AIA Bulletin

Attorney General Mike DeWine announced Tuesday that he has certified the petition language for a proposed constitutional amendment that would require the state to commit more than $1 billion a year for renewable energy sources.

The Ohio Clean Energy Initiative amendment, submitted by “Yes for Ohio’s Energy Future,” would require the state to issue $1.3 billion in bonds each fiscal year through FY23. The money could be spent to support energy infrastructure related to solar, wind, biomass, battery technology and geothermal sources; research and development; and site and facility development for clean energy. The amendment would also commit $65 million in bond revenue to run the Ohio Energy Initiative Commission.

“Without passing upon the advisability of the approval or rejection of the measure to be referred, … I hereby certify that the summary is a fair and truthful statement of the proposed constitutional amendment,” DeWine stated in a letter to the petitioners.

The issue now heads to the Ohio Ballot Board, which will decide if it should appear as one or more ballot issues.

The petition group would need to collect 385,253 valid signatures before July 4 in order to qualify for the November 2012 ballot. 

Ohio state and local government entities required by the Ohio Revised Code to publish public notices multiple times in a newspaper are able to reduce their costs by using the State Public Notice website, found at PublicNotice.Ohio.gov. The public will be able to search for and browse public notices for free, and there is no charge for state and local governments to post notices to the site.

“The site has the potential to pull together bid notices from more than 3,900 local governments and schools, making searches simpler for businesses pursuing government contracts which should increase the number of bidders for projects, further increasing savings for taxpayers,” said Randy Cole, president of the state’s controlling board, which handles certain adjustments needed to the state budget.

“It’s exciting to see this new tool that both presents immediate cost savings for schools and local governments and better services for the public and businesses,” Cole said.

The site was created by the Ohio Department of Administrative Services’ Office of Information Technology as a result of the most recent state budget bill. New Ohio Revised Code section 7.16 allows a state agency or political subdivision, after initially publishing the notice in full in a general circulation newspaper, to subsequently publish an “abbreviated” notice in the newspaper if the notice directs the public to the full notice on the state public notice website.

“We are happy to provide a new service that leverages state resources and provides a benefit to all levels of government in Ohio and ultimately, the taxpayers,” said Robert Blair, director of the Ohio Department of Administrative Services.

To post public notices, government users will need to create an account with the Ohio Business Gateway at ohiobusinessgateway.ohio.gov.

Wind energy developers and environmentalists urged senators Wednesday to find another way to address a steel company’s plan to convert blast furnace gas to energy.

However, AK Steel Corporation and Air Products & Chemicals Inc. told lawmakers that including cogeneration technology in the state’s renewable energy portfolio was critical to making the companies’ proposed $310 million project in Middletown economically viable.

The proposal (SB 271 & HB 443) would define technology that converts waste heat and gas from steel operations into electricity as renewable energy, making it eligible for renewable energy credits that utilities need to meet the requirement for 12.5% of the state’s power to come from renewable sources by 2025.

AK Steel’s Alan McCoy told members of the Senate Energy & Public Utilities Committee that power from the cogeneration plant would be more expensive than market prices, especially during the initial years of operation. So making the electricity it produces eligible for RECs would “improve the economics of the project,” he said.

“While we understand that the market will continue to determine the price of these credits, we strongly believe that this project fulfills the intent of the legislature to promote non-traditional forms of electricity production,” he said.

Joseph Terrible, Air Products’ senior business development manager, said the companies face a tight deadline to retain a $30 million grant from federal American Recovery and Reinvestment Act, which requires the plant be in operation by September 2015. “To meet that date, capital commitments for construction must be made by mid-summer 2012,” he said.

The value of RECs the plant produces and the federal stimulus grant will help offset the high cost of the project, which is nearly twice the amount for a comparable natural gas power plant, he said. “Without the economic benefit this legislation could provide, there will probably not be enough incentive to proceed with the project given the effect of lower-cost natural gas and the weak economy on electric power prices.”

The proposed facility would generate about 1 million megawatts of electricity a year, enough to serve more than 85,000 households, he said. That would displace 600,000 to 800,000 tons of carbon dioxide emissions annually, in addition to nitrogen oxide, particulates, and mercury pollution that would otherwise come from coal-fired power plants.

Mr. Terrible said the cogeneration technology could help improve the competitiveness of North American steel makers.

“It is not our intent or desire to undermine the value of renewable energy credits to other clean sources of power,” he said, noting that the cogeneration facility would produce less than 15% of the state’s total requirement for renewable energy when it comes online in 2016. That percentage would decrease as the quota nearly quadruples by 2024, he added.

Several witnesses said adding cogeneration to the state’s renewable energy portfolio would depreciate the value of RECs from wind and solar energy facilities and jeopardize development of the fledgling industries in Ohio.

Speaking on behalf of the American Wind Energy Association, Eric Thumma, director of policy and regulatory affairs for Iberdrola Renewables Inc., said wind developers’ investments in Ohio facilities were predicated on projections for the future size of the renewable energy market.

Adding cogeneration to the state’s renewable energy standards “could fundamentally undermine future renewable energy investments in Ohio by flooding the market with renewable energy credits from these projects and by creating uncertainty as to the state’s commitment to fostering a sound, reliable market for renewable energy,” he said.

The renewable energy market is “exceedingly volatile” and Ohio already has an oversupply of RECs, he said. Adding cogeneration could dampen further investment and drive down REC prices so much that could even impair AK Steel’s ability to recover its investment.

Mr. Thumma said adding cogeneration technology to the state’s energy efficiency or advanced energy standard portfolio would be a better option – something several witnesses recommended as an alternative. Testifying as an interested party, Nolan Moser, director of energy and clean air programs for the Ohio Environmental Council, said the group “very vigorously supports cogeneration,” but is concerned the bill would negatively affect other forms of green energy.

“We do not want to see cogeneration projects being developed at the expense of other renewable energy projects,” he said. “The bill, as drafted, could quite literally wreck the REC marketplace.”

