Written By: Brad Templeton View the original article here
Recently the French originated demonstration boat the Energy Observer stopped for a visit to San Francisco, on its way around the world, having come from the Galapagos and on its way to Hawai`i. The boat uses solar power, hydrogen and battery energy storage and a small amount of high-tech wind.
On board are 200 square meters of solar panels, 1500kg of batteries, tanks for 63kg of hydrogen (good for 1MWH of electricity and another 1MWH of heat) along with electric motors, solid computer-controlled “ocean wing” sails and a desalinator and hydrogen generator to refuel the hydrogen tanks. It travels only 5mph without wind, though can do more — and even regenerate electricity — when the winds get strong enough.
Using renewable wind power to move ships is of course a very ancient technique, and it’s well understood and efficient. Sailing ships have issues when becalmed, and in sailing in narrow channels, but otherwise it’s not clear this ship is a better idea than a sailboat with a small motor system. It is more to demonstrate and play with technologies, and the operators are reluctant to give concrete numbers on costs. That’s unfortunate because any story about energy is vastly reduced in meaning without examination of the economics — even if it’s the future promised economics rather than today’s. Indeed, inattention to economics has led to some really stupid renewable energy projects and even some very stupid laws. Nonetheless, the ship is a cool project, even if it doesn’t deliver information as meaningful as it should.
Hydrogen is a controversial energy storage fuel. It’s not an energy source, but rather a competitor for things like lithium batteries. Many had high hopes for it in cars, but for now it has lost the battle to batteries. Toyota sells the Mirai hydrogen vehicle in very small numbers, but with only a few filling stations available, and the hydrogen coming from fossil fuels, it’s not clear why anybody buys one. Hydrogen’s advantages such as weight and refuel time (when there aren’t any stations) aren’t very powerful in a car compared to its disadvantages — higher cost for fuel and fuel cells, offering less than 50% efficiency, having no refueling infrastructure, non-green sourcing, bulky tanks and much more. Some of those can be fixed, but others are difficult.
This has left us to investigate hydrogen in other areas — large vehicles like trucks and buses, aircraft (where weight is hugely important) and now, ships. There is also research on grid storage, though the low efficiency of conversion is a sticking point. The greatest promise is in aircraft. Hydrogen is actually the best fuel around in terms of energy per kg, but at present storing a kg of hydrogen requires 5 to 12kg of tank, which eliminates a lot of that — but even at that poor ratio it still wins in aircraft.
In a ship, the Energy Observer crew believe that batteries would weigh more than 10 tons. While they don’t say the weight of their H2 system, it probably is more in the range of a ton. Weight is not quite as crucial for ships but that much extra weight comes at a cost. In addition, the EO reduces the waste of fuel cells by making use of the excess heat to provide heat on the ship. Normally the total cycle of hydrogen as storage is less than 50% efficient, which is not good when batteries can deliver 90% or more. Heat though, is certainly needed for a passenger vessel at sea. A cargo vessel might not need so much.
The ship uses up the H2 in operation when there is no wind. The H2 recharges the batteries and provides heat, then the batteries run all systems. With enough wind, the solar panels can instead recharge the batteries and make new H2 using desalinated water and electrolysis. Their goal is to not use any net H2 on a typical day, but if winds and sun are poor, they will use it up, but plan their missions to leave with enough H2 to handle such situations. While docked, the panels and shore power build up the H2, or in theory, they might some day find H2 refilling at a “hydrogen marina.” When they left for Hawai`i from San Francisco, they only filled the H2 tank partially because they did not need it all the way full.
The ship used to be a racing catamaran, but instead of sails it has two “ocean wing” fixed-shape sails. These solid wings can generate as much thrust as cloth sails twice their size. They are small, to not block the sun, but they are also computer controlled, allowing them to be used without much crew effort or requiring any skill. When the wind is really strong, the propellers and motors can spin in reverse to generate electricity to build up more H2. Full sized sails would do better though, and could be put up at night with no risk of blocking the sun. They seem to have shied away from traditional sail and wind power in spite of their well established value. Before they had the ocean wings, they tried installing wind turbines, which failed for obvious reasons.
Life on board is spartan. The catamaran’s cabin is small for a crew of 8. Also on board is a small science sub-crew taking the opportunity to study the oceans and wildlife on such an unusual voyage.
A ship has the space for H2 tanks and the ability to generate it, so this can make sense. I don’t think a future vessel would look like the Energy Observer, but hybrids of electric drive and traditional sail, adding what solar power can be had make sense. Every inch of the deck is solar panels, and there are even panels to get the sunlight reflecting off the water. As panels get cheap this makes sense, though you don’t want to forgo useful sails because of the shade they will cast if the wind will give you more than the sun.
It’s possible to foresee solar/wind/electric recreational boats. Operating recreational boats is highly polluting and expensive. Sailboats are clean and cheap but a lot of work and under many limitations. A hybrid, using electric power, could be an answer there, as well as an answer for the big cargo ships.
What next for Hydrogen?
Hydrogen may not power cars, but it has some chance at other vehicles that want to avoid burning fossil fuel:
Aircraft care immensely about weight. Batteries today can give only modest range to electric aircraft. It’s either H2 or synthetic/biofuel hybrid power trains there.
One special type of aircraft is quite interesting, the airship. While people have been scared of H2 there since the Hindenberg, it’s important to realize that H2 can be more than a lift gas, it can be the power fuel. It’s the only fuel that has negative weight, and you don’t need to pressurize it with big heavy tanks in an airship.
Trucks are looking at H2 because the battery weight for a truck takes up a large part of their 40 ton limit, and trucks have a harder time stopping for long enough to charge it. The 50% energy loss is trouble, but the weight limit is a legal requirement.
Grid storage with over 50% loss is a serious problem. But with H2, if you want more capacity, you just need more tanks. Doubling the tanks doesn’t double the cost, but doubling batteries does double the cost.
Other types of energy storage are not standing still, though. There are experiments with newer batteries, flywheels, aluminum, synthetic hydrocarbon fuels and more underway. It’s a space ripe for change.
By Mukhisa Kituyi, UNCTAD Secretary-General, Dona Bertarelli, UNCTAD Special Adviser for the Blue Economy View the original article here
The world’s seventh largest economy based on GDP doesn’t belong to a single country, and isn’t even on land, yet it’s valued at around $3 trillion annually, and supports the livelihoods of more than 3 billion people.
It’s the ocean.
Worryingly, the ocean and the blue economy it supports are not only in severe decline, the current mode of operating is no longer sustainable.
We all rely on the ocean, which covers two-thirds of our planet, to regulate our climate, provide us with food, medicine, energy and even the very air we breathe. Put simply, without a healthy ocean, there is no life on Earth.
But the natural assets that the blue economy depends on are fast eroding under the pressure of human activities.
For example, 34% of all fish stocks are exploited at unsustainable biological levels or overexploited, while 60% are maximally sustainably fished or managed.
This means that we have reached a celling, as 94% of all wild stocks are already being fully utilized, with about one-third exploited in an unsustainable manner.
Further, the ocean is becoming acidic due to increasing levels of carbon dioxide being absorbed by it. Rising water temperatures have killed up to half of the world’s coral reefs, and by 2050 there could be more plastic than fish in the ocean.
Most of the more than 3 billion people who rely on the ocean for their livelihoods live in developing countries. About 90% of all fishers live in these countries too.
Also, 80% of the world’s goods are transported via maritime routes. And between 30% and 50% of the GDP of most small island developing states (SIDS) depends on ocean-based tourism.
Ocean health equals human health and wealth
We are at a crossroads in history. We can’t afford to continue mismanaging this important global resource whose health is intimately tied to ours. Investing in biodiversity, conservation and sustainable practices is key for a peaceful and prosperous future.
A regenerative and equitable blue economy that is sustainable must be a vital part of the world’s social and economic recovery from the COVID-19 pandemic. It will help cushion us against future global crises by enhancing the resilience of ecosystems and thus livelihoods.
Thankfully, implementing a blue economic approach is possible under the guidance of the UN’s Sustainable Development Goals (SDGs).
UNCTAD has identified the pillars of such an approach: economic growth, conservation and sustainable use of the ocean, inclusive social development, science and innovation, as well as sound ocean governance.
Towards a deep blue vision
We envision a blue economy that derives value from the ocean, seas and coastal areas, while protecting the health of the ocean ecosystem and enabling its sustainable use.
We need to diversify towards economic activities that will have a lower impact on ecosystems, while sustaining livelihoods and stimulating job creation.
