Santa Fe’s Climate Action Task Force
Jack McGowan, CEM and Beth Beloff
Santa Fe and the U.S. must fully leverage energy efficiency and renewables for many reasons, including climate change. Doing just that is the charge of an exciting collaboration between the city and private citizens serving on Santa Fe’s Climate Action Task Force (CATF). The CATF Energy Efficiency/Renewable Energy (EE/RE) and finance groups include 30 industry professionals. These working groups were formed to make recommendations that will drive positive action. The Finance Group advises all of the working groups on innovative financing options.
Timing for renewable energy couldn’t be better since solar photovoltaic (PV) systems cost 60 percent less than five years ago. Costs and other factors have resulted in nearly 20 states being at or near, grid parity; meaning the cost of electricity from home solar systems is at or below that of local utilities. Owners of net-zero-energy homes know this is true.
Efficiency is the single greatest untapped source of energy on Earth. The American Council for an Energy-Efficient Economy (ACEEE) purports that the U.S. could cut energy consumption 60 percent by 2050, preserving natural resources and avoiding greenhouse gas emissions. Amazingly, ACEEE estimates this could save up to $400 million per year, or about $2,600 per household. These were motivators for Mayor Javier Gonzales to ask CATF EE/RE and finance working groups for fast-track recommendations.
To truly grasp EE/RE’s importance, it helps to understand the larger energy picture, beginning with consumption. This Energy Information Administration (EIA) chart, published annually, provides valuable perspective on U.S. energy consumption.
The focus here is on residential and commercial, large end-use sectors in Santa Fe and New Mexico that make up 41 percent of national consumption. Industrial use is limited here, and CATF Transportation Working Group efforts are covered elsewhere. EIA charts below answer the next question: What is energy used for in residential and commercial buildings? It may not be clear at first glance; but we also know that different types of energy, electricity or natural gas, are consumed for different end uses. For example, heating is a major residential end use that consumes mostly natural gas, but energy cost is also critical when analyzing EE/RE projects. Environmental impact is key too. Electricity is the highest-cost fuel with the most environmental impact.
Even though electricity accounts for ~40 percent of home energy consumption annually, it represents ~70 percent of total energy cost.
It is common knowledge that energy can be managed to reduce consumption, which in turn offers major environmental and economic benefits. Most people wonder, “Where do I start, and what investments should I make?” Energy management provides these answers by starting with an energy history, or “baseline” of consumption that is collected from utility bills. The next step is to compare, or “benchmark,” city buildings, homes, etc. to other similar buildings to see how well they are performing. This is like comparing the mpg between two cars. EnergyStar® has published consumption data for buildings nationally. Next, this information and the building itself are analyzed to break down how energy is used, as in the EIA chart, and to prioritize ways (projects) to save energy and money. The best practice is to complete efficiency projects first and then look at renewables. Efficiency can involve changing use behaviors, but the most value is created by projects that install new, efficient appliances and equipment, which save energy and money. These savings make it possible for efficiency projects to pay for themselves. Financing is important because it can provide cash to pay for the project, and savings, in the early years, are used for repayment. To help with all this work, cities and commercial building owners can start with energy consultants or energy service companies (ESCOs). The NM Efficient Use of Energy Act also requires utilities to assist with commercial and residential efficiency.
After efficiency projects are complete, it is important to make sure that savings materialize. Big Data for Energy is the next frontier in this effort, that will host all of this information in the cloud to track savings over time and notify owners if savings falter. Think of this like a fitbit™ for energy.
There is one last important thing to understand about electricity: Renewables can be installed on the utility (supply) side of the meter, or the customer (demand) side of the meter.
This graph shows the path of energy from coal power plant to the plug. The customer meter separates supply and demand sides. Clearly today’s electric system is inefficient, making renewables at the home even better, an idea utilities don’t like. Utilities want to build solar on the supply side so they can keep selling electricity. Efficiency and renewables take money away from utilities, and they don’t like that. No business would. Wanting customers to keep buying electricity doesn’t make utilities bad, but the world is changing. Efficiency and renewables are “disruptive technologies.” Disruption occurs whenever there is a better way to do something, causing customers to change buying choices. We still need an electric system, but it cannot continue as it is today. In New Mexico, electricity and natural gas are regulated monopolies, so these businesses don’t react to market forces like others do, and that makes it harder to get “better ways” (efficiency and solar products) to market. Monopoly status also stifles innovation and cause utilities to protect the status quo. There are no bad guys here; rather, there is a system that needs to change so that we can encourage innovation, including efficiency and renewables throughout the electric system.