Responding to a question from Chairman Sen. David Daniels (R-Greenfield), Mr. Moser said he believed adding cogeneration to the state’s energy efficiency requirements would prove more beneficial to AK Steel’s proposed facility.

That would allow the company to reach a “reasonable arrangement” with a utility that would provide a guaranteed long-term revenue stream, rather than be subject to the volatility of the renewable energy market, he said.

Witnesses representing Environment Ohio, Ohio Business Council for a Clean Economy, and the League of Women Voters of Ohio echoed similar concerns about the measure’s potential impact on renewable energy development.

Ohio Environmental Protection Agency Director Scott Nally Tuesday explained a host of statutory changes his agency is seeking to make regulations clearer to businesses, reduce duplication and expand certain programs.

Nally and Sen. Tim Schaffer (R-Lancaster) testified on the changes proposed in Schaffer’s SB294 in the Senate Agriculture, Environment and Natural Resources Committee.

“I’ve had 326 external outreach meetings, and this bill is the culmination of those outreach meetings,” said Nally.

“This legislation institutes some long overdue, common-sense permitting improvements as well as business outreach programs, modifications to remove dual regulations, and simple good government practices,” said Schaffer.

The bill would expand the degree to which businesses can confidentially deal with the Ohio EPA on compliance questions. The agency’s Office of Compliance Assistance and Pollution Prevention currently can only offer confidentiality to small businesses inquiring about air permits. Schaffer’s bill would allow any business to ask about any permit type. 

“They should have the ability to have that conversation under confidentiality as long as it’s not posing immediate harm,” Nally said

The bill also would create a program for paying fees in lieu of wetland mitigation for impacts to isolated wetlands. Nally said that will give companies a clear idea of the per-acre cost of wetland impacts for business planning purposes.

The bill also would allow the Ohio EPA to renew National Pollution Discharge Elimination System (NPDES) permits when the permit holders are in violation of the current permit. Schaffer said the current prohibition on doing so means businesses might continue to operate under old permits with outdated pollution control standards.

Sen. Keith Faber (R-Celina) questioned one provision of the bill that would allow Ohio more freedom to adopt federal rules written under the federal Resource Conservation and Recovery Act, noting he’s generally leery of allowing agencies greater power to freely adopt new rules. 

Nally said the inability to keep up with federal changes affects businesses that would like to opt for the state regulatory process rather than the federal process, but can’t because of gaps in the state program.

Other changes proposed in the bill include the following: 

– Allow solid waste landfills to temporarily store low-level radioactive waste;
– Exempt coal combustion waste from solid waste management district generation fees. Nally said the biennial budget bill provided such an exemption for municipal solid waste landfills but overlooked solid waste management districts. The intent, he said, is to encourage the waste to go to existing facilities, rather than have waste generators build their own disposal sites.
– Expand the type of sites and parties than can proceed with corrective actions to remediate sites through the Voluntary Action Program;
– Increase from 2,000 to 5,000 the number of tires a scrap-tire site can have and still be eligible for funding from the Scrap Tire Fund for cleanup;
– Change the fee structure for operator certification testing for drinking water and wastewater operators, in part to enable third parties to administer the test. Nally said current practice is to offer the testing once per year in Columbus, an inconvenience to test takers.
– Changes construction and demolition debris fees to encourage the removal of recyclable debris from the waste stream before disposal and clarify the application of fees to asbestos materials that go to either a construction and demolition debris landfill or a municipal solid waste landfill;
– Update statute of limitations laws to correct an omission made several years ago;
– Update hazardous waste reporting requirements to be biennial rather than annual, consistent with the U.S. EPA’s practice;
– Revise environmental background check requirements;
– Clarify terminology related to the types of hazardous waste permits subject to a compliance history evaluation;
– Eliminate consent-to-service requirements for people transporting solid waste. In response to a question from Sen. Lou Gentile (D-Steubenville), agency legislative liaison Tracy Freeman said the state instituted the paperwork requirement previously to keep track of people transporting solid waste in case they’d later need to be called in for legal proceedings. But she said the agency hasn’t seen a need for that in the 23 years the requirement has been in place;
– Ban co-disposal of secondary aluminum production waste at municipal solid waste landfills, to prevent the harmful chemical reactions that occur during co-disposal;
– Removing some infectious waste oversight procedures to reflect the fact that such wastes are now heavily regulated by federal agencies;
– Make tampering with a public water system a felony.

Nally said the agency is seeking an additional amendment to pursue delegation authority from the U.S. Army Corps of Engineers on the section 404 permitting program under the Clean Water Act. Such a change would allow businesses to seek permitting under both sections 404 and 401 from the state, rather than going to the Corps of Engineers for one and the state for the other.

Even as lawmakers debate stripping renewable energy standards from Ohio’s four-year-old electricity policy, a group of four central Ohio residents is proposing a constitutional amendment to commit more than $1 billion in bond revenue a year to develop solar, wind and other energy sources.

The group, called Yes for Ohio’s Energy Future, submitted a petition summary for the Ohio Clean Energy Initiative amendment for approval Friday to Attorney General Mike DeWine’s office. He has until Feb. 21 to make a decision on certifying the petition.

Under the amendment, the state would issue $1.3 billion in bonds each fiscal year through FY2023. The money could be spent to support energy infrastructure related to solar, wind, biomass, battery technology and geothermal sources; research and development; and site and facility development for clean energy. The amendment would commit $65 million of the bond revenue to run the Ohio Energy Initiative Commission.

Project funding decisions would be made by Ohio Energy Initiative Commission LLC, a company registered in the state of Delaware.

The amendment was submitted by Columbus attorney Don McTigue on behalf of the Yes for Ohio’s Energy Future committee, made up of Evonne Richardson of Galloway, Maria Yonamine of Columbus, Kevin Howard of Gahanna and David Renner of Upper Arlington.

