NewEnergyNews: Holiday Reading: How Solar’s ITC Tax Credit Is a Money-Maker; A new study “blows apart the notion that the ITC is somehow welfare for the solar industry.”

NewEnergyNews

Gleanings from the web and the world, condensed for convenience, illustrated for enlightenment, arranged for impact...

The challenge: To make every day Earth Day.

YESTERDAY

THINGS-TO-THINK-ABOUT THURSDAY, Oct. 23:

  • TTTA Thursday-EVANGELICALS IN ‘CREATION CARE’ CLIMATE FIGHT
  • TTTA Thursday-ADVANCED WIND-MAKERS MAKANI, SHEERWIND READY DEMOS
  • TTTA Thursday-TEA PARTY BACKS SOLAR, ATTACKS UTILITY MONOPOLIES
  • TTTA Thursday-WHAT DRIVERS DON’T KNOW HOLDS BACK THE FUTURE
  • THE DAY BEFORE

  • THE STUDY: THE IMPACT ON REAL PEOPLE OF RISING POWER PRICES
  • QUICK NEWS, Oct. 22: SCHOOLS SAVE W/GEOTHERMAL HEAT PUMP SYSTEMS; BUILDING FOR NEXT-GEN U.S. BIOFUELS; ENERGY STORAGE MARKET EMERGING
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    GET THE DAILY HEADLINES EMAIL: CLICK HERE TO SUBMIT YOUR EMAIL ADDRESS OR SEND YOUR EMAIL ADDRESS TO: herman@NewEnergyNews.net

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    THE DAY BEFORE THE DAY BEFORE

  • THE STUDY: WHERE U.S. OFFSHORE WIND WILL CONNECT
  • QUICK NEWS, Oct. 21: SOLARCITY TO CROWDFUND WITH $1,000 BONDS; NEW JERSEY LOOKS AT OCEAN WIND; SMART LED LIGHTING MRKT TO DOUBLE
  • THE DAY BEFORE THAT

  • THE STUDY: NEW OPPORTUNITIES IN TRANSMISSION
  • QUICK NEWS, Oct. 20: ELEVEN GOOD THINGS ABOUT SOLAR ENERGY; YAHOO BUYS WIND; SMART THERMOSTATS’ BILLION DOLLAR FUTURE
  • AND THE DAY BEFORE THAT

  • Weekend Video: The Ocean Speaks Out
  • Weekend Video: Adapting To The Inevitable
  • Weekend Video: The Joy Of Driving EVs Powered By The Sun
  • THE LAST DAY UP HERE

  • FRIDAY WORLD HEADLINE-HOTTEST SEPTEMBER EVER; WORLD’S HOTTEST MONTHS STREAK AT SIX
  • FRIDAY WORLD HEADLINE-EU WIND BEATS FOSSIL, NUKE ENERGY PRICES
  • FRIDAY WORLD HEADLINE-DESERTEC SUCCUMBS TO MIDEAST TURMOIL
  • FRIDAY WORLD HEADLINE-JAPAN UPS PUSH FOR GEOTHERMAL
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    Anne B. Butterfield of Daily Camera and Huffington Post, is a biweekly contributor to NewEnergyNews

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT)

    November 26, 2013 (Huffington Post via NewEnergyNews)

    Everywhere we turn, environmental news is filled with horrid developments and glimpses of irreversible tipping points.

    Just a handful of examples are breathtaking: Scientists have dared to pinpoint the years at which locations around the world may reach runaway heat, and in the northern hemisphere it's well in sight for our children: 2047. Survivors of Superstorm Sandy are packing up as costs of repair and insurance go out of reach, one threat that climate science has long predicted. Or we could simply talk about the plight of bees and the potential impact on food supplies. Surprising no one who explores the Pacific Ocean, sailor Ivan MacFadyen described long a journey dubbed The Ocean is Broken, in which he saw vast expanses of trash and almost no wildlife save for a whale struggling a with giant tumor on its head, evoking the tons of radioactive water coming daily from Fukushima's lamed nuclear power center. Rampaging fishing methods and ocean acidification are now reported as causing the overpopulation of jellyfish that have jammed the intakes of nuclear plants around the world. Yet the shutting down of nuclear plants is a trifling setback compared with the doom that can result in coming days at Fukushima in the delicate job to extract bent and spent fuel rods from a ruined storage tank, a project dubbed "radioactive pick up sticks."

