HUD Jumpstarts PACE Financing for Homes

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Last week the U.S. Department of Housing and Urban Development and the Department of Veterans Affairs released new guidance, changing their previous positions, now widely allowing residential Property Assessed Clean Energy (PACE) financing.

With the guidance, PACE financing, where payments for energy efficiency, water conservation and renewable energy improvements to real estate are made through a building owner’s property tax bill without upfront cash from the owner could be bigger than anything in U.S. real estate since the invention of the glass window.

PACE state enabling statutes generally authorize local governments to work with private sector lenders to provide upfront low interest financing to property owners for qualified projects (e.g., HVAC system upgrades, photovoltaic systems, cool roofs, etc.), and to collect the repayment through annual assessments on the property’s real estate tax bill.  The term of PACE financing can be extended up to 20 years, often resulting in utility and other cost savings that exceed the amount of the assessment payment.

The concept is not new, but nationally, residential PACE programs generally have been put on hold or foregone as a result of concerns of HUD and the Federal Home Loan Banks, that issued a directive in February 2011 to refrain from purchasing mortgage loans secured by properties with outstanding first lien PACE obligations.

There were not similar concerns expressed about commercial loans. However, the extent to which similar concerns apply to multi family commercial mortgages was not previously resolved. And the uncertainty has resulted in modest commercial PACE programs in only 9 states and next to no residential programs actively running. A directory of state and local PACE laws in available here.

Residential PACE offer a host of benefits depending upon the program design, including: removing the barrier of a large upfront cash outlay by the property owner; allowing 100% financing of improvements in amounts over loan value ratios available in the marketplace, including without disturbing existing mortgage financing; underwriting tied to the property and improvements and not individual creditworthiness; repayment over a long period of time (often up to 20 years); low interest rates resulting from high security of repayment; reduced utility bills that can offset the payments; the obligation to repay runs with the property and not the owner; the improved properties have an increased value, benefiting both the owner and the property taxing authority; the owner may be eligible to take advantage of federal, state and local tax incentives; local government can facilitate the program with no direct debt obligation; and more.

Under this July 19, 2014 guidance in the event of a default on a residential property PACE loan, the liability is a property tax lien collected by the local government with the priority associated with other real property tax liens. Sort of. The “grand compromise” announced in the guidance is actually a restatement of what exists in current commercial PACE programs. The guidance describes it as,

the property may only become subject to an enforceable claim (i.e., a lien) that is superior to the FHA-insured mortgage for delinquent regularly scheduled PACE special assessment payments. The property shall not be subject to an enforceable claim (i.e., lien) superior to the FHA-insured mortgage for the full outstanding PACE obligation at any time (i.e., through acceleration of the full obligation.)

Which, in Federal government speak, means only the dollar amount of delinquent PACE payments take priority over existing mortgages, not the full amount of the PACE loan. Again, this would be a big deal except for the fact that most State commercial PACE programs are already structured this way.

What is huge is that the HUD and VA block is now lifted on residential PACE financing for energy efficiency, water conservation and renewable energy improvements to homes.

PACE loans can provide the capital to green the existing building stock. This change in Federal policy can jumpstart green building in the U.S.

Existing state programs will have to be reviewed to see if new legislation is required; it may not in many states where there are never implemented programs on the books. And local governments will need to adopt and implement residential programs, including attracting lenders to their jurisdiction. There will be a lot of competition in this space and well drafted local government legislation will be key to the efficacy of PACE programs.

PACE programs are good for the planet and good for improving the housing stock. This dramatic shift in Federal policy will result in significantly more PACE loans, including residential PACE loans across the country.

GMO Labels Coming to your Supermarket

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On the last day before leaving on a seven week recess, this past Thursday Congress enacted The Safe and Accurate Food Labeling Act of 2015 requiring the U.S. Department of Agriculture to regulate the labeling of bioengineered foods (often described as genetically modified foods or GMOs).

The bill trumps the Vermont GMO labeling law that went into effect July 1st (.. who says Congress cannot act swiftly in a bipartisan way) and forestalls a hodgepodge of different state GMO laws being considered in at least 14 states.

