As U.S. Hesitates, California Pours Billions Into Green Energy

DBL Partners' Nancy Pfund quoted in Reuters Article on Passage of Prop 39

November 15, 2012

(Reuters) — Cal­i­for­nia, long the national leader in clean energy pol­icy, is poised to dou­ble down on its invest­ments in the sec­tor, with bil­lions in new sub­si­dies set to flow in over the next few years. (see full arti­cle here)

Cal­i­for­nia vot­ers last week directed some $2.5 bil­lion to energy con­ser­va­tion pro­grams with the approval of Propo­si­tion 39, which closes a cor­po­rate tax loop­hole, allo­cates about half of the new rev­enue to envi­ron­men­tal goals for five years, and which passed with more than 60 per­cent of the vote.

In addi­tion, the state this week will begin sell­ing “car­bon allowances” as it imple­ments a cap-​​and-​​trade pro­gram to reduce green­house gasses. Rev­enues from those sales, which could reach $11 bil­lion a year by 2020, will also be used for clean energy development.

The new pro­grams come on top of a solar power sub­sidy pro­gram, now in its fourth year, which has dri­ven a wide­spread adop­tion of rooftop solar sys­tems around the state. And an aggres­sive effort to require elec­tric util­i­ties to use renew­able sources for one-​​third of their out­put has also given the sec­tor a big finan­cial boost and spurred the con­struc­tion of sev­eral mas­sive solar power plants through­out the state.

We put our money where our mouths are,” said Mary Nichols, chair of the Cal­i­for­nia Air Resources Board, the agency charged with imple­ment­ing the state’s cap-​​and-​​trade system.

We back up what we do in reg­u­la­tion by shift­ing sub­si­dies from things that pol­lute and are inef­fi­cient to things that are more effi­cient and make our state more resilient,” she said.

California’s aggres­sive push comes as fed­eral sub­si­dies for clean energy have come under scrutiny. The Depart­ment of Energy’s loan-​​guarantee pro­gram that sup­ported bank­rupt solar startup Solyn­dra sparked a polit­i­cal firestorm after the company’s col­lapse, and a cash grant pro­gram that sup­ports renew­able energy projects is the sub­ject of a Trea­sury Depart­ment probe over pos­si­ble mis­rep­re­sen­ta­tions in the value of solar systems.

Cal­i­for­nia has long been a bell­wether for efforts by states and local gov­ern­ments eager to address cli­mate change. In 2006, Gov­er­nor Arnold Schwarzeneg­ger signed into law a bill that requires the state to reduce green­house gas emis­sions to 1990 lev­els by 2020. That law sur­vived a chal­lenge at the polls two years ago, when Cal­i­for­ni­ans over­whelm­ingly defeated an oil industry-​​backed mea­sure to roll it back.

Sup­port­ers of poli­cies that address cli­mate change view state efforts as crit­i­cal after a bill to estab­lish a fed­eral cap-​​and-​​trade sys­tem to curb car­bon emis­sions died in the U.S. Sen­ate in 2010.

Pres­i­dent Barack Obama has promised more assis­tance for renew­able energy in his sec­ond term, but the con­gres­sional sup­port he needs to extend or renew tax breaks for the indus­try is far from guaranteed.

MURKYLAW ON HOW TO SPEND FUNDS

Prop 39 back­ers spent more than $31 mil­lion to pro­mote the ini­tia­tive, $29.6 mil­lion of which came from its spon­sor, bil­lion­aire hedge fund man­ager Tom Steyer. It received almost no oppo­si­tion, and, despite the mil­lions spent on adver­tis­ing, gar­nered less atten­tion than other ini­tia­tives on state taxes, polit­i­cal con­tri­bu­tions and genet­i­cally engi­neered foods.

Although exist­ing law requires that a por­tion of the funds from Prop 39 go toward schools, the rest of the money is “up for grabs,” said Anne Smart, direc­tor of energy for the Sil­i­con Val­ley Lead­er­ship Group, which worked to pass the initiative.

Spe­cific pro­vi­sions allow for the cre­ation of “new pri­vate sec­tor jobs improv­ing the energy effi­ciency of com­mer­cial and res­i­den­tial build­ings” and job train­ing “on energy effi­ciency and clean energy projects,” which could encom­pass a wide range of beneficiaries.