    With all these horrors to ponder you wouldn't expect to hear that you should also worry about the United States running out of coal. But you would be wrong, says Leslie Glustrom, founder and research director for Clean Energy Action. Her contention is that we've passed the peak in our nation's legendary supply of coal that powers over one-third of our grid capacity. This grim news is faithfully spelled out in three reports, with the complete story told in Warning: Faulty Reporting of US Coal Reserves (pdf). (Disclosure: I serve on CEA's board and have known the author for years.)

    Glustrom's research presents a sea change in how we should understand our energy challenges, or experience grim consequences. It's not only about toxic and heat-trapping emissions anymore; it's also about having enough energy generation to run big cities and regions that now rely on coal. Glustrom worries openly about how commerce will go on in many regions in 2025 if they don't plan their energy futures right.

    2013-11-05-FigureES4_FULL.jpgclick to enlarge

    Scrutinizing data for prices on delivered coal nationwide, Glustrom's new report establishes that coal's price has risen nearly 8 percent annually for eight years, roughly doubling, due mostly to thinner, deeper coal seams plus costlier diesel transport expenses. Higher coal prices in a time of "cheap" natural gas and affordable renewables means coal companies are lamed by low or no profits, as they hold debt levels that dwarf their market value and carry very high interest rates.

    2013-11-05-Table_ES2_FULL.jpgclick to enlarge

    2013-11-05-Figure_ES2_FULL.jpg

    One leading coal company, Patriot, filed for bankruptcy last year; many others are also struggling under bankruptcy watch and not eager to upgrade equipment for the tougher mining ahead. Add to this the bizarre event this fall of a coal lease failing to sell in Wyoming's Powder River Basin, the "Fort Knox" of the nation's coal supply, with some pundits agreeing this portends a tightening of the nation's coal supply, not to mention the array of researchers cited in the report. Indeed, at the mid point of 2013, only 488 millions tons of coal were produced in the U.S.; unless a major catch up happens by year-end, 2013 may be as low in production as 1993.

    Coal may exist in large quantities geologically, but economically, it's getting out of reach, as confirmed by US Geological Survey in studies indicating that less than 20 percent of US coal formations are economically recoverable, as explored in the CEA report. To Glustrom, that number plus others translate to 10 to 20 years more of burning coal in the US. It takes capital, accessible coal with good heat content and favorable market conditions to assure that mining companies will stay in business. She has observed a classic disconnect between camps of professionals in which geologists tend to assume money is "infinite" and financial analysts tend to assume that available coal is "infinite." Both biases are faulty and together they court disaster, and "it is only by combining thoughtful estimates of available coal and available money that our country can come to a realistic estimate of the amount of US coal that can be mined at a profit." This brings us back to her main and rather simple point: "If the companies cannot make a profit by mining coal they won't be mining for long."

    No one is more emphatic than Glustrom herself that she cannot predict the future, but she presents trend lines that are robust and confirmed assertively by the editorial board at West Virginia Gazette:

    Although Clean Energy Action is a "green" nonprofit opposed to fossil fuels, this study contains many hard economic facts. As we've said before, West Virginia's leaders should lower their protests about pollution controls, and instead launch intelligent planning for the profound shift that is occurring in the Mountain State's economy.

    The report "Warning, Faulty Reporting of US Coal Reserves" and its companion reports belong in the hands of energy and climate policy makers, investors, bankers, and rate payer watchdog groups, so that states can plan for, rather than react to, a future with sea change risk factors.

    [Clean Energy Action is fundraising to support the dissemination of this report through December 11. Contribute here.]

