Wednesday, October 28, 2009

The Rifken Report: "San Antonio Leading the Way Forward to the Third Industrial Revolution" --without supplemental material

The following has been transferred from a pdf which is freely available on the web. The authors clearly hope that there work will be influential so I don't think they will object to it being posted here.  I have not included the supplemental information.  Without it the report is 75 pages long.  Some images and tables are missing from this version of the report. 


You can obtain the full 133 page pdf from the Solar San Antonio site: http://www.solarsanantonio.org/pdf/A_Vision_for_Sustainability.pdf 


San Antonio Leading the Way Forward to the Third Industrial Revolution

Table of Contents
Preface
San Antonio: Leading the way forward
The Current Economic Circumstance in San Antonio
Energy Efficiency: A Critical Foundation Principle
First Pillar: Distributed Renewable Energy
Second Pillar: Buildings as Power Plants
Third Pillar: Energy Storage
Fourth Pillar: Smart Grids and Smart Infrastructure
The Distributed Social Vision
Mapping the Transition
Supplemental Information
Recommendations from Third Industrial Revolution Global CEO Business Roundtable participants


Acknowledgements
This report was written by Jeremy Rifkin (The Third Industrial Revolution Global CEO Business Rountable), John A. “Skip” Laitner (American Council for an Energy-Efficient Economy) and Nicholas Easley (Office of Jeremy Rifkin), with active support from Karen Ehrhardt-Martinez (ACEEE), Chris Knight (ACEEE), and Vanessa McKinney (ACEEE). We express our deep appreciation to the many participants of The Third Industrial Revolution Global CEO Business Roundtable, including Wendy Tobiasson (KEMA), Kaj Den Daas (Philips Lighting), Jeff Drees (T.A.C.), Chad Nobles (Siemens), Colin Harrison (IBM), Boris Schubert (Q-Cells), Laura Berland-Shane (Siemens), Thomas Jensen (SAIC), Peter Duprey (Acciona), Stefano Boeri (Boeri Studio), Enric Ruiz-Geli (Cloud 9 Architecture), Al Wynn (CH2M Hill), Cassie Quaintence (Schneider Electric), Ed Cross (Cross & Company), Angelo Consoli (The Hydrogen University), Robert Friedland (Proton Energy Systems), Woody Clark (Clark Strategic Partners), Daryl Wilson (Hydrogenics), Rob McGillivray
 Hydrogenics) Byron McCormick, Alan Schurr (IBM), Mark Hura (General Electric), Robert Wilhite (KEMA), and Alan Lloyd (ICCT).

And finally, we would also like to express our deep appreciation for the guidance and insights of Mayor Phil Hardberger (City of San Antonio), Aurora Geis (CPS Energy Board), Steve Bartley (CPS Energy), Cris Eugster (CPS Energy), Milton Lee, (CPS Energy) and the many other knowledgeable and professional staff from the City of San Antonio, CPS Energy, Alamo Area Council of Governments, Electric Power Research Institute, Nexant, Texas Public Utilities Commission, Solar San Antonio, American Institute of Architects, Zachry Construction, and Southwest Research Institute.

Preface
CPS Energy and the City of San Antonio have made a commitment to transition the Alamo region into a Third Industrial Revolution economy over the course of the first half of the 21st century. This would make San Antonio the first metropolitan region in the United States to usher in a post-carbon economic era by 2050.

The consensus in the scientific community is that to hold the earth’s temperature to two degrees Celsius or below will require at least an 80 percent reduction in global warming gasses in the developed nations by 2050. This is a daunting challenge, but an absolutely critical task if we are to avoid the potentially catastrophic consequences of climate change on earth’s ecosystems. CPS Energy and the City of San Antonio have already made impressive contributions to a Third Industrial Revolution, putting the Alamo area in a leadership position among metropolitan regions in the United States. However, we believe that CPS’ current projected scenario regarding future energy efficiency programs and power generation through 2034 still falls short of the ambitious goal that CPS has set to make San Antonio a Third Industrial Revolution flagship for the country.

To meet its objectives of “becoming a lighthouse” for a new, sustainable economic era, CPS and the city will need to establish an unprecedented partnership with the business community and civil society - in effect, to create a single voice - if it is to succeed in reaching its objectives of leading Texas and the United States into a new period of sustainable growth.

We are suggesting something that, to our knowledge, has never been attempted before: all two million people in the metropolitan region actively participating in their own energy future. That is, after all, what the Third Industrial Revolution is all about. While a demanding mission, nothing less will suffice to address the enormity of the threat posed by the global economic meltdown, the energy crisis, and the real-time impacts of climate  change. This white paper presents a broad, long-range vision and is not intended to be a comprehensive master plan. There is not one defined road to achieving the four pillars of the Third Industrial Revolution. Each city and region must chart its own path to develop energy policies and plans in order to meet their specific future needs.

The Eyes of Texas and the nation will be upon San Antonio. The crisis is clear. The challenges are extraordinary. While the solutions are difficult, they are attainable. What is needed now is the good will and determination of every resident in the greater San Antonio region to lead the country by example and inspire the world.
Jeremy Rifkin, Chairman Third Industrial Revolution, Global CEO Business Roundtable

San Antonio: Leading the way forward

Introduction

There is a wide consensus that we are approaching the sunset of the oil era in the first half of the 21st century. The price of oil on global markets continues to remain high and peak global oil is within sight in the coming decades. At the same time, the dramatic rise in carbon dioxide emissions from the burning of fossil fuels is raising the earth’s temperature and threatening an unprecedented change in the chemistry of the planet, with ominous consequences for the future of human civilization and the ecosystems of the earth.

The triple threat of the global economic crisis, the global energy crisis, and the global climate change crisis are interwoven and feed off of each other. Addressing the triple threat to our way of life will require a new economic story that can remake civilization along sustainable lines.

The great pivotal economic changes in world history have occurred when new energy regimes converge with new communication regimes. When that convergence happens, society is restructured in wholly new ways. For example, the first hydraulic agricultural societies - Mesopotamia, Egypt, China, and India - invented writing to manage the cultivation, storage, and distribution of grain. Surpluses of stored grain allowed for an expansion of population and the feeding of an indentured labor force which, in turn, provided the “man power” to run the economy. The convergence of written communication and stored energy in the form of surplus grain, ushered in the agricultural revolution, and gave rise to civilization itself.

In the early modern era, the coming together of coal powered steam technology and the printing press gave birth to the first industrial revolution. It would have been impossible to organize the dramatic increase in the pace, speed, flow, density, and connectivity of economic activity made possible by the coal fired steam engine, using the older codex and oral forms of communication. In the late 19th century and throughout the first two thirds of the 20th century, first generation electrical forms of communication -the telegraph, telephone, radio, television, electric typewriters, calculators, etc. -converged with the introduction of oil and the internal combustion engine, becoming the communications command and control mechanism for organizing and marketing the second industrial revolution.

We are now on the cusp of a Third Industrial Revolution. Today, the same design principles and smart technologies that made possible the internet and vast “distributed” global communication networks, are just beginning to be used to reconfigure the world’s power grids so that people can produce renewable energy and share it peer-to-peer, just like they now produce and share information, creating a new, decentralized form of energy use. We need to envision a future in which millions of individuals can collect and produce locally generated renewable energy in their homes, offices, factories, and vehicles, store that energy in the form of hydrogen, and share their energy with each other across a continent-wide intelligent intergrid.

[Graphic, “Building the Energy Internet” May 11,2004. from The Economist Electronic Edition omitted.]

In 2007, the European Union passed a written declaration committing itself to a Third Industrial Revolution economic game plan. That same year, the European Union committed its 27 member states to a 20/20/20 by 2020 initiative: a 20 percent increase in energy efficiency, a 20 percent reduction in global warming gas emissions, and the generation of 20 percent of its energy needs with renewable forms of energy, all by the year 2020.

The City of San Antonio, the nation’s seventh largest city, and CPS Energy, are committed to becoming a beacon for the nation by echoing the EU’s Third Industrial Revolution and 20/20/20 goals. To realize this goal, the City of San Antonio and CPS Energy will need to create an integrated master plan to establish the four pillars of the Third Industrial Revolution infrastructure between now and 2020. The four pillars of the Third Industrial Revolution are: renewable energies; buildings as power plants; hydrogen storage; and the promotion of smart-grids and plug-in vehicles. San Antonio is well positioned with its forward looking municipally owned utility, CPS Energy, and a city government committed to a sustainable future, to lead the nation as it takes on the challenges of peak oil and climate change.

The question is often asked whether renewable energy will, in the long run, be sufficient to meet the needs of the San Antonio region. Today, second generation information systems grid technologies allow businesses to connect tens of thousands of desktop computers, creating far more distributed computing power than even the most powerful centralized computers that exist. Similarly, tens of thousands of local producers of renewable energy in the San Antonio region, with access to an intelligent utility network, can potentially produce and share far more distributed power than the older centralized forms of energy - oil, coal, natural gas and nuclear - that we currently rely on. The creation of a renewable energy regime, loaded by buildings, partially stored in the form of hydrogen, and distributed via smart intergrids, opens the door to a Third Industrial Revolution. It should have as powerful an economic impact in the 21st century as the convergence of print technology with coal and steam power technology in   the 19th century, and the coming together of electrical forms of communication with oil and the internal combustion engine in the 20th century.

This report lays out a Third Industrial Revolution Vision and game plan for San Antonio with key recommendations for meeting the challenges ahead. By following the path laid out herein, San Antonio could pave the way for a more innovative and productive economy that is energy efficient, equitable, environmentally sustainable and rooted in a strong local workforce.

The road ahead requires a “systems approach” that adequately and simultaneously addresses the economic, energy, and environmental challenges that we face, as well as the human and social dimensions. The transition will require a strong commitment to energy efficiency, upon which the four key pillars of the Third Industrial Revolution will be built. These four pillars - or what we might call the four critical elements of future sustainable development - include: (i) the expanded generation and use of renewable energy resources, (ii) the use of buildings as power plants, (iii) the development of hydrogen and other storage technologies, and (iv) the development of a new energy infrastructure and transport system that is both smart and agile.

It should be emphasized, however, that the successful realization of the Third Industrial Revolution vision is not simply a function of innovative engineering, new technologies and physical infrastructure. New social, cultural and behavioral mechanisms will be needed if we are to empower individuals and communities and ensure equitable participation in the transformation to a post-carbon world.

San Antonio has already taken significant first steps toward this new era of sustainability. The City of San Antonio’s “Mission Verde” and the CPS Energy’s “Vision 2020” both emphasize specific actions that the community has taken to transition into the Third Industrial Revolution. Green jobs and adequate financing mechanisms are among the challenges being addressed by the City’s Mission Verde plan. And CPS Energy has already embraced the need for a more energy-efficient economy that is increasingly powered by renewable energy and other clean energy technologies. These actions, coupled with the insights and ideas that emerged from the April 2009 workshop on sustainability (convened by the City of San Antonio and CPS Energy) provide the groundwork for specifying how the vision of a Third Industrial Revolution might be applied to the specific conditions and constraints faced by the city of San Antonio.

The Current Economic Circumstance in San Antonio

Analysis of key Bexar County statistics shows a rapidly evolving economy which has been growing faster, on average, than the nation, and shares certain similarities to the larger United States, while retaining multiple unique strengths. Bexar County is roughly similar to the US in terms of the relative size of working and non-working populations - in both there are around twice as many persons of working age (16 to 64 years) as opposed to non-working age. They are also similar in that in each the ratio of nonworking to working persons has fallen over the last two decades. Thus, despite the graying of the population from aging baby boomers, Bexar County has managed to maintain a sizable pool of employable persons. Bexar also mimics US trends in the ratio between total population and total employment. In each case the relative size of the employed pool has increased.

Shift-share analysis - which is used to help explain the job creation process within a community [Laitner, Skip, and Marshall Goldberg. 1996. “Planning for Success: An Economic Development Guide for Small Communities.” Washington, DC: American Public Power Associaton.]  - shows that over the 1990 to 2008 period, Bexar County has significantly outpaced the national economy, growing 58 percent faster than the US as a whole. Indeed, nearly every sector in Bexar County grew much quicker than its national counterpart. The major exception is in manufacturing. While US manufacturing employment grew by 25 percent over the period, the employment in Bexar County actually shrunk, to just under 40,000 jobs. Furthermore, manufacturing represents a smaller share of Bexar County employment than in the nation as a whole. Despite the thin representation of manufacturing jobs within the region, the data show that Bexar 1 [Laitner, Skip, and Marshall Goldberg. 1996. “Planning for Success: An Economic Development Guide for Small Communities.” Washington, DC: American Public Power Associaton.]

Bexar County has strengths to build on. With competitive advantages in finance and insurance, information, wholesale trade, and professional and technical service sectors - which together make up 20 percent of the employment in Bexar County [ICF Consulting, “Alamo Regional Industry Cluster Analysis” July 2005] - the county and San Antonio are well-positioned to lead the way into a Third Industrial Revolution. Bexar County also has a strong and competitive local government sector. While the county has lost a significant number of federal non-military jobs over the last two decades, it has gained a great number of jobs - over 30,000 - in city and county governments, who will be key partners in the transition to create a greener economy. [This number reflects state, county and city. A gain of 30,000 jobs over the years 1990 through 2008. The county lost 19,000 Federal civilian and military jobs. Net gain is 11,000 jobs. Woods and Poole Economics, Inc. 2008.]

Compared to the national average, economic growth in both San Antonio and Texas has been relatively robust. Surprisingly, however, energy use in San Antonio has not increased at the same rate as Texas or the United States. San Antonio’s lower energy intensity is due to its somewhat unique economic structure, which is less heavily based in manufacturing and the fact that fewer vehicle miles are traveled. Not surprisingly, the immediate implications for San Antonio’s emissions of greenhouse gases are favorable.

Economically, both Texas and the metropolitan region of San Antonio have experienced greater levels of growth when compared to the nation as a whole. Much of this growth has resulted from the notable population growth in the state and the region, as well as the expanded levels of productivity per capita. Since 1969, for example, the population of the state and the region grew 85-90 percent faster than the national average. During the same period, economic productivity per capita was 12 percent higher than in the U.S. as a whole. Between now and 2030, growth in the San Antonio economy will continue to outstrip that of the U.S., expanding area income by nearly 90 percent - compared to 61 percent at the national level.[Woods & Poole Economics, Inc. “2008 Historical Data and Economic Projections for Bexar County, Texas 1969 2040.” Washington, DC: Woods & Poole. http://woodsandpoole.com/.]


