The Texas Tribune: Texas, Where Oil Rules, Turns Its Eye to Energy Efficiency

As the state’s population keeps surging, demand is expected to grow, prompting leaders to think about how it will meet its long-term needs.

Now, a diverse coalition, which includes renewable energy advocates, city officials, bankers and others, is racing to institute a plan to increase energy and water efficiency upgrades that supporters say could help Texas improve its conservation record and become a model for other states.

“We’re such a big energy user,” said Kip Averitt, a former Republican state senator who is part of the effort. “That means our opportunity to be efficient is huge as well.”

Supporters acknowledge the challenge of avoiding pitfalls that have tripped up similar efforts elsewhere.

The approach, known as Property Assessed Clean Energy, or PACE, addresses the biggest barrier to efficiency investments: initial costs that can take years to recoup. A law allowing cities and counties to set up programs passed this year with overwhelming support in the Legislature.

PACE allows the owners of commercial and industrial property to use a property tax lien to finance energy efficiency upgrades like solar panels and water recycling systems. PACE programs bill an owner through the lien and forward payments to a private lender. Under a smooth-running program, property owners pay less than what they save on their energy bills. If a property is sold, the new owner would inherit the debt — a rule meant to further reduce the risks of investment.

Tony Bennett, the president of the Texas Association of Manufacturers, said that after scrutinizing PACE, his group was backing the plan. “We don’t like subsidies,” he said. “We don’t like picking winners and losers.” But PACE is different, he said, and it would spur investments that could help his group’s 450 businesses cut costs.

Thirty other states allow similar financing plans, though most apply only to energy, unlike in Texas. Most of the states have stumbled, largely because of the objections of mortgage regulators, who feared that PACE liens would take precedence over mortgages if a homeowner defaulted. And in California, one of a few states that has had investment under PACE, observers say, a patchwork of rules across cities has discouraged investors from financing projects statewide.

“We have some baggage to overcome,” said Charlene Heydinger, a lawyer leading the Texas coalition, called Keeping PACE in Texas. But she and her colleagues say they benefit from their state’s late entry to the movement and ability to learn from others’ stumbles.

The coalition is devising what it calls “PACE in a Box,” a model it hopes many of Texas’ 254 counties and more than 1,200 cities will adopt, encouraging consistency in a state that values local power. It plans to unveil the program by the end of the year, and it is raising money to travel and make pitches to local governments.

Many PACE supporters would prefer the program to apply to home upgrades as well. But by focusing solely on commercial and industrial properties, advocates have garnered support from bankers.

In a state where industry guzzles more than half of the energy used and makes up close to 20 percent of all the industrial consumption in the United States, the narrowed focus could have an impact on energy demand.

“The scale here is so much bigger, said Doug Lewin, the executive director of the South-central Partnership for Energy Efficiency as a Resource, based in Austin. “I think Texas could be a leader in energy efficiency.”

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U.S. Revives Aid Program for Clean Energy

The Obama administration has decided to revive a controversial loan guarantee program at the Energy Department, administration officials said on Thursday, even as the program remains under Congressional scrutiny after losing hundreds of millions in taxpayer money on investments in failed green energy start-ups like the solar module maker Solyndra.

This time, though, the program would devote as much as $8 billion to helping industries like coal and oil make cleaner energy. Although the program, which does not require Congressional approval, would support a wide range of technologies, it could help coal-fired power plants find a way to keep their emissions from escaping into the atmosphere, department officials said.

Officials say the federal subsidies are necessary to support the development of technologies that are too complex, unproven and expensive for investors and private companies to pursue on their own, assertions that have already stirred criticism from opponents who see the program as too risky and a misuse of taxpayer money.

The program’s renewal comes just as the administration is releasing stringent environmental rules that would severely restrict air pollution at new coal plants.

“We have a real problem, and that’s, ‘How do we get new technology to market?’ ” said Peter W. Davidson, executive director of the loan program office at the Energy Department. “We partner with industry developers and entrepreneurs to demonstrate a new technology at industrial scale or utility scale, and hopefully once that technology is proven by deployment at scale, we step out of the way,” and let the private debt markets take over.

A spokeswoman for the House Committee on Energy and Commerce, which is controlled by Republicans, who have been critical of the loans in the past, took a skeptical view of the program.

“The D.O.E. loan guarantee program’s history of mismanagement, bankruptcies and failure to deliver the jobs promised raises significant concerns about risking billions in additional taxpayer dollars,” Charlotte Baker said. “We are supportive of efforts to encourage the development of advanced fossil fuel technologies, but we are skeptical that federal loan guarantees are the best way” to bring this about.