Specifically the bill amends the Agricultural Marketing Act of 1946 to require the Secretary of Agriculture to establish a national disclosure standard for bioengineered foods.

In the parlance of Congressional rules of order, some will find it interesting that as amended by the Senate on July 7, the legislative vehicle for this measure concerning bioengineered food disclosure, was a vote on the motion to concur in the House amendment to S.764, with a Senate amendment (.. that amendment being the entire text of the GMO bill).

But what is truly interesting is the definition of what requires a label under the new law. Bioengineering with respect to a food, is a food “that contains genetic material that has been modified through in vitro recombinant deoxyribonucleic acid (DNA) techniques; and for which the modification could not otherwise be obtained through conventional breeding or found in nature.” The FDA had expressed concern in its technical comments, that that definition of bioengineering was narrow and ambiguous, and could exempt many foods from GMO sources, but that could be cured at the discretion of the Agriculture Secretary.

And all of this is a big deal because, by many estimates, more than 80% of processed foods in U.S. stores contain at least one ingredient made with GMO crops. By way of example, more than 90% of cheese in the U.S. is made with genetically engineered rennet.

While a limited amount of food is already labeled for sale under the now superseded Vermont law, we are already meeting with clients about this nationwide requirement that “not later than 2 years after the date of enactment of this subtitle, the Secretary shall establish a national mandatory bioengineered food disclosure standard.”

But even the disclosure standard (i.e., what the label must say) has been controversial and under the law, food manufactures have a choice of placing a text statement or symbol directly on the food packaging itself indicating GMO ingredients, or alternatively, can include a digital QR code that customers could scan with their smartphone to learn about GMO ingredients. Smaller food producers also have a fourth option of offering a phone number or URL on the package that consumers can access for information about GMO ingredients.

It is suggested there is no rational basis for this new law with the broad scientific consensus that gene editing in a laboratory is not more hazardous than modifications through traditional breeding. A report by the National Academies of Sciences, Engineering and Medicine, released in May, said there is no substantiated evidence that GMO crops have sickened people or harmed the environment.

Just two weeks ago, more than 100 Nobel laureates signed a letter urging Greenpeace to end its opposition to GMOs, including asking Greenpeace to cease its efforts to block introduction of a genetically engineered strain of Golden Rice that would reduce Vitamin A deficiencies causing blindness and death in children in the developing world.

There were no state troopers at the Vermont border last week inspecting food packages for GMO labels. And with this federal law the U.S. will not have a patchwork of different State or local laws banning GMO food products or requiring GMO labels. Whether, the good, the ugly, the bad (.. the title of my favorite spaghetti Western) or some other attribute associated with this Congressional act is your pleasure, GMO labels are coming to your supermarket.

Miami Beach’s New Green Building Tax

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Some years ago an ordinance enacted by the City of Miami Beach received accolades across the globe when it protected endangered sea turtles that nest on the beaches of Miami Beach, by “restricting artificial lighting and other activities that disorient turtle hatchlings, causing them to crawl toward land rather than toward the ocean.”

However, a recent enactment by the City of Miami Beach is not being so widely applauded. On February 10, 2016, the City Commission voted unanimously to adopt the Sustainability and Resiliency ordinance which imposes a new tax for the failure to achieve LEED Gold certification or Living Building Challenge certification on new constructions over 7,000 square feet or ground floor additions to existing structures that encompass over 10,000 square feet of additional floor area.

In 2015, 64 permits were issued for buildings over 7,000 square feet. Apparently none of those projects are today registered with GBCI as pursuing or having achieved a LEED Gold certification.

The new law requires the payment of a Sustainability Fee prior to obtaining a Temporary Certificate of Occupancy, Certificate of Occupancy, or Certificate of Completion.  This fee is set as 5% of the construction valuation. If there is a failure to obtain any level of LEED certification, the fee is not refunded. A project that is LEED Certified receives a refund of 50% of the fee paid. A project that is certified LEED Silver receives a refund of 66% of the fee paid. And projects that are certified LEED Gold or Platinum or are Living Building Challenge certified received a 100% refund of the fee paid.