Interestingly, while per capita energy consumption in Texas is higher than the national average, per capita energy consumption in San Antonio is considerably lower than the national average. For example: for every unit of energy consumed per person in San Antonio, there are 1.6 units consumed per capita at the national level and 2.35 units at the state level. In other words, if all energy sources (whether electricity, natural gas or gasoline), were converted to gallons of gasoline equivalent, state level energy use per capita for Texas would be on the order of 4,000 gallons, while estimates of per capita energy consumption at the national level would be closer to 2,700 gallons. On the other hand, estimates of per capita energy consumption for San Antonio are surprisingly low – at only 1,700 gallons equivalent in 2006. Because energy consumption generally depends on the use of fossil fuels, this lower level of energy use in San Antonio translates into a similarly low level of greenhouse gas emissions. In 2006,  levels of energy-related greenhouse gas emissions were estimated at 27, 20, and 17 metric tons (per capita) of carbon dioxide (CO2) equivalent for Texas, the United States and San Antonio, respectively.[See ACEEE memo for further discussion: adapted from Alamo Area County Council of Governments. 2008. “Bexar County Greenhouse Gas (GHG) Emissions Inventory 2005”] In general, the reason for these reduced levels of both energy use and CO2 emissions is that San Antonio area residents travel somewhat less and use less electricity than the average person. Moreover, the number of manufacturing jobs per capita is about half of the number of manufacturing jobs elsewhere in the U.S. economy. In summary, San Antonio is using less energy and producing fewer greenhouse gas emissions when compared with both state and national averages. The question remains, then, how might these past trends combine with future economic growth to shape energy use and greenhouse gas emissions between now and 2030?

Looking Forward

As we anticipate how San Antonio’s economy might grow over the next 20 years or so, four factors are worth noting. First, the current levels of energy use and greenhouse gas emissions are related more to the structural features of San Antonio’s economy as opposed to the net efficiency of the economy. For example, manufacturing is generally a more energy-intensive economic activity, and because the local economy relies less on manufacturing jobs to support its population base, less energy is being used. A more urban economy also generally requires less travel. For that reason, less energy is used in the transport of people and goods. In both cases, comparable efficiencies generate less demand for energy because of the less energy-intensive aspects of the economy. Yet, as we shall see below, there are still significant cost-effective opportunities to improve the energy efficiency of the regional economy in ways that further decrease energy use and save businesses and consumers money.

The second factor is that San Antonio’s growth in greenhouse gas emissions (per unit of economic activity) will be slower than its economic growth as a result of existing trends in efficiency improvements. The third important consideration is that even greater emissions reductions are possible through both the adoption of more energy-efficient technologies and the integration of those technologies with the four pillar infrastructure that makes up the Third Industrial Revolution. This combination can help San Antonio to achieve net emissions reductions while sustaining current levels of economic growth and creating new jobs.

Finally, San Antonio’s choice to pursue the Third Industrial Revolution business model presents unique opportunities for the city to narrow the socio-economic gap that exists between what some have called the “Two San Antonios.” Unfortunately the normal market policies and business-as-usual practices underpinning current economic growth are unlikely to close the existing socio-economic gap on their own.

These key concepts and trends are illustrated by the two different greenhouse gas emissions pathways in Figure 1. Beginning with a complete 2005 emissions inventory for Bexar County, the chart highlights a business-as-usual reference case in which personal income of Bexar County grows 90 percent over the period 2008 through 2030. At the same time, normal market efficiencies and new investments drive down the intensity of total emissions per dollar of income by about 38 percent in 2030 compared to 2008. If that occurs and if income rises by about 90 percent over that same time horizon, then total greenhouse gas emissions will rise 17 percent, increasing from an estimated 27.2 million metric tons of CO2 equivalent in 2008, to about 31.8 million metric tons in 2030.

Figure 1. Bexar County Greenhouse Gas Emissions Trajectories 2008-2030.
0
5
10
15
20
25
30
35
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Total Greenhouse Gas Emissions (mmtCO2e)
Source: ACEEE (2009)

Unfortunately, even though normal market efficiencies, in fact, do moderate both energy demand and greenhouse gas emissions, an increasing number of scientists suggest that emissions should be reduced by 80 percent of current levels by 2050. Hence, the normal market gains are only a down payment on what must be achieved over the next four decades or so.

Informed behaviors and productive investments in energy-efficiency and the family of smart technologies underpinning each of the four pillars can get the job done. Before the report explains these opportunities in more detail, this section highlights the magnitude of investments necessary to move San Antonio onto a trajectory leading to the Third Industrial Revolution. It also summarizes the energy savings benefits together with the net employment that would likely follow any investment strategy that catalyzed movement within the Third Industrial Revolution.

Required Investment

As with any new market or economic strategy, it takes money to make money. For San Antonio that means thinking through ways to make better use of normal investment dollars, and perhaps finding a new level of greater investment in both people and technologies. Moving San Antonio from a business-as-usual case of a 17 percent increase in overall greenhouse gas emissions, to a transition that greatly reduces emissions, will require somewhere near the order of 15 to 20 billion dollars of smart investment. This is an economy-wide estimate that covers productivity benefits and emission reduction technologies across all sectors and all fuels within the area economy. It includes all energy uses within residential and commercial buildings, all processes and operations within industry and all forms of transportation in and around San Antonio.

While this seems like a large amount of money, an even larger amount of routine investments are needed to keep the local economy going in any event. This is true whether we are talking about new streets, schools, vehicles, industrial equipment, or new transmission lines and power plants. In fact, it appears that San Antonio will make an average annual investment in its economy on the order of $16 billion a year between now and 2030. In other words, if San Antonio can free up the equivalent of one year’s normal investment over the next two decades, or just 5% per year ($800 million) and divert these dollars into the kinds of productive technologies described later in this white paper, then the economy can be well on its way toward transitioning to a Third Industrial Era. [Please refer to ACEEE memo in Appendix for further discussion and explanation of methodology.]

These investments will garner substantial returns. As it turns out, energy bill savings will be quite significant over the period 2010 through 2030. This level of productive investment and the resulting energy bill savings can be re-spent within the area economy, which translates into a net positive impact on employment. Under the scenario examined here and highlighted in Figure 1, the initial investment drives a net employment benefit on the order of 1,000 new jobs in 2010. As the level of investment grows, and as energy bill savings accumulate [The annual energy bills savings across all fuels and all sectors would rise from about $100 million today]to more than three billion dollars by 2030, the net gain in jobs would grow to about 16,000 more jobs than might otherwise be available in the business-as-usual forecast.

Energy Efficiency: A Critical Foundation Principle

Henry Ford once commented that picking up and reclaiming the scrap left over after production is a critical public service. But, he noted, planning so that there will be no scrap in the first place is actually the higher public purpose. In a similar fashion, planning so that there will be no wasted energy in the production of our nation’s goods and services is also a critical public service. Drawing on that parallel, energy efficiency is the cost-effective investment in the energy we don’t use to produce goods and services. But choosing the more energy-efficient path or the more productive technologies is not an immediately obvious prospect for most people. Hence, there is a critical need for consumer information, policy solutions, and new business models to accelerate the continued development and widespread adoption of energy-efficient technologies and behaviors. The more quickly we act, the more quickly the benefits will accrue to businesses and consumers, and to the environment and global climate change.

A Strong Foundation Now In Place

The recent efforts by CPS Energy and the City of San Antonio provide momentum to move the community toward the Third Industrial Revolution through greater energy efficiency improvements. At the same time, to reach a community-wide goal of a 20 percent efficiency improvement by 2020 requires a doubling of its current efforts. From an economic perspective, the investment opportunity is there, but from a planning perspective, there is still work to be done.

In May 2009, the San Antonio City Council approved CPS Energy’s plan to fund $849 million for its energy efficiency program called STEP (Save for Tomorrow Energy Plan). This aggressive initiative is one of the largest energy efficiency efforts ever undertaken by a major city. As Figure 2 indicates, the expanded efficiency program will prove to be a hugely cost-effective investment for the city, and it will provide a critical down payment toward building a more sustainable economy.

Figure 2. Range of Costs for New Electricity Resources
Source: Lazard (2008) and ACEEE (2009) [These are national averages and, obviously, must be adjusted based on regional and local factors.]
As the STEP program ramps up, the new energy-efficient installations and retrofits are
projected to reduce electricity demand by 771 MW by 2020. Reducing demand at this
level is the equivalent of eliminating the need for a new power plant. In energy terms,
this savings appears to be over 10 percent of the projected demand in 2020. To reach 20
percent savings of anticipated electricity use by 2020 and fall in line with the 20/20/20 by
2020 goals, therefore, will require a business model that roughly doubles this effort. In
other words, nudging San Antonio’s economy toward the Third Industrial Revolution will
require the elimination of two power plants through greater energy efficiency investments
by 2020. [A similar commitment would be required for San Antonio’s transportation and other non-electricity uses
of energy.]



THIS IS A SEPARATE SIDEBAR WITHIN THE REPORT USE THE TABLE IN THE MIDST OF IT.
Comparing Generation Units with the Energy Efficiency Resource

If CPS Energy is to double its efficiency savings consistent with the transition to the Third Industrial Revolution, it is helpful to provide a more direct comparison of the energy efficiency resource with one of the standard electricity generation options. In this case, the table below compares the proposed purchase and construction of two additional nuclear units at the South Texas Project facility to the cost associated with the Save for Tomorrow Energy Plan (STEP). It further compares additional efficiency gains that might supplement the STEP investments in what we might call “STEP Plus.” These comparisons are made in megawatts of generating capacity (MW), in the energy generated or displaced by that equivalent capacity (in billions of kilowatt-hours), in the initial upfront capital cost that CPS Energy might have to pay (in millions of dollars), and in terms of what is referred to as the levelized cost, or annual cost of generating or displacing energy when both capital and operating costs are included over time.

The STEP program is a critical part of the CPS Energy “Sustainability Portfolio.” But as we note in the main body of the report, it appears to provide just over 10 percent of the anticipated baseline sales of electricity by 2020. This is half of the level required to position the City of San Antonio so that it can reach the 20 percent target by that same year. At the same time, CPS Energy is considering the purchase of a 40 percent share of the South Texas Project (STP) expansion, which would provide the utility with an additional 1,080 MW of capacity. Because of the very high (85 percent) capacity factor, this added generation capacity would deliver about 8 billion kWh of electricity for the community. The direct outlays would be on the order of $4 billion which would cost about 8.5 cents per kWh over the life of these new units. It is difficult to imagine that the efficiency resource alone can be deployed at a sufficient scale to displace all of the STP expansion by 2020. But with a full commitment of planning and resources, additional energy efficiency investments could augment STEP with a minimum 220 additional MW of energy efficiency by 2020 – for a total STEP Plus contribution of 990 MW equivalent. Both the incremental cost and the increment efficiency gain and the augmented STEP Plus cost and efficiency gain are highlighted in the table below. Moving toward an additional cost-effective investment in the energy efficiency resource would provide an important step toward an investment in the Third Industrial Revolution.

This transition would also be made easier by the CPS Energy commitment to smart grid investments, which may provide a minimum 80-100 MW (about 0.3 billion kWh) of energy system benefit. As smart meters are eventually installed in homes and businesses, consumers would then have the capacity to interact and respond to peak pricing signals and other information. In effect, they would be able to further save on their energy bills.
STP Units 3&4 STEP STEP Increment STEP Plus
Capacity (MW) 1,080 771 220 990
Energy (Billion kWh) 1 8.0 2.6 0.6 3.2
Capital Cost ($ million) $4,0002 $8493 $5773 $1,4253
Annual Cost ($/kWh) $0.085 $0.031 $0.082 $0.043
Notes:
1. The generation or displacement of electricity assumes a capacity factor of 85% for STP Units 3 & 4 and 39% for energy efficiency.
In effect, it requires more than twice the capacity for energy efficiency resources to offset a megawatt of capacity from a typical nuclear
power plant.
2. There are an estimated $1.2 billion in financial costs associated with construction STP Units 3 & 4. However, to provide a more
direct comparison with efficiency investments supported by CPS Energy, those costs are omitted in this comparison of capital costs
borne by CPS Energy.
3. The capital costs for the energy efficiency programs are those costs borne by CPS Energy. It is anticipated that customers
benefiting from the efficiency improvements will match 25 percent of the incentives that might be provided by CPS
Energy.
Source: These estimates are based on a variety of data from CPS Energy, the Energy Information Administration (2009),
and Lazard (2008). The calculations were provided by John A. “Skip” Laitner, ACEEE (2009).

Build the Financial Capacity

Although utility companies have historically funded technology driven incentives, efficiency installations rely on a deeper level of customer participation. The ultimate success or failure of the program will depend on careful monitoring, evaluation and open dialogue with all relevant stakeholders. These types of efficiency programs and goals will not be possible without the backing of the entire city’s businesses and consumers. Gaining buy-in from groups such as COPS/Metro, the San Antonio Manufacturers’ Association, the Sierra Club, and The Hispanic Chamber of Commerce will be critical. Luckily, San Antonio already has a strong foundation on which to build.

In 2008, San Antonio was among the top 25 U.S. metropolitan areas with the largest numbers of buildings qualifying for EPA's ENERGY STAR. These buildings typically use 35 percent less energy and emit 35 percent less carbon dioxide into the atmosphere than average buildings. Local businesses like USAA Insurance Company, San Antonio Marriott, and H-E-B are among those with ENERGY STAR buildings within the city.

As it is easy to see from Figure 3, the low risk and high levels of return speak for themselves. The question remains, then, how best to optimize and utilize limited resources to catalyze a Third Industrial Revolution within the greater San Antonio region. The following is an overview of the available funding mechanisms and policy considerations when evaluating the development of a comprehensive energy efficiency plan. There are many examples from which to draw lessons, but whether emulating a model from another region or creating something entirely innovative, most important will be the careful monitoring and the level of response to customer demands. CPS and the city must seek to understand which segments of the market are participating and where there might be a need to further incent whatever programs and initiatives are designed.

