NRG’s and Traditional Companies’ Dilemma in the transition to sustainable energy

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NRG’s former CEO David Crane wrote a very thought-provoking piece on how it is never easy for traditional polluting companies such as that of a coal company to become green. The company recently announced a divestment from renewable assets, as well as a sale that’s just been put up for their renewable business arm. This is a cold and cruel reminder for all of us how the reality of simple business models running on profit-making under scrutiny of indifferent investors can be a setback to any effort to push forward, regardless of how pure and good the intention for change is.

NRG’s capital allocation strategy — reinvesting coal profits into clean energy businesses — fell into disfavor with NRG’s traditional investor base. – Crane

Back in 2014 when Crane was still on board, he pushed for green goals of steering the business towards a less carbon-focused energy portfolio, in proportions as astounding as 90% carbon reductions by 2050. Many employees were on board this green hype and were extremely motivated by this new notion of doing good while doing well. The management painted a very rosy picture of how businesses can keep improving whilst switching to cleaner alternatives. Sure enough, the board was sold. They started to publicly announce the transition to cleaner energy.

But after the announcement of the company’s decision to move towards renewable projects, share prices dipped and investors started to turn their backs. The board thus had no choice but to reinstate faith in investors by abandoning ship. One of the main reasons why investors had lost faith so quickly is because they are only focused on short to at best, medium-term profits. This goes entirely against the tide of the renewable energy business where profits are more visible towards the end of a longer term.

This is also one of the road blocks that companies like Solar City will face in their pursuit for green energy. In the short-term, their finance reports looks dented when the main investment vehicle of solar projects is a zero-down payment model. Then it seems to turn into a self-fulfilling prophecy. Investors start becoming apprehensive which in turn hurts the business potential.

If we are going to make meaningful progress on carbon emissions, chronic emitters cannot be given a free pass simply because they have announced long-term reduction goals. If we are to maintain the integrity of the collective corporate effort, the climate movement needs to demand visible and meaningful progress from companies that have embraced long-term carbon reduction goals.

An important point for any meaningful efforts in transiting a business to a greener one is this: to show visible and meaningful progress, beyond just stating goals. That is why sustainability reporting and more importantly, an integrated reporting where investors can see a full picture of longer-term risks and costs is crucial. Investors ought to also be educated on how to invest and where to invest. Although NRG investors can cheer for now, their joy may not last beyond the decade or even the next few years.

NRG’s return to their old dirty coal business, in the mean time, serves as a harrowing wake-up call for us to reflect on chasing after our green dreams without being prepared for setbacks when they strike.

Green Mark and Facilities Management

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With Singapore gearing towards a more sustainable future, pushing for more building efficiency is one of the top priorities. The Green Mark certification by BCA certifies buildings that are more environmentally friendly and sustainable, by such indicators like a reduction in water, electricity and material usage, as well as improved indoor quality for better health and well-being. Currently, Singapore’s 31% of buildings are certified green with a lofty target of 80% by 2030. This is where facilities management comes in crucial.

FM drives the efficiency of buildings through active monitoring, tracking and managing of building energy efficiency, water and waste management and suitability of the indoor conditions for use. The FM scene is starting to get dependent on cloud-based solutions using such technologies like predictive analytics to improve asset management and provide real-time updates and tracking with all indicators. Currently, digital analytics is still nascent in the field, and there are few players, but it is important in ensuring that problems are detected beforehand instead of being dealt with post-occurrence.

There remains challenges in revamping the building landscape. One of the challenges is the fact that many buildings are old and efficiencies degrade along with age. It is up to the management and owners to decide whether the benefits of an upgrade will exceed the upfront costs of replacing the old systems. Some see benefits of an upgrade to sensor-based systems due to rising labour and utility costs. Ultimately, a simple cost-benefit analysis should answer the very question of “should we green our building?”

Sustainability and SMEs

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In Singapore, SMEs take up a majority share of the economy. Over 90% of the businesses are SMEs. Back in 2015 The UN developed a set of 17 Sustainable Development Goals (SDGs) for all countries in the aim of curbing poverty, inequalities and climate change worldwide.

The relevance of the SDGs however may be blurry to Singapore SMEs. Some feedback on the friction SMEs feel for SDGs include:

  1. They need government regulation and framework as guidance
  2. Tendency to focus only on sustainability costs rather than opportunities
  3. Time is needed to change consumer’s demands for more sustainable products

Suggestions for improvement in the adoption of SDGs in SME’s business strategies include looking at long-term partnerships and relationships, through factoring in not only finance but social and natural capital. Adopting the SDGs would also enable them to make better decisions based on more holistic considerations such as security of the supply chain and more reliable production. The companies would also need to be more creative and resourceful, equipped with the knowledge and ability to think ahead.

