Renewable Crowdfunding: New SEC Rule Could Increase Renewable Development

By Andrea Lang, Energy Fellow

Credit: SolarPlaza

Last Friday, the Securities Exchange Commission (SEC) finalized a rule to allow equity crowdfunding, which will go into effect on January 29, 2016.  Financing is one of the major hurdles to renewable development, because banks and other accredited investors may be wary of the risks involved in financing a renewable project.  The SEC’s new rule, which allows projects to receive a certain amount of investment through crowdfunding, may enable the development of more renewable energy projects that may otherwise have trouble finding investors.

Crowdfunding has become widely popular in the last several years, with companies or developers using sites like Kickstarter and Indiegogo to offer various rewards in return for funding projects. However, developers raising funds through these sites cannot currently sell debt or equity interests in the projects themselves. This is because under existing federal rules, equity offerings must go through a costly registration and reporting process with the SEC, or qualify for an exemption from the Security Act’s registration requirements. For example, offerings made exclusively to “accredited investors” may be exempt from securities registration requirements. Accredited investors include banks, investment companies, or people with a net worth of over one million dollars. Because most potential crowdfunding investors are not accredited, equity crowdfunding for renewable projects has been practically impossible. SEC rules also allow states to authorize wholly intrastate equity crowdfunding, but it is difficult for projects to meet the rules for the intrastate exemption in the states that do allow intrastate equity crowdfunding.

However, in 2012, the cleverly named Jumpstart Our Business Startups (JOBS) Act directed the SEC to develop a rule for a federal crowdfunding exemption to securities law. After delaying for several years, the SEC finalized this rule last Friday. The rule allows large numbers of less wealthy investors to invest a limited amount of money in return for a share in profits or revenues generated by the project – which is called “equity crowdfunding.” 

Obviously, the rule has huge implications for renewable projects, which have traditionally had trouble attracting accredited investors due to the perceived risk of such projects and their high costs. Because of the high amount of capital needed to finance these projects, the ability to raise capital through equity crowdfunding may enhance the ability of projects to get the financing they need to move forward. This is particularly true for small to medium-sized “community solar” projects, where neighbors that want to invest in a local renewable project likely don’t qualify as accredited investors and may not meet all of the requirements for the intrastate exemption.

Crowdfunding of renewable projects has been very successful in places that allow equity crowdfunding, such as the Netherlands. For example, the Netherlands-based renewable crowdfunding site deWindcentrale has raised about 15 million Euro for renewable projects since 2010. This huge potential source of financing won’t be completely new in the United States, since SEC rules did allow wholly intrastate equity crowdfunding in states that authorized it. In addition, crowdsourcing platforms such as Mosaic have been skirting the securities rules by acting as an intermediary between solar projects and crowdfunding investors so that investors earn a profit through Mosaic rather than owning an equity interest in the project itself, which would be illegal under the existing SEC rules. 

Now that the SEC has finally issued its regulation, platforms such as Mosaic and the newly launched  Gridshare have the potential to open new doors for renewable project finance, and hopefully connect more projects to the grid. 

Pursuing Zero Waste Goals Closes the Loop

Saving the planet: The Logic, Law and Business of Recycling

By Brandon Kline, Energy Law

Source: CalRecycle

Fellow

A number of my eco-friends caught John Tierney’s New York Times column on “The Reign of Recycling,” and it got us thinking about the current position of the recycling movement – which has gone from outlier status to accepted insider in recent years.

While most consumers now engage in recycling to some degree, they are less likely to consider recycling from a legal or economic perspective. Growing up as a Millennial, Recycle Rex’s mantra was beyond debate: “Recycle, Reduce, Reuse…and close the loop.”

In other words, closing the loop through individual action is something we must do to reduce greenhouse gas emissions. Not so, says Tierney, who has been trashing recycling since the 1990s.

His most recent op-ed criticizes the economic and environmental cost of recycling and assails the land-use goals of the recycling movement.

He writes: “But how much difference does it make? Here’s some perspective: of one passenger’s round-trip flight between New York and London, you’d have to recycle roughly 40,000 plastic bottles, assuming you fly coach. If you sit where each passenger takes up more space, it could be more like 100,000.”