New areas of opportunity include marine bioprospecting, ocean science, sustainable aquaculture, renewable energy, low-carbon shipping, blue finance as well as ecotourism and blue carbon.
The total “asset” base of the ocean is estimated at $24 trillion, excluding intangible assets such as the ocean’s role in climate regulation, the production of oxygen, temperature stabilization of our planet, or the spiritual and cultural services the ocean provides.
Instead of focusing only on the returns from harvesting and extracting the ocean’s resources, we need to realize the monetary value of conserving marine life.
For example, economists from the International Monetary Fund estimate that a great whale is worth $2 million alive, but just $80,000 once dead, as it absorbs the equivalent in carbon dioxide of 30,000 trees each year.
All hands on deck
Governments around the world can set a new course. We know the overwhelming cost benefit of nature-based solutions. It’s possible to combine production from the ocean while protecting its economic, social and environmental value for the future.
Coastal countries must prioritize ocean, marine and coastal resources and ecosystems in their strategies for trade, the environment and climate change as well as in their actions to promote sustainable development.
Countries such as the Seychelles are walking the talk. It has declared 30% of its waters protected areas, well beyond the 10% target set by SDG14, restricting activities in the protected area to balance economic needs with environmental protection.
Other nations rising to the challenge are Vanuatu, which is producing and consuming renewable energy from wind turbines and coconut oil, as well as Fiji, which banned single-use plastic this year to stem the pollution of its waters.
Science needs to drive these efforts and inform policymaking and regulations. The UN Decade of Ocean Science, which starts next year, will be an opportunity to maximise the benefits of effective science-based management of our ocean space and resources.
Regulation is key
Regulation is of prime importance for food security and to ensure harvesting and trade in marine resources is transparent, traceable, certified, sustainable and safe, to meet consumers’ growing need for sustainably sourced products and services.
Sustainable biodiversity-based value chains, products and services in ocean-based sectors should adhere to internationally agreed criteria of sustainability, such as the blue BioTrade principles.
As part of this effort, UNCTAD and the UN Division for Ocean Affairs and the Law of the Sea are launching the first-ever oceans economy and trade strategy in Costa Rica.
In addition, a pilot blue BioTrade project to make the queen conch value chain more sustainable in the eastern Caribbean region is on the cards.
Ending harmful fisheries subsidies
Harmful fisheries subsidies must end, and governments need to shift the allocation of public funds to fish stock management and ecosystem restoration, instead of fuelling overcapacity, overexploitation, inequalities, human and wildlife trafficking.
UNCTAD has been supporting negotiations on fish subsidies at the World Trade Organisation by providing a safe platform for dialogue and targeted research on key options and alternatives for a multilateral outcome.
Binding measures to be taken by governments include finalizing negotiations of the High Seas Treaty to enable the conservation and sustainable use of marine biodiversity in areas beyond national jurisdiction.
International shipping and coastal transport can reduce their carbon dioxide emissions by investing in low-carbon technologies and operations, reducing pollution and promoting greater digitalization for better monitoring, energy efficiency and lower emissions.
New technologies and satellite data can combine data sources that are enabling unprecedented insights into the ocean, in terms of mapping, surveillance and enforcement.
Such transparency is uncovering more than illegal, unreported and unregulated (IUU) fishing. We now have insights into the economics of fishing on the high seas, the relationship between IUU fishing and bonded labour and where to best establish marine reserves, and the capacity to provide data for enforcement.
Deploying blue finance and marine-based research
Innovative financial instruments such as blue bonds and blended financing are needed to fund the shift towards more sustainable ocean sectors. For instance, in 2019, Morgan Stanley, working with the World Bank, sold $10 million worth of blue bonds with of the aim solving the challenge of plastic waste pollution in oceans.
Investment in applied marine-based research, development and knowledge sharing should also be increased. To this end, UNCTAD has established regional centers of excellence with partner institutions in Vietnam and Mauritius, enabling the sharing of experiences, technical knowledge and fisheries’ inputs.
SIDS and coastal communities are vital to preserving the ocean and will need global support to conserve and develop a blue economy that benefits not only local populations but humanity as a whole.
Longer-term, countries around the world need to expand ocean and sustainable blue economy literacy, especially among vulnerable populations, and increase understanding of gender considerations.
We need more individual and collective action if we are to build a sustainable blue economy that leads to prosperity for all.
The U.S. needs a massive green hydrogen industry to decarbonize its electricity, transportation and industrial sectors, and major investments and policy changes today to enable it to grow to its full potential in the decades to come.
So says a new report sponsored by major oil companies, automakers, hydrogen producers and fuel cell manufacturers pushing U.S. policymakers to follow the lead of the European Union in making a major commitment to building the infrastructure to grow its green hydrogen capacity.
The Roadmap to a U.S. Hydrogen Economy report forecasts that hydrogen from low-carbon sources could supply roughly 14 percent of the country’s energy needs by 2050, including hard-to-electrify sectors now dependent on natural gas such as high-heat industrial processes and manufacturing fertilizer.
Hydrogen to power fuel cells will also augment battery-powered vehicles in decarbonizing the transportation sector, particularly for vehicles requiring long ranges and fast refueling times such as long-haul trucks, said Jack Brouwer, a professor at the University of California at Irvine and associate director of the National Fuel Cell Research Center, in a Monday webinar introducing the report.
Meanwhile, wind, solar and nuclear power that might otherwise be forced to curtail generation when the power grid doesn’t need it could be used to electrolyze water to generate hydrogen that can be stored to power natural-gas-fired turbines needed for grid reliability or on-site fuel cells to maintain continuous power at data centers, hospitals and other critical sites, he said.
The report, prepared by consultancy firm McKinsey, is “agnostic” as to how this future hydrogen supply is generated, “as long as it’s low-carbon,” Brouwer said. Beyond electrolysis via zero-carbon electricity, that could include steam reforming of natural gas — the way most of today’s hydrogen supply is made — using carbon capture and storage to reduce its greenhouse gas impact, or employing less fully developed methods such as waste gasification, he said.
The U.S. already generates about 11.4 million metric tons of hydrogen per year, with an estimated value of about $17.6 billion. But reaching the report’s targets could drive about $140 billion per year in revenue and support 700,000 jobs by 2030, and about $750 billion per year in revenue and a cumulative 3.4 million jobs by 2050, it states.
The U.S. lags behind China, Japan and the European Union in infrastructure and research investments to reach this potential. Government and industry investment in hydrogen as an energy carrier adds up to $2 billion per year in Asia and the European Union, the report finds, while U.S. Department of Energy funding for hydrogen and fuel cells has ranged from approximately $100 million to $280 million per year over the last decade.
A roadmap for green hydrogen expansion
The report doesn’t set specific dollar targets for U.S. investment. But it highlights the need for capital to build the hydrogen production and transport infrastructure to carry it to end users, incentives to stimulate private-sector investment, codes and standards to regulate a growing supply chain, and research into still-nascent technologies.
It also lays out a phased approach for building on existing hydrogen use cases to expand to new ones. Experience with the roughly 25,000 fuel cell-powered forklifts in use in the U.S. will enable expansion to larger classes of vehicles, for example, and fuel cells being used for on-site power at data centers can serve as models for integrating hydrogen into large-scale generation.
Major challenges lie ahead of this growth, Brouwer said. To reach the report’s goals, the number of fuel cell vehicles will have to grow from today’s roughly 2,500 to nearly 1.2 million by 2030, and the number of fueling stations will have to expand from about 100 today to more than 4,300. And advances are needed to blend existing pipelines will be needed to expand its use.
But utilities across the country are relying on these kinds of advances to allow them to meet goals of zero carbon by 2050. One example is Gulf Coast utility Entergy’s work with Mitsubishi Power to blend hydrogen into its gas mix at its power plants and plans to convert an underground gas storage facility to hold hydrogen as part of its long-term decarbonization goals.
Former Energy Secretary Ernest Moniz said at Wood Mackenzie’s Power & Renewables conference last week that “federal and state incentives to build a few major regional hubs for hydrogen” will be a critical early step for proving the fuel’s cost-effectiveness as a decarbonization strategy. “We think we should not be sitting here thinking of hydrogen as something for the 2030s and 2040s — it is, but let’s also make it something for the 2020s,” Moniz said.