A builder has up to two years to obtain a full or partial refund of the fee depending on the level of green building certification achieved. Earned fees in the Sustainability and Resiliency Fund do not revert to the general fund, but rather are to be utilized to provide public improvements that increase sustainability and resiliency in the City.

The new law is effective for all projects that apply for review after April 1, 2016, but as of July 8, 2016 the City has yet to collect the first dollar of the Sustainability Fee. Such is likely explained because the law does not apply to developments that have an approved order from the Planning Board or have been issued a building permit process number or submitted a complete application for hearing prior to the February 10 enactment date.

Beyond that this enactment is nothing more than a green building impact fee in an effort to create a new source for revenue for government capital projects, many believe that a voluntary, non mandatory approach to environmental protection is the best hope for stewardship of our planet; hence the broad brand and wide market share acceptance of LEED. Many are suggesting that burdening owners of terra firma with a ‘special’ green building impact fee with the revenue being used to address the larger public policy matters of sustainability and resiliency with improvements to government owned land, is wrong and will not be efficacious.

Moreover, imposing a new tax on the failure of a landowner constructing a building to obtain a third party green building certification (while obviously not in the same order of magnitude as the penalty of death imposed by the Code of Hammurabi for failure to construct a building properly) also raises the very real issue of how efficacious that sustainable project will be when the owner is simply pursuing a number of points to avoid imposition of the impact fee.

Supreme Court Decision is Good for Green Globes

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The recent unanimous decision of the U.S. Supreme Court in Kingdomware Technologies, Inc. v. United States, is a win for small businesses and very good for those that work on Green Globes projects.

In an effort to encourage small businesses, Congress has mandated that federal agencies restrict competition for some federal contracts.  The Small Business Act requires many federal agencies, including the Department of Veterans Affairs, to set aside contracts to be awarded to small businesses.

Kingdomware, a Maryland veteran owned small business, unsuccessfully vied for a federal contract from the VA to provide emergency notification services. Kingdomware sued, arguing that the VA violated federal law providing that it “shall award” contracts to veteran owned small businesses when there is a “reasonable expectation” that two or more such businesses will bid for the contract at “a fair and reasonable price that offers best value to the United States.” This provision is known as the Rule of Two.

The Supreme Court, in an opinion authored by Justice Thomas, held that the provision is mandatory, not discretionary. Its text requires the VA to apply the Rule of Two to all contracting determinations and to award contracts to veteran owned and other small businesses.

Among the significant beneficiaries of this Supreme Court decision will be the many small businesses involved with Green Globes green building assessment and certification system.

The Green Building Initiative has completed 537 assessments for the VA under both Green Globes and Guiding Principles compliance assessment programs, more than for any other federal department or agency.

The relationship began in 2009 when GBI partnered with the VA to assess buildings on 21 campuses including 21 hospitals.  From the experience on the hospital assessments, GBI developed Green Globes for Existing Buildings Healthcare, which specializes in healthcare buildings with licensed inpatient beds.

In 2011, GBI worked with the VA to develop the first assessment program for existing buildings to assist federal agencies in measuring compliance to the Guiding Principles For Sustainable Federal Buildings.

Since the initial assessments in 2009, GBI completed an additional 460 assessments of 279 unique buildings resulting in 206 certifications under Green Globes programs and 254 certifications under Guiding Principles compliance programs.

And the assessments and certifications are not limited to businesses that do work on hospitals, they also include medical offices and outpatient clinics, pharmacies, research laboratories, chapel, childcare facilities, firehouses, food service spaces, laundries, libraries, gyms, auditoriums, and many more opportunities.

The large number of small businesses that predominate the environmental industrial complex, many of which have a role in projects using Green Globes on VA buildings will be winners from the Supreme Court decision. Not only does the VA today operate the nation’s largest health care system, but as the Department strives for further improvements in performance, there will be much work done to VA facilities.

Moreover, what is good for Green Globes is good for green building, including given that much of the VA efforts have involved greening existing buildings.

It is only slightly irreverent to conclude that the Supreme Court decision in Kingdomware will be the proximate cause of more and additional green building, .. that will ultimately save the planet.

You Need to Review a SITES Scorecard, Now

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SITES is a sustainable landscape rating system.

