Archive for January, 2008

Bangladesh’s Solar Energy

Saturday, January 19th, 2008

by Gordon Feller, Urban Age Institute, January 18, 2008

Bangladesh has made impressive economic and social strides over the last two decades. It has achieved steady economic growth of around 5% annually, with relatively low inflation and a stable fiscal situation. Population growth and infant mortality rates have declined and primary school enrollment rates, particularly of girls, have improved dramatically. The rate of growth of per capita GDP has improved from less than 2% during the 1980s to over 5% during 1995-05.

Despite these substantial gains, a large unfinished agenda remains in terms of attaining the MDGs, which would require an acceleration of the economic growth rate to 6-7% per annum. Accelerating growth would also require substantially higher levels of investments in infrastructure, with a particular emphasis on the rural areas where the vast majority of the Bangladeshi population lives.

While infrastructure in the rural areas has improved, particularly for water supply and roads, Bangladesh has a particularly high demand for expansion of rural electrification services. Factors such as remoteness, inadequate load demand and resource constraints for expanding the power infrastructure are major barriers to electrification in the rural areas.  These areas currently use kerosene and diesel for their lighting and electricity requirements.

At present, about 38% of the Bangladeshi population has access to electricity and per capita electricity consumption is about 133 kWh which is one of the lowest in the world.  Nearly 75% of the population is rural and only about 30% of the rural households have access to grid electricity. The current rate of expansion in electrification is only about 400,000 new households gaining access every year and at such rate it would take more than 40 years to reach all households. Rural electricity access rates have to increase dramatically to accomplish the Government’s stated goal of providing universal electricity access by 2020. Government has encouraged implementing off-grid renewable energy technologies, such as solar home systems (SHS) and micro-wind power systems in coastal areas, and mini-hydro projects in the mountainous regions as a priority.

Presently, three state-owned utilities under the Ministry of Energy and Mineral Resources are responsible for electricity development in the country. These are:

i) Bangladesh Power Development Board (BPDB), responsible for generation and transmission of power in the country and distribution in urban areas, except the area under Greater Dhaka,

ii) Dhaka Electric Supply Authority (DESA), responsible for distribution of electricity in the greater Dhaka area including the metropolitan city of Dhaka; and,

iii) Rural Electrification Board (REB), responsible for distribution of electricity in rural areas through a network of more than 60 Palli Bidyut Samitis (PBSs) or rural electricity cooperatives.

Government strategy emphasizes promoting off-grid options in areas that are unsuitable for grid expansion. It has made a good start by eliminating import duty on SHS in April 2000. The strategy emphasizes the pivotal role of well functioning rural systems for the Government’s off grid promotion strategy and endorses the approach to use well-functioning rural community based organizations (CBOs) to leverage grass-roots reach and establish credibility to improve electricity provision significantly.

The objective of this Clean Development Mechanism (CDM) project is to contribute to sustainable development through the provision of renewable solar electricity to households not connected to the electricity grid and thereby reduce the Greenhouse Gas (GHG) emissions by displacing kerosene and diesel use for lighting and off-grid electricity generation.

The project will contribute to the sustainable development of Bangladesh with a particular emphasis on the rural population, which is generally poorer.  In addition to reducing GHG emissions, the project would have significant other social, economic and environmental benefits.  Bank’s involvement in supporting this project is therefore considered highly appropriate.

The project envisages installing 929,169 SHSs all across Bangladesh between 2007 and 2015.  The SHS will provide facilities for lighting, TV and radio and comprise of: (a) a Solar Module (10 to 120wp); (b) battery ( 47 Ah to 130 Ah); (c) Charge Controller; (d) fluorescent tube lights with special electronic ballasts; (e) mounting structure; (f) installation kit; and (g) cables and connecting devices. The capacity of individual SHS will vary according to consumer choice and demand. The cost of SHS would be recovered through monthly instalments over a period of up to 4 years which will be within the affordable capacity of the targeted consumers.  Upon full implementation in year 2015, the project activity will replace 20,075 kilo litres per annum of kerosene usage, equivalent to an emissions reduction of 48,380.75 tonnes CO2 per annum and 16,600,500 KWh/ year of electricity generation using diesel generators.