The fact that this amount of money is going to be spent is going to open the door for com­pa­nies of all sorts to get in there,” said Nancy Pfund, man­ag­ing part­ner of DBL Partners.

It’s a mean­ing­ful wind­fall,” said Jon Sakoda, a part­ner at New Enter­prise Asso­ciates. Both he and Pfund believe sev­eral of the clean-​​energy busi­nesses their firm backs could benefit.

Ven­ture cap­i­tal­ists say that depend­ing on how the final rules are drafted, a wide range of star­tups could ben­e­fit. They include auto­matic light­ing and dark­en­ing window-​​maker Soladigm; solar-​​installer Solar City; light-​​emitting diode light­ing com­pany Soraa; fuel-​​cell com­pany Bloom Energy; green masonry com­pany Cal­Star; and solar-​​module com­pany Suniva.

Large multi­na­tional com­pa­nies like man­u­fac­turer Hon­ey­well Inter­na­tional Inc and engi­neer­ing giant Siemens AG, which prides itself on inno­va­tion in clean energy tech­nol­ogy, are also watch­ing the sit­u­a­tion in Cal­i­for­nia closely, hope­ful they too can reap ben­e­fits from the new poli­cies for their energy-​​efficiency prod­ucts, exec­u­tives at the com­pa­nies said.

Many observers expect pro­grams result­ing from the pas­sage of Prop 39 will work like the Cal­i­for­nia Solar Ini­tia­tive (CSI), the key state incen­tive for solar energy sys­tems. With a bud­get of $2.2 bil­lion over 10 years, CSI’s total fund­ing is about the same as the Prop 39 fund.

The pro­gram, which began in 2007, has cre­ated an indus­try of solar rooftop installers and is on track to reach 1,000 megawatts of instal­la­tions by the end of 2012, approx­i­mately the equiv­a­lent of half a nuclear power plant.

Home­own­ers are given par­tial fund­ing for their solar sys­tems, and state incen­tives have decreased over time as the costs of sys­tems have fallen.

It’s been a boom­ing suc­cess,” said Danny Kennedy, CEO of solar installer Sungevity, said of the CSI. He esti­mated that “tens of thou­sands of jobs” were created.

Prop 39 will spawn a fur­ther evo­lu­tion in the industry.”

JOINT PROGRAM

The money raised by Prop 39 also has the poten­tial to be com­bined with another new source of clean energy cash — the roughly $1 bil­lion the state expects to raise over the next fis­cal year as the state’s pio­neer­ing car­bon mar­ket opens.

The car­bon mar­ket, part of California’s response to global warm­ing, caps the amount of car­bon emit­ted by indus­tries each year and lets com­pa­nies buy and sell per­mits to pol­lute. The state is the pri­mary seller of per­mits, which could raise $50 bil­lion over eight years. State law requires the rev­enue be spent on envi­ron­men­tal projects, but details have not been ironed out yet.

The car­bon funds and the new Prop 39 funds could go into a sin­gle pot, such as a loan pro­gram that could be tapped by home­own­ers, cities and indus­tries, said Smart, whose group backed the propo­si­tion. One ver­sion of the loan pro­gram would help buy­ers pur­chase sys­tems, or retro­fits, and then pay back loans with energy savings.

If the state decides to use cap-​​and-​​trade auc­tion rev­enues to set up an energy effi­ciency revolv­ing loan fund, then once the Prop 39 fund­ing starts com­ing in, it could also go to that revolv­ing loan fund,” she said.

Deci­sions on how the money from Prop 39 is doled out now moves to the state leg­is­la­ture with the first hear­ing to be held in early Jan­u­ary in a com­mit­tee led by state Sen­a­tor Kevin De León, who co-​​chaired the cam­paign to pass the ini­tia­tive. Expect lob­by­ing to begin soon.

(The propo­si­tion) really doesn’t give any guide­lines to how the money should be spent, or should there be X per­cent to energy gen­er­a­tion ver­sus X per­cent to energy effi­ciency,” said Bryan Ash­ley, chief mar­ket­ing offi­cer of solar-​​manufacturer Suniva. “The lan­guage is rather murky.”

(Addi­tional report­ing by Sarah McBride in San Fran­cisco and Nichola Groom in Los Ange­les; Edit­ing by Jonathan Weber, Peter Hen­der­son and Lisa Shumake