Critics suggest that Tierney gives short shrift to recycling and distorts the context.

“Americans recycle enough plastic water bottles every year to offset the carbon emissions generated by flying round-trip between New York and London, annually,” notes blogger Adam Minter, author of Junkyard Planet. “I find it representative of ‘The Reign of Recycling’ – sloppy, deceptive, and lacking any kind of context for a reader not familiar with the recycling industry.”

Tierney correctly notes that waste management is not likely to avert the land fill crisis “in a country with so much open space.” But this is so for a number of reasons. Most importantly, under Article I of the U.S. Constitution, the Commerce Clause protects the practice of cities exporting waste to rural communities, near and far, as a matter of course. Even if that means landfills overtake land locked states. This is so because the United States functions as a national economy.  See, e.g., City of Philadelphia v. New Jersey, 437 U.S. 617 (1978) (New Jersey statute prohibiting importation of most solid or liquid waste which originated or was collected outside the territorial limits of the State violated commerce clause).

As such, Tierney isn’t wrong to state that the country has yet to run out of landfill space. But it does not follow that the Zero Waste goal lacks merit.

According to the Zero Waste International Alliance, the zero waste goal attempts to guide people in changing their lifestyles and practices to emulate sustainable natural cycles, where all discarded materials are designed to become resources for others to use. Zero Waste means designing and managing products and processes to systematically avoid and eliminate the volume and toxicity of waste and materials, conserve and recover all resources, and not burn or bury them. Implementing Zero Waste will eliminate all discharges to land, water or air that are a threat to planetary, human, animal or plant health.

This goal can be pursued in a number of domains, including renewable energy.

For example, in San Jose, California, renewable energy advocates came together to design and construct an innovative dry anaerobic digestion (AD) facility for the City of San Jose’s commercial organics processing services.  Built by a green energy public-private partnership in December 2013, advocates lauded this facility as the largest dry AD project in the world, processing an estimated 90,000 tons per year (TPY) of commercial organic waste that would otherwise be disposed of in a landfill.  The high-quality compost produced is used to enrich soils.  In addition, the renewable biogas provides both on-site power for operations and power for sale to local users of green energy.

In conclusion, pursuing zero waste goals is about closing the loop of consumerism, and reducing greenhouse gas emissions through end-use efficiency. As a policy matter, stressing the importance of recycling goes beyond economics. It also makes us attentive to our levels of consumption. Even Recycle Rex understands that.

Untapped Potential: Geothermal Energy in Oregon

Credit: F. C. Whitmore (U.S. Geological Survey) and NREL

By Joni Sliger, Policy Extern

Oregon ranks third in the nation in geothermal energy potential. While the state ranks fourth in the nation on pursuing energy efficiency (which is delightful but surprising given Oregon had the eleventh lowest electricity rates in 2015), it has yet to develop its geothermal potential. Unfortunately, it’s not alone.

Geothermal power is chronically underdeveloped. Globally, installed capacity is only about 12.8 gigawatts (GW), or roughly a mere 6.5% of a potential 200 GW. Surprisingly, the United States leads the international market, boasting a grand total of 3.5 GW installed capacity, or roughly 21% of its 16.5 GW potential. (For perspective, the U.S. Geological Survey equates U.S. potential as “equivalent to 16 large nuclear power plants or dozens of coal fired power plants”). While Oregon has the potential to support around 2,200 MW of geothermal generating capacity, its installed capacity is a mere 35 MW. These numbers are all estimates, of course; determining the true potential requires site analyses and may vary with technology.

Geothermal has much to offer. Unlike variable renewable energy sources like wind or solar, geothermal is a reliable energy source. Geothermal plants can provide baseload and ancillary power, giving it the potential to replace baseload fossil-fuel-fired plants. The Geothermal Energy Association’s Executive Director recently pushed geothermal as “the glue that will help hold the clean power grid together.”

Geothermal energy is not without its problems. Like other renewable sources, it requires high upfront investments. A 2013 news report noted Oregon’s geothermal resources can be located far from transmission lines and can face environmental opposition. Geothermal energy is low in emissions, but it can present environmental risks. For example, the Renewable Northwest Project notes proper siting is critical to minimize the risk of groundwater contamination. (The Union of Concerned Scientists also discusses this concern and notes no geothermal plant has caused contamination in the U.S.)