SITES is modeled after the LEED green building rating system. And while it is a standalone tool for measuring landscape sustainability, in June 2015, Green Business Certification Inc., the USGBC associated certification body for LEED, announced it had acquired the exclusive rights to the SITES rating system, its publications and trademarks.

The well regarded material on which the SITES v2 rating system (there actually was no version 1, but there was a multi-year pilot) is based was developed by the American Society of Landscape Architects, The Lady Bird Johnson Wildflower Center at The University of Texas at Austin, and the United States Botanic Garden.

Of course development of SITES was a collaborative effort by the developers beginning in 2006 except for when in 2013, in an all-out brawl ASLA filed a lawsuit over the ownership of the trademark for the SITES against the Lady Bird Johnson Wildlife Center. The litigation was ultimately resolved and was in the end little more than a distraction that delayed the release of version 2.

While the lawsuit revealed the founding organizations did not have a written agreement among themselves to protect their valuable intellectual property, they have had a multi-year written agreement and close working relationship with USGBC.

Almost half of the prerequisites and credits in SITES are based in part on credits in LEED NC or LEED ND, and some of the SITES Guidelines and Performance Benchmarks 2009 have been incorporated into LEED v4. GBCI will have to find a consensus based process for updating the now somewhat dated SITES v2.

SITES v2 is a voluntary set of guidelines and performance benchmarks to assess the planning, design, construction, and maintenance of sustainable landscapes. SITES has lofty goals including creating regenerative systems and fostering resiliency, and it is ensuring future resource supply and mitigating climate change that sound good, but are concerning in terms of its broader goal of market transformation when only 46 projects have achieved SITES certification since 2006.

Actually reading the SITES v2 scorecard and accompanying rating system is an ideal way to understand why the system’s methodology is so well thought if by design professionals.

SITES v2 provides four certification levels. Projects that receive SITES Certification through GBCI have achieved the requirements within the 10 sections containing 18 prerequisites and accumulated a certain number of points, out of a total of 200 potential points offered by the 48 credits. All credits are optional but not all will apply to every project.

Certification is open for all project types located on sites with or without buildings, including “open spaces and parks, commercial and residential sites, campuses, infrastructure projects, and industrial sites” for new development and major redevelopment, but arguably only on sites that have significant area for landscaping, thus excluding most urban sites. Given these projects (.. maybe not the ‘open spaces’) could be LEED certified, is a project owner pursuing SITES a bug in search of a windshield?

SITES will likely get a boost because on April 13, 2016, the U.S. General Services Administration announced its 2016 version of the Facilities Standards provides,

Through integrative design and application of sustainable design principles, all new construction projects and substantial renovations with adequate scope must achieve, at a minimum, a SITES silver rating through the Green Building Rating System of the U.S. Green Building Council. GSA’s use of the SITES framework allows our land-based projects to better protect ecosystems and enhance the mosaic of benefits they continuously provide our communities, such as climate regulation, carbon storage and flood mitigation.

The larger influence will be that SITES credits are now being incorporated into and influencing the next version of the ASHRAE 189.1 green building standard that is the announced precursor to the next version of the International Green Construction Code, all that will provide the technical basis of the next version of LEED.

So, while it is unlikely you will find yourself working on a SITES project (.. there are simply too few of them), because of the deep and widespread influence SITES will have on the next generation of green building standards, codes and rating systems, you should familiarize yourself with the scorecard and accompanying version of the rating system.

Top 5 Things You Need to Know about the TSCA Overhaul

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On June 7, by a voice vote of the Unites State Senate agreeing to changes approved by the House of Representatives on May 24 (voting 403 for and 12 against), Congress has passed the “TSCA Modernization Act of 2015” that will amend the Toxic Substances Control Act, sending the 66 page bill to the President for his signature. The President is expected to sign the bill this week.

HR 2576 greatly expands the ability of the Environmental Protection Agency to evaluate and regulate chemicals.

