Study Details Renewables’ Impact On California’s Economy
A new study on the economic effects of existing climate and clean energy policies in California’s Inland Empire estimates a net benefit of $9.1 billion in direct economic activity and 41,000 net direct jobs from 2010 to 2016.
When accounting for the spillover effects of these benefits, the net value jumps to $14.2 billion in economic activity and over 73,000 jobs over the same seven-year period, according to the study, “The Net Economic Impacts of California’s Major Climate Programs in the Inland Empire,” released by nonprofit group Next 10, which commissioned researchers from UC Berkeley’s Center for Labor Research and Education and the Center for Law, Energy and the Environment to prepare the report.
The study focuses specifically on San Bernardino and Riverside counties, which both face unique economic and air-quality challenges. The report analyzes not only the benefits of California’s climate and clean energy policies, but also compliance expenditures, investment expenses and other costs.
“The Inland Empire is extremely important to the economy of California and is uniquely at risk to environmental and economic challenges,” says F. Noel Perry, founder of Next 10. “This report indicates that overall, policies including cap and trade and the renewable portfolio standard, as well as energy efficiency and distributed solar programs, are contributing jobs and economic benefits.”
According to Next 10, smog in San Bernardino and Riverside counties is consistently among the worst in the state, and, as a result, more residents are diagnosed with pollution-related health conditions. Residents’ per capita income is approximately $23,000, compared with the state average of $30,000, placing the region among the lowest-earning metro areas in the state. Furthermore, 17.5% of the residents of Riverside and San Bernardino counties are living below the poverty line, compared with 14.7% of all Californians, the study says.
Researchers looked at four key California climate and clean energy policies, including cap and trade, renewable portfolio standards (RPS), distributed solar policies, and energy-efficiency programs, to determine whether they are helping or hurting the Inland Empire’s economy.
“The Inland Empire has benefited overall – no question. But as happens with any economic transition, the move toward a low-carbon economy creates challenges for certain industries while boosting others,” notes Betony Jones, the report’s lead author and the associate director of the Green Economy Program at the Center for Labor Research and Education.
The report finds that the construction industry benefited most from these policies: It found an increase of over $9.6 billion in business investment and 36,000 jobs from 2010 to 2016, mostly from the development of wind and solar projects. Firms involved in the operation of new wind and solar power plants increased revenue by $1.8 billion and created over 900 ongoing maintenance jobs, the report says. In addition, local retailers, wholesalers and real estate establishments saw revenues and job counts rise.
According to the study, those facing challenges included companies involved in fossil fuel power generation; the authors modeled a negative impact of $1.7 billion in sales and over 1,100 jobs in the Inland Empire from 2010 to 2016. The model shows that businesses involved in extracting oil and gas lost almost $15 million in sales and over 40 jobs, the report notes.
“Employment and sales trends highlight the need for robust transition programs that can help workers and communities affected by the decline of greenhouse gas-emitting industries build good futures in the emerging clean energy economy,” says Ethan Elkind, a report contributor from the Center for Law, Energy and the Environment. “That’s one of the recommendations we make in the report.”
The researchers found that the proliferation of renewable energy plants was responsible for over 90% of the direct benefit of California’s climate and clean energy policies in the Inland Empire. As of October 2016, San Bernardino and Riverside counties were home to more than 17% of the state’s renewable generation capacity, according to the California Energy Commission. The region totals 3,721 MW of renewable capacity – enough to power 2.6 million homes – with projects representing another 2,162 MW already permitted and awaiting construction, according to the report.
“Constructing new renewable power plants created the largest number of jobs, generating 29,000 high-skilled, high-quality direct jobs over the seven-year period,” Jones says. “When you incorporate ongoing jobs in operations and maintenance, as well as spillover effects to the economy that boost other areas of employment, a total of over 60,000 jobs were created, even after accounting for job losses in the natural gas industry. In total, the net impact in the region from the renewables portfolio standard exceeded $12.4 billion and helped boost the Inland Empire’s competitive advantage in the renewables sector.”