Figure 3. Comparing Risk and Return on Investment Opportunities
Source: ACEEE (2009)

Advancing the Energy Efficiency Investment Opportunity

Federal funds may be available to complement Texas’ own LoanSTAR program (Loans to Save Taxes And Resources). LoanSTAR, a revolving loan fund featuring 3 percent interest loans for efficiency improvements, has provided the foundation for hundreds of millions of dollars in efficiency investments in public sector buildings over the last two decades. These investments have now saved over $219 million in energy costs. Bonds are another option to be considered by San Antonio, but they are suitable only for loans, not for subsidy or rebate programs. General obligation bonds pay lower rates of interest than revenue bonds, but the former generally require political approval. Revenue bonds supporting private sector activity are sometimes taxable, while bonds for upgrades of public buildings are generally not.[Private revenue bonds that are mostly geared toward programs providing public benefit are exempt from taxes, but a capped amount of these bonds are available to states and municipalities.] Public entities can also experiment with different types of funding simultaneously. [Minnesota uses a combination of taxable and non-taxable revenue bonds to fund its “Fix-up Fund”.]

Performance contracting provides still another financial mechanism to generate further energy savings. Performance contracting is a $3 billion industry and is often used by state agencies, municipal agencies, and universities. Energy Services Companies, or ESCOs, including services provided by established companies such as TAC Americas (a division of Schneider Electric) or Siemens, guarantee a minimum level of energy efficiency gains. In the eyes of the financial community, these agreements significantly reduce the risk associated with efficiency investments. It also eliminates the need for high up-front capitalization and increases return on investment (ROI).[See TAC “recommendations” on page (x) we standardize these recommendations after we have the final markup] In some cases, upfront costs can be financed through low interest bonds, possibly using a Tax-Exempt Lease Purchase (TELP) agreement to take advantage of the good credit and tax status that most municipalities enjoy. In addition, performance contracts can include provisions that all contractors and employees be local.

Public Private Partnerships (PPPs) are another financial arrangement that can ensure a quicker ROI. Traditionally focused on major transport development and large-scale infrastructure projects, PPPs have expanded to cover a broad range of projects and services. These partnerships between governmental agencies and private entities increase financing opportunities and ensure due diligence when assessing rate of return and risk assessment. Additionally, these partnerships lower costs, provide resource savings, and provide managers with breadth and depth of technical expertise.

In Rouen France for example, a contract for the centralized management of the “safety of public spaces” - in effect, a series of public lighting, traffic management and close-circuit surveillance TV systems - was awarded to an investment management consortium with a value of over 100 million Euros over a period of twenty years. As the city did not have the capital to make these investments, Philips recruited a financial company to help assess and capitalize the installations.[The financial company got 50 percent of the 30 percent savings, the city of Rouen got the other half.] In similar way, Cushman & Wakefield and Cross & Company have often made use of the Enhanced Use Leasing program (EUL), where the public entity contributes the building and the private sector brings capital to renovate or redevelop property for public sector use.[We have not touched on Energy Efficient Mortgages offered by the federal government by choice, as they have inevitably proven to be less popular as result of burdensome energy auditing and burdensome requirements for participating lending institutions.]

There are a number of examples for mid-sized residential energy efficiency financing programs that may provide a model development for San Antonio [See, Brown 2008.]. Five such examples are briefly described next:

 Idaho runs a residential efficiency financing program out of its state office of energy, which has lent about $2 million over its existence. Loans have an average value of $4000, are paid back over 5 years, collect an interest rate of 4 percent, and are secured by a lien on property. The fund is revolving, so that 1/5 of the portfolio’s value is repaid each year.

 Funded with $2 million provided by severance tax on oil and gas producers, the Kansas Energy Efficiency Program (KEEP) makes loans for efficient home improvements. The Kansas Housing Resources Corporation buys half the loan at 0 percent interest rate while a participating private bank buys the other half at the market interest rate, meaning the loan is offered at half market interest rates. The average loan amount is $9,800, secured by a lien against the borrower’s property. To date, there have been no defaults.

 Oregon has run an energy efficiency loan program out of its state energy office since 1980, and made $380 million in loans since then to all sectors. The average interest rate is between 6.0 and 6.5 percent, and the average loan size is $486,000. Oregon is unique is that it charges administrative fees on its loan. Application and underwriting fees adding up to 0.6 percent, and a closing fee of 1 percent, has encouraged large loan sizes.[Because some of the underwriting fee may count towards the closing fee, the actual total fee may be less than 1.6 percent.]

 The New York State Energy Research and Development Agency (NYSERDA) operates a loan program - managed by one full time employee equivalent - that since inception has saved 6,629 households an average of $756 each in energy  bills. The average loan size is $7,500 and loans are made for 5 and 10 years. Loans are made by private lending institutions at lower than market rates, and NYSERDA pays lending institution for the net present value of difference between the subsidized and market rates. There are two prevailing interest rates in the program, typically 1 percent within the service territory of Consolidated Edison, to a range of 2 to 5 percent outside the utility service territory.

 Pennsylvania has a unique model for a loan program. It is operated by a third party financing organization and funded through loans from the Pennsylvania State Treasury. Capitalized with $20 million in low interest loans from the State Treasury, the third party financing organization makes loans that average $6,316 per households. The loans pay an interest rate of 8.99 percent, the state treasury earns 4.99 percent on its seed funding, and the spread between these figures is retained by the third party financer.

In summary, with the City Council’s approval for the $850 million STEP Plan, CPS Energy can provide the early momentum in leading the way toward the Third Industrial Revolution. The City’s Mission Verde statement also provides a thoughtful underpinning for the larger community-wide effort that is needed. At the same time, as good as the STEP Plan is, it appears to take CPS Energy only halfway to the larger goal of a 20 percent energy savings by 2020. Hence, there is a need to double the level of energy savings across San Antonio by 2020. Although this next increment should still provide a cost-effective investment for households and businesses,[Generally, the professional staff at the American Council for an Energy-Efficient Economy believes there is room for cost-effective energy savings of 30 percent by 2030. As further examples of this opportunity, the recent Demand Side Management Potential Study (Nexant 2008) indicated an economic potential for energy efficiency improvements on the order of 20 percent (at customers’ full participation) by 2020. A separate analysis by the Lawrence Berkeley National Laboratory suggested building electricity consumption could be reduced by one-third at a levelized cost of 2.7 cents per kilowatt-hour. As suggested by the data in Figure 2, this is one-third to one-half the cost of most new generation units, and less than the cost of many existing units.] it is a sufficiently large increase that warrants further program assessment to determine how best to invest those next dollars. At the same time, the CPS program does not deal with other energy-related consumption - notably, natural gas and transportation energy use. Again, to identify the cost-effective investments that make the most sense for San Antonio, a further program assessment and updated strategy is warranted.

With the need to expand the efficiency goal to include the larger San Antonio region, a critical step forward would be to convene a transition taskforce to identify the larger community-wide energy efficiency goals for 2020. And because this is a long-term commitment, the taskforce - with appropriate support from an established team of energy, economic development, and financial management consultants – may want to extend the sustainability objectives out as far as 2030. Since this is logically an exercise in community economic development as well as long-term sustainability, the taskforce should also be charged with establishing reasonable metrics to assist the city and the Alamo region in the ongoing evaluation of this transition effort. Among the metrics to be included are those linked to: job creation, new business startups, energy savings, greenhouse gas and other emission reductions, and financial returns.

First Pillar: Distributed Renewable Energy

Renewable forms of energy - technologies that draw on solar heat and light, wind resources, hydropower, geothermal energy, ocean waves, and biomass fuels - anchor the first of the four pillars of the Third Industrial Revolution. In Texas these resources are abundant. For example, if we look only to what might be termed “accessible” solar heating and electricity,Texas could provide more than 20 times its total energy needs based on today’s energy consumption patterns.[See, “Texas Renewable Energy Resource Assessment,” prepared by Frontier Associates, LLC, for the Texas State Energy Conservation Office, December 2008.]

While these sunrise energies currently account for a small percentage of the global energy mix, they are growing rapidly as governments mandate targets and benchmarks for their widespread introduction into the market and their falling costs make them increasingly competitive. As businesses and homeowners seek to reduce their carbon footprint and become more energy efficient and independent, billions of dollars of public and private capital are pouring into research, development and market penetration. As these incentives take hold and the market expands, costs of these renewable energy technologies will become increasingly competitive. The question for the Alamo area economy becomes one of competitiveness. In short, will San Antonio choose to be competitive in this emerging and robust growth market? [Indeed, this question follows the insights of Henry Ford whose primary innovation was not the invention of the assembly line. His real genius was marketing – he cut prices to sell more cars, and he then invented mass production to enable those lower prices to actually take hold. In effect, mass production was the result, not the cause of his low prices. See, Theodore Levitt, “Marketing Myopia,” Harvard Business Review, July 2004. See also, Henry Ford, My Life and Work (Doubleday), 1923.]

Renewable energy is a highly-dispersed and locally-managed resource. The distributed nature of renewable energy technologies can be contrasted with centralized power sources. These larger systems are managed by large firms and typically are encumbered by complicated, obscure regulations. Distributed renewable energy systems are increasingly characterized as “agile energy systems,” especially when coupled with or enabled by smart grid technologies.[See Clark’s “The 21st Century “Green Energy Economic Paradigm: Agile Energy Systems.”] They inherently provide an emerging set of new civic-based market or investment opportunities.

The fact that these systems are dynamic, progressive and cost-effective, as well as readily adapted to a wide variety of economic circumstances, are reasons why more and more business and community leaders are moving towards a renewable-based economy.[As a recent number of studies have suggested, wind and biomass resources are among the more costeffective renewable energy resources with levelized costs that range from 6 to 9 cents per kilowatt-hour (kWh). This compares to costs of 10 cents per kWh or more for newly constructed conventional coal and nuclear power plants.] As one very recent example of rising support, Maine’s Community-Based Renewable Energy Act was passed unanimously in both chambers of the state legislature and was signed into law by Maine Governor John Baldacci on June 9, 2009. Another case in point is the recent detailed study for Marin County in California that found that the county could meet 50 percent of its energy needs with cost-effective renewable energy by 2017.

Lending further “proof of concept” to the staying power of renewable energy technologies is the growing number of businesses that are turning to these flexible resource technologies. Texas-based Dell computers uses a combination of biogas, solar, and wind energy to meet more than 100 percent of its total electricity needs. Another Texas-based firm, Whole Foods Market, uses solar and wind energy to provide all of its electricity requirements. Dallas-based Williamson Printing uses 100 percent wind energy for its power needs. Two non-profit organizations, Foundation Communities and the Rebekah Baines Johnson Center, add to the list of 100 percent green power users. The Aveda Institute of San Antonio is still another non-profit which relies on 100 percent renewable energy. The Lovett Commercial & Lovett Homes is a real estate firm in Houston that is going 100 percent renewable power. Among the Fortune 500 high tech firms that also have facilities in Texas, Cisco Systems, Apple Computers, and Advanced Micro Devices provide 46, 88, and 102 percent of their electricity needs with renewable energy technologies, respectively. In these cases, the renewable-generated electricity is purchased through agreements with other suppliers who actually provide these services to each of these Fortune 500 companies.

An Economic Development Perspective

While San Antonio has access to excellent solar, wind, geothermal, and biomass resources, more critically, the region also has a long-standing history of being a center for creativity and industrialism. And the region is blessed, as well, with a skilled labor force and a supportive infrastructure - including rail spurs, highways, and telecommunication resources - that might foster the development of new industrial activity built around investments in renewable energy technologies.[A recent industry cluster analysis shows that San Antonio employs a relatively large share of high quality jobs that may also provide a uniquely base for development of the renewable energy industry in the Alamo region. Among these are jobs in aerospace, automotive and advanced manufacturing, construction equipment and supplies, financial services, and information technology. See, ICF Consulting, “Alamo Regional Industry Cluster Analysis (July 2005).] Rather than be limited only to productive investments in renewable energy systems that have been manufactured elsewhere, the area economy should ensure a sustainable transition to a Third Industrial Revolution economy by developing the capacity to locally manufacture, assemble, finance, install and service a wide variety of renewable systems. In other words, San Antonio might become a leading developer of the many different elements within the supply chain for renewable energy technologies. Groups such as Solar San Antonio, an active and effective local organization, enabled with the correct policy and investment strategies, could help provide a solid base for developing models to incorporate the multiple components within the renewable energy supply chain. This organic growth strategy should have significant potential for economic stimulus and job creation; especially as marketing and production innovations bring down costs of renewable energy systems at all levels within the supply chain.

Although most cities look to solar cell and module manufacturing as the preferred economic development strategy for solar energy, there are other industries that contribute to the supply chain that also require manufacturing and engineering expertise such as: raw silicon processing, glass manufacturing, inverter production, racking manufacturing, and other various electrical components. Similar business opportunities exist with the other renewable energies.

With this in mind, San Antonio’s universities, community colleges, and vocational schools may wish to develop educational curricula to provide the skills needed to attract industrial employers that contribute to the entire supply chain for various renewable energy technologies and components. In this regard, it will be important for the city to match its economic development goals with a comprehensive assessment of its strengths and to set out a development strategy that builds on the numerous existing opportunities provided by this first pillar.[CH2M Hill “Mission Verde-Concluding remarks from Sustainability Conference” (See Table 1 “System Output vs. Mounting Type)]

Transparency and efficiency at the permitting, zoning and interconnection levels are as important considerations as the financial incentives and policies that they support. Best practices show that removing non-economic barriers and establishing transitional incentive programs are two of the most significant indicators of success. Programs such as California’s Production Based Incentive (PBI) and New Jersey’s Renewable Energy Credit are among the more interesting domestic projects from which lessons can be drawn.[Further expanded in Q-Cells Recommendations]

Internationally, Spain and Germany have both seen the powerful economic effects of transitioning to a renewable energy economy. As Figure 4 shows, the German renewable energy sector has experienced significant job growth. In fact, in 2003, conventional energy employment (coal, oil, gas and uranium) accounted for 260,000 jobs. By 2007, renewable energy employment accounted for more than 249,300 jobs. More impressive, however, is that renewable energy used for primary energy consumption remains below 10 percent (as displayed in Figure 5). In other words, less than 10% of the energy produced by renewable sources creates nearly as many jobs as all other energy sources combined. Spain is another example of an explosive shift toward a renewable energy economy. The Spanish economy, which supports over 188,000 renewable energy jobs and 1,027 renewable energy companies, has reportedly produced five times more jobs than the conventional energy industry.[Sáinz, Joaquín. “EstimaciÏŒn del Empleo en Energías Renovables 2007.” ISTAS 2008. 25 Acciona Recommendations.]

Much like energy efficiency investments, renewable energy technologies can eliminate or postpone conventional energy costs indefinitely. That is why renewable energy investment translates to a long-term reduction, or stabilization, of energy bills paid by both consumers and businesses. Again, this money can then be saved, or more likely, spent on other goods and services within the regional economy.