TSCA was enacted in 1976 to protect the environment and the public’s health against risks posed by chemicals in materials in commerce. Forty years later, there is general agreement that the law has not kept pace with the marketplace including a patchwork of state laws that were effectively trumping this Federal law, and the field was made more complicated by non governmental programs like the LEED green building rating system that incorporates Materials & Resources credits including building product and material ingredient disclosure and optimization.

Some perspective is likely appropriate because of the 85,000 chemicals on the TSCA inventory there were only five existing chemicals in the stream of commerce before TSCA went into effect that EPA deemed harmful and just four new chemicals that came to market after 1976 that have since been banned under the existing law.

It has been suggested that the bipartisan effort by Congress acting on this substantive legislative bill is the big news in and of itself. And while compromise on Capitol Hill is a big deal, this bill greatly expands the authority of EPA and will have implications not just for the chemical manufacturers, processors and importers, as TSCA had in the past, but now also for many more businesses. The top five takeaways for business are:

  1. The scope of the law is widened with a new safety standard providing “that the relevant chemical substance or significant new use is not likely to present unreasonable risk of injury to health of the community without consideration of costs or other non-risk factors.” The decades old cost benefit analysis is now altered throughout TSCA where “unreasonable risk” was used that it now excludes consideration of costs and other nonrisk factors, either by striking “unreasonable” or adding “without taking into account cost or other non-risk factors.”
  2. All existing chemicals will now be subject to possible future regulation in a bifurcated process. The first step will consist of an EPA risk evaluation and a second step for risk management. Risk evaluations are to be conducted on each chemical EPA designates as a high-priority substance. Six months after enactment, EPA must be conducting risk evaluations for 10 chemicals drawn from its Work Plan. The new law sets a 3 year deadline for all risk evaluations.
  3. With new chemicals, today a business is generally able to start producing a new chemical at the end of a 90 day review period, unless EPA finds the chemical “may present an unreasonable risk.” In the future EPA must review and affirmatively make a risk determination for all new chemicals. And if EPA determines that a new chemical presents an unreasonable risk or EPA lacks sufficient information to make a reasoned evaluation or the chemical may present an unreasonable risk or is produced in large amounts and results in large releases or exposures, EPA must impose restrictions to the extent necessary to protect against any such risk.
  4. Preempting state laws, that vary across the country, with a single Federal edict (whether good or not so good) was the reason that business supported amending TSCA. And while the preemption provisions are complex, the bill largely accomplishes that. The bill’s preemption applies to state restrictions on a chemical, but not to requirements for reporting, monitoring or disclosure. And most significantly, a state cannot now prohibit all use of a chemical in the state, except via co enforcement with EPA or getting a waiver from EPA. State actions taken before August 1, 2015, or taken under laws in effect on August 31, 2003, are exempted from preemption. And the bill preserves state and private party rights, causes of actions, and remedies from being preempted by EPA.
  5. Costs to some business will be significant. Today EPA can only charge fees to cover testing requirements for new chemicals, but now EPA may collect fees for both new and existing chemicals, as well as those designated as high-priority. But the dollars paid to EPA will be small when compared to the legal fees and hard science costs to businesses in compliance. And there is uncertainty associated with this much bigger regulation that impacts many more businesses, including by way of example, costs across industries from the probable banning of asbestos, as is anticipated under this new law.

Also significantly, this new enactment should portend revisions to LEED materials credits (including LEED’s use of EPDs and HPDs that do not include toxicity and as such are inconsistent with this new law) and other nongovernmental standards pegged to federal laws.

This law firm in concert with our team of biologists and chemists maximizing our hard science knowledge have been and continue to work with a broad breadth of business interests to determine how they will be impacted by this sweeping new TSCA. If we can assist your business in appreciating and taking advantage of federal regulation of chemicals, do not hesitate to give Stuart Kaplow a call.

Federal Government Proposes Greenhouse Gas Disclosures from Certain Vendors

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The Department of Defense, General Services Administration, and National Aeronautics and Space Administration are proposing to amend the Federal Acquisition Regulation which will require select government vendors, from landlords to defense contractors, to indicate if and where they publicly disclose greenhouse gas emissions.

In 2015, the Obama Administration announced a new target to reduce Federal government greenhouse gas emissions by 40 percent below 2008 levels by 2025.

