Renewable Energy

  • Capital Institute Goes to Buffalo

    April 26th, 2016 by ewalsh
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    (L to R) Ryan McPherson, John Fullerton & Amit Goyal visiting the 28-acre SolarCity facility

    I had the privilege of spending a full day in Buffalo last week before delivering a lecture on Regenerative Capitalism, at the invitation of Amit Goyal, Director of the State University of New York at Buffalo’s RENEW Institute. Regenerative thinking and action is what defines an emergent Buffalo. It is taking place across scales, and it is working at the edges of the private sector, the public sector, the non-profit sector, and the research university.

    RENEW is an impressive “university-wide, interdisciplinary research institute that focuses on complex environmental issues, as well as the social and economic issues with which they are connected.” The seven participating schools include the College of Arts and Sciences, the School of Management, the School Architecture and Planning, the School of Engineering and Applied Sciences, the Law School, the School of Public Health, and the School of Medicine. RENEW’s own vision calls for a regenerative economy, and even a one-day visit to Buffalo left me feeling the regeneration happening in real time. It was yet another example, together with our now 35 “Field Guide” stories, which gives me confidence that regenerative economies are indeed an emergent phenomenon happening everywhere on the ground, often in distressed cities and communities where the pressure for change is the greatest. This is as expected, in accordance with our understanding from the science of physics and how natural systems change in response to pressure.

    I experienced three distinct manifestations of regeneration during my Buffalo visit.

    The RENEW Institute, with an impressive $25 million budget, is certainly a shining example of higher education commitment to interdisciplinary (integrated) thinking and work, the future of higher education in this integral age. Amit likes to say they are looking for “T people” as opposed to “I people” to join the institute. An “I person” is the traditional academic expert, with deep knowledge within his or her field. A “T person” on the other hand, must demonstrate deep knowledge within a discipline, but also be a lateral thinker who can integrate ideas and discover new potential and solutions by working across silos. This is no easy feat as anyone familiar with the academy can attest. Listening to Amit during my visit, and to the Provost during the introduction to my lecture, I got the sense that the University is bound and determined to work at what we like to call the “edges” – the boundaries where different systems (or in this case disciplines) meet – leveraging its considerable domain expertise while at the same time forging relationships of exchange where the real regenerative potential lies.

    The second manifestation of regeneration happening on the ground is the People United for Sustainable Housing (PUSH) Buffalo initiative, under the leadership of the energetic Aaron Bartley.  Bartley is a Harvard Law grad who returned to his hometown to contribute to its regeneration after decades of decay from what was once one of America’s leading and wealthiest cities when it served as a vital trade hub.  Ten years young, PUSH and its partners have transformed neighborhoods one building at a time – inspiring work.  Walking block by block with Aaron and sharing brief greetings with local residents, the regeneration was palpable.

    Finally, there is the Buffalo Billion, a signature economic development project of Governor Cuomo, who has committed to invest $1 billion into the Buffalo economy. A central premise of regenerative economics is what we call “robust circulation.” This includes ample reinvestment in the economic system to ensure its vitality. Too often wealth is extracted from regions and reinvested elsewhere. Faced with decline often caused by external shocks, modern austerity ideology in the name of balanced budgets (see Europe post financial crisis) only furthers economic decline by starving a community of the vital reinvestment all healthy systems demand. After decades of disinvestment and decline, it is vitally important that the public sector engage in Buffalo’s regeneration in order for it to succeed. The city is very fortunate to have been selected by Governor Cuomo as the target for such large-scale investment.

    I was given a tour of the massive solar manufacturing facility being built for SolarCity. At an astonishing 28 acres under one roof, it will be one of the world’s largest and most sophisticated solar manufacturing facilities when it is complete. While the solar plant is but one aspect of the Buffalo Billion, it represents the majority of the funds being invested in an innovative public-private partnership under which the State will actually own the plant.

    Our regenerative framework favors a more diversified, risk-mitigating investment strategy, and greater focus on vital, enabling infrastructure and education than on individual enterprises. That said, if successful, the new solar facility will no doubt create a regional hub for innovation and employment, and generate tax revenue that will support the infrastructure improvements the city so sorely needs. The regenerative potential of a project of this scale, coupled with all the other positive things happening in town is truly impressive.