Sen. Kris Jordan (R-Powell) has introduced SB216, which would remove requirements imposed in 127-SB221 (Schuler) for Ohio electric utilities to provide a certain percentage of their electricity from renewable sources. 

The petition summary is available at http://www.ohioattorneygeneral.gov/BallotInitiatives.aspx/?from=nav 

Draft versions of the Design-Build documents have been posted to the OCR website for external review. To view and/or download the documents, go tohttp://ocr.ohio.gov and click on Documents. The deadline for comments is Monday, February 27.

Also, if you have not already registered for OCR Academy, the definitive seminar to learn the details of the changes of in public facilities construction in Ohio, and wish to do so, please register as soon as possible!

Four of the seven dates are now sold out! The following dates are still available. Registration is on a first-come, first-served basis and walk-ins are not being accepted:

• February 16 | Toledo
• March 22 | Akron
• March 27 | Bowling Green

To register, go to http://regonline.com/ohioconstructionreformacademy. If spaces in the sold-out locations become available DAS will send out a tweet on Twitter at @OHConstrReform.

Ohio EPA is accepting registrations for attendees and exhibitors for the Ohio Brownfield Conference, Wednesday and Thursday, May 23 and 24. The conference will educate attendees about options to redevelop brownfield sites and highlight funding resources to develop brownfield areas into greenfields. 

The conference will be held at the Columbus Convention Center, 400 N. High St. Exhibitors must register for booth space with Ohio EPA by Friday, April 20. Registration for attendees is open and will continue as space is available. 

Four tracks of information will assist participants at all levels of knowledge and interest. They include the following:
– Brownfield basics.
– Remediation and assessment.
– Planning a brownfield redevelopment project.
– How brownfields can incorporate green remediation and sustainability.

There will be four to five sessions in each track both days; a fifth track will offer brownfield-related training sessions and will run concurrently. Those who participate in the brownfield training track can learn how to apply for money for assessment and cleanup, how to prepare property risk assessments and how to set up a variety of legal protections that encourage redevelopment. 

The conference is geared toward local government leaders, financial and insurance providers, risk management practitioners, economic development officials, community development organizations, environmental and civil engineers, planners and public works officials, real estate developers, investors and attorneys. 

Additional information about the sessions and registration information is available online at http://www.epa.state.oh.us/derr/Brownfield_Conference2012.aspx.

The Construction Manager at Risk documents are now available for use and can be accessed via the State Architect’s Office website at http://ohio.gov/sao (click on Standard Requirements).

• By Juliet Eilperin   
• January 20, 2012  |  
• 3:21 pm  |  
• Wired February 2012
•  

Wind Power: Plummeting natural gas prices now make this option comparatively expensive.
Photo: Dan Forbes

John Doerr was crying. The billionaire venture capitalist had come to the end of his now-famous March 8, 2007, TED talk on climate change and renewable energy, and his emotions were getting the better of him. Doerr had begun by describing how his teenage daughter told him that it was up to his generation to fix global warming, since they had caused it. After detailing how the public and private sectors had so far failed at this, Doerr, who made his fortune investing early in companies that became some of Silicon Valley’s biggest names—Netscape, Amazon.com, and Google, among others—exhorted the audience and his peers (largely one and the same) to band together and transform the nation’s energy supply. “I really, really hope we multiply all of our energy, all of our talent, and all of our influence to solve this problem,” he said, falling silent as he fought back tears. “Because if we do, I can look forward to the conversation I’m going to have with my daughter in 20 years.”

As usual, Doerr’s timing was perfect. Just weeks earlier, Al Gore’s An Inconvenient Truth had won an Oscar for best documentary. (Gore is now a partner in Doerr’s green tech team at the VC firm Kleiner Perkins Caufield & Byers.) Interest in climate change had never been higher. And as the economy recovered from the dual shocks of the Internet bubble and 9/11, Doerr’s fellow Silicon Valley VCs were already looking to clean technology as the next big thing. What followed was yet another Silicon Valley gold rush, as the firms on Sand Hill Road were pulled along by the promise of new fortunes and the hope that they would be the ones to wean America off of fossil fuels. The entrepreneurs and tech investors who had transformed media and communications were ready to make Silicon Valley the Saudi Arabia of clean energy.

Never mind the fact that green technology had been struggling to achieve critical mass for decades. “You had folks who came in with the hubris to say, ‘I know these guys have been working on this for 50 years,’” says Andrew Beebe, chief commercial officer for Suntech, the Chinese solar manufacturer. “‘But I’ve got $50 million and I can blow the doors off this thing.’”

In 2005, VC investment in clean tech measured in the hundreds of millions of dollars. The following year, it ballooned to $1.75 billion, according to the National Venture Capital Association. By 2008, the year after Doerr’s speech, it had leaped to $4.1 billion. And the federal government followed. Through a mix of loans, subsidies, and tax breaks, it directed roughly $44.5 billion into the sector between late 2009 and late 2011. Avarice, altruism, and policy had aligned to fuel a spectacular boom.

Anyone who has heard the name Solyndra knows how this all panned out. Due to a confluence of factors—including fluctuating silicon prices, newly cheap natural gas, the 2008 financial crisis, China’s ascendant solar industry, and certain technological realities—the clean-tech bubble has burst, leaving us with a traditional energy infrastructure still overwhelmingly reliant on fossil fuels. The fallout has hit almost every niche in the clean-tech sector—wind, biofuels, electric cars, and fuel cells—but none more dramatically than solar.

Next-gen biofuels: The technology to efficiently extract the energy from cellulose just isn’t there yet.
Photo: Dan Forbes

Doerr’s TED talk wasn’t the start of this VC-fueled drive for a new-energy economy. Rather, it was a product of a transformation that was sweeping Silicon Valley. Many of the investors and entrepreneurs who had ridden the Internet bubble to various levels of success had already started pouring money and ideas into clean tech.