Companies need to up their innovation in greening their businesses, but they also require help from the government, public sector and policy side. Successful transition lies in having a well-developed ecosystem, not piecemeal efforts. Singapore’s recently opened Sustainability Academy between CDL and SEAS serves as as a good role advocate and platform for engagement in sustainability, underscoring the importance of partnership with such entities as NGOs.

Blended Finance in sustainable development

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Just a week ago, a new finance hub under the OECD and WEF called Sustainable Development Investment Partnership (SDIP) was launched. This was created in the aim to help fund and support sustainable development in the developing Southeast Asian region. Cambodia was the first in the SEA to join. According to the Asian Development Bank, Asia needs to invest US $26 trillion by 2030 to meet infrastructure challenges that threatens to stunt the growth of the region’s fast-growing countries.

Traditional financing models such as purely governmental or privately invested ones bear higher risks and thus the new mode of financing, Blended finance, was given birth to. Its flexibility and versatility lends more leeway to investors in a sense that they can pick and choose the types of projects they want to bear risks for, with other governmental institutions, banks, charity organizations, etc. taking up the rest of the pie.

Many projects in developing countries face a common problem: shortage of private investors even with attractive ROIs, because the returns are either hard to monetise, or the risks are too great for their tolerance level. The advantage and role of blended finance is thus to use public or charitable funds to remedy those problems, allowing private money to flow to these types of projects. According to a WEF survey of 74 blended-finance vehicles, this is working: every dollar of public money invested typically attracts a further $1-20 in private investment.

Blended finance can also be used to generate ROIs that would normally only yield less tangible benefits. The most common method is the “social-impact bond”, in which “outcome funders”, such as governments and aid agencies, pay back investors when goals are met which although socially desirable do not yield direct profits. For example, a charity foundation that pays a return of 10% on a project designed to improve school attendance among Indian girls if enrolment, literacy and numeracy improve as agreed after three years.

Such investment vehicles will be the linchpin of the future development of sustainable projects in the long-run and will be a terrific kickstarter for investors who are more cautious and uncertain of investing in projects that may be deemed risky. Hopefully, this will be a good start of achieving that $26 trillion goal to meet the needs of tomorrow.

Bike-sharing & sustainability

Ofo, Mobike, Obike are 3 China-based bicycle startups that launched their business here in Singapore this year. The sudden appearance of these colourful bikes around the city encapsulates not only the fierce competition among these startups to dominate the SEA market and but also governmental emphasis and support of sustainable transportation in Singapore and around the world.
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The National Cycling Plan lays out the ambitious goal of 190-KM bicycle paths around HDB estates by 2020, and 700KM by 2030. Following suit from other major cities such as Paris and New York, Singapore will build up its infrastructure to encourage taking up cycling, to reduce both air pollution, traffic congestion and promote healthier lifestyle.

In China, more than 200 million rides have been taken since the launch of bike-sharing. If each ride is around 5km, that translates to around 1billion km worth of reduction in carbon footprint, ie. 60,000 tonnes of CO2 reduced. Though this is hardly significant to compensate for their 10 GT of CO2 emissions yearly, it is a good start and more people will gradually pick up the trend as popularity of the system rises.

According to the World Bank, Singapore’s per capita CO2 emission was 9.5 whereas Denmark was 6.3 in 2013. Both have similar sizes in population. Copenhagen currently has around 500km of bike lanes. Till we reach that level, biking as a regular commute will be hard to take off. I look forward to the SG government sticking to its promises in giving us that 700km by 2030. Till then, I’ll stick to cycling at the parks.

Solar Power Part I

Overview

  • 90% of the solar panels in the market today are made of polycrystalline Si. The remaining 10% are made of inorganic materials.
  • The largest demand is Germany and the largest supplier is China.

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  • Solar is growing at the fastest pace than other major renewable energies. Although its capacity factor is the lowest.
  • Cost wise, the PV system has dropped below 1 USD/W. The non-modular cost such as maintenance fee, racking, wiring, inverters remain pretty much the same so the falling cost of modules are the main contributors to the falling price of solar PV.

Technical words

  • Irradiance = power per unit area (watts per sqm)
  • Spectral power density = incident power per unit area and per unit wavelength
  • The sun is a black body radiator (which is not reflective and absorbs all light). The higher the temperature of black body radiator, the higher the photon energies.
  • Solar spectrum is distributed 9% UV, 44% visible range, 47% infrared.
  • The amount of irradiation is affected by things like atmospheric mix (CO2, oxygen, water).
    • 20% of irradiation is reflected by clouds, 6% by molecules and 4% earth’s surface.
    • 19% absorbed by earth’s surface
    • Total lost = 49% of irradiation when hit on earth’s surface.
  • Solar irradiance is expressed in sun hours where earth is exposed to 1000watts per sqm. Places like Spain with more sun has around 4.2 sun hours daily.