    Not to mention that Buffalo is nicely situated with respect to water and climate for the future.  We will be back this summer for the New Economy Coalition’s CommonBound (July 8-10).  Watch this space!

     

  • BoE Central Banker Addresses Stranded Assets

    September 30th, 2015 by designburd
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                                             Video courtesy of Bloomberg.com

    We were very encouraged to hear Bank of England Governor Mark Carney address the financial market stabilization risk of “stranded assets,” the risk that if we are to avoid 2 degree warming, we will need to leave up to 80 percent of proved oil, gas, and coal reserves in the ground, echoing the important message that has been promoted tirelessly by our friends at the Carbon Tracker initiative. (Read Carney’s full speech here)

    Capital Institute’s 2011 post, “Our $20 Trillion Big Choice” addressed this issue not just as a financial market stabilization issue. Approximately three quarters of these fossil reserves are owned and controlled by national oil companies.  Exxon and BP are relative bit players in this game. The REAL risk and challenge is perhaps the largest geopolitical one ever to face the modern world.  Rapid drops in solar costs, and other technical revolutions could render much of these fossil fuels obsolete, resolving the problem, although with profound ramifications for fossil- fuel-dependent economies and their societies, with spillover affects throughout the world.  More likely, a comprehensive and highly complex international policy regime will be required far beyond what is currently even contemplated with voluntary “pledges” by nation states negotiating from the perspective of their national interests.

    Great progress this week.  The hard work lies ahead.

  • China: Ecological Civilization Rising?

    February 26th, 2015 by ewalsh

    Returning to China for the first time in a quarter century this month was equally awe inspiring and terrifying. The observation deck of the truly gorgeous Shanghai World Financial Center is breathtaking, a fitting testament to China’s rise. But it was the unexpected sense that we might be experiencing history at DeTao Group’s summit in Shanghai, “Future New Economy: Sustainable Model Toward an Ecological Economy,” that left an indelible mark on me.

    I had the honor to address the DeTao Group summit on the topic of regenerative investing in natural capital. Inspired by the vision and leadership of DeTao Chairman George Lee, it was an extraordinary experience. The warm hospitality and genuine appreciation and respect extended to all the visiting “experts” was quite exceptional. As George told me, “in Chinese culture, we honor our teachers.”

    DeTao Chairman George Lee

    DeTao Chairman George Lee

    The context of the summit was of course China’s unprecedented quarter century boom that has seen China emerge the second largest economy in the world, lifted two hundred million people out of poverty (so I’m told), and created middle class lives for many and immense wealth for more than a few. But this newfound wealth and power has come at a significant cost.

    China is now the world’s largest carbon emitter, the result of the west’s outsourcing manufacturing production to a location where environmental standards are lower, and cheap, plentiful coal is the power source of choice. I’m told that eighty percent of the population has no access to clean water, and virtually all of the productive soil is toxic. The now infamous air pollution is making people sick and reducing life expectancies. The environmental crisis is not a special interest issue; it is omnipresent.

    It was quite significant, therefore, when the 18th National Congress of the Communist Party wrote the construction of an “Ecological Civilization” into the Constitution in 2012, requiring a shift away from the industrial civilization modern China had become. Of course in an authoritarian State with single party rule, a change like this gets translated directly into policy, albeit slowly and unevenly. Note how clear China’s President Xi is with respect to the real source of wealth:

    “We value both natural landscape and resource as well as material wealth. The former overrides and promises the latter.” – Chinese President Xi Jinping

    I can’t pretend to know how serious China’s leaders are with respect to their stated goal of achieving an “ecological civilization,” and one certainly can’t help but notice the irony when looking at the pollution belching out of smoke stacks as you travel to and from the airport. But I was impressed with what I saw at this summit. Here are a few highlights:

    • The conference highlighted the work being led by ecological economist Dr. Robert Costanza in Sanya City (“the Miami of China”) to create the first natural capital balance sheet for one of the world’s major municipal governments. In his speech, Sanya City Vice Mayor Li Baiqing stated that “it is difficult for an entire society to think in a different paradigm,” and “this [management of natural capital] project is our destiny.”
    • Mr. Long Yongtu, who negotiated China’s entrance into the World Trade Organization and is now Secretary General of the Boao Forum for Asia, gave a remarkably honest assessment, stating that, “China is at a crossroads. After thirty years of development, people are getting wealthier but are not feeling happier.”
    • And Chairman George Lee closed the conference with a notable speech, calling for a “new economic system” in which investing in natural capital will be the doorway to the new economy. He has a vision for private capital working in collaboration with the public sector, enhancing the efficiency and speed of capital deployment for the shared benefits of healthy ecosystems, and the pathway to a “green mountain” to complement the “gold mountain” that has been built.