U.S. green hydrogen activity in the works
Andy Marsh, CEO of report sponsor Plug Power, noted Monday that the company’s hydrogen fuel cell-powered forklifts and distribution center vehicles used by customers like Amazon, Walmart, Home Depot and Lowe’s are using about 27 million tons of hydrogen per day, supplied by its more than 100 fueling stations across the country. It’s expanding into heavy-duty vehicles to serve ports in the U.S. and Europe, and into producing stationary fuel cells for data centers and distribution hubs.
Last week Plug Power signed a deal with Brookfield Renewable Partners to supply 100 percent renewable power for what Marsh described as a “gigafactory” it plans to build in an as-yet-undisclosed location. The factory will be capable of producing up to 60,000 fuel cells and about 500 megawatts of green hydrogen electrolyzers per year, he said.
Toyota, one of the first major automakers to commit to fuel cell vehicles with its Mirai sedan, is also planning to expand production of hydrogen-powered semitrucks now being tested at the ports of Los Angeles and Long Beach, Senior Engineer Jackie Birdsall said. Toyota sees the growth of light-duty fuel cell vehicle markets driving cost reductions through economies of scale, along with heavy-duty fuel cell vehicles increasing demand for hydrogen fuel production and distribution.
Dutch oil giant Shell, which is planning a gigawatt-scale, wind-power-driven hydrogen cluster in the Netherlands, is also building hydrogen fueling stations in Los Angeles to serve these ports’ fuel cell vehicle’s needs, said Wayne Leighty, the company’s hydrogen fuel business development manager. Shell is also investing heavily in EV charging businesses centered on battery-powered vehicles, but “hydrogen fuel cells and electric vehicles are quite complementary” for meeting different needs, rather than being mutually exclusive options for zero-carbon transportation, he said.
French industrial gas manufacturing giant Air Liquide is investing $150million into a renewable liquid hydrogen generation plant in Nevada set to generate 30 tons per day, or enough to supply 40,000 fuel cell vehicles, when it opens in 2022, said Karine Boissy-Rousseau, president of the company’s North American hydrogen energy and mobility business. It’s also investing about $40 million to renovate a hydrogen facility in Quebec, Canada to double its capacity to convert renewable hydropower and wind power to green hydrogen to 20 megawatts by year’s end, she added.
Perhaps Henry David Thoreau was onto something when he set out solo for a cabin in the woods with the aim of becoming completely self-sustainable – for one, he wouldn’t really need to stress about a contagious pandemic.
Thoreau’s experience would later shape the 19th century literary classic Walden; or, Life in the Woods, detailing how he was able to rely solely on himself, including growing his own food and sourcing firewood for heat and light at night.
Whether he knew it or not Thoreau was excelling at social distancing and we could all take a leaf out of his book.
Because, while most of us have got the idea of self-isolation down pat, I bet few are likely to pass the self-sufficiency test.
You only have to look at recent purchasing trends to see some of the panic stemming from a lack of self-sufficiency to see this ‘test’ in action.
First it was the toilet paper and tinned food, before spreading to plants, with a nursery’s months-worth of vegetables and seedlings stock sold over one weekend.
Next up: renewable energy infrastructure, as demonstrated by one solar retailer experiencing a 41 percent jump in PV sales and a 400 percent increase in battery enquiries over the past two weeks.
But where were these eco warriors, cultivating their own veggie patches and living ‘off-grid’ before the apocalyptic hysteria hit?
If history is any proof, crises are often the perfect kindling for igniting change, especially when standards of living are threatened.
And the COVID-19 crisis has certainly given the energy world a wake-up call when it comes to sustainability.
Mother nature gets a well deserved break
Amid coronavirus-induced lockdowns, shutdowns and working from home, air pollution has significantly dropped worldwide.
In New York, carbon monoxide levels, largely produced from cars, have fallen by nearly 50 percent compared with the same time last year.
Greenhouse gas emissions in China have also plummeted with NASA releasing images where you can see the country’s reduction in nitrogen dioxide from space.
According to one analysis, the slowdown of economic activity in China led to an estimated 25 percent reduction in carbon emissions in just four weeks.
The restriction on air travel, or any travel at all, has also clearly played a role in reducing pollutants.
And whether you choose to believe the stories of wildlife returning to cities, like dolphins and swans returning to Venice canals, coronavirus has certainly given mother nature a well-deserved moment of respite.
However, this has been at the expense of economic development, of jobs and livelihoods – and it’s certainly not going to be long-term.
Air pollutants will likely jump once day-to-day normalities resume.
However, if we’re smart about it, we can use this period to re-evaluate our energy systems to help flatten the emissions curve and keep our air clean.
Energy systems under pressure
Aside from the closure of factories and reduction in fuel-consuming transport, we can’t forget that data centers and server-farms are also huge energy-intensive industries.
Collectively, these spaces represent approximately two percent of the United State’s total electricity use.
In the UK, there’s been reports of home-working intensifying pressure on the electricity network, instead of being in the office where lighting, heating and cooling are shared.
Now everyone’s either working from home, or just at home, internet use and streaming is peaking.
A study by SaveOnEnergy estimated energy generated from the 80 million views on Netflix’s NFLX thriller Birdbox was equal to the equivalent of driving more than 146 million miles and emitting just over 66 million kilograms of CO2 – what it takes to drive from London to Istanbul and back 38,879 times.
Beyond the environmental impact, coronavirus has brought more attention to the question of whether our current energy systems and frameworks can actually keep up with increasing demand pressures.
Several country-appointed energy councils have met to discuss electricity demand pressures related to COVID-19, with renewable energy a popular topic.
In a meeting between Australia’s federal, state and territory energy ministers, the transition towards a genuine two-sided market was emphasized – where consumers become prosumers by contributing excess rooftop solar and battery electricity to the grid.
This would play a large role in forming a ‘day-ahead’ market, to “address concerns that managing challenges like system strength is becoming increasingly difficult with only a real-time market”.
On top of this, the Australian Government’s Economic Response to the Coronavirus actually includes tax deduction incentives for commercial and industrial solar PV, in a bid to help alleviate financial pressure through reduced electricity bills.
Digital transformation is underway across the energy sector, with significant advancements in renewable energy technologies and the ways in which energy is distributed.
For any real change to occur, you need people to switch perspectives.
Powering new mindsets
Tough times spark innovation. Now is as good a time as any to test new energy systems and processes, and it starts with a shift in thinking.
Energy networks, retailers and operators have delivered services in much the same way for a century – driven by fossil-fuels.
New technology is making it easier, more effective and affordable to use renewable energy, and the costs associated with installing those technologies, such as solar and batteries are decreasing.
And most industry players recognise the need to change and evolve in order to remain relevant, or are at least are starting to, with a little nudge from COVID-19.
Self-generating renewable energy infrastructure gives people the power to become self-sufficient for their electricity needs, with some even going ‘off-grid’ altogether.
National Energy Market retailer Powerclub is one company already trialling new technology to help alleviate demand pressure on the grid via a Virtual Power Plant (VPP) in South Australia and is currently calling for more households to join.
The VPP enables Powerclub households with batteries to sell their stored, excess solar back to the grid during peak demand periods and price hikes, via peer-to-peer energy trading technology.
There is a huge benefit to the broader community in that the VPP gives those who may not be able to afford solar panels, or those who are renting, the opportunity to access clean energy.
As great as it is to think of only the environmental benefit that comes with using clean energy, a monetary incentive certainly makes the proposition more appealing.
Not only does a VPP provide renewable energy infrastructure owners with a passive income, it can also provide an incentive for others to install solar panels – knowing they’ll be able to pay back their investment faster.
Pair a VPP with home grown vegetables and you’re a little closer to achieving Thoreau’s vision for self-sufficiency.
Where to from here?
At the end of the day, it shouldn’t take a pandemic for people to reconsider their impact on the environment – but it has.
We’re now being given a chance to press reset on many areas of our lives and reconsider what it takes and what choices to make in order to lead a more sustainable lifestyle.
Energy regulators are on the right track with numerous initiatives and policy changes currently underway.
But you could make a change right now – how we return to normal life post COVID-19 could lay the foundations for a cleaner and more resilient energy future.
Why does that matter? Well, as Thoreau said; “What is the use of a house if you don’t have a decent planet to put it on?”
The renewable energy industry is primed to enter a new phase of growth driven largely by increasing customer demand, cost competitiveness, innovation, and collaboration. But will challenges surrounding trade and tariff policy require the industry to prioritize risk mitigation tactics? Our 2020 renewable energy industry outlook explores what it will take for companies to thrive in the year ahead.