The project will be implemented by Grameen Shakti (GS) which develops, introduces and popularizes renewable energy technologies for sustainable energy solutions, particularly Solar PV systems, aiming to reduce poverty, improve living standards and protect the environment.  Over the last decade GS has installed about 77,000 SHS with combined capacities of 15.8 MW and more than 1,650 SHSs are installed each month.  It has also set up 120 offices for service delivery and performance monitoring, and has a research unit for improvement of the overall efficiency of the system and ancillaries. GS is currently serving more than 275,000 beneficiaries through its 120 offices spread over 58 districts of Bangladesh.

About the Author: Gordon Feller is the CEO of Urban Age Institute (www.UrbanAge.org). During the past twenty years he has authored more than 500 magazine articles, journal articles or newspaper articles on the profound changes underway in politics, economics, and ecology - with a special emphasis on sustainable development. Gordon is the editor of Urban Age Magazine, a unique quarterly which serves as a global resource and which was founded in 1990. He can be reached at GordonFeller@UrbanAge.org and he is available for speaking to your organization about the issues raised in this and his other numerous articles published in EcoWorld.

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Mass-Marketing Greentech

Friday, January 4th, 2008

The Best Companies Won’t Wait for the World to Change

by Laura Shenkar, Artemis Group, January 4th, 2008

Setting off in 2008, we must admit that getting out the message of climate change and the value of innovative technology to address it simply isn’t enough to bring about the sweeping new behaviors. We aren’t commuting to work by bus and coal continues to be a key source of energy throughout the US. Even as lush states like North Carolina and Georgia struggle at the limits of their water supply, little innovative water technology or simply conservation has been applied. If the world needs rapid change, then innovative go-to-market strategy must accompany the best innovative technologies.

Shai Agassi’s electric vehicle initiative, Project Better Place, provides one interesting example of the value of innovative strategy in bringing sustainable technologies to market.  Project Better Place does not develop its own electric vehicle technology.  It focuses upon the consumer rather than the car industry to gain rapid acceptance of a new electric vehicle (EV) infrastructure by addressing the “consumer contract for the vehicle.”

“The consumer’s contract for the EV must be the same – or better – than the consumer’s current contract for gas-powered cars,” Agassi explains. “We need to change the way consumers buy an EV so that it fits the current social contract we have with our cars, providing a normal car ownership experience even if the car has an electric drive train,”

At a small gathering last week, Agassi reviewed some of the details of that “consumer contract.”  Most people have their own car and seldom share it. Most cars transport cargo as well as four other individuals, cost about $20K and require a stop for refueling every 400 miles.  If an electric car provider can provide the same kind of “consumer contract,” then it could compete directly with the major car manufacturers and gain significant market share in a matter of months.

Winning widespread acceptance for new solutions requires that the technology solutions fit in with existing patterns of use.  The success of comprehensive commercial service packages for alternative energy like those offered by SunEdison are showing how established sustainable technologies such as solar power can gain wide acceptance rapidly when their offered in a format similar to that of their existing utilities.  SunEdison installs solar panels onsite at a commercial customer’s property and enters into long-term power contracts, typically for 20 years. Pricing is competitive with that of comparable energy costs.

Compelling green technologies for water abound as they do for energy and transport in the marketplace.  If they are to become part of our lives, innovative water technology needs to address today’s world and today’s practices.  Product by product, existing consumer and business markets have developed an inherent “service contract” with consumers.  For a certain price, each product provides a service with performance characteristics.  Cola costs about a dollar and comes in cans or bottles which last about a month or longer and can be served cooled.  Drinking water is free, but one pays taxes to utilities to support infrastructure and deliver drinkable water to your house.