Cap and trade
After accounting for compliance costs and investment of cap-and-trade revenue that leaks out for vehicle purchases, researchers found cap and trade had a net positive economic impact of $25.7 million in San Bernardino and Riverside counties from the first four years of program implementation (2013-2016). That includes $900,000 in tax revenue and net economy-wide employment growth of 154 jobs. When funds that have been appropriated but have not yet been spent are included, projected net economic benefits reach nearly $123 million, with 945 jobs created and $5.5 million in tax revenue, the report finds.
“The legislature’s recent decision to advance cap and trade through 2030 creates a level of certainty going forward, and our research indicates that’s good for the Inland Empire’s economy,” Elkind explains. “We recommend disbursing auction proceeds in a timely manner and ensuring the Inland Empire receives a fair share of the money, given the region’s needs. It’s also worth considering dividends to consumers to account for the region’s higher-than-average transportation fuel and electricity use.”
Distributed solar and energy efficiency
The researchers also looked at the costs and benefits of the California Solar Initiative, solar investment tax credit and investor-owned utility energy-efficiency programs. These programs provided about $1.1 billion in subsidies in distributed solar and $612 million in investments in energy efficiency in the Inland Empire between 2010 and 2016.
While researchers calculated benefits for these two programs separately, the costs to ratepayers must be considered as a whole, they say. When costs to ratepayers are weighed against the job and economic benefits of distributed solar and energy-efficiency programs, the net impact resulted in the creation of more than 12,000 jobs and $1.68 billion across the economy.
While the state subsidies for distributed solar have been fully implemented, sharply reduced costs, the federal tax credit and net metering continue to drive solar investment, the study points out. Researchers found that the Inland Empire has enormous potential for continued investment and improvements in energy efficiency, however; it is one of the hottest regions in the state, and energy use is above the state average.
“With such a great need for cooling and relatively higher energy demand, the Inland Empire is a prime candidate for expanded efficiency investment. Our report recommends expanding energy-efficiency incentives and expenditures to improve the building and housing stock while reducing energy costs and creating jobs and economic activity,” Jones adds.
Given the economic benefits of California’s climate and clean energy policies in the Inland Empire, the researchers offered recommendations for maintaining and improving results going forward:
Developing a comprehensive transportation program, equal to California’s renewable energy programs, to maximize benefits and minimize harm for local industry and residents. The importance of warehousing and logistics and the distances traveled by residents each day to and from work makes transportation the greatest unknown of California’s climate program.
Disbursing auction proceeds in a timely and predictable manner and ensuring that the Inland Empire receives an appropriate level of statewide spending based on its economic and environmental needs.
Developing robust transition programs for workers and communities affected by the decline of the Inland Empire’s greenhouse gas-emitting industries, including re-training and job placement programs, bridges to retirement, and regional economic development initiatives.
“Other states and nations look to California for leadership on climate and clean energy, both to learn from our experience and to craft their own policies,” Perry concludes. “We hope this report gives policymakers and stakeholders the concrete data they need to weigh policy options and invest in the best choices to minimize costs for the most vulnerable – in the Inland Empire and beyond.”
Fifty Entities Urge N.C.’s Cooper To Take Offshore Action
On Aug. 9, 50 elected officials, small businesses, community groups and environmental organizations sent a letter to Gov. Roy Cooper, D-N.C., to urge him to embrace offshore wind as a key part of North Carolina’s energy plan.
According to signee Environment North Carolina, the letter comes in the wake of the recent passage of H.B.589, which included an amendment to set an 18-month moratorium on onshore wind power developments. After signing the bill into law, Cooper issued Executive Order 11, which expressed support for wind power. Though the order was a promising statement about the future of offshore wind, says Environment North Carolina, the letter signees are urging him to go further by backing it up with tangible investments and a specific target for wind energy production.
“With strong energy demand, good wind resources, port access, excellent academic institutions and maritime know-how, the Tar Heel State can usher in a new era of economic development,” says Simon Mahan of the Southern Wind Energy Association.
