Energy efficiency finance

I posted this yesterday as a comment on Hacker News:

For two years I ran a company called Building Hero (www.buildinghero.com) that marketed and financed LED lighting retrofits to commercial locations in New York City and San Francisco.

Here are a few things to consider when wading into energy efficiency finance:

1. Returns to energy efficiency upgrades accrue out of negative cashflow (money not spent), which means its hard/impossible to put a legal “box” around the financial returns to the project, contra solar investments, where there is a meter and it’s usually possible to slice and dice who gets what.

2. Energy efficiency upgrades also pose a problem with respect to collateral. In our case, although we had the right to take back our LED lamps, the value of what we got back, even in the best case, would have been negligible. Most EE upgrades are even less inviting as collateral, like insulation or HVAC upgrades.

3. There are simpler, but more balkanized (i.e., different not only from state to state, but even utility to utility, or city to city) financial incentives for energy efficiency upgrades. This poses a challenge for finance as a differentiator for energy efficiency. Simpler incentives mean the value of a third-party financier who abstracts away these problems is less valuable; and more balkanized incentives mean that is harder in any case for a third-party to offer solutions that scale geographically. Again, contra solar, where the federal tax incentives mean that it’s almost necessary for a third-party with tax equity appetite to finance a portion of the investment, and since it’s at the federal level it scales across the US.

My advice would be to do some careful thinking about how and why your financial offerings are better than what you could do financing them on a credit card or through a normal bank loan.

In addition, I would put some serious thought into whether or not finance is the true barrier for energy efficiency projects. Again unlike solar, these things are inside the home/office/whatever, not outside, so bring up aesthetic concerns as well as comfort concerns. Other things, like HVAC systems, are usually replaced when they break.

Anyway, I hope this is useful and that you get a lot of projects done!

Climate Change is about Conflict

In various ways during and after college, I’ve worked on climate change. In fact, it’s pretty much the defining issue of my life and career thus far. For a long time, I might have had a hard time explaining exactly why it was that I cared about it. And outside of my professional circle, many people I know have a hard time envisioning exactly what it is about climate change we should care about. Yeah, there are big hurricanes and disasters like Sandy and Katrina, and extreme weather events like cold-waves and heat-waves that seem to be more common these days and that are beginning to impact the day-to-day of people around the world, but overall it’s something that is very hard to observe. But my logic was simpler and more abstract: that humans and our economy evolved on Earth under a broad set of climatic conditions; changing those conditions at our current scale and pace just seemed like a Bad Idea, and would manifest itself in broadly lower living standards around the world.

But now, I would characterize my concerns about climate change in one word: War.

I am not an expert in human conflict, but it appears broadly true that migration and struggles over resources are two of the most important ingredients in catalyzing strife at all scales. If you have trouble thinking of examples where resource conflicts caused human conflict, look no further than the current situations in Darfur and Syria. In both cases, droughts caused shifting resources and displaced peoples, and brought two groups of people into conflict.

In Darfur, a long period of low rainfall and advancing desert pushed Arab nomads into land held by black farmers, and the result over time was a major escalation into war, political collapse, and further ecological collapse triggered by conflict that resulted in up to half a million dead and scores of violent atrocities that will scar the region for a generation, and leaves a permanently unstable situation. [more info]

In Syria, a major drought over the years 2004-2011 caused almost a million Syrian farmers to lose their livelihood, and many of them abandoned their land. As much as 85% of all livestock died and major crop failures were common. Displaced farmers moved into cities at massive scale, and these people were at the brink, with no jobs and food shortages common throughout the country. In combination with a corrupt government and ethnic tension, the scene was ripe for conflict, which exploded in 2011 and shows no signs of abating. [more info]

In both cases, exacerbating factors were present, and it would be foolish to say that climate change was the only factor behind the conflict. Rather, it was one of many ingredients, amid sectarian and racial tensions, corrupt or failed states, and poverty, that sparked the conflict, and indeed it’s because these conflicts are so complicated that they have been difficult to untangle and end. But the connection is clear: changes in local climates caused resource shifts and movements of people that, under the right (or, rather, wrong) conditions, led to major conflict.

In both cases, droughts began a fairly straightforward, and short, sequence of events that led to conflict. But it doesn’t matter how long and complex the chain is, if climate changes cause something that causes something that causes something, and so on, that causes something that causes conflict, the changes to the climate are still culpable.

So the things that really scare me about climate change are things that won’t necessarily appear to be caused by the climate, like the two examples listed above, along with broadly lower living conditions, but quite unlike news-grabbing events like the Polar Vortex, Sandy, Katrina, the 2013 European Heat Wave, and so on.

I fear that changing, and in many cases deteriorating, conditions will be manifested, and punctuated, by human conflict at scales ranging from minor to massive.

I’ll conclude with a development that I consider to be evolving into situation with violent potential: potentially massive Bangladeshi migration caused by sea level rise. But as I quoted recently:

So perhaps what scares me most are the situations that we haven’t yet envisioned. All we need to know is that we’re adding more of the wrong ingredient.

Bangladesh is the most densely populated country in the world, with 150 million people crammed into an area the size of New York State. It also lies in lowlands, and a 1 meter rise in sea levels would flood about 10% of the land. Clearly, with so many people in such a small area, this would create problems. In addition, many people don’t know that Bangladesh used to be “East Pakistan”, or the eastern of two predominantly Muslim regions of the former British colony, and it shares with modern India (Bangladesh’s neighbor) and Pakistan in their violent history. It’s not hard to imagine a scenario where sea level rises (among other negative climatic changes) cause massive displacements of people in a context that cannot support that other than violently.

How to write

Could have used this before writing 16 business school essays:

As for how to write well, here’s the short version: Write a bad version 1 as fast as you can; rewrite it over and over; cut out everything unnecessary; write in a conversational tone; develop a nose for bad writing, so you can see and fix it in yours; imitate writers you like; if you can’t get started, tell someone what you plan to write about, then write down what you said; expect 80% of the ideas in an essay to happen after you start writing it, and 50% of those you start with to be wrong; be confident enough to cut; have friends you trust read your stuff and tell you which bits are confusing or drag; don’t (always) make detailed outlines; mull ideas over for a few days before writing; carry a small notebook or scrap paper with you; start writing when you think of the first sentence; if a deadline forces you to start before that, just say the most important sentence first; write about stuff you like; don’t try to sound impressive; don’t hesitate to change the topic on the fly; use footnotes to contain digressions; use anaphora to knit sentences together; read your essays out loud to see (a) where you stumble over awkward phrases and (b) which bits are boring (the paragraphs you dread reading); try to tell the reader something new and useful; work in fairly big quanta of time; when you restart, begin by rereading what you have so far; when you finish, leave yourself something easy to start with; accumulate notes for topics you plan to cover at the bottom of the file; don’t feel obliged to cover any of them; write for a reader who won’t read the essay as carefully as you do, just as pop songs are designed to sound ok on crappy car radios; if you say anything mistaken, fix it immediately; ask friends which sentence you’ll regret most; go back and tone down harsh remarks; publish stuff online, because an audience makes you write more, and thus generate more ideas; print out drafts instead of just looking at them on the screen; use simple, germanic words; learn to distinguish surprises from digressions; learn to recognize the approach of an ending, and when one appears, grab it.