Renewable energy industry primed for continued growth
For the first time ever, in April 2019, renewable energy outpaced coal by providing 23 percent of US power generation, compared to coal’s 20 percent share.1 In the first half of 2019, wind and solar together accounted for approximately 50 percent of total US renewable electricity generation, displacing hydroelectric power’s dominance.
Declining costs and rising capacity factors of renewable energy sources, along with increased competitiveness of battery storage, drove growth in 2019. In the first half of the year, levelized cost of onshore wind and utility-scale solar declined by 10 percent and 18 percent, respectively, while offshore wind took a 24 percent dip.2 The greatest decline was in lithium-ion battery storage, which fell 35 percent during the same period.3 This steady decline of prices for battery storage has begun to add value to renewables, making intermittent wind and solar increasingly competitive with traditional, “dispatchable” energy sources.
The renewable energy sector saw significant demand from most market segments as overall consumer sentiment remained positive. Renewable energy consumption by residential and commercial customers increased 6 percent and 5 percent, respectively, while industrial consumption declined slightly, by 3 percent, through June 2019 compared with the previous year.4 As in 2018, US corporate renewable energy contracts once again hit new levels, as corporations signed power purchase agreements (PPAs) for 5.9 gigawatts (GW) of renewable energy in the first half of 2019.5
The prospects for short-term solar and wind energy growth appear favorable, with about 96.6 percent of net new generation capacity additions (~74 GW) expected to come from these two resources in 2020.6 With several states increasing their renewable portfolio standards (RPS) in 2019, the industry will likely see mandatory RPS-driven procurement growth through the mid-2020s, while voluntary demand will continue to hit new levels. As of late 2019, at least 10 utilities have announced 100 percent decarbonization goals, and we’ll be watching for that list to grow in 2020.7
Moving into 2020, companies in the renewable energy industry should be mindful of a few caveats that could impact renewable energy growth. Under current policy, eligibility for the Production Tax Credit (PTC) for new wind build expires and the solar Investment Tax Credit (ITC) step down starts in 2020, both of which have been key drivers for wind and solar growth in the US renewable energy market.
While the wind industry did not request extension of the PTC before it expires next year8, it has requested that solar energy’s ITC be extended to wind projects.9 The solar industry, however, did request an ITC extension. In July 2019, both houses of Congress introduced legislation to extend the solar ITC for five years at its full 30 percent value.10 We’ll be watching to see if this becomes law by yearend or is taken up again in 2020, and whether wind will be included. For sectors that have worked together toward a cleaner energy mix, taking separate paths would likely create new industry dynamics.
We will also be watching US tariff policies throughout 2020. Solar developers are optimistic, since imported panel costs have fallen rapidly and are likely to offset the impact of existing tariffs by the end of 2019.11 That’s good news for growth as long as new tariffs are not imposed. However, the US government expanded tariffs on Chinese imports, most recently including bifacial solar modules, and is considering increasing tariff amounts.12 The wind industry expects record growth for 2019–2020 before the PTC phaseout, but we’re keeping an eye on recently proposed tariffs on imported wind towers from several countries. If these tariffs are imposed on top of existing tariffs on towers and other equipment from China—and existing multi-country steel tariffs—the upward pressure on prices could stymie some new projects.13 Overall, the decline in wind and solar construction costs—weighted project costs fell 13 percent and 37 percent, respectively, between 2013–2017—will likely help cushion the impact of tariffs on imported components.14
2020: Renewable energy industry poised to enter new growth phase
The year ahead promises further growth in the renewable energy sector. This will likely come against a backdrop of increased innovation and collaboration among multiple stakeholders. Renewables are likely to continue moving into the driver’s seat in electricity markets as utilities and regulators prefer them to replace retiring capacity and customers increasingly choose them to save costs and address climate change concerns. Growth in the US offshore wind sector will likely bring multiple opportunities for industry players as states vie for manufacturing and port infrastructure projects. Grid resiliency will also likely be a growing driver for distributed renewable deployment as utilities and their customers increasingly consider renewable microgrids combined with storage solutions. However, trade and tariff policy uncertainty will likely keep the industry on the lookout for risk mitigation tactics. But companies that are ready to innovate, collaborate, and seize new opportunities will likely thrive in a new phase of renewable growth.
In the past decade, the topic of “sustainability trends” has been a subject of great discussion. As we approach a new decade with our climate in crisis, it becomes more important than ever to keep up with and invest in the latest in sustainability efforts- particularly in the world of business. We asked over one hundred eco-minded business leaders what they saw as the sustainability trends that will shape the next decade. Here are the top ten trends they identified. From relying on renewable energy to eating smarter, we were excited to see that they were largely positive and optimistic!
1. CHANGES TO ENERGY PRODUCTION
One of the most talked about sustainability trends is reducing our dependence on fossil fuels. Fossil fuels are nonrenewable sources of energy and are the leading contributor to climate change. In the United States, they’re to blame for more than 80 percent of greenhouse gas emissions — and 98 percent of CO2 emissions alone.
As of 2017, fossil fuels accounted for 80 percent of the energy in the US. While this number seems depressing, this is the lowest share since 1902! Renewables now account for 11 percent, the highest share since the late 1910s.
This is a promising reminder of the fact that collective efforts to invest in and improve our energy infrastructure are having a meaningful impact, and many of you felt hopeful that solar and wind energy will become far more commonplace in the next decade.
Caio Bersot at EnergyRates.ca reminded us that not only are solar and wind energy technologically promising, the trends towards micro-generation of electricity in homes using these renewable energy technologies is also extremely promising. Whether wind turbine, solar panels or even geothermal energy, renewable energy tech is becoming increasingly affordable. This will probably enable people to invest in renewable energy sources without having to spend too much on installation costs.
2. REDUCTION IN OUR ENERGY CONSUMPTION
Another one of the most promising sustainability trends in business is reducing energy consumption. Electric vehicles (especially to fuel freight transportation), LED lighting, smart homes, and LEED certified buildings were all mentioned frequently as critical areas of forward progress because they change how we consume energy (and how MUCH electricity and fuel we consume).
Catherine Pears at Wavelength Lighting shared that in commercial spaces, the installation of LED lighting is less of a fleeting trend and more of a necessary shift required of any energy-efficient building. Legislation in cities like New York City and Berkley, California are already implementing requirements for lighting upgrades to commercial buildings above a certain size— because there is simply no need to be wasting so much energy by keeping traditional light sources (like CFL and incandescent) in place. Now that LEDs have caught up to traditional lighting in terms of price point, and actually pay themselves back in a short amount of time, the choice is pretty clear: choose LEDs and save energy and money.
Liz Jeneault of Faveable saw electric vehicles as the most promising trend. In the coming year and beyond, we absolutely will see people purchasing more plug-in hybrid and fully electric vehicles. Everyone is familiar with Tesla, but automakers across the board are offering or developing more eco-friendly options. Many of the vehicles are coming in the form of an SUV. The SUV segment continues to rise in popularity, as people want just the right of amount performance, comfort, and spaciousness. They don’t want the gas guzzlers of the past, however.
That’s why new vehicles like the Audi e-tron have been such a big hit. The SUV is fully electric, but offers excellent performance. I definitely feel having more zero-emissions vehicle options out there will help consumers make smarter choices for the environment. Reducing our personal carbon emissions is a great way to help address global warming. Since many of us drive so much, opting for a plug-in hybrid or fully electric vehicle can have a big impact.
Caio Bersot also highlighted trends towards a smart home. People buy personal assistants, motion sensors, smart lockers and bulbs, cleaning robots, and smart appliances all the time. The main reason is that such devices make your life more comfortable and practical. However, brands are starting to notice the importance of adding sustainability to the mix. Smart home gadgets will become each time more energy-efficient, be it by using less electricity or for actively preventing you from spending more energy than you should. This will include smart light bulb kits, smart power strips, smart thermostats, smart energy monitors and even smart curtains.
3. PLANT BASED EATING
The next in our series of sustainable trends attempts to mitigate the environmental impact of our diets. Many responses to this question were optimistic about recent trends towards plant-based eating and meat substitutes. It’s no secret that eating meat has a big impact on the planet. Within the United States, agriculture and forestry together accounted for 9.0 percent of U.S. greenhouse gas emissions in 2017 (not to mention the negative impact that agriculture has on soil and waterways). What does this have to do with meat? 26 percent of the earth’s land is actually used for livestock grazing and one-third of the planet’s arable land is occupied by crop production used entirely as livestock feed.