Analysts and climate experts also questioned whether the program, which was originally established in 2005 and whose new guidelines will be completed this fall, could make the technologies economically viable on a mass scale. There are currently no ventures in the United States that achieve this, despite years of government-sponsored research and development, according to the Congressional Research Service. An ambitious clean-coal demonstration project called FutureGen, proposed by President George W. Bush in 2003, has yet to advance beyond the early development stages.

“It seems sound policy for the administration to provide these loan guarantees,” said Paul Bledsoe, a former energy aide in the Clinton White House who is now a senior fellow at the German Marshall Fund. “The real question becomes, ‘Is that adequate to actually prompt significant numbers of new builds?’ and I think that the answer so far is no.”

The Energy Department’s loan program was created in 2005 under President Bush to spur commercial adoption of innovative technologies or those that avoided, reduced or permanently stored pollutants. In 2008, Congress added another section, for more fuel-efficient cars, and a year later created a temporary program to encourage renewable energy and electrical transmission projects.

That temporary program, which was responsible for the Solyndra loan, has since expired, but the department still has about $50 billion left that could be lent, with a large chunk earmarked for nuclear projects.

The department points to several successful investments from the loan program. Ernest J. Moniz, the energy secretary, has pointed to Tesla Motors’ early repayment of $465 million as an example. Mr. Davidson said that since his office financed the first six large-scale photovoltaic solar farms in 2010 and 2011, 10 big solar power plants had started or finished construction without any federal money. On a $34 billion loan portfolio, the government has lost about $800 million, he said. That’s about 2.3 percent, and only a small fraction of the $10 billion Congress set aside to cover losses.

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An Unusual Public Battle Over an Energy Nomination

WASHINGTON — The coal industry, feeling threatened by federal efforts to promote wind and solar power, has opened a counterattack by opposing President Obama’s nomination of a renewable electricity advocate to head the federal agency with jurisdiction over power lines.

The Senate Energy Committee is expected to hold a hearing Tuesday on the nomination of Ronald J. Binz to head the Federal Energy Regulatory Commission. Mr. Binz, 64, headed the Colorado Public Utility Commission from 2007 to 2011, where he was known for promoting renewable energy and efficiency, and for helping to draft a law that encouraged closing some old coal plants and cleaning up newer ones.

The fight over Mr. Binz has been unusually public, considering that the job at stake is at an agency most people cannot name.

“I’ve never seen anything quite like this,” said James J. Hoecker, an energy lawyer who is a former chairman of the commission. “It’s an extraordinary show that’s being put on right now.”

In April 2012, Mr. Binz was the lead author of a paper favoring “risk-aware energy regulation,” which argued for building wind farms and other sources of renewable energy as a hedge against future fossil fuel price increases and costly new pollution rules on burning coal or gas. He argued that renewable sources should be pursued even if they cost more than conventional ones.

But the coal industry maintains that Mr. Binz’s nomination is part of an administration strategy to further reduce the use of coal. “FERC is the last piece of the puzzle,” said Benjamin Cole, the spokesman for the American Energy Alliance, which is financed by coal and other fossil fuel industries. The administration’s goal, he said, was a low-carbon energy strategy that could not win the approval of Congress.

Environmental groups have rushed to Mr. Binz’s defense. Regulatory decisions “shouldn’t just be about cost,” said Dan Bakal, director of the electric power program at Ceres, an environmental advocacy group. “So often the least-cost mentality dominates, but you really have to think about the risks.” Ceres published Mr. Binz’s paper.

Neither Mr. Binz’s supporters nor his opponents have said exactly what he might do as chairman to advance renewable energy. Since Congress has not acted on climate legislation, the driving force for renewable energy is the states; the federal commission is limited to setting rules that enable such development rather than mandating it. Under the current chairman, Jon Wellinghoff, the agency has already created rules to encourage construction of transmission lines to places where renewable energy projects can be built.

The agency is also in charge of authorizing natural gas pipelines, and has a say in whether natural gas exports should be allowed. It also has some influence over how utilities prepare for digital attacks and extreme weather.

In the weeks before Mr. Binz was nominated in June, there was some speculation that the chairman’s job would go to John Norris, the senior Democrat on the five-member commission after Mr. Wellinghoff. But Mr. Norris told a trade publication, Transmission Hub, last week that the chief of staff of Harry Reid, the Senate majority leader, told him he would not get the job because he was considered “too pro-coal.” Mr. Norris denied being pro-coal, and Mr. Reid’s office denied the exchange.

