Monthly Archives: December 2018

New Climate Change Disclosure Litigation

This year, the New York State Attorney General filed a lawsuit in NY State Supreme Court against Exxon Mobil alleging the firm violated the securities fraud provisions of a 1921 New York statute called the Martin Act in connection with their public disclosures of the future costs of complying with climate change regulations, as well as the future of the company’s existing energy processes. The Attorney General alleged that Exxon misrepresented to stockholders climate change risks by excluding its public estimates of climate change costs, substituting lower internal estimates when evaluating business risks. The AG stated that this maneuver gave investors the impression that Exxon was a safer investment than it may be and caused its stock price to be overvalued.

Public corporations are required to disclosure fully to its investors complete and accurate available data of all matters related to the business’s viability. Recent rulings include risk pertaining to climate change, even if hard numbers are not attainable. While projecting business impacts from physical, business, and regulatory risks of climate change is not definitive, the NY AG believes Exxon knowingly misled the public.

Climate change business risk is focused on the oil and gas industry, as climate change may make their very business obsolete or too costly, not to mention the means it must endeavor to get oil and gas (more physically difficult). Another risk that Exxon did not disclose but is of growing importance to the oil and gas industry is the growing global movement for carbon taxes, which would hit this industry hardest.

While Exxon will, no doubt, vigorously defend itself against this lawsuit, the pending litigation does portend the future importance of changing regulations, sound data gathering, risk assessment, and clear communication by public companies now applied to climate change.

This is a non-legal assessment of developments. If you have further interest, please engage qualified legal professionals. CCES has the experts to help your entity assess the technical and physical aspects of climate change and advise on technical policy to address these issues. Contact us today at karell@CCESworld.com or at 914-584-6720.

Recent U.S. DOE Report Shows Positive Signs for Wind Market

In August 2018 the U.S. Department of Energy (DOE) issued its 2017 Wind Technologies Market Report (https://www.energy.gov/eere/wind/downloads/2017-wind-technologies-market-report). The report tracks trends in installation, technology performance, cost, and price of wind power. Overall, the DOE report shows strong current growth and predicts this would continue into the next decade.

In 2009, power purchase agreements (PPAs) for wind power peaked at a price of $70/MWh. However, improvements in technology and implementation have lowered the price to about $20/MWh in 2017. The “wind belt” of the Great Plains has a lower average PPA price than the rest of the country. It follows that most wind power projects and the lowest prices would occur there, having the nation’s highest and most consistent wind speeds. DOE believes the PPA price will not drop significantly in the foreseeable future.

As a whole, U.S. wholesale electricity prices have declined in the last decade due, in part, to the overall decline in natural gas prices. Therefore, the wholesale energy market value of wind has followed along this major market indicator and declined similarly. Another factor influencing the cost of wind power is the decline in turbine prices as demand for wind grows and manufacturers devote more effort to production.

Due both to incentives from federal, state, and some utility players and to the decline in the price of wind energy, the wind power market in the U.S. has grown. The federal Production Tax Credit (PTC) has been cited by developers as a large motivator. Security is important, and investors and developers know that the PTC will be in place at least through 2021, encouraging wind farm development. There is concern that PTC will be phased out at that time, but many factors, including politics, will come into play as we get to 2021.

Even if the PTC is phased out, the wind market is likely to continue in the U.S. due to market forces, such as the low prices of PPAs. As there is economic growth and population shifts within the country, power is needed. Wind farms are certainly competitive cost-wise with building a new traditional gas or oil-fired power plant. In addition, wind may vary in the short-term, but if placed right it should provide a hedge against any future uncertainties about availability and price of natural gas.

CCES has the expertise to provide technical background to determine whether your building or company can benefit from generating your own power from renewable sources, like wind or solar. Contact us today at 914-584-6720 or at karell@CCESworld.com.

Financial Factors Point to 2019 As The Best Time to Invest In Energy Upgrades

One of the most common complaints from building owners who want to upgrade their facilities, be more energy efficient and green, and save costs is that they do not have the funds to invest in those energy-saving technologies. If they can just get access to capital cheaply, they would make the investment and reap the benefits and savings in the future. As has been discussed in these writings, energy upgrade is a great investment, as good as any in any bank or on Wall St. A well-designed and executed project can net the building owner or company 20%, 30% or greater return on investment per year. Given that, a number of financial institutions have begun specializing in energy project financing. They realize with returns like these the risk of a borrower not having the funds to pay a loan back is very low. With low risk, they can afford to offer relatively low interest rate loans. Never has funds been so available for energy upgrade projects.