Figure 4
Employees in the German renewable energy sector
2004, 2006 and 2007
3,400
9,500
4,300
9,400
95,400
82,100
4,300
4,500
9,400
50,700
96,100
84,300
63,900
56,800
25,100
1,800
40,200
4,200
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 110,000
Geothermal energy
Hydropower
Solar energy
Biomass
Wind energy
Source: BMU Projekt "Kurz- und langfristige Ausw irkungen des Ausbaus der erneuerbaren Energien auf den deutschen Arbeitsmarkt", interim report
March 2008
Public / Non-profit
Sector Jobs
Increase:
approx. 55 %
2004 2006 2007
160,500
employees
235,600
employees
249,300
employees
Figure 5
Primary energy consumption in Germany in 2007
Hard Coal
14%
Gas
22%
Biomass: 4.9% 2)
Wind energy: 1.0%
Hydropower: 0.5%
share RE
6.7%1)
Other RE: 0.3%
Oil
34%
Lignite
12%
Nuclear
11%
Total: 13,878 PJ
1) Acc. to the substitution method: Renewable Energies Accounted for 9.1% of Primary Energy Consumption ; 2) solid, liquid, gaseous biomass, biogenic share o f waste, landfill and sewage gas; RE - renewable energies; Version: M arch 2008; all figures provisional Source: BMU according to Working Group on Renewable Energies / Statistics (AGEE-Stat); using data from Working Group on Energy Balances (AGEB); physical energy content method.
Advancing the Pillar One Investment Opportunity

CPS energy has committed to the strategic energy goal of producing 1200 MW of renewable energy by 2020, and is already producing 850 MW. These initial renewable energy targets provide a great deal of momentum to move the community toward the Third Industrial Revolution. There are three aspects that might advance the Pillar One initiative to the greater economic benefit of the Alamo area, however. First, rather than provide a 20 percent target for the electric utility system in 2020, CPS Energy might adopt the European Union target of 33 percent goal for the system as an anchor to give the community a stronger capacity to reach a 20 percent goal across all energy resources.[Without being overly complicated, if electricity from CPS Energy represents about 40 percent of the region’s total demand for energy and related resources (other energy uses include natural gas and transportation fuels, for example), this means about 12 percent of the remaining city’s energy needs would have to come from renewables in order for the entire region to average 20 percent renewables by 2020.] Second, rather than specify the goal in capacity terms (or megawatts of capacity) which reflects only the ability to generate energy (or megawatt-hours of electricity), CPS might want to choose to set up the renewable energy target in terms of energy. From a standard business model perspective, a move from program goals that are expressed in megawatts to goals that are expressed in megawatt-hours is a significant departure from the normal viewpoint of a utility planner. But from a community economic development perspective, and with a transition to the Third Industrial Revolution in mind, the emphasis on energy production provides a more useful planning metric.[Generally speaking, both energy efficiency and renewable energy resources have a capacity or utilization factor that is about half the standard baseload generation unit. From an energy perspective, therefore, twice the megawatts of renewable must be installed to provide the same level of megawatt-hours of electricity as a coal or nuclear power plant. As the same time, if we are concerned about carbon dioxide and other pollutants, referencing the production and consumption of energy appears to be the more logical planning metric.]

Finally, rather than focusing only on the investment or purchase of electricity generated by renewable energy technologies, the community should use the market power of this expanded energy goal to build the production capacity across the entire supply chain - from the manufacture and assembly of renewable energy systems, to the sales, financing and servicing of such systems - in ways that build local expertise, businesses, and jobs. At the same time, the community should celebrate the initial CPS vision and charge the transition taskforce (described in the previous section on energy efficiency and further at the end of this report) to identify the long-term commitment to Pillar One as an exercise in community economic development. As with energy efficiency goals, this includes developing reasonable metrics to assist CPS Energy, the City of San Antonio and the Alamo region, in the ongoing implementation and evaluation of the transition effort. Again, such metrics would include job creation, new business startups, energy savings, greenhouse gas and other emissions reductions, and financial returns.

Second Pillar: Buildings as Power Plants

While renewable energy is found everywhere and new technologies are allowing us to harness it more cheaply and efficiently, we still need infrastructure to load it. This is where the building industry steps to the fore, to lay down the second pillar of the Third Industrial Revolution. Worldwide, buildings consume 30 to 40 percent of all the energy produced and are responsible for equal percentages of CO2 emissions. Nationally, buildings account for 75 percent of electricity consumption. But in San Antonio, this figure is over 90 percent.

For the first time, new technological breakthroughs make it possible to renovate existing buildings and design and construct new buildings that create some, or even all, of their own energy from locally available renewable energy sources, allowing us to reconceptualize buildings as “power plants.” The economic implications are vast and far reaching for the real estate industry and, for that matter, the world.

Over the next 25 years, thousands of San Antonio buildings, homes, offices, shopping malls, and industrial and technology parks could be converted or constructed to serve as both “power plants” and habitats. These buildings will collect and generate energy locally from the sun, wind, waste, and geothermal heat to provide for their own power needs, as well as surplus energy that can be shared on the grid.

A new generation of commercial and residential “buildings as power plants” is going up now. In the United States, Frito-Lay is retooling its Casa Grande plant, running it primarily on renewable energy and recycled water. The concept is called “net-zero.” The factory will generate virtually all of its energy on-site by installing solar roofs and by recycling the waste from its production processes and converting it into energy.

The General Motors factory in Aragon, Spain, the largest GM production facility in Europe, has installed a 10 Megawatt (MW) solar plant on its factory roof at a cost of $78 million. The power station produces enough electricity to power the equivalent of 4,600 homes. In France, Bouygues, the French construction company, is taking the process a step further, putting up a state of the art commercial office complex this year in the Paris suburbs that collects enough solar energy to provide for all of its own needs, while also generating surplus energy.

The Walqa Technology Park in Huesca, Spain is nestled in a valley in the Pyrenees and is among a new genre of technology parks that produce their own renewable energy on-site to power their operations. There are currently a dozen office buildings in operation at the Walqa Park, and 40 more slated for construction. The facility is run almost entirely on renewable forms of energy, including wind power, hydro, and solar. The park houses leading high tech companies including Microsoft and Vodafone. The creation of a network of distributed power plants made up of thousands of buildings can maintain a stable and reliable electricity grid. If these buildings are energy efficient and can create more energy than is consumed at certain times of the day or week, the excess energy can be stored or transmitted to nearby neighbors.

Just as the distributed renewable energy sector is labor intensive, so too are the jobs and services required to convert buildings into power plants. Converting existing buildings to use energy efficiently, while simultaneously constructing new buildings to maintain positive power generation, will generate thousands of jobs for the people of San Antonio. Additionally, as companies, individuals, and the City gain experience in these areas, this newly-acquired knowledge and skill-set can become a service for hire.


Critical Steps in the New Design

There are two steps to a building becoming a power plant: energy efficiency and power generation. In terms of energy efficiency measures, there are two different categories of buildings, and thus, two different strategies that must be considered: 1) new building construction and 2) retrofitting existing buildings. For new construction, the City has passed a city ordinance (effective in 2010) that requires new building construction to be 15 percent more energy efficient than the existing 2008 code, 30 percent more efficient by 2012, and with a net zero goal by 2030.

It is important to secure the “low-hanging fruit” available in buildings. Lighting is one important “fruit” not only for increasing productivity, but also for increasing the comfort and well-being of its inhabitants. Currently 20 percent of global energy production is used for lighting, while in the US it is about 8 percent. In fact, it is estimated that globally, new opportunities in lighting could save 40 percent of the energy used, over €100 billion in costs, and 530 power plants.28 Preliminary audits in San Antonio show an average of a 1.5 year payback for lighting improvements. In 2007, President Bush passed the energy bill banning incandescent light bulbs by 2014. The phase out begins with the 100 watt light bulb in 2012 and ends with the 40 watt light bulb in 2014. San Antonio might want to consider taking more aggressive measures that phase out these bulbs even sooner.

Some form of certification should accompany these plans for green retrofits and new construction if San Antonio hopes to add more market value to their building stock. One certification and measurement tool commonly used is the US Green Building Council’s (USGBC) Leadership in Energy and Environmental Design (LEED) program. Many local governments have adopted LEED incentive programs and there are numerous examples of incentive structures for municipal government agencies available for review. Some organizations have learned, however, that LEED certification can significantly increase design and construction costs. Thus, for small residential projects, other options 28 Verhaar, Harry Dec. 2008 issue of European Energy Review may be more attractive.

For this reason, The Metropolitan Partnership for Energy in San Antonio has developed Build San Antonio Green (BSAG). This local standard, developed by many stakeholders and co-administered with the Greater San Antonio Building Association, works with the building and development community to certify buildings through a quality review process. Not only does such a program offer an alternative certification process, but it also requires builders to receive ongoing training through Continuing Education Classes (CEC).

The “Report on the Formation of a Green Retrofit Program” funded by the Environmental Defense Fund and delivered to the San Antonio Mayor’s office earlier this year gives a clear-eyed perspective on how best to finance these power plants. In particular, the report discusses the promising PAYS (Pay As You Save) system. PAYS would finance energy efficiency in San Antonio through a surcharge added to the utility bill of a building. The tariff would be attached to the meter, not the owner or occupier.

The proprietary PAYS system is similar to other financing schemes. The Berkeley First model is another pay-as-you-save model. However, the Berkeley model is funded by an additional line item on property taxes rather than a utility bill surcharge. In general, programs that attach payment to a building through property taxes, or to an energy meter through a utility surcharge, will provide more appropriate incentives than those that attach payment to a person. Moreover, these types of programs are more accessible to persons who have poor credit scores, but have a history of consistent payment of property taxes and utility bills.


For low income households, the free retrofit program run by the city of Houston may be more appealing. Houston’s program, called the Residential Energy Efficiency Program (REEP), is a block-by-block efficiency retrofit program targeted to reach low income neighborhoods. The program utilizes a standardized production line approach to achieve participation rates reaching more than 50 percent of its eligible residences. For an investment of roughly $1,000 per household, energy use is reduced 12 to 18 percent.[Eugster, Cris. 2009. Personal Communication with Chris Knight, American Council for an Energy-Efficient Economy, Washington, DC.] The consultants who produced the aforementioned report recommended that the city of San Antonio use both the PAYS and REEP models to achieve its building efficiency goals. They also recommended that the city initially establish a pilot program along these lines that could be financed with new tax-privileged federal bonds called “Qualified Energy Conservation Bonds” and “Clean Renewable Energy Bonds.”

A combination of bonding and third party financing allowed The Los Angeles Community College District (LACCD) to transition from owning buildings to operating power plants. Passing “Measure J” by 70 percent allowed for bonds to be issued for renewables and building infrastructure. With the banks investing the capital, LACCD pays back the loan by buying electricity out of the campus system. The electricity rate is less than if they were paying utilities.[This includes maintenance and capital costs] Banks can also take advantage of federal, state, and local utility incentives, and monetize the depreciation of the equipment through tax write-offs. For its energy efficiency measures, the district called on Energy Services Companies (ESCOs) to complete investment grade audits and recommend retrofits. The ESCOs financed the efficiency upgrades and were repaid out of the energy savings.

LACCD, with a baseload demand of 4 to 6 MW and annual energy costs of around $10 million, will be completely energy self-sufficient by the end of 2010. By installing wind turbines on the perimeter of the campus, geothermal heat pumps in the buildings, and photovoltaic arrays that double as shade for parked cars, new building construction does not even add to the base load. After installing electric re-charging stations and selling surplus electricity to Southern California Edison (SCE), LACCD transformed an initiative that began with the goal of merely “greening the campus” into a larger strategy that generates revenue, and positions this community college district as a nationally recognized pioneer in innovation.

Advancing the Pillar Two Investment Opportunity

Combining San Antonio’s experience in renewable energy with the available funding for energy efficiency retrofits, the City of San Antonio could launch a city-wide, “buildings as power plants” initiative. The first step, of course, would be to conduct a broad-scale energy audit based on: size and physical characteristics, owner/tenants, and energy use. The city has already taken the first steps by planning audits in lighting, HVAC, energy and water through the newly created Office of Environmental Policy (OEP). After these audits have been completed for energy efficiency measures, buildings slated for conversion can be further divided based on the capacity for renewable energy integration.[For a larger discussion on baseline information and strategies for large-scale implementation see Cushman & Wakefield/ Cross & Company “Situational Analysis and Recommendations for Master Plan”]1 A more complete integration of the Pillar Two investment strategy, together with the identification of appropriate metrics to assist in the evaluation of this strategy, would be another responsibility of the transition taskforce described in the previous section and elsewhere in this report.

Third Pillar: Energy Storage

The introduction of the first two pillars of the Third Industrial Revolution - renewable energy and “buildings as power plants” - requires the simultaneous introduction of the third pillar. To maximize renewable energy and minimize cost, it will be necessary to develop storage methods that facilitate the conversion of discontinuous supplies of energy sources into reliable assets.

This is because renewable energy is intermittent. The sun is not always shining, the wind is not always blowing, water is not always flowing, and agricultural yields may vary. When renewable energy is not available in San Antonio, electricity cannot be generated and economic activity grinds to a halt. But, if some of the surplus electricity can be used to extract hydrogen from water, which can then be stored for later use, citizens can have a continuous supply of power.

What many fail to consider is that when significant amounts of renewable energy are present on the grid, an increased number of power generators are needed on standby to handle large power fluctuations. At penetration levels greater than 20-25 percent (and recall that the Pillar Two recommendation suggests an overall goal of 33 percent renewable as a share of electricity generation by 2020), most grids start to hit the limits of their ability to handle these fluctuations. To move beyond those limits, energy storage is a necessity. If there were a way to store large quantities of energy and provide a means to balance load and power, the need for grid stabilization services would be better met and there would be greater capacity in grids to take on more renewable energy.

Today the most popular form of energy storage for utility companies is pumped hydro. This simple storage method involves pumping water to a high elevation. When it is released, it flows downhill and drives a hydroelectric turbine. This storage form is limited by its stringent requirements for excess energy, a plentiful water supply, and a variable geography.