Toward the goal of encouraging energy innovation around efficiency and renewables, and in support of city goals to reduce energy consumption and greenhouse gas emissions, the CATF presented the following recommendations to City Council in May. These are short-term actionable objectives, some leveraging and enhancing ongoing city efforts, and are all practical within the city’s economic framework.
1. Establish goals and benchmarks to reduce citywide energy consumption and greenhouse gas emissions.
2. Pursue energy savings performance contracting for city facilities with an Energy Service Company (ESCO).
3. Scale up solar-distributed generation projects on city facilities.
4. Strengthen and expand energy-efficiency programs and solar-energy projects in commercial and residential sectors.
5. Educate and inform the public about available programs.
6. Utilize creative financing options to pay for programs and projects.
Some recommendations are already gaining traction with city programs for: green lodging, community solar, increased efficiency and renewable funding for homeowners through Homewise and others, streamlining solar permitting, and a resolution to pursue low-interest financing for city efficiency and renewable projects. These programs have both environmental and economic benefits, including creating jobs.
Another CATF recommendation was that the city oppose PNM’s rate increase, including the solar access fee, which were felt to produce inequitable impacts on our community and starkly reduce the cost effectiveness of residential solar projects.
The working groups studied innovative financing options to fund city programs and projects leading to development of this matrix. Further discussion on some funding options is provided below the matrix.
Qualified Energy Conservation Bonds (QECB)
The city of Santa Fe can use interest-rate buy-downs on bonds to provide low-cost financing to pay for projects that reduce energy consumption in public buildings by at least 20 percent, or to implement green community programs. QECBs can be used for wide-ranging purposes, including EE/RE projects and community energy conservation programs. A maximum of 30 percent of QECB allocations may be used for private activity purposes. There is no expiration date for QECBs, and currently there is $20M allocated for New Mexico.
Property Assisted Clean Energy (PACE)
In New Mexico PACE programs help building owners pay for the upfront costs of renewable-energy technologies, which the property owner pays back through an increase in property taxes by a set rate over ~20 years. This allows property owners to begin saving on energy costs while they are paying for their energy improvements. Property owners usually have net gains even with increased property tax. A challenge with PACE funding in Residential is lien priority. PACE loans are subordinate to the primary mortgage; however, the loans can be taken over at the time of sale. Therefore PACE in Santa Fe is focused on commercial owner-occupied projects, and the county has already created a Special Assessment District for PACE.
On-bill financing refers to a loan made to a utility customer—such as a homeowner or a commercial building owner—to pay for energy-efficiency improvements to houses or buildings. Regular monthly loan payments are collected by the utility on the utility bill until the loan is repaid. On-bill financing programs are a great way for utilities to help customers invest in energy-efficiency improvements and create local jobs. Unfortunately, no New Mexico utilities are offering on-bill financing.
The fact that Santa Fe has a CATF is a testament to our mayor. It is nearly unprecedented to have 70-plus local professionals in diverse fields working with a city on such efforts. Around the country cities have energy and sustainability councils, but not multi-disciplinary efforts addressing those issues, plus transportation, land management, food and water security and waste management as well. Tasking such a group to drive action is also unique. It is both exciting and rewarding to see such an effort formed and driving results so quickly. Thanks to all the city staff for making this possible, and to the citizen experts for giving selflessly of their time.
Jack McGowan chairs Santa Fe’s Climate Action Task Force EE/RE Working Group. He is a Certified Energy Manager and served as director of the Energy Conservation and Management Division in New Mexico.
Beth Beloff co-chairs Santa Fe’s Climate Action Task Force Finance Working Group and is on the Sustainable Santa Fe Commission. She has been in the sustainable development world as a founder of nonprofit think tanks and as a consultant since 1990.