 

 

“The Grid” Analysis of America’s Energy

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Renewable sources are still far from overtaking energy supply fully because the grid just isn’t robust enough to deal with the fluctuations in electricity being made. Oftentimes, solar panels produce more than 100% power needed in the day, and flounders at night. The extra power made in the day cannot be put aside for use later. Thus, night time demand is usually supported by firing up of more power plants. These power plants are not efficient unless ran at full capacity.

First of all, the grid is very old. It is the same grid, for the most part, that was first built from 1950s. The grid is also unstable, susceptible to crumbling at the slightest perturbance, and get overloaded easily leading to blackouts.

Back in the days, DC grids were developed based on multiple private companies each with their own generating station and lines. The first step towards universalizing access to power was invention of AC power.

Samuel Insull, Thomas Edison’s assistant, was the one that led to the centralization of the grid. He bought over infrastructure and private companies, consolidating “load” and persuading factories to purchase cheaper off-peak power resulting in more switching to general grid from private power.

Then there was a regulation, PURPA to allow for small power plants to do cogeneration (using leftover steam to generate useful heat). This broke up the monopoly structure. And in even more recent times electricity start becoming a traded commodity. Too much electricity start travelling to far, burning and degrading the lines. Upkeep of grid lines are declining as customers do not wanna pay more. Power plants often do not keep up with maintenance, or try to evade inspections.

The biggest challenge utility faces today is the problem of peak demand. Peak times happen around 5pm. That’s unfortunately when the renewables are starting to become asleep/inactive. Thus most of US evenings are powered by fossil fuels. Utilities in the past used to have up to 30% capacity margins (ie. they can fire up to 30% more power in times of emergency), while now it’s only down around 10%. While consumption of energy surges. But the entire concept of having power plants sitting idle for half the time when there’s no demand is a huge waste. It costs the same whether the plant is idle, or going full steam, and it is even more costly when they start firing up additional plants to make up for the excess capacity needed.

Smart metering is the one tool that utilities can consider upgrading themselves to keep their businesses running. Shedding 5-10% during peak hours could eliminate powering up of dirty power plants. Utilities could also monitor and control electricity (unbeknownst to some).

The bad thing about home-based grid solar is that the normal citizens who are not using solar or who cannot afford solar systems pay higher electricity rates which are used to curtail the loss of utility customers. In 2013, Germany’s two largest utilities lost $6 billion as corporate are getting off the grid. This leads to the “utility death spiral” leaving utilities with stranded assets like those big expensive power plants but aren’t used. Their initial colossal investment in fossil fuels ended in unprecedented losses.

Electric cars could well be the most viable solution for smoothing out the instability of the grid. Much like huge batteries on wheels, they could act to balance out peak load by feeding power into the grid (when they’re docked into the 2-way charger). Besides their flexibility to go anywhere and readily provide power back to the grid, they are also in lower demand at night when peak load happens. This would tie perfectly with rooftop solar when the solar power wanes at night, and the “car batteries” are plugged in to fill in the gap. Cars are only utilized about 3% daily. So if we can make use of them effectively as storage, they can be used up to 95%.

However, the drawbacks are that electric car batteries are the main holdbacks for consumers who are concerned with their lifespan and range. Which all comes down to price and costs. Denmark has provided zero tax incentive (usually 100% of car price), and also lifelong free batteries for electric cars. Another question is the costs of infrastructure for the massive expansion of charging spots in order to make the “cars as storage” dream a reality.

What Donald Trump’s presidency means to energy & environment

GOP 2016 Debate

The Trump presidency was not great news to climate change supporters. It was not the outcome many hoped for, and could potentially pose a significant threat by demolishing any progress made in the Obama administration for climate and environment.

Calling climate change a hoax that the Chinese fabricated to gain unfair advantage, he vowed to pull out of the Paris agreement on climate change first thing he comes on board. He will also remove any form of carbon taxing and deregulate any bans on drilling or fracking. Many coal workers voted for Trump in hopes that he can revive the coal industry to its glorious past. However, this proves to be unrealistic and likely impossible.

Renewables aside, coal is no longer competitive on any front. Successful fracking for natural gas in tight shale formations has enormously increased America’s natural gas production, keeping prices low, and outcompeting all other energy sources, especially coal and nuclear. It doesn’t make a lot of financial sense to expand coal use again within the United States.