According to John Moss, of English Blinds, the rise of veganism is perhaps the main sustainability trend to watch over the next decade. Nestle, the world’s largest food conglomerate, states that “the plant-based food trend is here to stay,” and America’s top takeaway marketplace GrubHub states that demand for orders of plant-based food have reached an all-time high. In fact, GrubHub’s data indicates that orders of vegan food increased 19% in the first half of 2017 compared to the same period of 2016, and GlobalData identified a 5% rise in the number of data subjects identifying as vegan between 2014 and 2017.
The ability to eat vegan without spending huge amounts of time and money doing so has also increased exponentially in recent years, making this a much more viable option for people who might have previously ruled it out due to time or financial constraints, which is helping veganism as a whole to snowball.
Sylvain Rochon was particularly favorable towards simulated meat substitute products like the Impossible Burger and lab-grown meat.
The “meatless meat” market is growing very quickly because most people don’t care whether their burger or steak is made of actual meat or not. They like the taste and texture and how it feels. These companies like Impossible Foods figured out a way to put vegetables together to simulate color, texture and taste of meat. Since real meat is environmentally problematic and expensive to produce, most people, taste and texture being equal, would prefer to buy the less expensive alternative “veggy-meat” than the real thing.
Lab-grown meat, once ready for mass production and cost-effectiveness, can be an amazingly effective alternative to real meat, giving rise to designer meats. It is much easier to alter muscle cells in a lab environment for taste, texture, color and shape than to do that on a real live animal. So expect different varieties of muscle cell cultures to emerge as sources for future meats without the need to harvest any cells from animals anymore.
And, just like vertical farming in controlled environments, lab-grown meats can be produced within city borders, near distribution centers. This is all great for the consumer’s health, our wallets and the environment, and it is all made possible by the massive amount of investment made in artificial intelligence plus automation over the past few years.
4. REGENERATIVE AGRICULTURE
While many were focused on plant based eating trends, others felt that regenerative agriculture, to support both plants and livestock production, is the more important game changing wave of progress.
Lucinda Cramsey of Moink Box highlights,there are only 60 years left of top soil on this earth if we do not take a step toward regenerative farming. I was born a poor farmer in LaBelle, MO, where I still live today. I’ve seen how big ag. companies abused the family farm, and their land. Without our top soil, we have no food. Without food, we have nothing as humans.
Regenerative agriculture – defined as a system of farming principles and practices that increases biodiversity, enriches soils, improves watersheds, and enhances ecosystem services – is an antidote to our current depletion of topsoil.
Regenerative Agriculture aims to capture carbon in soil and aboveground biomass, meaning that it can feed the planet while simultaneously reversing current global trends of atmospheric accumulation.
Nonprofit Regeneration International claims that transitioning 10% to 20% of agricultural production to best practice regenerative systems could sequester enough carbon dioxide to reverse climate change. That seems like a bold claim, but many independent farmers have been astounded by the results they’ve seen. Take, for example, Gabe Brown who moved to regenerative practices on his ranch in Bismark, North Dakota. Organic matter and rainwater uptake tripled while he was able to handle five-times the number of cattle he used to.
With big brands like Patagonia, Dr. Bronners and Justin’s Nut Butters behind the regenerative agriculture movement, this trend certainly holds promise.
5. CHANGES TO OUR RELATIONSHIP WITH PLASTIC
Many felt that the tides were finally turning on our relationship with single use plastic, in large part driven by the growing awareness of ocean plastic pollution and its impact on ocean life, acidification and the food and water we consume.
Louis Watton of Shiply shared, I believe that cutting down on excess plastic packaging has been and will continue to be the biggest sustainability trend over the next decade, and will have a big impact on both businesses and consumers.
The packaging industry is the single largest producer of plastic. In 2015 there was roughly 146 million tonnes of plastic produced for packaging (over twice the amount that was produced for building and construction) and 141 million tonnes of that plastic is wasted – as such, targeting this industry is very important in the fight for sustainability.
As long as high profile programs such as Blue Planet 2 continue to bring attention to the undeniable negative impact such massive plastic production and waste has on our planet I believe consumers will be hyper-aware of the products they buy and how they are packaged.
John Moss of English Blinds echoed these sentiments. The consumer-led drive to cut down on the use of nonrecyclable plastics is already well underway and this is a trend that is only going to strengthen and snowball in the coming decade. We’re already in a position where a significant number of consumers across all demographic groups are willing to call out businesses of every caliber on the needless use of disposable plastics, and/or vote with their feet when it comes to leaving stores with poor plastic credentials without making a purchase.
Robert Piller of Eco Marketing Solutions reminded us that much damage has already been done. [Plastic reduction] will continue to trend, but will it help reverse ecological challenges? Well, that remains to be seen. The damage done so far is staggering, as between 4.8 and 12.7 million metric tons of plastic materials end up in oceans each year (National Center for Ecological Analysis and Synthesis), and 100,000 mammals and 1 million seabirds are killed each year by consuming plastics (The Ocean Conference). Fixing this problem would require every business and consumer to go green in a big and bold way.
6. CHANGES TO RECYCLING AND COMPOSTING
While strides have been made with composting and recycling in the US and worldwide, both have major challenges. Between the China Ban (and our even more problematic recycling practices before the China Ban) and composters struggling to accommodate (and now banning) materials like bioplastic that add no nutrients to their output, our system of sustainable waste management needs an overhaul.
Many responses were optimistic about technologies that can help us improve both recycling and composting in the future.
Jeff Kneal of The Critter Depot reminded us that our longstanding approach to composting (designed largely for yard waste) is not ideal going forward. One of the biggest trends is composting with black soldier fly larva. Black soldier fly larva are create a highly nutritious compost, that performs better than chemical fertilizers. Black soldier fly larva can also compost meat, fish, and other complex proteins, making them more efficient than worms. BSFL will consume and produce about twice their body weight per day, reducing landfill, and the need for large trash trucks. And, because of their protein, black soldier fly larva are also great food sources for reptiles and chickens.
These types of innovations can help us significantly improve industrial composting, and the output from industrial compost.
Most respondents recognized that recycling is essential to sustainability long-term. We will continue to produce goods out of metal, glass, plastic, paper and other materials – and when these items are at the end of their life, recycling them into new useful goods is optimal.
Improving single stream recycling involves three things:
(1) improved sorting technology, so Materials Recovery Facilities can better and more cleanly sort even more waste items into separate, usable materials. An example of an innovation here is that currently needed – MRFs cannot accept plastic bags because they are so flimsy and get caught in the gears of machinery. Investments are being made to better sort this material out at the front of th sorting line. If successful, plastic film (a material that is technically fairly easy to recycle) could start being accepted curbside nationwide!
(2) improving reclaiming and remanufacturing with recycled content, so manufacturers can readily and effectively use the materials. For example, printing on recycled plastic and paper can be challenging. Colors are less vibrant. Advancements that enable manufacturers to produce goods made with 100% post consumer waste that are still excellent for printing.
(3) developing end materials and products that can be made easily with this recycled content.
For example, as highlighted by Ronald D’souza of Angel Jackets, several brands have taken the initiative of producing sustainable t-shirts made out of plastic water bottles, including the significant brand Ralph Lauren. The most notable benefit of such trend is that it replaces harmful human-made polystyrene with waste plastic bottles that would otherwise be dumped in the ocean. “Approximately 18,834,000,000 are dumped in the landfills every year. While, each plastic bottle can take up to 700 years to perish. Although this method of recycling plastic is still in its developing phase, in the next decade, we will witness more products made of plastic bottles, including Jackets, pants, bags, hats, and most wearable and even customers would opt for such items. Recycling plastic, especially for creating something sustainable is undoubtedly a positive step that will help us reverse the looming ecological challenges the world is facing.
7. GOVERNMENT REGULATION AND POLICIES
The single issue that garnered pessimism about progress was the role that governments play in pushing true, long-term progress when it comes to sustainability.
Though globally, there are a lot of countries whose political leaders have made the planet a core priority, many lamented the fact that this is not true of the US’s current administration. Many did, however, recognize that 2020 is just around the corner and that a new wave of optimism could emerge with our next election – [I’m] not at all confident under the current US administration. I’m somewhat optimistic if we see a new administration elected in 2020. Others also highlighted the role that local and state politicians have played in the US to keep environmental progress going during this time.
8. CONSUMER AWARENESS AND YOUTH ADVOCATES
Even those who felt hopeless about politics voiced optimism of just how passionate the next generation of consumers and citizens is when it comes to climate change and marine plastic pollution.
There is hope of the impact this will have on companies and governments.