    It bears mentioning that even China is enacting a "peak coal" mentality, with Shanghai declaring that it will completely ban coal burning in 2017 with intent to close down hundreds of coal burning boilers and industrial furnaces, or shifting them to clean energy by 2015. And Citi Research, in "The Unimaginable: Peak Coal in China," took a look at all forms of energy production in China and figured that demand for coal will flatten or peak by 2020 and those "coal exporting countries that have been counting on strong future coal demand could be most at risk." Include US coal producers in that group of exporters.

    Our world is undergoing many sorts of change and upheaval. We in the industrialized world have spent about a century dismissing ocean trash, overfishing, pesticides, nuclear hazard, and oil and coal burning with a shrug of, "Hey it's fine, nature can manage it." Now we're surrounded by impacts of industrial-grade consumption, including depletion of critical resources and tipping points of many kinds. It is not enough to think of only ourselves and plan for strictly our own survival or convenience. The threat to animals everywhere, indeed to whole systems of the living, is the grief-filled backdrop of our times. It's "all hands on deck" at this point of human voyaging, and in our nation's capital, we certainly don't have that. Towns, states and regions need to plan fiercely and follow through. And a fine example is Boulder Colorado's recent victory to keep on track for clean energy by separating from its electric utility that makes 59 percent of its power from coal.

    Clean Energy Action is disseminating "Warning: Faulty Reporting of US Coal Reserves" for free to all manner of relevant professionals who should be concerned about long range trends which now include the supply risks of coal, and is supporting that outreach through a fundraising campaign.

    [Clean Energy Action is fundraising to support the dissemination of this report through December 11. Contribute here.]

    Author's note: Want to support my work? Please "fan" me at Huffpost Denver, here (http://www.huffingtonpost.com/anne-butterfield). Thanks.

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    Anne's previous NewEnergyNews columns:

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT), November 26, 2013
  • SOLAR FOR ME BUT NOT FOR THEE ~ Xcel's Push to Undermine Rooftop Solar, September 20, 2013
  • NEW BILLS AND NEW BIRDS in Colorado's recent session, May 20, 2013
  • Lies, damned lies and politicians (October 8, 2012)
  • Colorado's Elegant Solution to Fracking (April 23, 2012)
  • Shale Gas: From Geologic Bubble to Economic Bubble (March 15, 2012)
  • Taken for granted no more (February 5, 2012)
  • The Republican clown car circus (January 6, 2012)
  • Twenty-Somethings of Colorado With Skin in the Game (November 22, 2011)
  • Occupy, Xcel, and the Mother of All Cliffs (October 31, 2011)
  • Boulder Can Own Its Power With Distributed Generation (June 7, 2011)
  • The Plunging Cost of Renewables and Boulder's Energy Future (April 19, 2011)
  • Paddling Down the River Denial (January 12, 2011)
  • The Fox (News) That Jumped the Shark (December 16, 2010)
  • Click here for an archive of Butterfield columns

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    Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart

    email: herman@NewEnergyNews.net

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    Your intrepid reporter

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      A tip of the NewEnergyNews cap to Phillip Garcia for crucial assistance in the design implementation of this site. Thanks, Phillip.

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  • Thursday, January 03, 2013

    Holiday Reading: How Solar’s ITC Tax Credit Is a Money-Maker; A new study “blows apart the notion that the ITC is somehow welfare for the solar industry.”

    Holiday Reading: How Solar’s ITC Tax Credit Is a Money-Maker; A new study “blows apart the notion that the ITC is somehow welfare for the solar industry.”

    Herman K. Trabish, July 30, 2012 (Greentech Media)

    The honeymoon is over, a European regulator recently reportedly observed about renewables. A divorce? He was asked. No, he replied. It is a maturing relationship. Renewables have to show their benefit. We’re not going to do it simply because we love them.

    The main U.S. federal support provided to solar is the investment tax credit (ITC). Given today’s hard economic times, it is important to know if U.S. solar is returning the “love” the federal government is providing with taxpayer dollars.

    The ITC allows a tax credit equal to 30 percent of a project’s costs. After 2016, the credit will be stepped down to 10 percent.