One of the first to bet big was Martin Roscheisen. He sold his email-management firm eGroups to Yahoo for $450 million, and in 2002 he cofounded Nanosolar, a panel manufacturer. But that was just the beginning. Vinod Khosla, cofounder and former CEO of Sun Microsystems, moved his VC firm, Khosla Ventures, heavily into biofuels and other renewables. Beebe, cofounder of the dotcom-era darling Bigstep.com, a web-hosting company, helped start the solar panel maker Energy Innovations in 2003. Arno Harris, who had helped steer what he now calls “an Amazon-Kleiner Perkins online wine store that left a big hole in the ground,” worked with Beebe at a subsidiary of Energy Innovations before founding Recurrent Energy, a company that develops utility-scale solar projects, in 2006. And PayPal cofounder Elon Musk has put $96 million of his own money into the electric-car startup Tesla Motors and was joined by well-known VCs Steve Jurvetson and Nancy Pfund.

In 2008, by which time Kleiner Perkins had allocated more than $300 million to clean tech, the firm launched a $500 million growth fund that it said was “intended to help speed mass-market adoption of solutions to the world’s climate crisis.” Doerr, who told Forbes that curbing climate change was “the largest economic opportunity of the 21st century, and a moral imperative,” helped direct money to everything from solar to smart meters.

These investors were drawn to clean tech by the same factors that had led them to the web, says Ricardo Reyes, vice president of communications at Tesla Motors. “You look at all disruptive technology in general, and there are some things that are common across the board,” Reyes says. “A new technology is introduced in a staid industry where things are being done in a sort of cookie- cutter way.” Just as the Internet transformed the media landscape and iTunes killed the record store, Silicon Valley electric car factories and solar companies were going to remake the energy sector. That was the theory, anyway.

Solar: Cheap panels from China have viscerated the US industry.
Photo: Dan Forbes

The major energy bills that passed in 2005 and 2007—which provided tax credits and loan guarantees for clean tech—gave investors further confidence. Venture capital in solar alone rose from $32 million in 2004 to nearly $1.85 billion in 2008. Investment in battery tech rose more than 30-fold during the same period.

Other clean-energy sectors were thriving as well, buoyed not only by VC money but by the fact that the average price of electricity, which had been stable for years, shot up 35 percent between 2002 and 2008. At the end of 2006, the total capacity of all the wind turbines installed in the US was 11,468 megawatts, enough to power 3.2 million homes. By 2010, it was nearly four times that much. “As more entrepreneurs and innovators saw there was capital available in the clean-energy sector, you saw more folks looking into developing solutions and business around that,” says Joshua Freed, vice president for clean energy at the think tank Third Way. “There was a virtuous circle of capital moving to clean energy, and entrepreneurs moving to clean energy because there was a capital.”

One of these was Chris Gronet, a Stanford PhD in semiconductor processing who had been general manager of the thermal processing group at Applied Materials, a firm that provides equipment and software to semiconductor and solar companies. He had come up with a design for a revolutionary new solar module (a module is a light-gathering photovoltaic cell with all the attendant structural hardware and circuitry) that he believed would be vastly more efficient than the flat-panel modules that had dominated the market for more than three decades.

Conventional photovoltaics are tricky things to install. Under the best conditions—when their surfaces are clean and aimed directly into the sun—they generally operate at no better than 20 percent efficiency, meaning that they convert just a fifth of the energy striking them into electricity. But an immobile flat surface faces the sun head-on for only a brief period each day, at best. And simple dust can reduce the efficiency by 5 to 10 percent. Furthermore, flat panels’ vulnerability to wind poses numerous structural challenges—from mounting hardware to rooftop integrity. Solar firms routinely employ aeronautical engineers to deal with this issue, and VCs looking to get into the sector sometimes brought these experts on board to help judge whether a startup’s product could withstand intense wind patterns.

Gronet’s design called for a grate made of rows of cylindrical cells rather than a single panel of flat cells. The sun tracking across a cylinder will always be shining directly on part of it. That meant Gronet’s modules could be mounted parallel to a roof and out of the wind, rather than angled up into it. As an added bonus, the tubular cells would gather not just direct sunlight but also ambient light reflected off of the rooftops on which they were mounted.

At around this time, investors were searching for an alternative to the crystalline silicon used in photovoltaics, which was skyrocketing in price. As more and more manufacturers had been getting into making solar panels, increased demand had driven the price of processed silicon from around $50 per kilogram in 2004 to well above $300 by 2008. When the higher production costs were factored in, the price of electricity from solar firms was 17 to 23 cents per kilowatt-hour, even after subsidies. That was about twice the average price of conventionally produced electricity at the time.

Gronet’s design called for a mix of copper, indium, gallium, and selenium, or CIGS, instead of crystalline silicon. Though slightly less efficient than silicon in direct sunlight, CIGS performs better under cloud cover and in variable light. The technology had been around for several years but was too expensive to be practical. That changed as soon as silicon climbed above $200 per kilogram. Suddenly CIGS could compete. With his cylindrical module and exotic coating, Gronet had a model for transforming the solar industry. He incorporated his company in 2005, first calling it Gronet Technologies but quickly changing the name to Solyndra.

Gronet and his chief financial officer, Jonathan Michael, set out to raise capital for a factory. By 2007, they had $99 million from sources including RockPort Capital Partners and Argonaut Private Equity and were busy renovating an old Hitachi building in Fremont, California. In 2008, Virgin Green Fund, an investment arm of British business icon Richard Branson, chose Solyndra as the only solar company that it would put money into, out of more than 100 that applied for funding. By the end of that year, Solyndra had raised $600 million, boasted more than 500 employees, and had two major orders—$325 million from Sacramento-based Solar Power and $681 million from a German company called Phoenix Solar. “Everyone was pretty optimistic,” recalls Lindsey Eastburn, who was designing factory-automation software for Solyndra. “We were making product, and we were selling it.”