In January of this year, Avangrid Renewables won the rights to develop an area of 122,405 acres off the coast of Kitty Hawk. That area alone is capable of providing enough clean power for 500,000 homes, says Environment North Carolina.
“North Carolina has immense potential to harness the vast energy from the winds off its shores,” says Connor Rockett on behalf of Environment North Carolina. “A clear commitment from the governor to develop and invest in offshore wind power would help transition us from fossil fuels and move North Carolina closer to a future powered entirely by clean, renewable energy.”
The letter also highlights “the risk that sea level rise and storm surges pose to North Carolina’s thriving coastal economy and ecosystem.” With these coastal communities and landscapes under threat from climate change, the letter cites the importance of the rapid adoption of clean energy technologies, says Environment North Carolina.
“Meaningful progress on this clean, renewable energy source is now more critical than ever as the window of time to combat global climate change narrows,” adds David Carr, general counsel at the Southern Environmental Law Center. “With action stalling at the federal level, it is up to states to take the lead in reducing carbon emissions.”
Rockett adds, “The development of offshore wind power in North Carolina will fit in with efforts across the nation to reduce fossil fuel usage and ultimately respond to the challenges posed by global climate change.”
Another City Takes 100% Renewables Pledge
Nevada City, Calif., has joined the growing list of U.S. cities that are officially committed to transition to 100% clean, renewable energy.
Surrounded by city council members, key members of the community and partners, Nevada City Mayor Duane Strawser announced the city’s near-unanimous vote to ensure that the city’s electricity will come entirely from renewable sources by 2030 and that all energy sources would be renewable by 2050.
According to the Sierra Club, Nevada City is now the 41st city in the U.S. to establish a 100% renewable energy goal, which also comes on the heels of similar pledges from other mountain communities, including South Lake Tahoe, Calif., and Park City, Utah.
“Nevada City’s commitment for 100 percent renewable energy is driven by our community,” said Strawser. “The passion for the natural environment and our responsibility to take care of it is part of the fabric of what makes Nevada City a very special place to live. I challenge other communities across the nation to join us in this goal.”
The Sierra Club says Nevada City’s resolution is grounded in a burning reality as the growing impacts of climate change threaten the mountain community. Fourteen of the 15 hottest years on record globally have occurred since the beginning of this century, and 2017 is predicted to be the second warmest on record.
“If this summer is any indicator of what climate change can mean for the future of our community, it is time to do all we can to avoid its impacts,” said Don Rivenes with the Nevada County Climate Change Coalition. “Over the last three years and particularly the last few months, we have seen citizens from across our community come together to tackle climate change by helping our city officials take bold action. We’re thrilled to see Nevada City commit to 100 percent renewable energy today.”
Nevada City has an existing Energy Action Plan (EAP) with a goal of a 28% reduction in electricity use by 2020. The resolution will lead the way toward updating the EAP to transition to 100% renewable energy by 2050.
“The Sierra Nevada Alliance [SNA] is proud to work with cities like Nevada City,” said Jenny Hatch, SNA’s executive director. “Nevada City recognizes the many impacts on the local economy and environment that climate change will bring. At Sierra Nevada Alliance, we bring together the passion to fight climate change with the passion to protect our mountain communities to make an unstoppable force for change. That’s why it is no surprise that mountain cities are leading the way on renewable electricity.”
Patent Wars Flare Again: GE Tags Vestas For ZVRT In U.S.
On Aug. 1, GE filed a complaint, 2:17-CV-5653, in the U.S. District Court in the Central District of California alleging that Vestas is infringing a patent on zero-voltage ride through (ZVRT). GE contends that the Vestas V90-3.0, V100-2.0, V112-3.0 and V117-3.3 wind turbines comprise technology that utilizes a converter control system capable of riding through a grid voltage drop down to “approximately zero volts.”
Interestingly, this is the same patent that was used by GE in a previous patent litigation against Mitsubishi Heavy Industries. During the course of those patent litigation trials, the patent went through a “re-examination” process at the U.S. Patent & Trademark Office to determine whether it was a valid patent. While the GE patent seems to have been battered a bit through that re-examination process, it has survived mostly intact and is considered valid.