    Supported by both the Bush and Obama administrations, the ITC has enabled lease and Power Purchase Agreement (PPA) financing mechanisms which, according to GTM Research’s most recent Solar Market Insight report, accounted for more than 63 percent of California residential installations and more than 80 percent of Colorado residential installations in Q1 2012.

    California, which represents 40 percent of U.S. solar, went from 42,933 total kilowatts installed in the first five months of 2011 to 77,473 kilowatts in the same period of 2012. But kilowatts installed with cash went down from 23,360 to 21,223, while kilowatts installedusing third-party financing lease and PPA models nearly tripled from 19,572 to 56,250.

    Paid in Full: An Analysis of the Return to the Federal Taxpayer for Internal Revenue Code Section 48 Solar Energy Investment Tax Credit (ITC), authored by SolarCity Structured Finance Associate Connie Chern and sponsored by financial coalition U.S. PREF, demonstrates that, over the life of solar assets installed in residential and commercial settings, lease and PPA financing structures can deliver a nominal 10 percent internal rate of return (IRR) to the federal government for its ITC investment.

    It is, SolarCity Communications Director Jonathan Bass said, “a fairly narrow look” at the IRR-generating revenues. It considers only taxable wages and revenues by the direct participants in the solar projects modeled: the developer, the commercial EPC or residential installer, and the energy user.

    “We’re not looking at all the external factors,” Bass said, such as those included in the comprehensive Job and Economic Development Impact (JEDI) calculator NREL uses to assess economic benefits of renewables. Including those, he said, could significantly increase the calculated ITC benefits.

    The study modeled a 200-kilowatt commercial project at an estimated cost of $1 million. The 30 percent ITC would mean a taxpayer investment of $300,000. The revenue returned from developer, EPC and owner taxes was calculated at $677,627, for a benefit above investment of $377,627. That’s a 126 percent return on investment (ROI), which, over 30 years, is a roughly 10 percent per year interest on investment.

    A five-kilowatt residential system, estimated at $35,000, would get a $10,500, 30-percent ITC. Total revenue would be $22,882, for a benefit of $12,382, a 118 percent ROI which, over 30 years, would also be an approximately 10 percent annual return.

    Because investors in the lease and PPA mechanisms typically do so to take advantage of the accelerated depreciation mechanism allowed by the tax code to capital improvement investments as well as the ITC, Chern also modeled ROI scenarios that included both tax breaks.

    “We felt it was important to show that impact,” Chern said, adding, “We didn’t feel the purpose of the paper was to look at depreciation.”

    In those cases, the annual return to the taxpayer for the commercial and residential systems is approximately 1 percent. With both tax breaks, “the government is essentially recouping its investment,” Bass said, but “what’s unique to solar is the ITC.”

    Some 90 percent of the nearly 5,000-megawatt U.S. installed solar capacity was built after the ITC was increased to 30 percent during the Bush administration, Chern’s study reported from GTM Research and SEIA data.

    But incentives for solar energy, according to a University of Tennessee Howard Baker Center May 2012 report, are “less per megawatt-hour than for any other fuel source by a factor of ten,” despite the fact that “the solar industry has produced more jobs per megawatt-hour than any other energy industry,” Chern’s study also reported.

    Neither Chern nor Bass could say if there are comparable studies of the benefits from incentives provided to other energies.

    “The point of this paper was to analyze solar,” Chern said, “because it hasn’t been done.”

    “If you were going to make a cross-comparison,” Bass added, “you would need to consider environmental impacts, job impacts, fuel costs versus the cost of project development and a lot of other factors.”

    KPMG, one of the widely respected Big Four auditing firms, reviewed the study and found its income tax assumptions, incentive numbers, financial model architecture and mathematical formulas to be correct.

    “It’s a very sophisticated analysis,” DBL Investors managing partner Nancy Pfund said recently. “It blows apart the notion that the ITC is somehow welfare for the solar industry at the taxpayer’s expense. Quite the opposite; it’s a revenue generator.”

    With the solar trade war still a thorn in the industry’s side and the House of Representatives increasingly hostile to renewables, this research could turn a few important heads.

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