Just as Solyndra was starting to take off and needed more money for expansion, the venture capital climate began to cool. The 2008 financial collapse erased a quarter of the gains VC firms had made between 2003 and 2007, and the sudden paucity of capital—combined with the difficulty of taking smaller companies public—hit renewable startups particularly hard. Venture investments in clean tech fell from $4.1 billion in 2008 to $2.5 billion in 2009.

There was an additional factor at work: impatience. Venture capitalists tend to work on three- to five-year horizons. As they were quickly finding out, energy companies don’t operate on those timelines. Consider a recent analysis by Matthew Nordan, a venture capitalist who specializes in energy and environmental technology. Of all the energy startups that received their first VC funds between 1995 and 2007, only 1.8 percent achieved what he calls “unambiguous success,” meaning an initial public offering on a major exchange. The average time from founding to IPO was 8.3 years. “If you’re signing up to build a clean-tech winner,” Nordan wrote in a blog post, “reserve a decade of your life.”

The truth is that starting a company on the supply side of the energy business requires an investment in heavy industry that the VC firms didn’t fully reckon with. The only way to find out if a new idea in this sector will work at scale is to build a factory and see what happens. Ethan Zindler, head of policy analysis for Bloomberg New Energy Finance, says the VC community simply assumed that the formula for success in the Internet world would translate to the clean-tech arena. “What a lot of them didn’t bargain for, and, frankly, didn’t really understand,” he says, “is that it’s almost never going to be five guys in a garage. You need a heck of a lot of money to prove that you can do your technology at scale.”

Luckily for the clean-tech industry, a much larger investor stepped in to replace the retreating VCs—the federal government.

Power Struggles

For each unique green-tech sector, a unique set of challenges.—Rachel Swaby

Solar

Promise: Enough sunlight hits Earth in one hour to power the world for a year. In 2010, the solar industry predicted that as many as 500,000 people would be directly or indirectly employed in the US solar sector by 2016.

Reality: As we head into 2012, the number is more like 100,000. Prices for conventional solar cells have fallen 40 percent in the past year, due largely to a flood of panels from Chinese manufacturers, which have benefited from plunging silicon prices and government support. The price drop has eviscerated the US solar manufacturing industry.

Outlook: China’s 54 percent share of the global panel-making market will grow, and we’ll remain locked into older technology. But cheap panels mean more of them on rooftops, which is good.

Wind

Promise: The US has the potential to generate enough wind energy to meet the nation’s total consumption 12 times over.

Reality: At $35 a megawatt-hour, wind looked like a good deal back in 2007, when wholesale electric prices ranged between $45 and $85 per megawatt-hour. But the natural gas boom, plus the 2008 recession, drove prices under $30 by 2009, eliminating wind’s financial edge. Also, NIMBY protests have made getting approval for a wind farm in the US as difficult as getting it for a coal-fired plant.

Outlook: Cheaper prices for turbines should result in lower costs for wind power by 2014. Though growth has slowed since 2008, this sector is still expected to cover about a third of any increased energy consumption in the US between now and 2035.

Algae

Promise: Algae is, by some measures, up to 30 times more energy-dense than other biofuel crops. It ought to yield cheaper fuel, saving huge swaths of arable land.

Reality: A recent Department of Energy road map includes a 33-item list of R&D challenges—from assessing environmental risks to creating efficient conversion methods—that must be overcome for algae to be viable. In fact, researchers still aren’t able to cultivate the stuff on a large scale.

Outlook: In 2010, the DOE cautioned that “many years of both basic and applied science and engineering will likely be needed to achieve affordable, scalable, and sustainable algae-based fuels.”

Fuel Cells

Promise: Zero-emission energy for everything from laptops to cars to power stations, all fueled by the most abundant element in the universe, hydrogen.

Reality: To compete with fossil fuels, the electricity from fuel cells needs to sell for around $30 per kilowatt. Right now, that figure is about $49. Also, there are only about 60 hydrogen refueling stations in the country, serving around 200 small vehicles and 15 buses. Industry leader FuelCell Energy lost $56.3 million in 2010 and has never turned a profit.

Outlook: Even if fuel cells become cheaper and more reliable, a workable hydrogen infrastructure is still decades away.

Batteries

Promise: Zero-emission vehicles (assuming that the power for recharging the batteries comes from zero-emission sources).

Reality: The federal government injected $2.4 billion into the battery industry in 2009, under the American Recovery and Reinvestment Act, with the stated goal of getting more electric cars on the road. But expensive materials means that advanced lithium-ion batteries still cost about $650 per kilowatt-hour of usable energy. At that level, the 24-kWh battery pack for a Nissan Leaf costs more than some cars.

Outlook: Despite a White House call to get battery prices down to $100 per kWh by 2020, the rosiest predictions foresee nothing cheaper than $300 per kWh over the next decade.

Cellulosic Biofuel

Promise: Biodiesel derived from stalks, trunks, stems, and leaves—rather than plant oils or the edible parts of crops—would supply cheap renewable energy without hitting the food supply.

Reality: In 2010, the US produced 88 million gallons of cellulosic biofuel—less than a year’s output from a single corn ethanol plant. Large-scale commercialization is still not viable, because the sugars in biomass are harder to tease out than those in corn. Building a cellulosic ethanol plant costs up to four times as much as building a first-gen biofuel plant.

Outlook: In 2007, the government set a target of 100 million gallons of cellulosic biofuel reaching pumps annually. In 2010, that target was revised down to just 6.6 million gallons.

Smart Meters

Promise: Replace analog meters with digital devices that provide real-time feedback to both customers and utilities, which would help build more efficiency and stability into the grid.

Reality: Smart meters are being widely deployed. But fringe groups have voiced concerns about privacy and health that have slowed or canceled rollouts in several communities. And faulty meters that led to higher bills have caused several local governments to require independent reviews of the systems.