In agriculture, for residential users as well as commercial and industrial sites, water is a service as well as a product.  It is a means to a different end—may it be production of food or microprocessors, drinking or hygiene.

Having worked with innovative technology for two decades, and having worked with innovative “green” technologies for several years, I am convinced that fitting new technology into the existing consumer contracts for the products we seek to replace is a requirement for success.

The world is made every day with our smallest actions and decision, and it can be remade with our actions.  As anyone who has ever been on a diet or any corporation implementing cost savings can tell you, it is the end-user who drives profound changes.

Laura Shenkar is Principal of The Artemis Project, a consultancy that specializes in supporting innovative technology companies achieve their potential in the global market.  As a member of the leadership team of three successful startups, she has learned how to employ the unique capabilities of a company’s technology and its team to target the best opportunities in an emerging market.  Laura is an active member of several national and international water industry associations and participates in governmental water management initiatives as well as venture investment conferences. This combination of activities enables her to share with The Artemis Project clients a wide view of emerging opportunities and new product trends.  Ms. Shenkar can be reached at laura@theartemisfund.com.

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Land Development circa 2008

Friday, January 4th, 2008

by Dave Garland, Hansen PSC, Inc. , January 4th, 2008

As the housing market evolves, it is inevitable that many developers and homebuilders will be caught in the undertow of the downward cycle. To make matters worse, the maze of community, county, and state regulations is getting longer and more confusing for land owners, engineers, architects and developers. In fact, entitlement and regulatory issues, driven by multiple sources of influence, are one of the largest concerns within the development and home building industry today. Understanding these forces and preparing for their impact can enhance project appeal, add revenue opportunities, and favorably position you and your clients for future prosperity.

Market Forces:

Force #1 - Organized Activism: Citizens who have historically acceded to the decisions of local and regional regulatory officials now seemingly challenge them at every turn.  Organized campaigns crafted by neighborhood or special interest groups can force officials to risk their office on every vote, no matter how reasonable a development application may be.  From angry neighbors to prepared activists, groups opposed to developments are frequently issuing press releases, retaining attorneys and raising money for lengthy court battles.  Even national publications are showcasing articles on how to best organize to fight developers.

Force #2  - Demographics: By 2040, America’s population is projected to increase by an additional 83 million people.  Concentration of this growth is expected to center on resource-constrained metropolitan areas; adding to existing traffic and infrastructure woes.  According to the Brookings institution, by 2030 nearly half the buildings in the U.S. will have been built after the year 2000, with residential development commanding two-third’s of this expansion.

Force #3 - Zoning & Code Updates: To combat the possible consequences of growth, regulatory agencies have instituted urban growth boundaries, comprehensive planning campaigns, and urged the use of “smart growth” initiatives.  While growth management practices are nothing new, the degree by which land use regulation is being implemented is unprecedented in the United States.  Take Loudoun, Virginia, the nation’s fastest-growing county in the last five years as an example.  Its population tripled in 15 years to a quarter million residents constraining area resources, and decreasing air quality and the affordability of homes.  Land use experts have argued that there is one solution to these challenges: heavy regulation.  Regulators now call for smart growth zoning coupled with dense, mixed use developments to preserve open space, constrain urban sprawl and meet the area’s surging housing demand.  These same responses are being proposed in communities throughout the country.

Force #4 - Affordable Housing: Additional housing demand has and will continue to be met with new stipulations and regulations that call for affordability components.  In fact, most “smart growth” planning reforms adopt the principle of housing affordability and diversity.   The premise of the affordability problem is that not enough low-cost housing exists, particularly in the shadow of the recent housing boom.  The policy response in most states has been to subsidize rental housing development, or mandate percentages of for-sale units be sold below market rates.  The net affect is that the costs of affordable housing requirements are borne by the land owner, developer, builder or some combination thereof.

