equipment is paid for. This scheme gives residents the chance to pay for it over 20 years, according to the Mayor, who added that because the panels are tied to the property, the cost would pass to the new owner if a house with installed panels was sold.

Payment under the San Diego programme would amount to roughly $150 a year on top of the existing property tax bill – a fee advocates of the scheme claim will be largely offset by savings on utility bills.

I’m not sure how $3,000 spread over 20 years pays for a $25,000 system, but the general concept–institute government programs that reduce the barriers to entry for homeowners who want to do the right thing–has to make anyone reading this site smile.

(I would still much prefer to see a top-down approach to subsidies, such as a feed-in tariff, but I doubt we’ll see that mechanism used in the US except in some very localized areas.)

From War Bonds to Environment Bonds:

James Cameron, an executive director of Climate Change Capital, an investment company, is proposing creating “environment bonds” similar to bonds created by governments during the 20th century to fund efforts to fight World War II.

In a talk on Friday at Yale, Mr. Cameron said environment bonds (or climate bonds, as he has called them on other occasions) would be a straightforward way for governments to raise money to develop clean technology and build low-carbon economies.

Governments would collect money from investors who would benefit from guaranteed – but modest – rates of return. In the meantime, governments would invest in green infrastructure.

Because the bonds would offer secure returns, they should appeal to citizens and investors disillusioned by the implosion of the banking sector and worried by the grim economic outlook, according to Mr. Cameron. Additionally, the bonds could tap a vein of renewed idealism among investors who are seeking to use financial system for good causes.

“I sense that there is now will for people to put their money to productive use,” Mr. Cameron said. “There is something powerful in the idea that, ‘My money built that and it works and I use it.’ Building things for a purpose that binds investor, worker, user – and society – is a noble cause.”

I would invest some of my money in a climate/enviro bond in a heartbeat. This kind of program could be added as an option to the current savings bonds that the US Treasury Dept. sells, and would likely not incur a sizable overhead for administration.

If I were running this program, I would take it a step further and appeal to the “Prius factor”–the desire of people who do the right thing to be seen as doing the right thing. I would sell stickers for perhaps $5 a piece (but only available to those who have bought enviro bonds) that people could put in a car window, something official looking that says the person has purchased the bonds. I would even go one step further and sell T-shirts, coffee mugs, etc. through some third-party outlet like Cafe Press. The cost to the government would be zero beyond the labor to create the designs, and the items could be priced at some fixed amount, like $1 or $2 above Cafe Press’ price, with the earnings going into the same fund as the bonds. I can very easily imagine a Prius with several of these stickers in the rear window parking and the driver wearing one of the shirts.

Is it a tacky appeal to the “look at me” characteristic in society? Yes. Would it raise money for a vital cause? Yes. Would I really do this? In a nanosecond.[2]

In short, I beg you not to overlook the critical role that the “boring stuff” like public policy and business arrangements can have on our future. They’re a major part of the economic conduit that will carry the breakthrough technologies we read about all the time online out into the real world where they can and will do a lot of good for everyone on the planet.

[1] Obviously there are several knobs the policymakers can use to tune such a program. X could equal Y, or there could be a gap, e.g. vehicles that get less than 24 MPG pay a guzzler fee, but only vehicles that get more than 28 MPG get a rebate. Also, the exact amount of the fee or rebate as a function of the vehicle’s MPG could be tweaked to no end. Obviously they should increase (higher fee for lower MPG, higher rebate for higher MPG), but the exact shape of those two curves would provide material for endless debates, and, no doubt, loopholes.

[2] Of course, the same nitwits who go apoplectic over the fact that Al Gore (gasp!) travels in an air plane and exhales would scream about the carbon footprint of the shirts and stickers. I couldn’t care less. They’ll find (or invent) something stupid to go apoplectic over anyway, and if the rest of us (meaning the sane people) can point to wind turbines or solar panels or mass transit subsidies paid for with the money, then putting up with their idiocy is the bargain of the century.