However, geothermal offers a host of benefits worth considering, too. In addition to being naturally low in emissions, geothermal projects rely a renewable resource—heat from the earth’s core. Additionally, the Renewable Northwest Project reports that geothermal projects provide local jobs and support local economies and tax bases. The Geothermal Energy Association proclaims geothermal has benefits over other renewables, because it uses less land than wind or solar (404 square miles versus 1335 or 3237, respectively) and it emits fewer lifecycle greenhouse gas emissions than solar (by a factor of four). (Lifecycle emissions include both direct and indirect emissions; solar power does not directly produce greenhouse gases, but constructing the photovoltaic panels creates indirect emissions).

Geothermal provides a renewable, local power for Oregon. It deserves more attention from utilities and investors. In the meantime, individuals can take matters into their own hands. The Energy Trust of Oregon can help private landowners take advantage of geothermal energy, by providing financial incentives for small geothermal projects (less than 20 MW nameplate capacity) that can connect to PGE or Pacific Power.

My Introduction to Negotiating Renewable Energy Policy

By Brandon Kline, Energy Law Fellow

  

Earlier this month, California Gov. Jerry Brown signed the Clean Energy and Pollution Reduction Act of 2015 (SB 350) into law. SB 350 is landmark legislation that establishes world-leading energy efficiency and renewable energy goals for California. 

 

As an energy law fellow, I have watched California’s actions with great interest. I got my start as a California Executive Fellow, working under the legislative affairs secretary and deputy chief of staff to Gov. Arnold Schwarzenegger. This position followed my work at the California Energy Commission, where I cut my environmental teeth as an undergraduate research assistant. During my fellowship year, I was picked by Gov. Schwarzenegger’s deputy chief of staff to handle a wide range of projects in the Governor’s Office – from homelessness to the State Budget.

 

The most interesting part of my job was sitting in on meetings with legislators and others from the Administration. Indeed, it was in this setting that I received my introduction to high stakes negotiations in the context of renewable energy. I became interested in renewable energy after watching my mentor negotiate AB 32 (the Global Warming Solutions Act of 2006). I left my fellowship year with a clear understanding of how negotiators achieve meaningful reforms.  

 

I also came to understand that climate change mitigation hinges on policymakers finding common ground on complex issues. California’s actions on climate change have increased importance as world leaders seek common ground on climate, even as the countdown to the U.N. Climate Change Conference continues to run.

 

The U.N. Framework Convention on Climate Change’s goal is to reduce greenhouse gas emissions to limit the global temperature increase to 2 °C above pre-industrial levels. This requires negotiators to bridge the divide between rich and poor countries.

 

The new agreement will be adopted at the Paris climate conference in December and implemented from 2020. It will take the form of a protocol, another legal instrument or “an agreed outcome with legal force,” and will be applicable to all Parties. It is being negotiated through a process known as the Durban Platform for Enhanced Action (ADP).

 

California has provided global leadership on environmental policies and energy regulation since AB 32 established a market for carbon allowances and offsets. SB 350 now sets new aggressive targets for the state’s Renewable Portfolio Standards, and doubles the rate of energy efficiency savings in California buildings.

 

Balancing job growth and economic growth with environmental leadership requires a vision that understands that climate adaption measures are smart economic and ecological investments in our future. Because California’s legislative leaders found common ground with the private sector, an amended version of the bill emerged that builds on California’s environmental legacy.

 

No doubt similar dynamics animate global negotiations to achieve a legally binding international agreement on climate. With California’s actions on climate, there is cause for hope.

Can Any of the Democratic Presidential Candidates Lead Us “Back to the Future”?

By Andrea Lang, Energy Fellow

Credit: Whitehouse.gov

At the end of the 1980s classic “Back to the Future,” Marty McFly jumps into a DeLorean fueled by some banana peels and the dregs of a beer can to travel to October 21, 2015. Yesterday marked the day of Marty McFly’s visit, and although we do have biofuel technology, we are far from divorcing ourselves entirely from fossil fuels. So how can we get “back to the future,” and who can get us there?