Another storage technology for utility-scale energy storage is Compressed Air Energy Storage (CAES). Such a system pumps air where it is stored until needed. Upon release, the system mixes the high velocity air with natural gas and it co-fires this as a clean fuel in a regular natural gas combustion turbine - using 30 to 40 percent of the natural gas compared to a regular turbine. At present, there are only two CAES plants worldwide, one in Germany and one operated by the PowerSouth Energy Cooperative in McIntosh, Alabama. PowerSouth pumps the compressed air into a 19 million-cubic-foot underground cavern.[The Iowa Association of Municipal Utilities is also planning a CAES system for wind power, dubbed the Iowa Stored Energy Park.]

While CAES energy storage is not reliant on water and nearby high elevations like pumped hydro, it does require the presence of a hydrocarbon-based fuel in order to be cofired, and therefore, has a somewhat higher level of greenhouse gas emissions. Both CAES and pumped hydro energy storage technologies are large and expensive systems, and thus, mostly restricted to centralized utility-scale applications.

Other best practices and benefits of energy storage systems can be gleaned from projects emphasizing battery-based projects, of which there are several notable examples in the United States. In 2006, the utility American Electric Power (AEP) tested out an energy storage system at its substation in North Charleston, West Virginia. With supporting funds from the US Department of Energy’s Energy Storage Program, AEP installed 1.2 MW, in total weighing 77 tons, of Sodium-Sulfur (NaS) batteries at a cost of $2.2 million. When fully charged, this battery can supply 500 to 600 households with enough power for 6 or 7 hours.http://www.electricitystorage.org/images/uploads/docs/Sandia_First_Storage_AEP.pdf]

The North Charleston battery installation has multiple benefits. One large and immediate benefit was the delayed investment in a new substation.[Hohmann, George. December 18 2008. Charleston Daily Mail. “Utility installs giant batteries in Milton.” http://www.dailymail.com/Business/200812180200.] Longer-term benefits include easing the effects of heavy penetration of customer-sited distributed generation, improved equipment life through a reduction in peak loads, and the ability to conduct energy arbitrage. Even though operating at less than full capacity, the 1.2 megawatts (MW) North Charleston battery probably saved AEP around $50,000 in its first 11 months alone. This was done by allowing the utility to exploit differences in locational marginal prices.[Nouri, Ali. 2007. “Installation of the First Distributed Energy Storage System (DESS) at American Electric Power (AEP)”. Sandia National Laboratories.]

Two-and-a-half years later, AEP decided to install a 2 MW system on the Milton circuit in West Virginia. While the 1.2 MW unit at the Chemical Substation was turned on during times of the day that typically have heavy loads, the Milton battery is automatically turned on when load reaches a certain level. It will also have an “islanding” capability of supporting the grid when regular generation has failed. AEP has plans for similar batteries on its grid in Ohio and Indiana.[http://www.electricitystorage.org/images/uploads/docs/Sandia_First_Storage_AEP.pdf]





The Milton installation is the largest utility-scale battery in the US, but is dwarfed by international competition. Japan Wind Development Co. has connected a 51 MW wind farm to a 34 MW NaS battery complex. The battery will be able to store wind energy generated at night when winds are strongest, and provide power to 26 thousand homes during the day (Hohmann 2008).

Highly modular technologies that can provide carbon-free power in centralized and distributed applications are the future of energy systems. These systems can be combined to deal with large loads and storage requirements, but they are also well-suited to distributed deployment in industrial facilities, clean energy vehicles, and households.

Hydrogen: the Universal Medium

There is one storage medium that is both widely available and relatively efficient. Hydrogen is a universal medium that “stores” all forms of renewable energy to assure that a stable and reliable supply is available for power generation and for transport. Hydrogen is the lightest and most abundant element in the universe and when used as an energy source, the only by-products are pure water and heat. Our spaceships have been powered by high-tech hydrogen fuel cells for more than 40 years.

Here is how hydrogen works. Renewable sources of energy - solar cells, wind, hydro, geothermal, ocean waves - are used to produce electricity. That electricity, in turn, can be used, in a process called electrolysis, to split water into hydrogen and oxygen. Hydrogen can also be extracted directly from energy crops, animal and forestry waste, and organic garbage (biomass) without going through the electrolysis process.

Hydrogen can also be used to provide ancillary services or demand response through load control (as opposed to ramping up power generation from standby mode). The hydrogen can also be used in a number of different applications from transportation to industrial [Levene, J., B. Kroposki, and G. Sverdrup. 2006. “Wind Energy and Production of Hydrogen and Electricity--Opportunities for Renewable Hydrogen.” National Renewable Energy Laboratory. http://www.nrel.gov/docs/fy06osti/39534.pdf] applications. There are a large number of options to store this hydrogen gas at a variety of pressures for very low incremental cost compared to more traditional electrical energy storage devices such as batteries. Electrolyzers can be turned on and off very rapidly or follow a power signal, allowing it to be used for grid stabilization. The by-product of providing grid stabilization services is the generation of hydrogen.

Using hydrogen as an energy storage and transmission media in this way has an additional economic benefit. Combining wind or solar generation assets with hydrogen provides a potentially more efficient way of developing electricity than more conventional forms of power generation. Many generation methods operate in a steady state fashion, often referred to as baseload power. The drawback to these assets is that they don’t respond to load demand very well. In other words, they continue to produce the same amount of power, whether the grid demands it or not. But by coupling renewable energy with hydrogen storage, you not only handle the intermittency of the renewable power source, but also provide a means to match the load demand moving up and down over the course of the day. This can prove to be a more effective use of “power generation” since there is no “wasted” power. A renewable energy/hydrogen plant sized to meet a typical load profile may actually be less expensive, on a capital cost basis, than some large scale conventional baseload power plants.

Hydrogen is easily obtained from industrial processes, wherein it can then be compressed and stored in tanks or in subterranean natural gas reservoirs like those used by CAES systems. Most importantly, upon chemical conversion to heat and power through a fuel cell, hydrogen releases virtually no greenhouse gas emissions. Distributed fuel cells fed by pipelines of hydrogen synthesized using clean energy-fueled electrolysis could conceivably provide all of the heating, cooling, and electricity needs of modern societies without contributing to climate change.

Current technologies can cleanly produce hydrogen at prices comparable to that of gasoline. The National Renewable Energy Laboratory (2006) found that wind turbines could generate hydrogen through on-site electrolysis for a near term price of $5.55 per [University of Glamorgan, Sustainable Environment Research Center. “Wake up to a low carbon future: Hydrogen and fuel cells”. www.welshenergysectortraining.org/hydro percent20fuel percent20cell percent20Glamorgan.ppt] kilogram and a long term price of $2.27 per kilogram.38 Given that one kilogram of hydrogen contains roughly the same amount of energy as one gallon of gasoline, producing hydrogen can be competitive with gas given present-day prices at the pump. Transmitting wind electricity to distributed fueling stations where it would be converted to hydrogen - at next generation “gas stations”, for instance - was found to be even cheaper, at $4.03 per kilogram in the near term and $2.33 per kilogram in the long term.

Researchers are currently experimenting with new methods of hydrogen synthesis that can produce gas even more cheaply and cleanly. Electrolysis can produce hydrogen, and if the electricity is from a clean energy source, this process emits few greenhouse gases. In the future, “bio-hydrogen” may even be produced using food, sewage, or crops as a substrate.39 But today, it is possible and profitable to create an integrated system for the production, distribution, and consumption of hydrogen at a local level, as the Munich Airport has demonstrated.

Beginning in 1997, the German state of Bavaria partnered with 14 companies to develop hydrogen busses, generation systems, and refueling infrastructure at the Munich Airport. Hydrogen gas - as used in buses - is obtained from the waste of a local petroleum refinery as well as the use of a pressurized electrolyzer. Meanwhile, the airport uses liquefied hydrogen in an automated refueling station (with robot dispensers) for the smaller tanks in passenger cars.[http://www.ieahia.org/pdfs/munich_airport.pdf] The first five years of the project cost about $20 million, but has resulted in over 13 thousand visitors, and are set to be expanded upon in subsequent stages.[Burmeister, Wolfgang. “Hydrogen Project at Munich Airport”.







Perhaps what is most interesting for San Antonio is that the airport makes use of a special electrolyzer made for decentralized hydrogen production. A 450 kW electrolyzer is hooked up to the local grid, and then produces hydrogen using electricity and water. If the local grid is powered with clean energy, or the electrolyzer is hooked up its own solar energy system, this hydrogen can be produced with near zero emissions of greenhouse gases. Conceivably, such a system could be used both for the production of hydrogen for vehicles and for fuel cells located in households and businesses.

Implementing hydrogen technology for utility, storage and transit applications will require a coordinated effort from the utility, municipality, and transit authority. Only such a coordinated approach will lead to the realization of the full potential of hydrogen technology. Hydrogen can also be used for generator cooling. This is a well-known and widely used application. Optimizing an overall hydrogen energy system on a broader basis will take some insightful planning across several agencies in the community. The utility will need to integrate demand response and grid stabilization programs alongside the transit authority, who must work toward targets for zero emission transit. Not only does hydrogen transfer large amounts of energy to vehicles quite easily, but the only way to achieve zero emission public transit is through the use of hydrogen, since the energy demands are simply too great for pure battery operation. As a point of departure for San Antonio, transit busses fueled by hydrogen technology may be an ideal way to get started; they make great “rolling billboards” and can engage the community on a very personal level.

Advancing the Pillar Three Investment Opportunity

While energy efficiency is about cost-effective reductions in wasted energy, and renewable energy technologies are a smart supply-side option, storage systems provide an entirely different element of energy services. The ability to store energy in a flexible energy form and in a variety of decentralized systems and media enables any given energy system to provide useful energy when and where it is most needed and in a costeffective manner. Over the longer post-2020 time horizon, hydrogen fuels may also provide a direct source of power in addition to its many benefits as a storage medium.

Right now, however, demonstrated technologies that are both cost-effective and reliable have not significantly penetrated the market. And unlike energy efficiency and renewable energy resources which can be immediately deployed in community-size quantities, storage technologies - whether pumped storage, batteries, or hydrogen - lack sufficient scale to make the same level of impact. In short, they are technologies which must be further developed at the commercial scale and then integrated with other critical resource technologies. Hence, a different investment strategy is required to optimize for full system benefits.

It is in this last regard that the recommended transition taskforce may find a more difficult challenge - in effect, to: (i) identify an optimal mix of storage technologies,given both the energy efficiency and renewable energy goals previously discussed; and (ii) provide a roadmap that greatly increases the probability that an optimal set of hydrogen and other storage technologies will be available at the scale and at the level of distribution needed to ensure reliability and cost-effectiveness. As a second critical task,the Taskforce will need to develop, in parallel with the other Pillar technologies, an appropriate set of metrics both to guide the development as well as the implementation and evaluation of this Pillar Three effort. Such metrics would begin to include an initial focus on scale, cost, and reliability, as well as job creation, new business startups, energy savings, greenhouse gas and other emissions reductions.

Fourth Pillar: Smart Grids and Smart Infrastructure

By benchmarking a shift to renewable energy, advancing the notion of buildings as power plants, and funding, supporting, and integrating an aggressive hydrogen fuel cell technology R&D program, San Antonio will have erected the first three pillars of the Third Industrial Revolution. The fourth pillar is the smart reconfiguration of San Antonio’s larger infrastructure. This includes reconfiguring the transportation system, the communications network, and the power grid along the lines of the Internet - and what some are beginning to call the Smart Web. The “intelligent utility network” will [In the ultimate sense, a customer – whether a user or a producer of power, or both – would have access to multiple energy forms through multiple vendors. In effect, a smart intergrid connection would allow any single customer to buy, sell, or use hydrogen, electricity, compressed air, steam, and mechanical or shaft power and optimize the production of other goods and services.] enable the community to produce and share more forms of their own energy in many more cost-effective ways. The smart grid will also provide energy companies and utility systems with the means to increase system reliability, enhance market robustness, and reduce overall energy system costs. Finally, an intelligent utility network will allow businesses and homeowners to provide, move, and ship goods and services in new and different ways.

A smart intergrid that allows producers and consumers to tap into multiple resource options by way of several different energy providers will not only give end users more power over their energy choices, but will create significant new efficiencies and business opportunities in the distribution of electricity. The intergrid is a stark contrast from today’s centralized distribution of energy resources like fossil fuels. 42 In 2008, for example, central generation and transportation of electricity wasted two-thirds of all US energy, just short of 28 Quads. This rate of inefficiency is essentially unchanged since 1960 and is more than Japan uses to power its entire economy.[John A. “Skip” Laitner, presentation to the ACEEE Energy Efficiency Finance Forum, San Francisco, CA, April 2009. The calculations are based on data from the Energy Information Administration.]

With a smart intergrid, however, if the grid is experiencing peak energy use with the prospect of system overload, smart grid sensors and software can automatically direct a homeowner’s washing machine to rev down one cycle per load or drop the air conditioning requirements by one degree or more. Consumers who agree to these slight adjustments in their electricity use could receive credits on their bills. Since the true cost of electricity on the grid varies (sometimes significantly) during any 24-hour period, moment-to-moment information can open the door to “dynamic pricing” opportunities. This, in turn, will allow consumers to increase or drop their energy use automatically - in part as a function of price (and perhaps other preferences such as drawing a greater mix of renewable energy as part of household demand). Real time pricing also allows local energy producers the choice of automatically selling energy back to the grid or dropping off the grid altogether.


Components of the Smart Grid

The fourth pillar of the Third Industrial Revolution is made of four basic components: minigrids, which are community or neighborhood-scaled grids or industrial parks or plazas that operate within a larger power system; smart meters, which direct and optimize the ebb and flow of energy from consumers to producers; embedded sensors and relays, which enable real-time operation and system optimization; and intergrids, which connect multiple resource options with multiple agents (whether producers or buyers). Minigrids enable energy to be produced and consumed locally and smart meters communicate energy flows into and out of homes and buildings. The bi-directional communication that these meters provide allows buildings to both produce and consume energy while providing the user and utility with net energy usage data. Embedded sensors and relays allow electricity in the grid to be routed wherever and whenever it is needed most. Embedded sensors also ensures reliable power and reduces the likelihood of browns-outs and service disruptions.

Demonstrations of intergrid projects are occurring on many levels; across entire countries, such as Malta; regionally, in several European locales; and domestically, through utilities such as Southern California Edison and Duke Energy. Installing smart meters is the first upgrade that could be quickly deployed for only two to three dollars per month, per residential customer.[Barry Smitherman, chairman of the Texas Public Utility Commission, 4/6/09.] Smart meters can also provide an immediate payback as they can affect behavioral changes. Washington DC has a pilot time-of-use pricing program that has saved up to 70 percent of use during certain periods.