Outlook: Smart meters are the linchpin of the smart grid—computer-based automation of electricity delivery. None of these early glitches are likely to get in the way for long. Analysts predict 250 million smart meters will be installed worldwide by 2015.

Charging Stations

Promise: A network of 240- and 480-volt charging-station kiosks could dot roadsides and parking lots, like ATMs for electric cars.

Reality: The fastest charge for a Nissan Leaf takes about 30 minutes at 480 volts. Unless we could suddenly install enough stations to guarantee no waiting (there are currently only 1,800 nationwide), the time commitment means that recharging on the go just isn’t feasible. For the most part, electric-car owners are limited to as much driving as they can get from a single at-home charge.

Outlook: The cost of kiosks (up to $35,000 each) plus relatively low demand means they’ll be limited to metropolitan areas for years to come.

In 2005, Congress created a federal loan guarantee program as part of the Energy Policy Act, which initially was authorized at $4 billion. Though ostensibly set up to promote nonpolluting energy sources, it was, like most federal slush funds, created by a politician (in this case, former Republican New Mexico senator Pete Domenici) to help a specific industry (in this case, nuclear energy). But the expected nuclear renaissance never happened; the private market was unwilling to finance plants that cost billions to build, created toxic waste, and ran into all the NIMBY hurdles that come with nuclear energy. So the door was open for applications from other clean-energy sectors.

While solar projects would ultimately receive more than three-quarters of the program’s financial support, the list of recipients included everything from a wind farm in Oregon to a cellulosic ethanol plant in Kansas. But by the time Bush left office, not a penny had been distributed. Most of the applications, including one from Solyndra, were still wending their way through the approval rounds at the Department of Energy. There were only 16 employees tasked with sorting through the applications and relevant data, and the loan program was more of a theoretical construct than an engine of economic activity.

Then Obama took office, and the loan program suddenly had an administration committed to using federal dollars to stimulate what it referred to repeatedly as “the clean-energy economy.” For Democrats, the concept of clean energy hit every button there was to push: It addressed the looming problem of climate change, offered a domestic source of electricity and fuel, and promised new jobs in a shaky economy.

The Department of Energy, which for decades had focused on managing nuclear waste and weapons and doling out subsidies to the fossil fuel industry, had a new leader—Steven Chu, a renowned physicist and Nobel laureate—and a fresh mandate.

The money the federal government delivered dwarfed what VCs had put into clean energy. The loan guarantee program alone provided a little more than $16 billion for 28 projects. The government pumped an additional $12.1 billion into the sector through tax credits. All told, federal subsidies for renewable energy nearly tripled between 2007 and 2010, rising from $5.1 billion to $14.7 billion. The federal largesse also made clean tech look like a safer bet to the VC world, whose investments rebounded after the 2009 dip.

Solyndra’s $535 million loan guarantee closed in September 2009. The firm had no problem putting the funds to use, starting construction on a second factory, expanding its workforce to 1,100 employees, and paying millions for a custom machine designed to put the finishing touches on the cells at a rate of 60 per minute. As part of an ongoing “Main Street tour” highlighting the nation’s manufacturing prowess, Obama scheduled an appearance at the Solyndra factory in May 2010. After a tour of the facilities, the president gave a speech on the factory floor in which he called Solyndra “an engine of economic growth.” “The future is here,” he added.

By fall of 2010, Solyndra had scuttled plans for a $300 million IPO and was still waiting to hear back on an additional $469 million loan application, filed just days after the first loan was approved, to help finance its second factory. While the company’s solar modules were working as planned, Solyndra needed to increase its production capacity to get per-unit costs down. The custom machine had turned out to be a dud. Despite months of work by a team of engineers sent over from the Dutch company that had built the two-story-tall behemoth, it was struggling to reach its expected output. When all the costs were factored in, a Solyndra module cost at least 30 percent more per watt than a traditional photovoltaic, and the gap was growing. Unless Solyndra got faster and cheaper, there was no way it would be able to compete.

Given the concerns about Solyndra’s financial viability, the company agreed with DOE officials to drop the request for a second loan. Yet in early 2011, despite further warnings about Solyndra’s cash-flow issues, the DOE agreed to restructure the original loan, with a provision guaranteeing that private investors, not the federal government, would be repaid first in the case of a default. It was a decision that the Obama administration’s critics would make much of within a matter of months.

Solyndra’s failure wasn’t just the result of manufacturing problems. It was also a product of a broad shift that was happening in the US energy sector. The financial models that had justified the massive investments in clean-energy sources were built on assumptions that the price of fossil fuels, in particular natural gas, would continue to rise. But those models began to fall apart as a natural gas boom transformed the energy landscape.

As with the Internet bubble, and the more recent housing bubble, there were signs of trouble. In fact, in the weeks and days leading up to Obama’s visit to the Solyndra plant, officials at the Office of Management and Budget were issuing warnings. “I am increasingly worried that this visit could prove embarrassing to the Administration in the not too distant future,” wrote one OMB official.

In fact, though Solyndra CEO Brian Harrison painted a rosy picture for lawmakers in July 2011—boasting that revenue “grew from $6 million in 2008 to $100 million in 2009 to $140 million in 2010? and would nearly double in 2011—the truth was laid out in an internal White House memo obtained by TheWashington Post after Solyndra filed for bankruptcy. The August 2011 memo, written days before Solyndra went bankrupt, stated simply that “the company has had 0 percent sales growth since [fall] 2009.”

Perhaps the biggest force working against not just Solyndra but clean energy in general is this: Because natural gas has gotten so cheap, there is no longer a financial incentive to go with renewables. Technical advances in natural gas extraction from shale—including the controversial practice of hydraulic fracturing, or fracking—have opened up reserves so massive that the US has surpassed Russia as the world’s largest natural gas supplier.

