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


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