In response, DoD, GSA, and NASA are now proposing to revise the FAR to add an annual representation for vendors to indicate if and where they publicly disclose GHG emissions and GHG reduction goals or targets. This representation would be mandatory for vendors who received $7.5 million or more in Federal contract awards in the preceding fiscal year. The representation would be voluntary for all other vendors.

Additionally, in furtherance of E.O. 13653, “Preparing the United States for the Impacts of Climate Change” DoD, GSA, and NASA are by this proposed regulation considering the development of means and methods to enable agencies to evaluate and reduce climate change related risks to, and vulnerabilities in, agency operations and missions in both the short and long term, with respect to agency suppliers, supply chain, real property investments, and capital equipment purchases. This consideration reflects growing Executive Branch interest in operational and supply chain risks associated with climate change facing agency suppliers and steps those suppliers are taking to identify and manage those risks.

This proposed regulation is at best overreaching when this Executive Branch action, without legislative authority, attempts to ‘draft’ on the fact that Federal vendors that are public companies are already subject to requirements to disclose material risks associated with climate change, per Securities and Exchange Commission Interpretation “Commission Guidance Regarding Disclosure Related to Climate Change.” There is simply no material connection between that existing SEC disclosure requirement and this Executive Branch proposed GHG test.

Moreover, this law firm works with a broad breadth or public companies and their counsel, and most undertaking the SEC analysis determine there are no material risks associated with climate change, resulting in no disclosures and certainly no disclosures of GHG emissions. It is in this wrong context that DOD, GSA, and NASA are purportedly considering by this regulation approaches to make disclosures of climate change risk analyses from government suppliers available to agencies (.. but this proposed disclosure regulation is not about analysis of climate change risks?).

The existing SEC climate change disclosures require significant work and depending upon the industry can be quite onerous and expensive. Such should also be anticipated for GHG specific emissions disclosures. Not to mention that adding a new prerequisite to the Federal Acquisition Regulation has significant implications when the Federal government is among the planet’s largest purchaser of goods and services.

This proposed rule is not based in statute, so public comment may be particularly important in determining the scope of a final rule, if any. Comments should be submitted on or before July 25, 2016 to be considered in the formation of the final rule, however, skeptics have suggested it may be the result in the Presidential election that determines if this Administration driven GHG litmus test has legs?

Maryland Vetoes Renewable Energy Portfolio Standard Increase

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Maryland Governor Lawrence J. Hogan, Jr., vetoed an increase in the State’s Renewable Energy Portfolio Standard that would have resulted in higher electricity prices across the State. This push back against an ever increasing legislatively mandated subsidized renewable energy ‘market’ portends a national trend.

Specifically, Governor Hogan announced he was vetoing House Bill 1106 – Clean Energy Jobs – Renewable Energy Portfolio Standard Revisions, as enacted in the just concluded 2016 Maryland General Assembly session.

The legislation has been characterized as a “tax increase” to be levied upon every electricity ratepayer in Maryland. House Bill 1106 would impose higher electric prices from $49 million next year to $196 million by 2020 to fund the proposed increase in the State’s Renewable Energy Portfolio Standard.

The aim of House Bill 1106, to increase the State’s Renewable Energy Portfolio Standard to 25% by 2020 is laudable, but the dramatic increase in dollar costs to Maryland ratepayers for electricity, not to mention the regressive nature of the additional dollars, including burdening the poor that rely on electricity to heat and light their homes, while benefitting out of state investors in the solar industry (many of which institutional investors leverage those dollars with federal tax incentives), was widely seen as the wrong approach.

Maryland ratepayers already were assessed over $104 million dollars for renewable energy credits in 2014 (the last year for which data is available), most of which went to subsidize solar installations. House Bill 1106 would have imposed an additional burden on ratepayers each year. Forecasting precise Renewable Energy Portfolio Standard prices is difficult, as the markets for them are influenced by multiple factors, including technology costs, labor costs, permitting costs, electricity costs, capacity market prices, potential future environmental regulations, and federal and state tax policies, but this bill would have nearly doubled year 2014 costs.