Regulatory changes are needed to usher in the advanced intergrid. Energy efficiency and distributed generation will not be a high priority for utilities that are supported by sales of kilowatt-hours. Thus, regulators must work with utilities to decouple energy sales from energy services and accelerate changes in business models to create organizations compatible with the new business models in the Third Industrial Revolution.



Beyond State of the Art

A number of cutting-edge firms are working to integrate wireless networks with advanced metering reading (AMR) capabilities. As a testament to the economic development prospects of flagship demonstration projects, Tendril started up in the same city as the premier US Smart Grid demonstration project in Boulder, CO (Technology Review 2009). The use of wireless data transfer avoids the costly labor and materials necessary for hard wiring and it also promotes functional flexibility. Information on the customer regarding home energy use can be beamed rapidly and cheaply over the internet to utilities. Utilities can then communicate new price and market conditions directly to customers. Electricity information is just one type of data that can be integrated on wireless networks. Wireless Home Area Networks (HAN) can integrate multiple sources of home information, from electricity use, to temperature and communications capabilities.

CPS Energy has demonstrated that it understands this critical resource opportunity. Indeed, it has already planned for smart grid investments on the order of $113 million through 2020 as part of its on-going commitment to promote sustainability within the CPS system. With smart meters being installed in homes and businesses, consumers will soon have the capacity to interact and respond to peak pricing signals and other information. In effect, consumers can become active, participating agents in helping reach the 20/20/20 by 2020 goals, as they will be able to reduce peak demand for energy as needed. Hence, energy efficiency combined with smart grid investments can provide important flexibilities for the larger energy system within San Antonio. Assuming this smart meter investment translates into as many as one-half of CPS customers integrating smart meters into their normal patterns of buying and using electricity, this may provide perhaps 80-100 MW or more energy system benefit. [St. John, Jeff. 2009. “Top Ten Smart Grid”. April 30 2009 article in Greentech media. http://www.greentechmedia.com/articles/read/top-ten-smart-grid-3605/N10/]

The economic development potential of electricity is enhanced by the integration of  cutting edge information and communication technologies across the entire power grid. Established firms like IBM, GE, Siemens and KEMA excel at integrating smart products into large infrastructure systems. Smaller firms, in turn, are specializing in the sensors and devices that make the smart grid possible.

The bi-directional flow of energy also creates the possibility of interfacing with the transportation system. When energy is in high demand, smart meters and plug-in hybrid vehicles add more energy storage capacity to the grid. Electric and hydrogen powered fuel cell plug-in vehicles can become “power stations on wheels,” with a generating capacity of twenty or more kilowatts. Since the average car, bus and truck are parked much of the time, they can be plugged in during non-use hours, to the home, office, or the network to provide electricity back to the grid. Thus, electric and fuel cell plug in vehicles also become a way to store massive amounts of renewable energy.

Projects and industry partnerships are being formed at all levels to explore these new applications of smart grid. In 2008, Daimler and RWE, Germany’s second largest power company, launched a project in Berlin that established recharging points for electric Smart and Mercedes cars. Toyota has now joined with EDF, France’s largest utility, to build charging points in France and other countries, for its plug-in electric cars. Similarly, Renault-Nissan is readying a plan to provide a network of hundreds of thousands of battery charging points in Israel, Denmark and Portugal to service Renault’s all electric Mégane car. By 2030, charging points for plug-in electric vehicles and hydrogen fuel cell vehicles will be installed virtually everywhere - along roads, in homes, commercial buildings, factories, parking lots and garages - providing a seamless distributed infrastructure for sending electricity to and from the main electricity grid.

Smart Grid Operations and Utilities of the Future

Smart Grid projects are increasingly popular, especially in states with progressive utility regulation such as California. On June 18th of this year, the board of the Sacramento [Carvallo, Andres. “Austin Energy Plans Its Smart Grid 2.0”. Article by Austin Energy Chief Information Officer Andres Carvallo. http://www.ciomaster.com/2009/04/austin-energy-plans-its-smartgrid-20.html] Municipal Utility District approved a 30 month rollout of 620,000 smart meters. And the huge California utility PG&E has committed $2.2 billion toward a smart grid program,utilizing networking technology from Silver Spring Networks.

Austin Energy (AE) has been working on a smart grid since 2003. It began its smart grid efforts with Smart Grid 1.0, focused on the utility side of the grid. This involved installing 410,000 smart meters that communicate via a wireless mesh network. AE has also installed 86,000 thermostats that it can control remotely and 2,500 distribution grid sensors.45 Austin predicts that its entire service territory will be “smart” by August of this year. Most recently as part of its 1.0 strategy, AE has been working with General Electric to integrate GE’s distribution management system, which will essentially function as a GPS for the grid.

These efforts are now being folded into the Pecan Street Project, which is a part of Smart Grid 2.0. This segment of Austin’s smart grid project extends beyond the meter, including appliances, distributed generation, and vehicles. Indeed, Austin’s Pecan Street project explicitly includes a vision of an electricity grid reconnected with the transportation sector. Austin also emphasizes that it doesn’t see smart grids as bad business. Part of its vision for the smart grid are “smart business plans” that allow Austin Energy to be a leader without compromising its financial footing.

Xcel Energy completed the first phase of its effort to turn Boulder into a “Smart Grid City” in August 2008. The Smart Grid City project focuses on customer empowerment, wherein the utility company encourages customers to manage their own power consumption online. When the demonstration project is complete, it will include 10,000 Boulder homeowners. So far, relatively few meters have been installed in Boulder (around 15,000) and project leaders have demonstrated a more cautious approach to creating a smart grid.

The best example of the realization of the potential of the smart grid comes from overseas, from the Italian utility Enel. In the 1990s, Enel conducted a large pilot study of the feasibility of remote meter management for residential customers by installing 70,000 meters. In 1998, the utility decided to go ahead with a plan to replace all residential and small business meters with digital meters that could be read remotely, a project estimated to have a 4 year payback.

Enel uses concentrators to combine the information from many separate meters and then transmits this information to the information processing center via modems. Enel installed 20 thousand meters per day and by 2006 was remotely managing 28.8 million meters. Enel spent 2.1 billion Euros creating its smart grid. This includes every cost from R&D to IT systems development. More importantly, Enel estimates that the project achieves an annual savings of 500 million Euros.

As a result of its project, Enel has eliminated estimated billing, enabled remote reading of power consumption, facilitated remote change of contractual parameters, and improved fraud detection and prevention. Its meters have a lifetime of 15 years and a failure rate of less than three-tenths-of-a-percent per year. Since 2006, Enel has provided bidirectional policy phase meters that can be used with distributed generation systems. Another new development is integrated digital metering of gas, water, heating, and electricity.[Rogai, Sergio. 2006. “Enel’s Metering System and Telegstore Project”. Presentation to NARUC Conference, Washington, DC, 19th February 2006. See, http://www.narucmeetings.org/Presentations/ENEL.pdf.]

Recently, Enel partnered with Daimler in the “e-mobility Italy initiative” to build a network of 400 electric vehicle charging stations to use with 100 electric vehicles in Rome, Pisa, and Milan. The recharging system will use the same type of technology as Enel’s 32 million digital smart meters.

Hydro One, a utility in Ontario Canada, is also implementing a smart grid system. By 2025, the utility is going to have to replace 80 percent of its generating facilities while also expanding its generating capacity. Hydro One is similar to CPS in that it takes a long-run view of competitive business models and strategic investments. Given this backdrop of large investments, Hydro One decided to implement solutions that will maximize their resources, which includes an Advanced Metering Infrastructure (AMI) to serve all of its 1.3 million customers by the end of 2010.

As of December 2008 Hydro One had installed over 700,000 meters. The utility partnered with General Electric, Trilliant, Motorola, and Capgemini to create an open network that will allow the layering of additional applications on top of the basic technology, permitting advanced usage of smart thermostats and home displays. The communication networks that Hydro One are putting in place will also enable a wide variety of new productivity-enhancing business capabilities. These include automated vehicle location, safety monitoring, emergency communications with vehicles, and a much more mobile workforce.[Hydro One. 2009. “The Hydro One Smart Network: The Future Has Arrived”. http://www.smartgridnews.com/artman/uploads/1/Hydro_One_Case_Study_012209.pdf.]

CPS Energy is currently formalizing a three part smart grid strategy comprised of a longterm vision for a CPS Energy smart grid, a roadmap charting the course for achieving that vision and a comprehensive implementation plan. The existing initiatives include: installation of Intelligent Electronic Devices (IEDs) such as digital relays and reclosers; Distribution Management System installation; Outage Management System (OMS) installation and applications; and the deployment of a Geospatial Information System (GIS). To that end, CPS Energy has been actively engaged in the processes that will result in the deployment of an Automated Metering Infrastructure (AMI) consisting of meters and a secure two-way communications system that will enhance customer choice related to rate options; demand response; communicating customer usage patterns; improved service restoration; and overall efficiency improvements in the daily operations of the electric system.

The evolution of smart grid will be crucial in advancing energy efficiency, renewable
energy, and a cleaner transportation system. CPS can capitalize upon the experiences of
others by determining what aspects of smart grid the city, CPS, and other stakeholders
value the most. Different service areas have differing priorities and experience has
shown that this shapes the development of the smart grid. The experience of Enel in Italy
shows the effect of a commitment to market transformation combined with maximum
value creation. Hydro One in Canada has the best example of a smart grid that
emphasizes open communication protocols which allow broader application than most
would imagine. Xcel energy in Colorado demonstrates an approach focused on consumer
interaction, including some of its pitfalls.

Advancing the Pillar Four Investment Opportunity

A large scale deployment of smart grid in San Antonio will require an integrated
approach involving simultaneous engagement in organizational transformation, business
process transformation, solutions implementation, standards coordination, and regulatory
involvement.[For an elaborate discussion on strategic involvement, see “General Electric’s Recommendations”] CPS has the opportunity to reduce learning curve delays by leveraging
best practices and lessons learned from the many demonstration projects currently under
implementation. Utilities, trade associations, and the Department of Energy are all
developing databases and information clearinghouses that can enable the City and CPS
Energy to avoid pitfalls that others have experienced.

Focusing on specific market demographics and prioritizing specific technical elements is
essential. For instance, CPS Energy has historically maintained low retail electricity and
gas prices; therefore providing new energy services and time based rates may require
greater customer outreach programs for ensuring broad acceptance and realization of
benefits.

Smart grid technology application, much like distributed renewable generation discussed above, can create completely new business models and applications for both CPS and the City. Leveraging data from near-real-time systems - inherent in the potential for San Antonio’s smart grid infrastructure - creates the opportunity to expand a traditional utility’s service line to include energy advisory, energy management, and control services. There are many lessons to take from other industries (i.e., telecommunications and supermarkets) that have leveraged the value of consumer data to expand service lines and apply new business models.

Creating alliances and partnerships with key organizations charged with development of standards for device and systems interoperability, as well as cyber security measures, will also allow the City of San Antonio and CPS energy to mitigate the potential of systems obsolescence. Other alliances with appliance manufacturers whose products overlap with the City and CPS’ smart grid architecture should also be considered, as many manufacturers are becoming proactive in working with the utility industry for product demonstration and future product enhancements.[See KEMA (R. Wilhite) “Key recommendations for the City of San Antonio/CPS Energy]

As a first step toward coalescing and coordinating the many alliances and partnerships that will be needed if the Alamo region is to optimize the development of Pillar Four, the transition taskforce may find yet another difficult challenge, but one similar to outcomes needed for Pillar Three. In this case, the Taskforce should be directed to: (i) identify a range of smart infrastructure technologies that might enhance the seamless operation of the many different technologies embraced within the first three pillars; and (ii) provide a road map that ensures the optimal set of smart infrastructure technologies are available at the scale and distribution needed to ensure reliability and cost-effectiveness. Again, in parallel with the other technologies, the Taskforce would identify an appropriate set of metrics to guide the development as well as the ongoing implementation and evaluation of the Pillar Four challenge. As with Pillar Three, the development and implementation metrics would include an initial focus on the scale, cost, and reliability of the system grid and community infrastructure, as well as on job creation, new business startups, energy savings, greenhouse gasses and other emissions reductions.


The Distributed Social Vision

Knowledge will be the key to fostering the Third Industrial Revolution and ensuring a smooth transition. The remaking of the infrastructure and the retooling of industries is going to require a massive retraining of workers. The new high-tech workforce of the Third Industrial Revolution will need to be skilled in renewable energy technologies, green construction, IT and embedded computing, nanotechnology, sustainable chemistry, fuel cell development, digital power grid management, electric and hydrogen powered transport, and hundreds of other technical fields. Entrepreneurs and managers will need to be educated in how to take advantage of new businesses models, including opensource and networked commerce, distributed and collaborative research and development strategies, and sustainable low carbon logistics and supply chain management. The skill levels and managerial styles of the Third Industrial Revolution workforce will be qualitatively different from that of the workforce of the second industrial revolution.

To this end, just as the first and second industrial revolutions were accompanied by vast changes in the educational system, the Third Industrial Revolution will require equally innovative educational reforms in order to prepare future generations to work and live in a post-carbon world. The new curriculum will focus increasingly on advanced information, bio- and nanotechnologies, the earth sciences, ecology, systems theory, collaborative and distributive education, open-source learning models, and social capital. We will need to educate our children to think as global citizens and prepare them for the historic transition from 20th century conventional geopolitics to 21st century global biosphere politics. Education will increasingly focus on both global responsibility to preserve the health of the planet’s biosphere and local responsibility to steward regional ecosystems. Living sustainably will become the anchor of 21st century learning environments.


Efforts to create and retain green high-tech jobs in San Antonio can be enhanced through education and community partnerships. Such partnerships will cultivate talent by bringing together higher learning institutions, such as Texas A&M’s newest San Antonio location with local businesses and neighborhoods. A similar model, the Triangle Universities Center for Advanced Studies Inc. (TUCASI) was employed with much success in the development of Research Triangle Park in North Carolina.[TUCASI was founded in 1975. http://www.rtp.org/main/index.php?pid=53&sec=1. Flexible office and state-of the-art lab space for new businesses (Park Research Center) has also been key to RTP’s role as an economic incubator in the community]

A program like TUCASI would connect students with the high-tech industries that San Antonio is cultivating. The new students drawn to San Antonio’s higher-learning institutions would supply the talent needed to develop and grow existing high-tech and green industry. Also, some of these students would presumably start their own firms, ensuring that San Antonio’s industrial development is always on the cutting edge.