In this new complaint, GE lists the San Gorgonio Wind Farm, Brookfield Wind Farm, Alta II-IX Wind Farms and Solano III Wind Farm, which comprise Vestas turbine units, as potentially infringing the ZVRT patent. GE also cites other U.S. project sites where the same turbine models have been installed in California, Texas, Oklahoma, New Mexico, Maine, New Hampshire, Vermont and Kansas.
Pending litigation against Vestas in the other states referenced is unknown at this time. However, for the project sites identified in California, GE is within its rights to request an injunction on the ongoing operation of those projects in order for the potentially infringing technology in the converter control system to be removed or otherwise altered. This type of injunction creates a significant financial risk that goes well beyond the commercial damages of the patent litigation, considering the injunction could further expose liquidated damages for lost production.
Vestas may be listed as the only defendant in the court trial, but typically in such matters, it is not alone. Project developers and asset owners share in the risk due to the terms typically used in turbine supply agreements throughout the industry by multiple OEMs. Surprisingly, most OEMs do not fully indemnify developers and asset owners from patent infringement liability.
As we saw in the U.K. recently when Enercon sued Siemens for patent infringement on wind turbine controls, project developers and even engineering, procurement and construction contractors may have some responsibility and liability for patent infringement. The Enercon litigation against Siemens had threatened over $5 billion worth of projects in the U.K. offshore sector. Even though the lawsuit was ultimately decided in favor of Siemens, it highlights the shared risks noted previously, considering both DONG and A2SEA were named as co-defendants in the litigation trial.
Though Siemens was likely contractually obligated to defend DONG and A2SEA in the trial, there was a chance that Enercon could have been successful with an injunction that may have delayed the start of project construction on both Westermost Rough and Gunfleet Sands. Equally, London Array could have faced a shutdown order until the potentially infringing technology was removed from the turbine control systems.
But how does a matter like this end up in court? Why aren’t the similarities between products and competitor patents uncovered during the product design/development process, when it is easier and less costly to change the design? Why aren’t intellectual property risks identified and mitigated during the project finance due diligence or type certification process? Why do the insurance underwriters continue to ignore $2.3 billion in total patent infringement liabilities in the wind sector?
Sadly, this matter was probably avoidable, as is the case so many times in patent infringements. Intellectual property (IP) risk is not considered a “real” risk by most companies unless litigation happens. But you don’t have to see the inside of a courtroom to suffer commercial harm.
In the complaint filed in the California court, GE cites a number of documents that make reference to the Vestas product specifications for the V90, V100, V112 and V117. Such documentation pops up quite frequently online when project developers are obligated to reference such documents for siting committees and the like. Although many documents comprising technical specifications and other proprietary information are redacted when shared in the public domain, not all of them are.
But the key isn’t to simply avoid being caught.
So how do we keep OEMs and others out of court? An independent IP due diligence, similar to getting a type certification, is the simple answer. Proactive companies that have already undertaken this have saved a collective $293 million in royalties they would have otherwise paid to companies like GE. They avoided the cost by identifying where the potential land mines were and navigating a path around them during product design.
Presently, independent IP infringement risk certification is not mandated in the wind industry (or virtually any other industry in which project finance is utilized). Most turbine OEMs provide their own internal data and validation to turbine purchasers and project financiers – but only if asked and typically only in matters related to publicly acknowledged patent infringement litigation in which a competitor is known to be in active litigation (such as this new matter between GE and Vestas).
But in-house validation from the OEM is, indeed, not an independent assessment. What most turbine OEMs do not realize, or else they have not publicized, is that they are all infringing on one another to a certain degree. The only reason more litigation has not sprung up is due to the recognition of the mutual costs of pursuing patent infringement litigation against one another and the inevitable counter-suits each would face.
No one should ever want to see the inside of a courtroom for an IP litigation, but the time to understand the risk profile is not right before you have one foot past that threshold. – Philip Totaro
Philip Totaro is founder and CEO of Totaro & Associates LLC, a market research and strategy consultancy. He can be reached at email@example.com.