As for the renewable energy sector, wind companies saw their shares tumble the first few days after the election. Fears have been building up in the renewable industry that his win means a big loss to them. Trump has a personal history with some wind projects which he thinks are against the advancement of his private businesses. One example is his fight against wind farms built across his golf course in Scotland, because it “blocked the views” of his golf course.

Tax credits are the lifeblood of renewables. Concerns about Trump rewinding the tax credits and hurting the renewable energy industry have been raised but may not crystallize in the way we envisioned. The Republican-controlled Congress already extended the renewable energy Production Tax Credit to 2021, and there also are various state tax credits and the Renewable Portfolio Standards — laws requiring a certain portion of a state’s power generation mix to come from renewable sources — to consider.

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Pure economics will dictate the fate of the futures of renewable energy. The price of wind per MW is already cheaper than coal and solar is quickly catching up. Time-wise, it is also smarter to invest in solar farms as they take only a few months to come online where as coal-fired plants can take up to years. Solar and wind will continue rising at a fast pace in the next few years, and their growth will be driven mostly by state rather than federal policies. Even without tax credits, their prices are falling, making them naturally competitive.

However, let’s remember: all talk of Trump’s actions may deem futile as his words are rarely gone to fruition at the end of the day. Case in point: he has started reconsidering his stances on climate change and expressed that he would like to see “clean air and crystal clear water”.

Solar Power Generator, Storage, Software, 3-in-1

Meet SolPad, an Integrated Solar-Plus-Storage Solution Fresh Out of Stealth Mode

So here’s one of the most exciting products ever for solar. It kinda looks like an ipad except it does way more cool stuff.

An all-in-one solar system, enabling users to power their homes, monitor their electricity uses, interact intelligently with the grid, and you can even bring it outdoor. Why this is so great:

  1. Solar power your home easily. This is a solar power generator, power storage, and power monitoring, ALL IN ONE. This sort of all in one integrated system was just “talk” before this.
  2. Their cost is about half of the equivalent of what the market is offering now.
  3. Portability means that it can supply electricity on the go. This is like bringing a powerbank with you except it doesn’t only power phones, but basically any electric device you want, anywhere.
  4. Self sufficient, and no need to be grid connected, which means there won’t be a net metering issue anymore.
  5. This system is also a smart home system. It can connect to any device, like lights, TV, dishwashers and be controlled through an app. This also means that consumers can monitor their real-time electricity usage and control it.

The 1-kilowatt-hour battery can be fully recharged by the sun or the grid in roughly three hours, while the 500-watt hour battery can be fully recharged in just an hour and a half. And in cases where the grid rates are low, it can automatically charge from the grid. When the rates are high, it will draw from the stored solar power.

Although it has not been released to the market yet, I see great things coming out of the product, given it delivers what it promises. It could be the solution to electrification of many rural areas, giving billions access to precious power source in a financially viable manner. This could be game-changing.

Go, solpad.

 

Trends in wind in the US

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US Dep of Energy published their annual wind technologies market report, containing a lot of insightful information for the US wind industry. Some of the highlights will be summarized in this post.

Average price of new wind contracts are 2 cents/kwh 2015, compared with solar which is around 4 cents/kwh. Globally, it is 3 cents/kwh. So US wind contracts are really insanely cheap now.

Some useful things to note are as follows:

  • LNG prices have also declined. But it will rise later over time, this will put wind at stronger competitive advantage.
  • Although prices are low at the moment, the fate of wind prices is out of the control of the industry. It could change drastically over the next few years due to regulations and policy. For eg. if the PTC goes away, 2 cents/kwh may then rise to 4cent/kwh which puts it at a disadvantage over the wholesale market which is priced in the middle. LNG is 3.5cent.
  • 80% of wind plants are manufactured domestically in the US. This is due to the economic sense of shaving off shipping costs of imported large/heavy components.
  • Typically, the market is dominated by 3 players: GE, Vestas and Siemens. About 3/4 of the installations come from two companies: GE and Vestas.
  • OEM has consolidated over the past decade, now the second and third tier wind OEMs are declining as their supply chains dry up. Only those with capabilities to serve the larger players can stay in the market.

One thing is clear: What is keeping the renewable sector afloat is the PTC and RPS. Whether these will continue to give incentives and much-needed fuel for progress in this industry remains to be seen. It is forecasted that the PTC will be reduced gradually beginning 2017. Hopefully, the degree of impact it will have on the wind industry will not be too substantial.

Glossary/Key Terms:

PTC: Production Tax Credit.
RPS: Renewable Portfolio Standard. Regulation that requires increased production of renewable energy.
Nameplate capacity: Term classifying the power output of a power station usually expressed in megawatts (MW)