To prevent the creation of two San Antonios, the city should consider the use of energy skilling programs for both energy and equity goals. The city of Oakland, CA has adopted targeted skilling programs as a means to ratchet up the income of low-wage manual laborers, funded initially by a grant from the federal level through green jobs legislation passed in 2007.[The Green Jobs Act of 2007 authorized $125 million for employee education/skilling programs that address skill shortages in “green” industries.] However, given San Antonio’s ambitious goal of being a Third Industrial Revolution lighthouse city in the United States, a broader and more comprehensive program is in order. When planned well, an education/skilling campaign can be an integral part of a more comprehensive plan aimed at increasing the enduring human capital and knowledge base of a region. 51 http://www.rtp.org/files/Fact%20Sheets/park_research_center_022307.pdf.

Such a project would increase the quality of public school education generally, focusing on math and the sciences. Concurrently it would also address higher and community education. Increased funding through state and federal grants and heightened faculty recruitment efforts for undergraduate programs in Science Technology Engineering and Mathematics (STEM) would provide the academic foundation for building a high-level scientific base at the University of Texas San Antonio, Trinity University, and St. Mary’s University. Extension and normal course programs in HVAC improvements and solar panel installations could be run out of the campuses of the Alamo Community College District to create a living laboratory model similar to the LACCD model as discussed in Pillar Two. In sum, all educational assets of the region could be fully engaged, creating many educational synergies with significant potential multiplier effects over the course of the next two decades.

Some cities that have taken on this challenge have started largely from the grassroots level and still achieved considerable success. Among these efforts are the so-called “transition towns,” around 120 towns and cities around the world that are choosing to be beacons of sustainability in an era of peak oil (Smitherman 2009). While some may criticize their efforts as “mere virtue,” many are positioned to prosper in an era of resource scarcity. Because the transition town movement is so “bottom up” it may not apply fully to the situation of San Antonio. Yet the efforts of transition towns may be a good model, especially for how to increase awareness of public issues and facilitate organic behavioral change. Because these towns have had to start from the bottom, they’ve worked to generate smaller behavioral and micro-cultural shifts before they could effect larger change. Even though San Antonio’s Mission Verde plan has buy-in from many larger stakeholders, to be successful it will need to have popular buy-in. But for citizens to fully take advantage of the programs, they’ll need to be educated, informed, and impassioned.

These principals are being applied in one city during its earliest stages of development. The city of Masdar in the Middle Eastern state of the United Arab Emirates will be the world’s greenest city: the first zero-carbon, zero-waste, car-free city (Contractmagazine.com 2008, Porter 2008). Solar energy will provide heating, cooling, and clean water for the city of 50,000. Waste streams will be recycled, composted, or used in a waste-to-energy plant. Transportation will be provided by Personal Rapid Transport (PRT) vehicles guided by magnetic rails, similar to those unveiled by Toyota in recent years. The city will also guarantee fair wages for all inhabitants. Most interesting from an energy efficiency perspective, the city will require only 25% of the energy typically required to power a city of its size. This is especially notable because the city will require few sacrifices to achieve this.

The Massachusetts Institute of Technology is advising the city as it plans its Masdar Institute of Science and Technology, modeled on the US MIT. The city will be a hotbed of advanced clean energy science and technology, as well as a living laboratory where thinkers can see their ideas in practice. This element of “learning by doing” is part of why it is so important to see other cities’ attempts to become sustainable. Much of the path towards sustainability cannot be planned. It must be learned. But as more large cities undertake this journey, others will be able to learn from them and actually leapfrog ahead. We hope that San Antonio can become the largest and most successful “leapfrog” with much of the same cutting-edge knowledge as Masdar, but practiced in an American way, in a Texan way.

Reinventing CPS Energy

A smooth transition into a Third Industrial Revolution will require new ways of conducting business. As more and more people become actively involved in power production, traditional power producers will adapt their business models, expand service lines, evolve value propositions, and re-examine the level of customer engagement. Utility companies are not exempt from this transition.

Current business models require utility companies to be experts in providing electricity. But in an era where efficiency gains and less power production could replace the higher costs of new generation sources, utility companies must begin to transition from producing power to managing both energy and high value-added services. As more and more sources of distributed power are introduced, the business opportunities will increasingly lie in routing the traffic in energy grids to connect producers and consumers. Strengthening the core capacities of logistics and supply chain management and learning more about these transactions, opens the opportunity for a nearly infinite number of other value propositions.

As is commonly quoted, “the cheapest electricity is the kilowatt-hour that isn’t used.” In a time where everyone is looking for the option with the least cost, utility companies and municipalities in partnership with financial institutions will increasingly need to use business models similar to ESCOS, providing up front capital for individual homeowners and businesses to make efficiency installations and begin producing their own power.

The repayment for these investments comes in the form of energy savings. The utility benefits when it can share or completely avoid the higher cost of bringing new generation sources online, while the homeowner receives the benefits of lower energy bills. This multi-stakeholder buy-in also ensures a greater overall interest in understanding energy; which as previously noted, when combined with time of use pricing programs, can significantly affect consumer behavior.

As San Antonio and CPS gain more experience with Third Industrial Revolution models and begin to develop new business plans, they are also building institutional capacity, strengthening their own supply chain, and positioning themselves to offer these services in the future.

Bringing together all four pillars of the Third Industrial Revolution in a unified business plan could make San Antonio and CPS Energy a one stop shop for implementing a Third Industrial Revolution economic game plan in the region. CPS might consider new business opportunities along the entire value chain of a Third Industrial Revolution Infrastructure. With this in mind, CPS Energy and the city should become actively engaged in the business of financing, manufacturing, and servicing the various components and process that make up the four pillar infrastructure of a Third Industrial Revolution. CPS can begin to transform itself from its traditional role as a producer of power and energy to a full-service provider that engages in business opportunities and partnerships at every stage of the production and delivery process, including the supply chain and logistics.

It should be emphasized that neither CPS nor the city will be able to implement an economic game plan of this magnitude, going it alone. To achieve its objective of becoming America’s first Third Industrial Revolution region, the city and CPS will have to secure full customer participation. Common Interest Developments (CIDs), cooperatives, neighborhood associations, etc. are all potential players and partners in the implementation of a Third Industrial Revolution game plan for San Antonio and South Texas. According to Peter Bella, Director of Natural Resources for the Alamo Area Council of Governments, many of the difficulties faced by San Antonio are shared with the surrounding counties. San Antonio should consider positioning itself at the center of a South Texas energy network to bring together utility companies and other energy providers and users with the aim of establishing a Third Industrial Revolution Infrastructure across the entire South Region of Texas.


Mapping the Transition

CPS Energy faces an initially difficult quandary. On the one hand it has a strong capacity and presence in the traditional generation of electricity, as it delivers electricity and natural gas at reasonably low costs. On the other hand, it is intelligently examining new ways to move into the Third Industrial Revolution. With a growing population and with many of its existing power plants now planned for retirement in the near future, it must balance the need to provide sufficient energy for all of its consumers - while doing so at the lowest possible cost. It needs to do all of that while also mitigating the impacts of climate change. Both the city and CPS Energy have balanced these priorities quite well thus far. The question must be asked, however, whether “more of the same” will truly position the entire San Antonio region for the transition into a pattern of sustainable economic development.

New patterns and new opportunities will require questioning old assumptions. Utilities have long counted on load growth and annual sales growth between one and two percent. In fact, this rule of thumb held true in 45 of the last 58 years. But as consumers begin using less energy and producing their own power, there is decline in demand. Utilities around the country are currently going through this learning curve. Power demand in Texas is down 3.2% so far this year, while American Electric Power has seen an electricity demand decline of 4.4%. This decline in demand will also affect long-held assumptions about the profitability of wholesale markets. In the Houston pricing zone, the spot price in June 2008 was $129.48 a megawatt hour; in 2009, it was $61.82.[Smith, Rebecca. "Electricity Prices Plummet." The Wall Street Journal [New York City] August 12, 2009: A1.]

At the same time, there could be an increase in demand for power as the transportation sector transitions to plug-ins and electric vehicles. In order to bridge this gap, utilities may be considering new power generations options. Assumptions regarding the risks associated with projected costs for these options should be carefully considered. Any investment which ends up costing in the upper range of uncertainty could absorb the discretionary capital that might otherwise be available for investing in sustainable development activities that could contribute to the transition to the Third Industrial Revolution. (See graph below)


For instance, CPS Energy and San Antonio could create an ongoing program similar to the recent Car Allowance Rebate (CAR) - “Cash for Clunker” - program by providing rebates for upgrading “Clunker” buildings and appliances. Perhaps a program for upgrading homes and businesses with state of the art energy efficiency and renewable energy technologies, if operated at a sufficient scale over time, could cost-effectively cancel the need for investment in traditional supply options. Upgrading the city’s building stock would also appreciate the value of the real-estate to the benefit of owners, the city, and CPS.

Perhaps the most important issue to be explored is how to minimize long-term environmental risk. CPS currently projects that over 10 million tons of carbon dioxide (CO2) emissions will be avoided by investments in carbon capture and storage technologies, beginning in the year 2019. These assumptions must also be carefully examined as this is a technology has not yet been shown to be a commercially viable business activity. A related question is whether there might be management strategies that can defer the planned retirement of the older, less efficient power plants so that the community might buy more time to fully deploy the full set of the four pillar technologies.

While there are uncertainties associated with energy efficiency and distributed renewable energy technologies, the evidence suggests there are even greater uncertainties associated with carbon capture and storage technologies. Nearly everyone in the industry acknowledges that the cost of traditional fossil fuel power generation is becoming more expensive - and will only continue to do so - given the rising energy prices and the projected climate change and emissions policies. On the other hand, the cost of Third Industrial Revolution generation is dramatically decreasing as these technologies reach economies of scale and scope, and as a result of greater learning and production experience.

Two things remain in this report. The first is to review and address several concerns raised by CPS Energy and City staff, both in the April Sustainability Workshop and in on-going communications since that workshop. The second is to recommend a framework to help the City and the region move forward into the Third Industrial Revolution.

Addressing Key Concerns

During the April workshop on Sustainability, CPS Energy and the City Staff (among others) raised a number of thoughtful concerns. The questions they posed were not intended to stymie momentum; rather they were serious questions that needed to be addressed in order to increase the probability of a successful transition to the Third Industrial Revolution. Three of those questions are addressed in some detail here:


Rates Versus Bills

The understandable concern both with ratepayers, and the community more generally, is the potential impact on the cost of energy if San Antonio moves too aggressively to fund investments, which may not prove to be cost effective. In this case, there are three questions that might be asked. First, would the rates go up anyway and would programs like this have a tendency to push costs back down? Second, if the U.S. economy pushes any form of GHG emissions targets, would that have a tendency to push up costs even further? Finally, can the level of energy savings offset higher prices, so that even with higher rates, the total bill might actually decline?

It turns out that there is a strong likelihood that energy prices, from whatever energy resource we choose, are likely to rise. The Energy Information Administration’s latest forecast for the U.S. economy is that, on average, real energy prices will rise 50 percent by 2030. At the same time, efficiency improvements and less expensive renewable energy resources can help mitigate these upward pressures on energy prices. In other words, doing nothing at all is likely to place huge demands on all energy resources in ways that almost guarantee significant price increases. Moving the economy onto the path of the Third Industrial Revolution can significantly reduce those upward price pressures for San Antonio, for Texas, and for the US and global economies as a whole.

There is one possible exception, and that is if the US and other nations agree to put a cap on future greenhouse gas emissions. That is likely to place a carbon charge on all fossilfuel related energy resources. The latest analysis from the US Environmental Protection Agency, for instance, suggests a carbon charge on the order of $30 to $60 per tonne of carbon dioxide emitted in 2030. To see how that might look in terms of electricity prices, for example, it might increase rates (based on US averages) from an average of $0.10 per kilowatt-hour (kWh) to as much as $0.13/kWh - roughly a 30 percent price increase. At the same time, if the nation as a whole made the kinds of investments envisioned by the Third Industrial Revolution, the electricity price might increase by 15 percent to only $0.11/kWh. What this means, then, is that if the overall energy use decreases by 25 percent, the total electricity bill might actually drop by about 18 percent. In many ways then, productive investments in the Third Industrial Revolution today provide a hedge against future price increases while lowering overall energy bills for rate payers.[This working analysis is based on analytical tools developed by ACEEE (2009).] This becomes even more apparent when we recall that the analysis characterized in the early part of the report, and buttressed by the data highlighted in Figures 2 and 3, suggest that it takes money to make money. But investment in the more productive energy system envisioned by the Third Industrial Revolution shows a net positive return for the San Antonio economy.[In fairness, we must point out that there is a wide range of uncertainty in this kind of “futures analysis.” But the critical point remains, that doing nothing is almost ensuring dramatically rising energy costs.]

Financing the Transition

Although we can’t be precise or certain about the magnitudes of investment that might be required to lead the San Antonio economy onto the path of the Third Industrial Revolution, a reasonable starting estimate is on the order of $16 to $20 billion between now and 2030 - or $800 million or so investment each year, which is approximately 5% of each year’s total economic investment. That is a sufficient investment to help San Antonio meet its 20-20-20 goal by 2020, and push on to 2030 in ways that lower greenhouse gas emissions (perhaps to 50 percent of the levels otherwise projected for the year 2030). While the returns look positive, that is still about 20 times the level authorized by the San Antonio City Council to underwrite CPS Energy’s STEP program. So the question naturally arises, how does the community “step up” to that level of investment? And where does that kind of money come from? There is more good news that may help the community move in that direction.

San Antonio already has a strong cluster of financial institutions, and as the seventh largest community in the US, it has the demonstrated skill to raise this kind of capital year after year. As we again suggested in the early part of the report, San Antonio needs an average of about $16 billion per year of routine investment just to keep its normal economy going. This is the money necessary to build roads, schools, hospitals, factories, and the like - year in and year out. So in its diverse ways, the community is raising the amount of capital that would be needed to fund the entire community’s transition to the Third Industrial Revolution each and every year. Or, as it was just stated, if San Antonio diverted the equivalent of just one year’s routine investment over a 20 year period - or $800 million per year - and then channeled those dollars into more productive infrastructure, the Third Industrial Revolution would be substantially underway; this means using only 5% of the yearly economic investment to transition into to a Third Industrial Revolution.