The price of natural gas peaked at nearly $13 per thousand cubic feet in 2008. It now stands at around $3. A decade ago, shale gas accounted for less than 2 percent of America’s natural gas supply; it is now approaching one-third, and industry officials predict that the total reserves will last a century. Because 24 percent of electricity comes from power plants that run on natural gas, that has helped keep costs down to just 10 cents per kilowatt-hour—and from a source that creates only half the CO2 pollution of coal. Put all that together and you’ve undone some of the financial models that say it makes sense to shift to wind and solar. And in a time of economic uncertainty, the relatively modest carbon footprint of natural gas gets close enough on the environmental front for a lot of people to feel just fine turning up the air-conditioning.

Solyndra’s Epic Missteps

From Chinese competition to the color of customers’ roofs, the solar manufacturer made assumptions that proved disastrously wrong.—R.S.

The scene at Solyndra two days after the company’s September 6, 2011, bankruptcy filing.
Photo: Bloomberg/Getty

Ramp-Up Costs

Gearing up to manufacture a new consumer product is notoriously expensive. In the energy sector, the costs can be crushing, as Solyndra found out: It spent at least $87 million to outfit its first factory and get to market, $290 million in research and development, and $733 million on just the first phase of its second factory, which was necessary to manufacture at the required scale. Per watt, Solyndra’s projected prices were up to double what consumers can now pay for conventional solar power.

Silicon Prices

Traditional solar panels are made from silicon. Solyndra’s next-gen design used CIGS—a combination of copper, indium, gallium, and selenium. When Solyndra launched, processed silicon was selling at historic highs, which made CIGS a cheaper option. But silicon producers overreacted to the price run-up and flooded the market. Prices dropped by as much as 90 percent and stayed there. Solyndra’s business model was based on a price advantage for CIGS that no longer existed.

Shale Gas Output

In 2001, shale gas accounted for less than 2 percent of US natural gas output. Today, thanks to advances in horizontal drilling and the effective though highly controversial technique of hydraulic fracturing, or fracking, it accounts for 30 percent. Meanwhile the price of natural gas has fallen by 77 percent since 2008, and the cost of producing electricity in gas plants is down 40 percent since then. Renewables simply can’t compete.

Chinese Supply

In 2010, China established a $30 billion line of credit for the nation’s solar industry as part of a strategy to bolster domestic production. The result: Chinese firms went from making just 6 percent of the world’s solar cells in 2005 to manufacturing more than half of them today. The US share has plummeted from 40 percent to 7 percent. Solyndra and other manufacturers were simply price out of the market.

Rooftop Colors

Solyndra’s model assumed that its cylindrical cells would generate 15 percent more energy per square foot than flat crystalline-silicon cells. This math assumed that the cells would be installed on white roofs, where their sides and bottoms would absorb reflected light. The company hoped to forge partnerships with roofing companies to facilitate this—and to open new sales channels—but was unable to do so in sufficient numbers.

Another blow to the domestic clean-tech industry was a glut of processed silicon that sent prices back down below $30 a kilogram. That price, combined with the technological simplicity of manufacturing conventional solar panels, opened the door to relatively unsophisticated operators. For example, in 2007, a Chinese textile manufacturer approached Arno Harris, CEO of utility developer Recurrent Energy, to see if he’d be interested in buying solar panels that they hoped to begin making. When the bar to entry is so low that textile makers can churn out solar modules, Solyndra’s expensive CIGS-coated cylinders and other next-gen renewable technologies simply can’t compete.

There was another factor driving down the cost of conventional photovoltaics. In recent years, China has worked aggressively to develop its domestic solar production capacity. National banks have given credit lines that dwarf the federal loans US firms enjoyed; local and provincial governments have provided tax incentives as well as land at below-market rates; and the national government recently established a so-called feed-in tariff, which compels utilities to buy electricity from solar developers at above-market rates to offset their production costs.

Understandably, American firms have struggled to remain competitive. In 1995, more than 40 percent of all silicon-based solar modules worldwide were made in the US; now it’s 6 percent. In less than two years, at least eight solar plants have closed or downsized, eliminating nearly 3,000 American manufacturing jobs, including the 1,100 employees who saw their jobs disappear with Solyndra’s spectacular September 2011 bankruptcy. China now accounts for more than half of global photovoltaic output, and Chinese-made modules are up to 20 percent cheaper than American ones.

Wind has also taken a hit. Not only can the turbines not match the current costs of gas-fired plants, the flood of cheap Chinese solar panels can make them less attractive as a green option, too. The pace of new wind-turbine installations in the US has declined by more than half since 2008. This past October, Cliff Stearns, the Republican chair of the House Energy and Commerce Oversight and Investigations Subcommittee, admitted to NPR what had by then become obvious: “We can’t compete with China to make solar panels and wind turbines.”

The boom has gone bust.

And yet, clean tech is far from dead. Certain companies and technologies will emerge from the ruins not only to survive but to thrive, just like they did after the bursting of the Internet bubble.

Electric cars seem like a relatively safe bet, spurred by both rising oil prices and federal rules requiring greater fuel efficiency. Additionally, as it has with solar, China has aggressively pushed into the competitive battery industry. As a result, prices for the lithium-ion battery modules in electric cars—which can cost more than some gas-powered cars—are coming down. Tesla started out making 600 sports cars a year, priced at $109,000 each; in 2012 it will begin selling the Model S, a full-size sedan that goes from zero to 60 in six seconds and costs just under $50,000 (once you kick in a $7,500 federal tax credit). Within five years, the company says, it will be producing 100,000 cars annually and charging just $30,000 apiece. The company’s stock took a hit in early December, after Morgan Stanley cut its price target—citing concerns about the broader EV market—but it was still up for the year, even after the drop.

Meanwhile, the low silicon prices and cheap Chinese photovoltaics that undermined next-gen clean tech have proven a boon to distributed-generation businesses—the firms that install solar systems to power individual homes and offices. These companies are thriving because they came up with a new financing model that makes installing standard flat-panel solar generators truly affordable.