Dr. Nardia Haigh shared, Greta Thunberg’s Fridays for Climate movement is reinvigorating people who have worked on climate change for many years, activist investors, and other social movements in related areas. The breadth of industries affected will continue to grow. Climate change activism is no longer of concern just to energy companies, but it stands to affect all kinds of companies as these activists are consumers, students, investors, entrepreneurs, parents, and leaders. All this appears likely to make climate change a strategic issue for all companies, and therefore competition on the basis of one’s climate change credentials will continue to grow.
Sarah Hancock of Best Company shared a similar sentiment. In my opinion, the sustainability trend that will have the biggest impact on business and consumers in the next decade is the increased awareness, education, and action surrounding sustainability initiatives.
People are and will continue taking to social media and the streets to demand action from governments and businesses on environmental issues. Up-and-coming Gen Z’ers will continue to be important influencers in these movements. Expectations for companies to address issues such as climate change, deforestation, and waste will continue to grow. Consumers, especially younger ones, will increasingly shift their loyalties to companies they perceive to be acting on these issues.
As a result, I expect to see many businesses increasing their sustainability commitments through more responsible recycling practices, efforts to become more energy efficient, and donations to environmental causes. A growing number of organizations will likely take the next step and put in the necessary work to gain B Corporation status as well.
9. THE MOVE TO SLOW FASHION
Sheri Turnbow of Bespoke Southerly was one of the many respondents that highlighted the exciting trends towards sustainability in the fashion industry. Fashion is considered one of the largest industry polluters in the world.
Textile factories produce toxic wastewater, synthetic fibers get released into the ocean through washing, fast fashion has created a culture of disposable clothing where very little is recycled and most ends up in landfills — 92 million tons of solid waste dumped in landfills each year.
As a result of these issues, we are seeing trends, particularly among smaller entrepreneurial brands to implement systems to reduce waste at all stages of fashion production. Possibly the most prominent of these is the made to order model. Made to order means each garment is made when the customer orders it – so cut one at a time vs. creating vast amounts of inventory that may never be sold. This model also enables personalization and customizations of clothing that is increasingly popular with millennials.
Steven Li of The Rising echoed these sentiments. High fashion, including Burberry and Gucci can afford to source sustainable materials, but brands like H&M will have a hard time following suit. Consumers are more aware of their environmental footprint than ever before, and when it comes to fashion, consumer decisions will most certainly weigh in the sustainability of the brands they buy from. Fashion has long been an industry optimized for the end product. Supply chains often top emissions charts and it’s good to see brands are pivoting to be more sustainable.
Mass migration begins as coastal homes are bulldozed in the state facing the biggest threat from climate-driven inundation.
Lori Rittel’s home in Marathon Keys, on Sept. 16
Lori Rittel is stuck in her Florida Keys home, living in the wreckage left by Hurricane Irma two years ago, unable to rebuild or repair. Now her best hope for escape is to sell the little white bungalow to the government to knock down.
Her bedroom is still a no-go zone so she sleeps in the living room with her cat and three dogs. She just installed a sink in the bathroom, which is missing a wall, so she can wash her dishes inside the house now. Weather reports make her nervous. “I just want to sell this piece of junk and get the hell out,” she said. “I don’t want to start over. But this will happen again.”
The Great Climate Retreat is beginning with tiny steps, like taxpayer buyouts for homeowners in flood-prone areas from Staten Island, New York, to Houston and New Orleans — and now Rittel’s Marathon Key. Florida, the state with the most people and real estate at risk, is just starting to buy homes, wrecked or not, and bulldoze them to clear a path for swelling seas before whole neighborhoods get wiped off the map.
By the end of the century, 13 million Americans will need to move just because of rising sea levels, at a cost of $1 million each, according to Florida State University demographer Mathew Haeur, who studies climate migration. Even in a “managed retreat,” coordinated and funded at the federal level, the economic disruption could resemble the housing crash of 2008.
The U.S. government’s philosophy has been that local officials are in the best position to decide what needs to be done. Consequently, the effort has so far been ad hoc, with local and state governments using federal grants from the last disaster to pay for buyouts designed to reduce the damage from the next one.
“The scale of this is almost unfathomable,” said Billy Fleming, a landscape architecture professor at the University of Pennsylvania. “If we take any of the climate science seriously, we’re down to the last 10 to 12 years to mobilize the full force of the government and move on managed retreat. If we don’t, it won’t matter, because much of America will be underwater or on fire.”
If not for the $174,000 that Rittel, 60, owes on her mortgage, the Montana transplant would have left long ago. Insurance money is insufficient to rebuild, so she applied for one of the buyouts, administered by the state with $75 million of Irma-relief cash from the U.S. Department of Housing and Urban Development, as long as it lasts.
The inside of Lori Rittel’s home. Photographer: Jayme Gershen/Bloomberg
Florida accounts for 40% of the riskiest coastal land in the U.S., according to the Union of Concerned Scientists, but it’s done little so far to pull people back from the coasts and lags behind states such as New Jersey, North Carolina and Texas. Across the country, the effort is still more theory than practice, even as a consensus among planners grows that “managed retreat” may be the best of bad options.
This year, HUD made available $16 billion for climate resilience, its first dedicated fund to fortify for future storms. Nine states, plus Puerto Rico and the Virgin Islands, will decide how to use it, whether to build sea walls, put houses on stilts or move people out of the way. The money is a fraction of what’s needed, and the process is moving at the speed of government.
A study by the Natural Resources Defense Council this month found that buyouts by the Federal Emergency Management Agency, which responds to disasters, take five years on average to be completed. By that time, many homeowners have rebuilt or moved. Similar data isn’t available on the grants from HUD, which also provides money to demolish homes.
“It’s a slow-motion emergency,” said Rob Moore, director of NRDC’s water and climate team. “But it’s happening right now. These last three hurricane seasons show us what it kind of looks like.”
A FEMA spokesman said the agency supports the voluntary acquisition of flood-prone structures and provides the grant funding, but the prioritization of projects happens at the local level first and then by the state acting as the recipient. The agency believes each county floodplain manager and local official knows the needs of their communities best and are responsible for land usage and permitting.
About 6 million Floridians will need to move inland by century’s end to avoid inundation, according to Hauer, the demographer, in a 2016 paper. By then, about 80% of the nearby Keys, the archipelago that includes the tourist mecca of Key West, will be underwater. About 3.5 million people would be flooded in South Florida’s Miami-Dade and Broward, the two counties with America’s biggest exposed populations.
“Florida’s doing it at a really small scale,” said A.R. Siders, an assistant professor at the University of Delaware who studies climate adaptation. “Compared with the new housing units going up in South Florida, I don’t know if that would even cancel out.”
Here Comes the Flood
Number of people at risk by county from a sea level rise of 1.8 meters
Florida State University demographer Matt Hauer
But Florida runs on tourism and real estate revenue, and managed retreat is a phrase that makes real estate listing agents nervous. But there’s another Florida housing bubble waiting to pop. The Union of Concerned Scientists warns of a coming housing crash — from Miami to San Mateo, California — on a scale worse than last decade’s foreclosure crisis, caused by climate change — from flooding to heat waves and wildfires.
Cities are only starting to grapple with where to resettle residents, and how to transport communities and hometown identities. And homes on higher ground will also demand higher prices, worsening an affordability crisis.
Fifteen years after Hurricane Katrina, Louisiana is trying to relocate the Native American settlement of about 100 people on the Isle de Jean Charles, a narrow island that lost 98% of its land over the past six decades to climate change. It’s working with a $48 million grant from HUD for buyouts and to help them start anew on a 500-acre sugar cane field 40 miles north that the government will populate with homes and businesses. Importantly, it will be 9 feet above sea level. All but three of about 40 households have signed on.
“They’re starting to scale this up,’’ said Jesse Keenan, a social scientist at Harvard University who also specializes in climate adaptation. “This is about building up institutional knowledge on how to do this.’’
New Jersey has a $300 million fund for buyouts and has purchased hundreds of houses since Superstorm Sandy in 2012, though like Florida, even more homes have been built on the coast in the meantime. Harris County, Texas — which includes Houston, ravaged by a series of storms including 2017’s Harvey — has done more than 3,000 FEMA buyouts, more than any other county in the U.S., according to NRDC.
In Monroe County, Florida, where Rittel lives, the planning is just beginning. The county has applied for $5 million of the HUD money — the state maximum. Already, about 60 local homeowners have applied, so it will require triage. Senior citizens, families and residents in the riskiest flood zone would get priority, said Assistant County Administrator Christine Hurley.