It is worthy of note that Maryland’s largest electricity generating utilities did not oppose this bill. Some have suggested that under the regulatory complexities of many jurisdiction’s Renewable Energy Portfolio Standards, it is the dinosaur electric generating monopolies that are actually among the largest dollar beneficiaries.

Without this now vetoed bill, under existing law, Maryland will retain its status as a national leader in renewable energy. In 2016, electric suppliers must demonstrate they have accumulated RECs at a percentage of 15.9 of their total electric supply into Maryland. This includes 12.7% for Tier I renewables, 0.7% for Tier I solar, and 2.5% for Tier 2 hydroelectric. The current law will have Maryland reach 20% by 2020 with the inclusion of express standards for solar and offshore wind (.. yes, Maryland rate payers are subsidizing offshore wind development and later operation) by 2022.

But calculatedly, the Maryland Portfolio Standard does not take into account that more than one third of electricity in the State is generated from nuclear power, the ultimate (but controversial) renewable energy source that produces virtually no greenhouse gas emissions.

Maryland first adopted a Renewable Energy Portfolio Standard in 2004 and has subsequently increased it. Maryland’s existing law has benefitted the growing solar industry, but there is also a corresponding cost which is borne by all Maryland citizens.

And that cost does not exist in a vacuum where Maryland ratepayers are already burdened with $277 million in Regional Greenhouse Gas Initiative ‘cap and trade’ program costs on emission allowances (through 2013, the last year for which data is available), despite a recent Congressional Research Service report that concluded, “from a practical standpoint, the RGGI program’s contribution to directly reducing the global accumulation of GHG emissions in the atmosphere is arguably negligible.”

And significantly, Maryland advantage the solar industry in other ways including that all solar panels in Maryland are, by law pervious (don’t be confused by the interplay of law and science) for purposes of stormwater management, zoning and the like.

Twenty years ago Maryland had among the least expensive price of electricity to the ultimate consumer in the residential, commercial and industrial sectors, but as of March 2016 at 14.3 cents per Kilowatt hour the average price is among the highest in the continental U.S. and the very highest among all south Atlantic states.

That rate does not include that at the time of the veto, pending before the Maryland Public Service Commission was a Baltimore Gas and Electric Co. electric and gas rate increase, largely to recoup cost of smart meters, that was ultimately approved on June 3, 2016 which is expected to boost the average residential customer’s monthly bill by $7.53.

The veto was Maryland’s effort to strike a balance in energy policy. Governor Hogan is to be applauded for vetoing House Bill 1106 as part of a national rebalancing of government energy subsidies (and not on the backs of the poor).

Solar Panels Mandated for Muscle Beach and ..

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This coming Wednesday the City of Santa Monica will begin mandating the installation of a solar electric photovoltaic system on all new building.

Santa Monica joins the California cities of Lancaster and Sebastopol which started requiring rooftop solar installations in 2013, and San Francisco which similar law, for building under 10 stories tall, takes effect January 1, 2017.

On April 26, 2016, Santa Monica, which lies west of downtown Los Angeles, adopted local amendments to the California Energy Code. All building permit applications, including for alterations to the city’s iconic Muscle Beach, will now be subject to these local amendments, which include:

All new one and two family dwellings are required to install a solar electric photovoltaic system with a minimum total wattage 1.5 times the square footage of the dwelling or a photovoltaic system or other renewable energy system that will offset 75%-100% of the Time Dependent Valuation energy budget (in accordance with state law).

All new low-rise residential dwellings are required to install a solar electric photovoltaic system with the minimum total wattage 2.0 times the square footage of the building footprint.

And all non-residential and high-rise residential are also required to install a solar electric photovoltaic system with a minimum total wattage 2.0 times the square footage of the building footprint. So, a four-story building with a footprint of 10,000 square feet would need a 20 kilowatt system under the new law.

These requirements can be waived or reduced, by the minimum extent necessary, where production of energy from solar panels is technically infeasible due to lack of available and feasible unshaded areas.

Note, California law already requires most new construction to have 15% of the rooftop “solar ready.”