One area of lending specifically for energy projects is Commercial Property Assessed Clean Energy or C-PACE (in some areas, known as PACE). With C-PACE, building owners can begin to implement smart energy upgrades quickly and re-pay over a long time through a voluntary benefit assessment lien, levied and recorded against the benefiting property, to be repaid along with property taxes. C-PACE allows building owners to potentially finance 100% of the cost of energy upgrades with, in most cases, only positive cash flow. The team assesses the likely future energy cost savings over time and arranges payments based on those projections, so that there is only positive cash flow. In the meantime, the upgrade is completed and the owner gets the benefits while repayment is made. Payments are usually made at the same time as property taxes are paid to the municipality, which transfers C-PACE payments to the lender. The owner knows when payment is due and how much.

A C-PACE loan is repaid through a long-term assessment, similar to property taxes, spacing out payments longer than traditional 7-year financing. Therefore, energy cost savings will exceed annual C-PACE payments for nearly all applicable projects. Only positive cash flow. While the owner receives a long-term asset upgrade, tenants get lower overall expenses and a more productive work environment.

Building owners commonly express concern that a C-PACE loan binds it to the building. While the buyer does have the obligation to pay back the loan once they take over ownership, the C-PACE lender has no say regarding the sale.
The C-PACE lender does not impose traditional lender requirements, such as quarterly reporting, maintenance of debt covenants or similar requirements. One less item for the building owner to worry about.

Things are topsy-turvy in government, in terms of energy policies and incentives to upgrade one’s energy systems. But waiting is not the answer because there is much money being wasted waiting and in the meantime operating old, clunky energy inefficient systems. This is simply not good business. As funds are now more readily available with terms that are more acceptable, 2019 is the best time to borrow funds and move forward and evaluate, design, and implement good energy upgrade projects.

CCES has the experts to help you plan the most financially beneficial energy upgrade project. We can give you several options to save money on energy and related systems and you can choose the one(s) most beneficial to you. CCES knows the PACE and C-PACE programs, as well as other lenders to help your projects go to reality and get the most benefits for you. Contact us today at karell@CCESworld.com or at 914-584-6720.

How To Avoid Acrimony When Talking About Environmental (and Other) Matters

Not that long ago we could have discussions with family, friends, colleagues, and clients about many topics in a civil way. Unfortunately, nowadays many such conversations are fraught with politics and anger. These conversations are still necessary for us as a country, a civil society and, specifically, environmental and energy discussions to serve our clients. How can we have such conversations without someone blowing up, making an uncomfortable scene, and perhaps losing a friend or client?

Whether it’s getting together with family for the holidays or talking about environmental, energy, or other policies with colleagues and clients, here are several approaches that should result in a meaningful exchange of views, avoiding acrimony, leading to respect.

1. Ask open-ended, nonjudgmental questions. Try to inquire how a situation impacts that person personally or how the company operates, and/or its bottom line. As an example, ask a person how a certain rule or availability of a fuel impacts their lives or company. Remember, that even the best-intentioned rules that you agree with may have a harsh impact on certain others.

2. Listen carefully to that person’s answer, even if you disagree with it. Even if you feel that this person is too sensitive to the impacts or you believe he or she is exaggerating them, remember it is still important to that person or company. Therefore, listen with respect, so that you expand your understanding of the family member, friend, or client. Don’t presume you know every situation, even if you know the person or company well.

3. Echo back to this person their viewpoint; summarize back the person’s answer or concerns. Upon hearing it from somebody else, he or she may think about it and modify the stance. At a minimum, the person will have to acknowledge they are being listened to, a feeling missing in the current polarized world. Many times I have done this with others and see genuine smiles of gratitude on their faces.

4. Find and verbalize any areas where you agree with this person. Avoid verbalizing disagreements; at least initially. State where you agree with this person’s point of view; show sympathy. State that you understand that a certain rule may have an outsized impact on that person or firm, that they are doing their best to comply, and that you wish the rule can be tweaked to make things easier for the person or firm. At this point, you could begin to gently provide your view about the overall good of the rule, mention other impacts of the rule that the person may not realize are beneficial, or suggest ways to lessen the perceived negative impacts.

5. Story-telling is a good way to engender a civil conversation. Share your thoughts by telling a real story about a similar experience that happened to you in your personal life or with a prior project or client. I have done this a number of times to show I understand and to let this person know that he or she is not alone, that others are impacted, too, and that there are ways to minimize such impacts.

You never know. Such an approach might lead to exploring opportunities to improve the person or firm’s life; a chance for a new, beneficial project. I have worked with many clients over the decades whose views toward energy and environmental rules are fundamentally different from mine. While these five tips are no guarantee of success, these can go a long way toward having healthy family interactions and foster positive, long-term business and client relationships, too.

CCES has the experience to help you evaluate and make the best of environmental and energy rules that impact your company. Contact us today at 914-584-6720 or at karell@CCESworld.com.