    Now of course the devil is in the details. (For more on that, see my thought piece Limits to Investment.) Unleashing huge surpluses of investment capital in the name of “natural capital investment” can do as much damage as good, and much more is needed than unlocking investment capital. Indeed, Long Yongtu himself cautioned that investment had become “the bad guy” but felt it didn’t need to be. I understood what he meant when I peered from atop the Shanghai World Financial Center across endless nondescript concrete blocks of apartment buildings that stretch as far as the eye can see.

    But what struck me most as I listened to the presentations and even more in the private conversations was that I was experiencing history in the making. Unlike so many conferences in the West where there is a lot of talk, and then everyone knows little will change, in Shanghai, I felt the tide shifting under our feet. I felt that a force was being unleashed, that began, no doubt, with the amendment to the constitution in 2012, in response to profound ecological and human crises.

    Authoritarian leadership, like it or not, has pointed to a spot on a distant horizon and set change in motion. Five-year plans were affected, and transitioning the economic system will require an ability to plan (take note, America!). Reward systems have been adjusted. Experts are called in for their ideas. Old paradigms that brought great success in the past are put on the table and critiqued in light of the new context. No ideological debate casts a shadow, only debate about how to engineer solutions. We may not like all the answers (200 nuclear power plants are in the pipeline). No doubt there will be ups and downs, and likely crisis. Success is far from certain.

    Yet powerful mainstream Chinese interests appeared interested to learn, not defend. Successful and practical business leaders like George Lee, now a practicing Buddhist, have taken up the reins and are initiating action. The mayor of a major city is establishing a natural capital balance sheet and will begin monitoring its rise or fall as “destiny.” Others will follow. We all signed a bold joint declaration, despite an imperfect translation. The media was present in full force doing interviews and reporting on the substance of the event. History was unfolding.

    Notes to self:  It’s in our collective interest that they get this right. Remember the name George Lee.

  • The Club of Rome’s Next Act

    October 30th, 2014 by ewalsh

     

    Image Courtesy of Wikipedia.org

    Courtesy of Wikipedia

    The Club of Rome was founded in 1968 but really came into the public eye with the publication of Limits to Growth in 1972. The controversial book, which sold 12 million copies in 37 languages, first called attention to the systemic limitations of the exponential expansion of the human population and the related material inputs and waste outputs of its economic system on a planet that is fixed in scale.

    The concept is not complicated. Sooner or later, the endless expansion of the metabolism of a system within a finite body will cease.

    Critics and the media misinterpreted (or willfully distorted) the message at the time as a prediction of imminent collapse. The authors were accused of being neo-Malthusian alarmists, personally attacked, and dismissed. If there were any doubt about that dismissive conclusion it was reinforced in the following decade of the eighties, during which deregulation ushered in an era of seemingly boundless prosperity. The authors were quacks; their systems dynamics models were wrong; there are no limits to growth — end of discussion.

    One problem: Turns out reality is tracking the modelers’ “business as usual” case remarkably closely.

    Courtesy of OurFiniteWorld.com

    Several recent studies, the most prominent one by Australian physicist Graham Turner, have validated the basic accuracy of the systemic interconnections the original study highlighted forty-two years ago. We are tracking the “business as usual” scenario quite well, given the limitations of these early systems models in 1972. Critically, we are just now approaching the moment of truth with respect to the economic indicators that the models anticipated, as the charts below demonstrate. Furthermore, as Turner explores, it is possible that the 2008 financial collapse, and the ongoing economic malaise, may actually be linked to the looming tipping point around 2015 that the “business as usual” scenario indicated back in 1972.