And while mandating onsite solar systems is not at all common today, Baltimore was actually the first major American city, to mandate all new building include renewable energy systems. Baltimore’s green code requires all buildings that consume energy must contain at least one renewable energy system capable of producing at least 1% of the total estimated annual energy use of the building.  More elastic and arguably more progressive than the California mandates, the Baltimore options include not only solar photovoltaic systems, but also wind systems, solar hot water heating systems, and geothermal systems.  There is an exception for buildings which commit for a period of ten years to buy renewable energy credits for at least 2% of annual energy consumption.

Whether in Santa Monica or Baltimore, there is still the very real unanswered question of whether or not onsite renewable energy mandates are good energy policy or environmental policy (e.g., possibly rooftops are better utilized for greywater collection, storm water management, combatting urban heat island effect, etc.)?

Both California and Maryland have mature renewable energy portfolio standards that make distributed small scale generation not only more expensive per watt than central generation for the user but also economically inefficient, largely as a result of regulatory schemes that protect dinosaur electric utility monopolies.

A 30 story highly energy efficient proposed LEED Gold building being permitted in Baltimore has little alternative but to purchase 10 years of RECs (i.e., the building cannot produce 1% of energy used in the roof footprint) increasing first costs under the guise of distributed generation, and such seems like less than ideal public policy.

Can the EDGE Green Building System Save the Planet?

Bathroom in tea house, Dingboche, Nepal Bathroom in tea house, Dingboche, Nepal

If you are regular reader of this blog you are aware there has been a brief hiatus in postings. I have been climbing in the Himalayas in Nepal for the past month and, in fact, am composing this blog post sitting in the lobby of the Yak and Yeti hotel in Kathmandu, as I begin to make way home.

While Nepal is breathtaking, containing eight of the world’s ten tallest mountains, the country is landlocked to the north by China and to the south and east by India, and is a developing country with a low income economy, ranked among the poorest of the 187 countries in the U.N. Human Development Index.

Writing this post from Nepal, it seems appropriate to discuss EDGE.

EDGE, the acronym for “Excellence in Design for Greater Efficiencies” is a green building certification system for new residential and commercial buildings in emerging markets and developing countries. Yes, think “like LEED” for the other 70 percent of the world.

EDGE certification is available in over 120 countries around the globe, from Afghanistan to Zimbabwe and including Nepal, but not in developed nations like the U.S.

The photograph above from a popular tea house in Dingboche, Nepal depicts that LEED type notions of interior water use reduction (e.g., WaterSence flush toilets) and energy reduction (e.g., LED lighting) have little in any application for the majority of buildings in most developing counties where squat toilets with a bucket of water are the norm and the only illumination is daylight from a window.

EDGE was created by the International Finance Corporation, one of five organizations that comprise the World Bank Group. It has three component parts, including: Free web based software at www.edgebuildings.com, that is country and building type specific (ranking a project against typical similar buildings) and recommending specific measures to reduce energy and water use, including sophisticated databases and calculations that make separate energy modelling obsolete and even project dollar return on investment for specific contemplated design features.

Second, a new pass or fail green building standard for projects that are able to demonstrate 20% less energy (from efficient HVAC systems, superior glass, low-energy lighting, solar solutions, etc.) against the city specific prototype; 20% less water (from low-flow faucets, efficient water closets, recycled water systems, etc.); and, 20% less embodied energy in materials (from floor, roof, wall and window construction with low embodied energy).

And the third component is a third party EDGE certification system geared toward greater marketability. EDGE is new so there are few auditors today, but GBCI is a global certification partner for EDGE and the exclusive certification partner for EDGE projects in India. Certification will vary from country to country and is intended to be at affordable rates, but it is not yet clear that certification costs are low enough to encourage marketplace acceptance of EDGE certification.

Green building can save the planet, or at least the people on the planet. Today, significantly less than one percent of buildings in the U.S. are LEED certified and that percentage is obviously much smaller across the globe, so maybe the answer outside of the U.S. is EDGE? And while it is premature to reach grand conclusions with the small number of completed EDGE projects, possibly there is much to be learned, substantively and process wise, from the EDGE web based software about how to expand the green building market within the U.S.

20% less energy, 20% less water, and 20% less embodied energy in materials, in a large enough number of buildings, will save the planet.

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