Force #5 - Environmental Awareness:  Growing environmental awareness is demanding greater due diligence and analysis of a project’s potential impact on the surrounding infrastructure and ecosystem.  Municipalities are expanding their requirements for studies of biological, cultural, anthropological, and specie history specific to your properties.  National policies also poised to directly influence design.  Indeed, environmental awareness, environmentally sustainable development trends, and “green” practices have dominated the recent trade headlines.  From complying with EPA guidelines to applying for and LEED certification standards, there is an underlying, unspoken assumption that we are moving from: ‘Every developable structure could have a green component.’  To, ‘Every structure should incorporate sustainable practices in its design.’

Regulation’s Impact:

As the above forces converge, increased regulations to meet social and environmental demands will increase both costs and time frames for development approvals in the planning and entitlement phases.  From a valuation standpoint, any additional regulatory and/or social, economic or environmental constraint can be a multiplier of time and risk.  More importantly, requirements for affordable housing, development impact fees, higher permit fees, special impact fees and the like are often based on the assumption that developers have the resources necessary to consistently meet evolving policy.

In reality, policy forces developers to continually reinvent mechanisms by which to cut costs.  In the past, these costs could come out of the underlying price of land, or through increased densities, and not be passed on to the end customer in the form of heightened asset prices.  Unfortunately, speculation in raw land by hedge funds, foreign investment, institutional investment, and players with little previous development experience has pushed land values into the stratosphere   thereby placing serious constraints on future development profitability through added competition.

New Opportunities:

There is a flip-side to that coin: if there is one thing that added regulation gives us besides longer entitlement time frames, it is uncertainty in receiving intended approvals.  Where there is uncertainty in an economy, there is a chance for arbitrage and opportunity.

While the challenge for receiving entitlements will increase, so too will the rewards.  Where it once took mere months to receive approvals for a project, it might take a year or two.  The difficulty for receiving entitlements will be commensurate with the added value of the property upon approvals.  The trend will be that value will increase significantly for paper approvals.  This means that by obtaining tentative maps, planning commission approval, city approvals, or the equivalent (even without necessary building permits), the value of land will be substantially increased, and not just due to land appreciation over time.  Now, more than ever before, the ideas and expertise of development consultants are critical to differentiating one project from the next and adding necessary economic value for a development.

Paper value of land will constitute a significant portion of the estimated $25 trillion  land grab over the next 30 years.  Strategies for obtaining approvals, and thus the increased land value, will be of utmost importance.  Outsourcing of the entitlement process is a growing trend throughout regulation heavy states such as California, Oregon and New York.  This niche opportunity will only expand in other states as development constraints mount and provide opportunities for consultants such as civil engineers and land planners.

As the conflicting needs of the political, social, demographic, economic and environmental influences mount, there is bound to be uncertainty and volatility.  For those who know how to navigate these waters and address the forces of volatility, a wellspring of opportunity awaits.

References:

Robert Charles Lesser & Co. Housing Predictions, February 2007

Davenport, Coral. “In a fast-growing county, sprawl teaches hard lessons,” The Christian Science Monitor. 1/23/06.

Staley, Sam. And Gilroy, Leonard, C., “Smart Growth and Housing Affordability: Evidence from

Statewide Planning Laws”, Reason Foundation Policy Study No. 287, Dec. 2001.

Roney, Maya. “Overseas Investors Still Find US Property Hot,” Business Week.com, Feb. 14, 2007

“Builders on the Block,” The Economist, 3/31/07.

Kaihla, Paul. “The $25 Trillion Land Grab,” Business 2.0 Magazine, Nov. 1, 2005.

Dave Garland is Vice President of Development of Hansen PSC, Inc. a strategic investment and land development firm located in Menlo Park, CA.  Hansen PSC, Inc. strives to locate commercial and residential land throughout America on which to create socially respectable and environmentally friendly development projects.  Mr. Garland can be reached at dgarland@hansenpsc.com.

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