Of course an investment of $800 million per year boosts the economy in the short term by creating new business opportunities and employment while laying down the infrastructure for a new industrial revolution with economic benefits to mid century and beyond. The question that San Antonio needs to ask itself is where it wants to be in twenty years from now - in the sunset energies and industries of a Second Industrial Revolution already on life support, or in the emerging sunrise energies and industries of a Third Industrial Revolution? In other words, how should San Antonio use its 16 to 20 billion dollars in annual investment in the local economy? We believe the answer is clear.

As Figure 3 indicates, investments in these kinds of technologies tend to have a much lower risk which, when coupled with a smart business plan, makes them more attractive to investors. At the same time, the many sections of this report highlight a variety of funding mechanisms. The real question is how the community chooses to organize itself to accomplish this task, and what collaborators and financial institutions it believes can do the best job to generate this desired outcome. To that extent, one of the major recommendations already mentioned, and further described below, will be to launch a community-wide transition taskforce to help the Alamo area prioritize both its energy and sustainability goals, and to identify the specific funding mechanisms and partners that will help San Antonio get the job done.


Economic Development

The City’s Mission Verde Statement underscores the importance of integrating an economic development perspective into the forward momentum of the Third Industrial Revolution. This means examining the larger effort for its employment and business start up implications. It also means attracting the quality educational programs and the appropriate industry clusters that magnify returns on the community’s investment in sustainability. In short, an economic development perspective means building the capacity needed to deliver goods and services in ways that rely on local businesses, local expertise, local resources, and the local labor force. [For a further discussion on the planning and implementation of a “Green Jobs” program in San Antonio, please see “Building Green Skills: A Green Jobs Program for San Antonio” by the Council for Adult and Experiential Learning (CAEL 2009) http://www.cael.org/pdf/AGreenJobsProgramforSanAntonio.pdf]

As it turns out, San Antonio is well-positioned to build its economic development capacity through investments in the Third Industrial Revolution. First, the working analysis to this point suggests a net average benefit of 10,000 jobs per year added to the regional economy. This is the result of the direct investment in the current economic structure of the region. To the extent that San Antonio increases its capacity to provide more of the materials and skills locally, using the Four Pillar investments to empower new local markets, the number of jobs will grow well above the jobs cited above.[This is a critical point from an economic development perspective. If the regional economy now buys an average of 60 percent of its goods and services directly from local producers, merchants, and service providers, then its base economic multiplier – in simplified terms – might be 1/(1-0.60), or 2.50. But if the community uses the investment from the Third Industrial Revolution to stimulate an even greater level of local capacity so that it raises its internal spending from 0.60 to 0.65, then the economic multiplier increases to 1/(1-0.65), or 2.86. This is a 14 percent greater level of local economic activity for the same amount of investment dollars. While not a perfect fit, this rule of thumb would then suggest that the net gain of 10,000 jobs would grow to more like 11,400 jobs.]

While there is not a strong manufacturing presence in the area economy, there are many existing skills in aerospace engineering and advanced manufacturing; and there are resources available through the Southwest Research Institute and the University of Texas at San Antonio. With these and other strengths, coupled with an investment strategy that is strategically linked to developing San Antonio’s internal capacity, the commitment to a Third Industrial Revolution provides a game plan to build a sustainable economic development program within the community. This chart below is an especially useful lens to gain some perspective into this opportunity.

With the program activity catalyzed by a commitment to the Third Industrial Revolution, the productive investment begins with the foundation sectors of the San Antonio economy (as shown to the left of the figure). These foundation efforts build the market for the supply chain manufacturers and service providers. As the scale of the market begins to grow, and as more activity “clusters” around the technologies and systems that underpin the Third Industrial Revolution, more expertise and supply chain providers are likely to grow within the Alamo area economy. Finally as the momentum builds and successful projects take hold, new markets outside of the region will turn to the project and engineering expertise as well as the increased production capacity within San Antonio. All of this then lends itself to an even greater business volume to the benefit of the region as supply chain providers also begin to export their own goods and services.


Handing Off the Baton

The CPS Energy Vision 2020 goals and the San Antonio Mission Verde provide a momentum-building foundation. It is one that can enable the City of San Antonio and the Alamo region to invest in and begin the development of a sustainably-based economy. Yet, there are a number of practical issues to be addressed. These range from how to map an implementation plan that reconciles the many different objectives within the community, to extending the CPS Energy Vision 2020 goals so that San Antonio as a whole can more completely fulfill the Mission Verde framework. While there are thorny issues in the implementation of these goals, there are also management solutions that can move the entire community ahead. The distillation of these solutions requires a finer grained assessment - one that melds careful thought with insights from multiple vantage points. It is with this perspective that these next recommendations are described beginning with the 2020 energy goals set forth for the April 2009 Sustainability Workshop.

As the City of San Antonio and CPS Energy laid out the working agenda of the April Workshop, the intent was to “begin the process of creating an initial roadmap for transitioning the City of San Antonio and CPS Energy into a Third Industrial Revolution infrastructure and economy.” The background documents prepared for that workshop further suggested that the goal would be “to assist the City of San Antonio in reaching toward the benchmark of 20-20-20 by 2020.” In other words, the workshop might determine whether and how the City might achieve a 20 percent increase in energy efficiency, a 20 percent reduction in greenhouse gas missions, and the generation of 20 percent of its energy needs with renewable forms of energy, all by the year 2020. Figure 5. Critical Steps in Mapping the Transition

In the three-day executive seminar that followed, a compelling case was laid out for both the need and the opportunity to meet those 2020 benchmarks. The case was supported by presentations from more than two dozen professionals with expertise in energy efficiency and in each of the Four Pillars. In addition, there was a variety of knowledgeable City and CPS staff and many other professionals within the Alamo region who were knowledgeable about systems and technologies that might enable a transition to a sustainable economy. The opportunity for such a transition is further supported by the evidence provided in this report. Yet, there is more hard work to be done if the community is to move past these 2020 goals and transition fully into the Third Industrial Revolution.

Given the context just described, some have appropriately asked: “How might the City and the larger Alamo region move forward with this transition effort?” Figure 5 provides at least an initial road map in this regard. The details include four sets of overall activities or steps. The different activities are then placed within four general phases of effort, beginning with the “Readiness” phase. This first phase generally covers the balance of 2009 and 2010. The next phase is referred to as the “Enabling” phase which includes activities in the years 2011 and 2012. The events to this point have been designed to give San Antonio and the Alamo region the capacity to formally begin the “Transition” years of 2012 through 2020. This period is consistent with the initial planning and work now supported by the CPS Energy Vision 2020 document. Finally, and with ongoing evaluations and adjustments along the full time horizon, the City of San Antonio and its many collaborators and allies would then be on the actual path to the Third Industrial Revolution in the years 2021 through 2030. Each of the four major steps is described next.

Organizational Transformation

As a first step onto the path leading toward the Third Industrial Revolution, the City of San Antonio and CPS Energy must help with the organizational transformation of the larger region. The intent is to better coordinate, manage, and direct the flow of investments and resources that will help achieve the desired social and economic outcomes. Perhaps the most important recommendation in this regard is to convene a “Transition Taskforce.” The members of this taskforce, supported by an appropriate level of consulting services made available within the regional economy, and building on the solid program efforts of the City and CPS Energy to date, would be charged with three specific tasks.

First, the Taskforce would be asked to study and sift through any existing or additional information so that it might provide an optimal business plan and definition of the “20-20-20 by 2020 goals.” It would then move beyond the goals for 2020 with a vision and larger set of objectives for the Alamo region by 2030. Even as CPS Energy and the City continue to build momentum with the successful implementation of the STEP program and other initiatives, the Taskforce would release the 2030 Community-wide Goals (covering the entire Alamo Region) some time in the spring of 2010.

Second, after a longer investigation and review of the relevant business and financial perspectives associated with funding the transition to the Third Industrial Revolution, the Taskforce would release the equivalent of a Community Business Plan to lay the groundwork for securing the eventual investments needed between now and 2030. This second taskforce effort presumably would also be supported by adequate expertise and consulting services. The business plan would be released in the Fall of 2010. At that point, both the City of San Antonio and CPS Energy might determine how best to ramp up their existing program efforts to support the larger 2030 goals suggested in the taskforce recommendations.

Third, the taskforce would suggest a set of metrics by which the various goals and programs would be periodically evaluated. At this point, two sets of metrics might be adopted: (i) a set of development benchmarks to gauge the progress of introducing key systems and technologies that may not yet be commercially viable, but which are critical to the longer term success of the Third Industrial Revolution; and (ii) a set of implementation metrics to guide the regular evaluation of program outcomes. The first major evaluation of the larger transition effort might be expected in 2012, toward the end of the enabling phase.

One further note might be especially appropriate, and that is a comment about the composition and life of the Transition Taskforce. There is no magic number as to the appropriate size of such a taskforce. Rather the focus should be on the availability of expertise within the Alamo region. More specifically, the taskforce should include individuals with skills and expertise in energy efficiency and in each of the Four Pillars, as well as expertise in business development, financial planning, and program implementation. Finally, the membership should include people representing the many different faces and voices of the larger San Antonio community.

Given the critical role played by the Transition Taskforce, the City and CPS might consider one additional recommendation. Rather than merely invite individuals to participate on the taskforce, they might actively recruit and screen potential candidates for eventual membership. Perhaps several dozen potential candidates might participate in a daylong briefing later in 2009 about the efforts to date and about the outcomes of the April 2009 workshop. These potential candidates might then formally apply for membership. Following a screening process set up by the City and CPS, the final selection of members (and perhaps alternates) might then be announced. Their work would begin almost immediately. Depending on the mix of events and outcomes, the responsibilities of the Transition Taskforce might expire at the end of the Enabling Phase, or in 2012 (although not before recommending how work and specific tasks might be expected to continue after dissolution of the taskforce).

Community Participation

However solid and credible the efforts of the Transition Taskforce, a successful transition to the Third Industrial Revolution will not be possible without the enthusiastic backing of the businesses community and the active involvement of the city’s consumers. As a means to encourage direct participation and active buy-in from the widest range of

groups and organizations, this step focuses on the direct participation of the full community. The first major event in this regard is a Community Sustainability Fair that is timed just after the release of the 2030 Community-wide Goals in early 2010. The event should be both an announcement of the 2030 goals and a celebration and acknowledgment of the ongoing efforts by the City of San Antonio, CPS Energy and others within the community. The point is both to honor the work that is already being done and to encourage the active involvement of others within the community. The Community Sustainability Fair should be celebratory, informative, and educational; and above all, it should be fun.

Following the release of the Community Business Plan, the City of San Antonio and others should hold what might be termed “a Re-Skilling Festival.” This is a multi-day event that focuses on the education, skills, and training that will be needed to ensure a knowledgeable and active workforce - one that can directly participate in the transition to the Third Industrial Revolution. The Re-Skilling Festival might also provide workshops and information on how local households and businesses can participate in and better position themselves to contribute to the full transition. In short, there would be two aspects of the Re-Skilling Festival. The first would focus on job and career skills and the second would focus on personal and community skills.

The last community-wide event in this enabling phase might be a Community Assessment of the Third Industrial Revolution Program. Ideally, this will follow the release of the Transition Taskforce’s first formal evaluation of the activities and efforts through mid-2012. This event will signal the transition from a readiness stage of the transition effort to the successful completion of the enabling stage.

Solutions Implementation and Evaluation

Building on the early energy efficiency and renewable energy momentum established by CPS Energy, this step begins to lock in the active implementation and evaluation of the critical elements of the full transition effort. The first element, generally following the release of the 2030 Community-wide Goals, is the securing of additional sources to expand the level of energy efficiency agreements or programs within the region. This is an effort to slowly increase current program efforts so that, consistent with the community-wide goals, the energy efficiency solution moves from a phase of readiness to one that can further build momentum for the full transition. Among those agreements are the recruiting and approval of what might be termed Super ESCOs within the Alamo region. The energy service firms which have been vetted and approved by the City and CPS Energy can then deliver a greater level of energy efficiency gains than now envisioned in the CPS Energy STEP program, for example.

The next task is to build on both the 2030 Community-wide Goals and the Community Business Plan by establishing additional financial mechanisms that will attract the needed investment into the San Antonio region. Although the roadmap in Figure 5 identifies no specific organizational responsibility, one can imagine that this is an effort that might best be undertaken by the City, CPS Energy and other governmental allies. Finally, each of the Four Pillars will be separately defined, implemented and evaluated at staged intervals in ways that are coordinated with the community goals and business plans.

Community Coordination

Although there is a clear need to directly involve the community in a very large and celebratory way, there is also a need involve the many community members in an organized and coordinated way. This step is designed to enlist the active and direct involvement of the many community groups and organizations by creating sustainability partnership agreements. Again following the release of the 2030 Community-wide Goals and the Community Business Plan, the City and CPS Energy (or perhaps another entity on behalf of the City) would create and secure a set of partnership agreements.

Each set of partnership agreements would be targeted to the many other governmental entities, educational institutions, business and labor organizations, community and church groups, and the wider variety of formal and informal groups that reflect the many social and economic stakeholders found within the San Antonio region. Much like the various EPA Energy Star partnerships, this effort would provide an especially strong foundation to enhance the probability of a successful outcome for the transition to the Third Industrial Revolution. Since it is inevitable that both the means and the objectives of the transition would evolve over time, one can also imagine such agreements would be dynamic in that they would evolve as the larger transition takes place. Finally, the responsibility of City’s many sustainability partners would be to ensure on-going implementation and success of the full transition to the Third Industrial Revolution.

A Final Note

The roadmap described here, and summarized in Figure 5, is presented in full recognition that there is no simple recipe that will ensure San Antonio is able to secure a robust and sustainable economic future. What can be said with confidence, however, is that there is both a need to act and the opportunity to do so. In the words of author and Pastor John Maxwell, “The pessimist complains about the wind. The optimist expects it to change. The leader adjusts the sails.” With this report and roadmap now in the hands of the City of San Antonio and CPS Energy, it is our hope that we have at least provided the Alamo region with the means to help adjust the sails.

The evidence is compelling and the opportunity is large. The City of San Antonio and CPS Energy have the means to fully transition the Alamo economy onto the path of the Third Industrial Revolution - if it chooses to do so. And there is every reason to believe that the future health of the area economy depends on making that proactive choice. Moreover by becoming the nation’s first city to transition into a Third Industrial Revolution, San Antonio will lead the way for the rest of the country, setting the United States on a path to a sustainable “quality of life” society in the 21st century.

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