Back in May, GEI Staff Attorney Amelia Schlusser blogged about the positions of the Republican presidential candidates on climate change (they either deny its existence or think it doesn’t pose any real threats—clearly they won’t be leading the way back to the future). In light of the relatively prominent role climate change played in the first Democratic presidential primary debate, it seems like a good time to explore the positions and histories of the Democratic contenders on climate change and renewable energy. The field of Democratic candidates has narrowed in the last week, with Senator Jim Webb dropping out of the race and Vice President Joe Biden officially deciding not to run. This leaves Hillary Clinton, Bernie Sanders, Martin O’Malley, and Lincoln Chafee as the primary Democratic contenders.

Hillary Clinton:

The Democratic frontrunner states two main goals for her climate policy: (1) install a half billion solar panels by the end of her first term, and (2) “[g]enerate enough renewable energy to power every home in America within 10 years of…taking office.” She also proposes a target of producing 33% of U.S. electricity from renewables by 2027. While her position is an improvement over current policy, it doesn’t go far enough to transition to a fully renewable grid. Moreover, Clinton has a spotty history with respect to climate change and related issues. She had been reticent to state a position on the Keystone XL pipeline until recently, and twice voted to allow offshore drilling as a Senator. Additionally, the fact that Clinton resorted in the first debate to touting her role in the controversial and ineffectual Copenhagen Accord as a demonstration of her efficacy on climate issues speaks to her weak history regarding the subject. Thus, although her concrete plans to address climate change are admirable, Clinton lacks a bit of credibility in light of her inconsistency on the issue in the past. 

Bernie Sanders:

When asked “what is the biggest national security threat to the United States?,” Bernie Sanders answered that “the scientific community is telling us, if we do not address the global crisis of climate change, transform our energy system away from fossil fuel to sustainable energy, the planet that we are gonna be leaving our kids and our grandchildren may well not be habitable." Despite the apparent urgency of the issue to the Vermont Senator, his website does not lay out a concrete plan to address climate change in the future, and mentions only what Sanders has done in the past to address the issue. Sanders did introduce a bill with California Senator Barbara Boxer to tax carbon and methane emissions, and he has consistently opposed the Keystone XL pipeline. In contrast to Secretary Clinton, Senator Sanders has been consistently strong on the issue in the past but does not have a concrete plan for the future. 

Martin O’Malley:

I was pleasantly surprised when Governor O’Malley published an op-ed in USA Today calling for a move to a 100% clean energy grid by 2050, which he also repeatedly emphasized  in the first debate. O’Malley’s website also lays out specific actions he would take to achieve this goal. Among his promises: to end fossil fuel subsidies, extend the Production and Investment Tax Credits that encourage wind and solar development respectively, financially support rural clean energy development through new and existing programs, extend the Biodiesel Tax Credit, create a “Clean Energy Jobs Corps,” and  modernize the electric grid to support more renewable energy. And although O’Malley has a questionable record on other environmental issues (see the Chesapeake Bay cleanup), he does have a strong history on climate change. For example, in 2007, O’Malley created by executive order the Maryland Commission on Climate Change to develop a statewide “Plan of Action” including firm benchmarks and timetables. Thus, O’Malley seems to bring together both a history of action and a plan for the future with regard to climate change.

Lincoln Chafee:

Although the former Republican had a poor performance in last week’s debate, he did bring up climate change in his opening remarks as a “real threat to our planet.” This position is consistent with his website, which claims that he “will work tirelessly to significantly reduce greenhouse gasses [sic].” Chafee does have a long history of climate action, even while he was a Republican. Unfortunately, like Senator Sanders, Chafee does not appear to have any specific plans to address the issue. 

So Who Has the Strongest Climate Policy Proposal?

Martin O’Malley's climate policy sets by far the most ambitious goal of achieving a 100% clean energy grid by 2050, and lays out concrete strategies to get us there. While he may be an underdog candidate, I hope that he can push the other candidates towards a more aggressive position on climate change to bring us “Back to the Future” of fossil fuel independence.