December 2006

Candle Power 2007

by Roger Feldman  --   Bingham, Dana L.L.P.
(originally published by PMA OnLine Magazine: 2008/01/05)
 

It was the night before Christmas and all through the Capitol good cheer was enfolding the darkening halls.  Rollicking choruses could be heard of “There’s No Partisan Like a Bipartisan” and thought of global warming simply crystallized snowflakes. The sages gathered to prognosticate as they do each year.

And yet . . . everyone knew that the energy grinch still stalked the halls and that the coming new year, one of elections no less, would stir it to particularly gothic frenzy. “Surely the lame duck president will want to leave a legacy,” quoth the pundits, “where else than in this critical field?” “That will be while the oversight hearings on the original Cheney energy plan of ‘00 are going on,” chortled a sour sage. “But green house gas is on everyone’s mind,” reminded an earnest elf, “corporations are voluntarily buying green power and Shell has actually denounced America for not Kyoto-izing itself.” ‘“Barton’ down the hatches,” replied a skeptic, “he’ll blow it somehow.”

As gloom settled over the assembled talking heads, a platitude was seen to lift it somewhat: “Energy Efficiency, that’s the ticket.” Everyone’s for it. It makes environmental sense and economic sense at the same time. “It’s something everyone can get behind,” twinkled a lightning bug, smug in its phosphorescence.

And then the assembled sages began to puzzle: how would this “Energy Efficiency” be different from your grandfather’s conservation — the fossilized NECPA or slow trudging EPACT Title I? How can capital  become excited over something business does anyway? How do the major energy delivery systems — the utilities — realize reward for such efforts? Is this a “back to the future” nod to the very distributed generation the industry more or less quashed? In short, if you wanted to stuff Santa’s stocking with new ideas, where would you turn for some efficiency ideas that are not a lump of coal (clean, of course, so as to be PC) in the stocking over the fireplace?

That is the real challenge for progressive thinkers who want to make a difference. Are they what ACEEE has proposed: energy efficiency portfolio standards, efficiency tax incentives, oil savings targets appliance and efficiency standards, and a broader grant and loan program in the Farm Bill? Are they State Energy Efficiency Indexes and the Patriots’ Energy Pledge and a Sales Tax Holiday for Energy Efficient Products as ASE proposes? Perhaps in part.

But then a cowering counsel suggested another line of thought lies based on the unintended ramifications of the term “Energy Efficiency” in the Wikipedia — the lawyer’s guide to public policy:

“Even though the definition includes the notion of usefulness, efficiency is considered a technical or physical term. Goal or mission oriented terms include “effectiveness” and “efficacy.”

Suppose, as a policy matter, the US tried to incentivize the most “efficacious” uses of efficiency in the economy through specifically targeted economic rewards:

• Forward looking combinations of energy conservation and complementary energy renewables such as solar;
   

• Environmental regulation that favored use of efficiency and renewables in all offset trading settings (and those settings to come, like carbon);
   

• Incentives that rewarded those large scale energy distributors that promoted complementary goals, e.g., resource management and carbon reduction; and;
   

• Tax structures conducive to aggregation of the overall energy/environment benefits gain, so that third party financing could be utilized.

In short, efficiency reward not for “giving up” something under imposed standards, or consumer incentives to make intelligent choices, but for creating something. Rewards for financing structures that demonstrably added “efficacy” values. In short, a tuning of the marketplace so it can do what it does best — allocate resources to where they are best rewarded (whether voluntarily, or because incentives direct them in to societally most rewarding channels).

As the Energy Saving Star glowed in the heavens, the pundits dispersed, putting callow counsel’s thoughts down to too much eggnog before the Yule log. Fortunately, one recalcitrant roisterer stuck up a sign which we can only hope will be a guidepost “Energy Efficiency in 2007.” It runs on long life batteries.

ROGER FELDMAN, Co-Chair of Andrews Kurth LLP Climate Change and Carbon Markets Group has practiced law related to the finance of environmental and energy projects and companies for 40 years.  In particular, he has analyzed and executed a wide variety and substantial value of project financings.  He chairs the American Bar Association’s Committee on Carbon Trading and Finance, serves on the Board of the American Council for Renewable Energy, and has been a senior official in the Federal Energy Administration.  He is a graduate of Brown University, Yale Law School and Harvard Business School.