Coal advocates are hoping that some coal-state Democrats, perhaps Senator Joe Manchin III of West Virginia, will not vote for Mr. Binz, creating a tie that could doom his nomination. In an attempt to portray him as radical, they are also raising the idea that Mr. Binz might be opposed to the greater use of cheap and relatively clean natural gas, which he once referred to as a “dead end.” (The reason is that natural gas emits far more carbon dioxide than would be allowed under President Obama’s long-term goal to reduce greenhouse gases.)

At the Electricity Consumers Resource Council, which represents large industrial customers, Marc Yacker, a vice president, said that the coal industry had some reason to be worried. The industry believes, he said, that “the whole idea of socializing the cost of new transmission necessary to get wind to population centers is anti-coal.”

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The Energy Rush: Foreseeing Trouble in Exporting Natural Gas

The reason? He is spearheading a public campaign against increased exports of natural gas, which he sees as a threat to a manufacturing renaissance in the United States, not to mention his own company’s bottom line. But many others say such exports would provide far more benefits to the country than drawbacks, all part of a transformation that promises to increase the nation’s weight in the global economy.

The debate has grown personal. In the words of Charif Souki, an energy industry executive promoting a new natural gas export facility, Mr. Liveris is both “self-serving” and a “hypocrite.”

Now it seems that one constituency where Mr. Liveris had gained a sympathetic ear, the federal government, may also have turned against him. Last week, the Energy Department approved another planned project to export natural gas, the second such proposal it has accepted since May.

The battle over natural gas exports reflects just how starkly the nation’s economic landscape is being reshaped by newfound energy supplies — much of the discoveries in the form of oil and gas being freed up by unconventional methods like horizontal drilling combined with hydraulic fracturing.

As environmentalists and industry advocates debate the merits and risks of fracking, as the practice is frequently called, its consequences are increasingly visible. Last week, the government reported a sharply improved trade balance for June, largely because of lower oil imports.

By 2020, new oil and gas production could increase the country’s economic output by 2 to 4 percent beyond what it otherwise would be, add as many as 1.7 million jobs and perhaps reduce the bill for energy imports to zero, according to a report by the McKinsey Global Institute.

“This is a giant turnaround,” said Daniel Yergin, a longtime energy expert and author of a recent book, “The Quest: Energy, Security and the Remaking of the Modern World.” “This is fundamentally improving the competitive position of the United States in the world economy.”

But that windfall is at risk if the government permits natural gas exports to increase quickly, Mr. Liveris warns.

“What a hand the United States has been dealt!” he said in an interview in his office here.

To nurture the nation’s good luck, he says, the government needs to plan an energy policy that carefully balances the interests of the oil and gas companies that want to freely export natural gas with those of industries like Dow Chemical that fear that an export boom could outpace domestic gas supplies and bring higher energy prices.

An Australian by birth and citizenship, Mr. Liveris has emerged as the principal opponent of unfettered natural gas exports. Mr. Liveris has founded a lobbying organization to promote his cause, and he sharply criticized an Energy Department report last December that said liquefied gas could produce $30 billion a year in export earnings without meaningfully driving up domestic gas prices for consumers.

“Why should we gamble?” he asked. “I think we should be out of the gambling business on energy policy. I mean, we’re not in the gambling business on food policy. We’re not in the gambling business on defense.”

After spiking in the last decade, natural gas prices in the United States have hovered between $3 and $4 per million B.T.U.'s this year. That is down from a high of $12 before the recession, and a fraction of what it costs in Asia and Europe.

That price differential is one reason exports are so appealing for domestic energy companies, who are willing to spend billions to build export facilities to ship liquefied natural gas in tankers in the hopes of selling it overseas.

On the other hand, cheap domestic supplies mean Dow — one of the biggest private consumers of natural gas in the country — and other chemical companies are now paying much less than their foreign competitors for the raw material they turn into products like plastic, raising profit margins. It could also bring back jobs to the United States as manufacturers that use natural gas for energy benefit, Mr. Liveris says, although that renaissance is just in its infancy.

Mr. Liveris withdrew his company from the National Association of Manufacturers this year when his ideas clashed with those of other members, particularly Exxon Mobil, which hopes to convert a Louisiana gas terminal that was built to import the fuel to process exports instead. In an interview, Ken Cohen, an Exxon Mobil vice president, said that having a major business leader like Mr. Liveris supporting “protectionism” is so incongruous that “it’s almost like man bites dog.”

Mr. Liveris even came close to withdrawing Dow Chemical from the American Chemistry Council over the export issue, until the trade group modified its pro-export position.

This article has been revised to reflect the following correction:

Correction: August 16, 2013

An earlier version of this article misstated the name of an industry trade group to which Dow Chemical belongs. It is the American Chemistry Council, not the American Chemical Council.

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