A decade ago, a rooftop solar array for a 3,000-square-foot home would have cost the owner about $45,000. The price can now be less than $20,000. That’s not cheap, but instead of having to pay it up front, homeowners can now work with companies like San Mateo, California-based SolarCity and Oakland-based Sungevity and lease the systems for $119 a month—less than a lot of conventional electricity bills. John Stanton, head of federal affairs for SolarCity—which recently closed a $350 million deal with Bank of America to install panels that will provide power for up to 120,000 military families—likens it to leasing Xerox machines to offices. “It’s taking a 60-year-old business-equipment model and bringing it into the solar industry,” he explains.

That leasing model, combined with a number of software advancements, has transformed the rooftop solar business. It used to take months to close a residential sale; now these companies can use a combination of remote mapping and mathematical calculations to help determine exactly how many solar panels an individual home would need and how they should be positioned. The whole process can be completed in a matter of weeks.

In at least one respect, these companies rely on a very old-fashioned boost: federal and state subsidies and tax breaks. When they install a solar system on someone’s roof, they take all the government sweeteners that accompany the installation, which helps these firms offer their systems at lower prices. “Between 40 and 50 percent of the system is covered up front,” says Danny Kennedy, founder of Sungevity. “The customer is getting an incredible value proposition: ‘I’m going to save money from day one.’ That’s a hell of a thing. For no investment, I’m going to save money.”

But there is an investor: the taxpayer. Government coffers have been compensating for a number of market challenges solar faces, including the incumbency advantage of the fossil fuel industry and private investors’ distaste for capital-intensive enterprises that will take years to deliver a return. And in 2012, the solar industry may face a sudden reduction in these subsidies, as the post-Solyndra political climate grows less and less receptive to investments in clean energy. Despite the fact that renewable energy received only a quarter of the subsidies that fossil-fuel-based electricity received between 2002 and 2007, it’s wind and solar that are on the chopping block.

Even solar’s biggest allies on Capitol Hill—people like Edward J. Markey, a top Democrat on the House Energy and Commerce Committee—fear the industry’s oil and gas foes may have gotten the upper hand now that the clean-tech bubble has burst. “We are not Panglossian about what lies ahead,” Markey says. “The fossil fuel industry and its allies in Congress clearly see the solar and wind industries as a threat and will try to kill these industries as they have for the preceding two generations. They want this to be a five-year aberrational period.”

In other words, John Doerr may once again have a good reason to shed a tear.

Below is a quick summary of the progress made on Ohio Construction Reform to date:

• The first three Administrative Rules (Surety Bond, Contract Form and Subcontract Form) became effective on Dec. 26, 2011.
• The last four Administrative Rules (Prequalification, Best Value, Electronic Advertising and Electronic Bidding) will go into effect on Feb. 3, 2012.
• The final General Contracting (Single Prime) documents were posted on Dec. 26, 2011.
• The final Construction Manager at Risk contract documents are nearly complete and will be posted to the OCR website on Feb. 2, 2012.
• The final Design-Build contract documents will be developed next and are anticipated to be ready in mid-March. Drafts are anticipated to be posted for public comment on Feb. 9, 2012.
• OCR Academy, the definitive seminar to learn the details of the changes in public facilities construction in Ohio, will take place in seven Ohio locations in February and March. To learn more and register for the OCR Academy in your area, click this link: http://www.regonline.com/ohioconstructionreformacademy.

All of the above information is available on the Ohio Construction Reform website at http://ocr.ohio.gov. We encourage and welcome you to review the information on the OCR website on a regular basis for new information or revisions to previously posted documents.

The USGBC – Central Ohio Chapter will host the inaugural Ohio Green Schools Rally on February 22, 2012, at Reynoldsburg’s eSTEM Academy.  This event will bring together some of our region’s leading construction industry professionals and school administrative decision-makers at a unique, informative, and ground-breaking event. 

With its LEED-Silver mandate for public school construction, Ohio leads the nation with approximately 300 LEED certified or registered school projects.  Attendees will tour an exceptional high-performance green school (1.5 hours of Green Building Certification Institute Continuing Education credits), attend one of three educational presentations (each approved for 1.5 hours of GBCI-CE credit,) and hear a keynote address from Rachel Gutter, Director of the USGBC Center for Green Schools (approved for 1 hour GBCI-CE credit).

For more information about the event, please see the attached flyer, or to register please visit http://ohiogreenschoolsrally.eventbrite.com/. 

The Ohio School Facilities Commission on January 26 heard an overview of an energy-saving program administered by the body and why it often takes schools the maximum allowable amount of time to pay back the state.

Jon Walden, manager of Contracts and Compliance, described the School Energy Conservation Financing Program, which allows districts to make energy efficiency improvements to their buildings and use the incorporated savings to pay for those upgrades.

Questions had arisen at the November OSFC meeting about why so many districts in the program ran right up against at 15-year maximum time frame for paying back money borrowed from the state. 

Mr. Walden said schools often have to balance their projects using multiple improvements because some changes elicit faster energy cost savings than others. For instance, window replacements take an average of 30 to 80 years to realize savings enough to cover the project cost whereas lighting improvements can be paid for in three to five years.

Older buildings often have many improvement needs, he said. “What they do, they have the scope of those projects and when they put them together they buy as much as they can to fall within that lawful payback period.”

The program also underwent some changes through the last budget bill. Applicants must now include the residual value of any equipment being replaced as part of its calculation of cost and payback period, Mr. Walden said. “So in effect we’re trying to change this because it helps maximize the improvements but also recognizing we want to minimize the impact on taxpayer dollars.”

District must now also look at baseline energy costs over a five-year rather than one-year period to determine the savings expected to result from improvements, he said. Lastly, the budget now requires schools provide annual reports to ensure they are realizing projected savings.

Also on Thursday, the commission re-elected Office of Budget and Management Director Tim Keen as chairman and Department of Administrative Services Director Robert Blair as vice chairman for the 2012 calendar year.