Rittel isn’t sure how long she can hang on.
Her insurance payout of about $100,000 would cover repairs to the 640-square-foot house. But the county requires that when more than 50% of a home is damaged, that it be completely rebuilt to meet modern storm-resiliency codes and — in her flood zone — on stilts. That would cost at least $200,000, money she doesn’t have.
She dreams of resettling in Key West or Homestead, a safer spot on the Florida mainland.
“I’d like to take the money and run,” Rittel said. “But I’ll have to buy something on stilts. I’m not buying anything on the ground down here ever ever again.”
This story is part of Covering Climate Now, a global collaboration of more than 220 news outlets to highlight climate change.
In his legal commentary posted on April 1, 2019, my colleague, Rick Jones, a partner with Dechert LLP, a leading law firm serving the Commercial Real Estate Debt Market, opened with “I’m finally writing about climate change… not because 97 out of 100 scientists are shouting at us incessantly about the need to do something, but because I am dead certain that there are real and fairly immediate risks associated with the public reaction to the perception or awareness (take your pick) of the climate change risk which will drive regulatory intrusion on both the state and federal level, will drive legislation and moreover, will inform market reaction to lenders, investors, developers and their properties because of their climate change posture or profile.”
The esteemed Mr. Jones continues: “Where do we start? We are already seeing some commercial real estate owners begin to adapt to regulatory change. Look at the fantastic engineering marvel which is the Hudson Yards, built 40 feet above sea level, with its storm management system and its fortress-like power system designed to survive a mega storm. That’s expensive. It was clearly purpose driven. We should ask what made them, a bunch of smart folks, put up the money. I guarantee it wasn’t frivolous. I would suggest to you that it’s a sign of things to come. More generally, we are also seeing more solar, more green building technology and more innovations in engineering and in general more willingness to pay real money to address environmental concerns.”
New York has a wet climate, and water – from hurricanes, flooding, storm surges and even blizzards – is one of its primary environmental challenges throughout the year. Of course, buildings in NYC also endure seismic activity, high heat loads in the summer, power outages, manmade disasters like those produced by terrorist attacks as well as high humidity and year-round precipitation.
On the Pacific coast, seismic considerations are a primary concern as well as danger from wildfires, flash floods, and drought.
For most of my career serving the real estate industry, I have primarily conducted due diligence and providing underwriting and financial feasibility analyses for buyers, investors, lenders and capital market participants.
We usually start with a checklist of due diligence and underwriting items which typically includes:
reviewing historical operating statements and related reports,
abstracting leases and tenant correspondence records,
getting a title abstract, checking the flood zone,
obtaining and reviewing a property condition assessment (PSA) and a Phase 1 environmental site assessment (ESA), and
evaluating all legal and contractual arrangements that may affect the income and expenses of the property.
But, if you are like most real estate investors, you have missed one item which affects all properties and portfolios: the risk resulting from climate change and sea level rise as well as man-made hazards: You still do not know how sustainable and resilient the income and future value from your investment is.
Beginning about five years ago, my clients started to ask questions regarding the potential effect of climate change and sea level rise on the sustainability and resiliency of the property.
It is important to note that the risk to real property assets – which are immovable by their nature – exists regardless of whether you believe humans have caused climate change, or not.
In fact, my client chose to divest of assets in Miami in order to buy assets in locales without the risk of sea level rise and our screening process involved an informal, yet substantive, assessment of the risk from climate change – no matter the location of the property.
In an article entitled “What does resilience mean for commercial real estate” by Ryan M. Colker published in the September/October issue of BOMA Magazine, he opens with the following observation:
“Around the world, the frequency, intensity and impacts of natural disasters are increasing. These events can significantly affect the social, economic and environmental functionality of communities. The ability of commercial buildings and the businesses they house to adequately prepare for such events and quickly return to full operations—a quality known as resilience—contributes significantly to a community’s ability to bounce back. In addition to the community-wide impacts, the state of individual buildings also can affect the long-term viability of the businesses that occupy those buildings.”
For a multi-family, commercial or industrial building, we at Emerald Skyline define building resilience as “the ability of the systems and structure to protect, maintain or restore the value of, functionality of, and income generated by a property after a damaging event or calamity – whether it is from a weather event or a man-made circumstance – within a pre-determined acceptable timeframe.
A widely-cited 2005 study by the Multi-hazard Mitigation Council (MMC) of the National Institute of Building Sciences “documented how every $1 spent on mitigation saves society an average of $4.
In a 2018 interim update report by the MMC found that costs and benefits of designing all new construction to exceed select provisions in the 2015 IBC and the IRC and the implementation of the 2015 International Wildland-Urban Interface Code (IWUIC) resulted in a national similar benefit of saving $4 in future losses for every $1 spent on additional, up-front construction costs.
In a report published last month (April 2019) by the Urban Land Institute (ULI) and underwritten by Heitman LLC (Heitman) entitled “Climate Risk and Real Estate Decision-making,” the authors note that:
“In 2017, the year Hurricanes Harvey and Maria hit the United States and storms battered northern and central Europe, insurers paid out a record $135 billion globally for damage caused by storms and natural disasters. This figure does not represent actual damages, which in the United States alone equaled $307 billion, according to National Oceanic and Atmospheric Administration estimates.”
In the Foreword, Ed Walter, Global CEO, ULI, and Maury Tognarelli, CEO, Heitman, highlight the need to address sustainability and resiliency:
“Failure to address and mitigate climate risks may result in increased exposure to loss as a result of assets suffering from reduced liquidity and lower income, which will negatively affect investment returns. At the same time, investors who arm themselves with more accurate data on the impact of climate risks could help differentiate themselves and benefit from investing in locations at the forefront of climate mitigation.”
And the industry – especially among institutional investors – is taking note. “Many leading investment managers and institutional investors are undertaking flood, resilience, and climate vulnerability scans of their portfolios. These mapping exercises seek to identify the impacts of physical climate risks on their properties, including sea-level rise, flooding, heavy rainfall, water stress, extreme heat, wildfire, and hurricanes. Potential impacts being considered range from physical access and business disruption for tenants to the effects that longer-term temperature increases or increased wear and tear on buildings could have on operating and capital expenditure requirements. The ultimate objective for the investment community is to understand how climate will affect asset liquidity and, as a result, returns, in terms of both income and capital growth.”
The results of the survey conducted in preparation of this report, the researchers found that industry participants continue to rely on insurance companies to cover potential losses from physical damage due to a natural disaster – but they astutely point out that insurance “does not protect investors from devaluation or a reduction in asset liquidity.” They categorize the climate risks either physical or transitional risks as follows:
“Physical risks are those capable of directly affecting buildings; they include extreme weather events, gradual sea-level rise, and changing weather patterns.
“Transition risks are those that result from a shift to a lower-carbon economy and using new, non-fossil-fuel sources of energy. These include regulatory changes, economic shifts, and the changing availability and price of resources.
“The location-specific physical threats posed by factors such as sea-level rise, hurricanes, wildfires and forest fires, heat stress, and water stress are among the most easily observable risks to real estate investment. They are a particular concern since many key markets for real estate investment are in areas exposed to the physical impacts of climate change.
These risks and their potential impact on real estate is summarized in the following table.
So far, according to the ULI report, “…most investment managers and investors for directly held assets currently use insurance as their primary means of protection against extreme weather and climate events.” However, “leading companies in the industry … are modifying existing decision-making and management processes to add climate and extreme weather-related factors to those being considered alongside other risks and opportunities.
The National Infrastructure Advisory Council (NIAC) in a 2009 repot characterized resilience as having four key features known as the “4-Rs”:
Robustness: the ability to maintain critical operations and functions in the face of crisis.
Resourcefulness: the ability to skillfully prepare for, respond to and manage a crisis or disruption as it unfolds.
Rapid recovery: the ability to return to and/or reconstitute normal operations as quickly and efficiently as possible after a disruption.
Redundancy, back-up resources to support the originals in case of failure that should also be considered when planning for resilience
From the Whole Building Design Guide, a program of the National Institute of Building Sciences (NIBS), understanding the relationship between Asset (Building) resilience and the community’s resilience requires an understanding of the distinctions and relationships between risk, resilience and sustainability as follows:
Risk is expressed as the relationship between a particular hazard or threat that may degrade, or worse, devastate, the building’s security, operations and functionality and the consequences that result from this degradation of performance.
Resilience is the ability of a building or asset to recover from, or adjust, easily to misfortune or change. The ability to prepare and plan for, absorb, recover from, or more successfully adapt to actual or potential adverse effects as reflected in the aforementioned Four Rs.