    Image Courtesy of Graham Turner's "Is Global Collapse Imminent"

    Courtesy of Graham Turner’s “Is Global Collapse Imminent”

    And most importantly, we have wasted four decades ignoring the insights of the original Club of Rome report, leaving us in a state of global emergency that is becoming harder to ignore, with warning signs flashing red, most notably the effects of global warming. (See Johan Rockstrom’s “Planetary Boundaries: Exploring the Safe Operating Space for Humanity“)

    This is the context in which Club of Rome Co-Chairs Anders Wijkman and Ernst von Weizsaecker convened the annual meeting of the Club of Rome in Mexico City last week. The theme of the conference was the energy transition off fossil fuels, which juxtaposed nicely against Mexico’s new commitment to clean up corruption in Pemex, the State-owned oil company, while also welcoming (and this is where it became surreal but also very poignant) new foreign direct investment, previously banned, into exploration partnerships with Pemex in order to accelerate fossil fuel extraction with the goal of reversing the State’s declining oil revenues.

    This is exactly the tension underlying what I call our “$20 Trillion Big Choice.” While we focus as we must on the monumental challenge to mobilize the necessary policies and investments to transition the world off fossil fuels, those sitting on our existing stock of fossil fuel reserves, from Exxon to Mexico, are naturally seeking to optimize the exploitation of those reserves, which remain highly profitable as long as we continue to ignore the costs of global warming. And the $20 trillion “choice” is harder. It means not only ceasing to invest new capital to expand fossil fuel extraction – $674 billion last year alone – it means writing off some $20 trillion of existing proved reserves (“stranded assets”) rather than cashing them in (as a comparison, the direct financial losses of the subprime crisis in the U.S. were a mere $2.7 trillion).

    The divestment movement now well underway is focused primarily on the 25 percent of this stranded asset issue owned by public companies. (See Rockefeller Brothers Fund historic decision to divest.) Exxon, the successor company to John D. Rockefeller’s Standard Oil, has responded to the Rockefeller decision with a statement about their concern for those facing energy poverty. Touching.

    But the real question is the largest and most complex geopolitical challenge of all time: how can we restrain the exploitation of existing proved fossil fuel reserves, not only those controlled by the Exxon’s of the world, but even more difficult, the 75 percent of reserves controlled by nation states like Mexico (and Saudi Arabia, Iraq, Iran, Venezuela, Canada, and Russia just for starters) whose economies (and social cohesion) are currently highly dependent upon the continued sale of oil and gas?

    I was privileged to address the attendees at the Annual Meeting on “Financing the Energy Transition.” In my speech, I addressed three interconnected monumental challenges:

    • Mobilizing the estimated $44 trillion (that’s Trillion with a “T”) of investment required between now and 2050 for renewable energy technologies and critical energy efficiency, (see the International Energy Agency’s recent report);
    • The $20 trillion stranded asset challenge referred to above; and
    • The overarching context of limits to growth, which implies a corollary limits to investment a challenge no economic system has ever had to contemplate.

    Jane Jacobs once said, “it’s not how big you grow, it’s how you grow big.”

    As we reflect on the prescience of the Club of Rome’s seminal work on limits to growth, nothing could be more important at this pivotal moment in time. Future growth and development, beginning with the energy system that fuels it, and the business models that define its qualities, will need to evolve as living systems have done over billions of years, to more intricate, regenerative systems.

    Watch for the Club of Rome’s next act, shifting from

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    prescient diagnosis, to a search for genuine solutions, rooted in a systemic level understanding of the forces at play. We can say for sure that there are limits to mindless growth. Regenerative economies nurture mindful growth and development. This is the future we had better embrace.

    To read John’s full address to attendees of the Annual Conference of the Club of Rome, click here.

  • How Stewardship Investors Can Drive the Great Transition to Regenerative Prosperity

    April 29th, 2013 by John Fullerton

    We are pleased to introduce this week’s guest blogger, Tim MacDonald, who is joining Capital Institute as a Senior Fellow. Out of his experience as an attorney organizing partnerships in tax-preferred projects like renewable energy and affordable housing, Tim has crafted a model for stewardship investing that we believe has real potential as an alternative to capital markets >> Read more