Sustainability of an asset is determined by its ability to meet the needs of the present while being able to maintain its functionality over time without not being harmful to the environment or depleting natural resources.
The following diagram created by Mohammed Ettouney and Sreenivas Alampalli in their books on Infrastructure Health in Civil Engineering, presented the relationship of threat, vulnerability and consequences to risk as follows:
The physical review of the property is conducted in conjunction with the Phase I environmental site assessment and the property condition assessment and includes a review of the property’s resiliency features like hardened walls, raised electronic and network connections, secondary systems.
No building operates in a vacuum: Its resiliency, in particular, is directly connected to its location and is directly affected by the surrounding neighborhood, the community, and natural and man-made risks (hazards).
Based on a property-specific assessment including use of mapping services, our team of professionals evaluate a building’s resiliency and sustainability resulting in a rating from 1, not resilient or sustainable (High Risk) to a 5 (Highly Resilient). Our objective is to provide investors with the information they need to make prudent investment decisions that account for the physical, environmental and social risks to the cash flow stream and market value of the building.
At the conclusion of our procedures, we identify land and building improvements that would enhance a property’s resiliency and sustainability. The economics of each improvement or enhancement is assessed in a cost-benefit analysis.
We then evaluate the tradeoffs between performance of a building over its life-cycle and the cost of improving the building systems to ensure its sustainability and resiliency. Accordingly, we evaluate the total cost of ownership (TCO) by determining the capital cost of the property including any improvements plus the present value of the future expenses of operations, maintenance, utilities and the estimated cost to recover from a calamity.
By Counterpointe Energy Solutions
You can view the original article here.
Historically, making energy efficiency improvements to buildings has been uneconomic for owners of commercial real estate. There are structural reasons why leased commercial properties have traditionally lagged all other properties types in terms of energy efficiency. The results? Billions of dollars of inefficiencies, hurting the environment as well as most companies bottom lines. “Energy use in buildings is a $400bn to $500bn a year problem,” according to Stephen Selkowitz of the Lawrence Berkeley National Laboratory. Worse, tenants are inhabiting buildings with outdated infrastructure for seemingly no reason. These problems are well-understood, and the solutions are readily available, so what is holding commercial properties back?
THE SPLIT INCENTIVE
Common types of commercial leases, such as triple net or modified gross leases, make tenants responsible for energy bills. As a result, the benefits of any reductions in operating costs from energy efficiency upgrades accrue to tenants. As great as that is for the tenant, it leaves the property owner holding the bag and bearing the total cost of those capital improvements. So not surprisingly, property owners have virtually no reason to invest in improvements. They utilize equity for no return. This conundrum is known as “the split incentive”. Given this raw deal, it is no wonder that property owners have been reluctant to engage in energy efficiency projects.
PACE IS THE SOLUTION
Enter Commercial Property Assessed Clean Energy (C-PACE), an innovative financing option that can be used to finance 100% of renewable energy, energy efficiency and resiliency improvements to commercial properties. PACE financing also covers all development and soft costs, so there are no out-of-pocket expenses for the property owner. C-PACE solves the split incentive problem and uses the commercial lease structure to the owner’s advantage. Since it is an assessment, not a loan, C-PACE payments are paid with property taxes. And in most triple net and modified gross leases, tenants pay their share of property taxes. So now, the tenant who benefits from the upgrade is also responsible for repayment – thereby solving the split incentive problem.
For property owners, C-PACE is a definite win. They get to upgrade their assets, with no out-of-pocket expenses. The improved properties have lower energy bills, resulting in lower operating expenditures and higher valuations. The properties can also be marketed as “green”, allowing owners to take advantage of any rent premiums for environmentally friendly buildings, as well as better cap rates upon sale
Recently upgraded buildings are also an added selling point when attracting new tenants and buyers. For example, the World Green Building Council reported in 2016 that greener retail buildings correlate with happier customers and higher revenues for stores. When it comes time to find new tenants or renegotiate terms of a lease, property owners will benefit handily from having made a C-PACE assessment.
Tenants also benefit from C-PACE. Most C-PACE programs require energy efficiency improvements to have a savings-to-investment ratio greater than one. This means that tenants should be able to make each C-PACE repayment with only the funds they have saved from lower energy bills – and still have cash left over that they can pocket. Tenants additionally get to inhabit improved buildings with brand new HVAC, windows, chillers, and other features.
The community likewise benefits from the environmental impact of C-PACE. Energy efficiency reduces the emissions of greenhouse gases, minimizing smog and asthma-inducing particles and diminishes the need for environmentally disruptive fossil fuel extraction methods.
Energy efficiency has long been a difficult investment for owners of commercial real estate. C-PACE flips this script – energy efficiency projects are now not only a good idea but are a slam dunk for commercial property owners.
With the growing awareness of the threat from rising seas, there is a fundamental point of confusion. It is widely believed that “green projects,” energy efficiency, and better public transportation can “solve sea-level rise.”
This popular notion is even showing up in candidates’ platforms for the upcoming election. It is simply wrong.
The warming of the planet, now about 1.5 degrees Fahrenheit over the last century and headed for at least double that level, correlates with increased carbon dioxide levels in the atmosphere from fossil fuel use — the so-called greenhouse effect. Even the controversial 2015 Paris Climate Agreement only aims to keep the temperature rise to 50 percent further warming, and recognizes we are not instituting the changes to reach even that modest goal.
Efforts to slow and reverse that warming should be our highest priority. Those efforts should focus on reducing energy consumption and switching to renewable sources, such as solar energy. Improved mass transit, electric vehicles, and more use of bicycles are all efforts that will contribute to slow the warming.
Also, developing technology to remove carbon from the atmosphere or lock carbon in plant matter — trees, the Everglades and even algae — can help reduce the warming atmosphere. But none of those efforts can soon stop sea-level rise.
Rising sea level is primarily caused by the melting of the ice sheets on Greenland and Antarctica, which is happening at an accelerating rate because of the extraordinary heat alreadystored in the oceans. The oceans also expand slightly as they continue to warm. Those two causes of rising sea level cannot be stopped in the next few decades, even if the entire world could magically switch to 100 percent solar energy right now.
Our oceans, atmosphere, and planet have gotten warmer primarily because the heat-trapping CO2 (carbon dioxide) level is now 410 PPM (Parts per million), 40 percent higher than any time in the last 10 million years.
That greater atmospheric insulation adds heat to the sea equivalent to four nuclear bombs every second of every day. Like a giant outdoor swimming pool, the ocean retains heat even if the air temperature cools. That extra ocean heat will continue to affect our weather and melt glaciers for many decades, even if we can slow the warming.
The latest projections from International and national science organizations and the Southeast Florida Regional Climate Change Compactsay that we need to plan for a few feet of higher sea level by mid-century and as much as 6 to 8 feet by the end of the century.
Thus, it is imperative that we now separate three quite distinct problems and solutions. A solution to one will not soon have any effect on the other two.
Reduce emission of greenhouse gases and even remove them from the atmosphere. SOLUTIONS: Energy conservation, switch to renewable energy sources, improve public transportation, promote bicycle use, plant trees and develop affordable technologies to take carbon dioxide out of the atmosphere.
Prepare for extreme weather events. More heat in the oceans and atmosphere produces stronger storms, more rainfall, droughts, and wildfires. SOLUTIONS: Buildings, infrastructure, and building codes should be designed to accommodate periodic flooding, improve drainage, use less energy, etc.
Adapt for rising sea level: Higher sea level will change coastlines and marshlands all over the world and means ever increasing high tides and worse temporary flooding from storms, rainfall and runoff. SOLUTIONS: Elevate buildings and infrastructure (better building codes), install temporary flood barriers for extreme events, and ultimately, accept that coastlines will change.
Our futures require that we design and implement personal, community, and governmental policies to respond to these three threats: elevated greenhouse gases, extreme weather events, and sea level rising ever-higher.
It is great to see that politicians, the public, and professionals are developing greater concern for climate change and rising sea level. Recognizing that these three challenges demand separate solutions is the only smart path forward — and upwards.
John Englander is an oceanographer and author of “High Tide On Main Street.” He is also President of The International Sea Level Institute, a new nonprofit think tank and policy center. His weekly blog and news digest can be found at www.sealevelrisenow.com
“The Invading Sea” is a collaboration of four South Florida media organizations — the South Florida Sun Sentinel, Miami Herald, Palm Beach Post and WLRN Public Media.