This week’s Green Scene column in Crain’s Chicago Business: Tax-credit collapse takes the wind out of local wind-power industry’s sails


When politics creates uncertainty in the renewable-energy sector, it’s often bad news for entrepreneurs and businesses trying to make a buck in those industries.

That’s the general reaction this week among Illinois business owners and executives running wind-energy companies in the wake of last week’s news that a federal wind-energy tax credit won’t be extended beyond the end of this year. Washington lawmakers dropped the tax-credit renewal from a larger payroll tax bill, and there are doubts the measure will get tacked on to any other larger bills before the November election. A bill dedicated solely to extending the wind tax energy credit isn’t likely either.

More than a dozen wind-energy firms are based in Chicago and the state has more than 150 companies engaged in some piece of the wind-energy pipeline.

If wind-energy extension was folded into the payroll tax bill, companies operating in that sector would have continued to receive 2.2 cents in income tax credits per kilowatt-hour of electricity they produced. Without the extension, customers will put orders for supplies on hold or cancel them, and fewer turbines will get installed in 2013, predicts Kevin Borgia, director of the Illinois Wind Energy Coalition, a group of wind farm developers, turbine manufacturers, businesses and landowners. The coalition is a project of Wind on the Wires, a Midwest nonprofit wind-power advocacy group.

Crain’s met with Mr. Borgia to learn more about what Illinois stakeholders are doing in response to the recent legislative setback.

Crain’s: What’s the potential impact for Illinois manufacturers in the wind-energy supply chain?

Mr. Borgia: It’s a disaster. For turbines to be placed in service in 2013, manufacturers need to take orders now. But because of the policy uncertainty, orders are drying up, and another slice of the U.S. manufacturing sector is laying off workers. And while it’s possible Congress will pass the credit by the end of 2012, the closer we get to the end of the year, the less chance we have for growth in the wind market for 2013. The bottom line is that every business wants certainty, but congressional stalemates on this and other issues ensure American businesses have no certainty, and this hurts our economy.


Kevin Borgia

Also, this on-again, off-again cycle drives up the overall costs of wind power. When a manufacturer has consistent orders and maintains a constant product output, it finds efficiencies that reduce cost. But the start-stop cycle of the wind PTC (production tax credit) hinders this reduction in cost. This prevents wind power from achieving cost parity with other energy sources, and paradoxically extends the time frame when the PTC is needed.

Crain’s: Are you optimistic that some other type of wind-energy tax incentive or rebate could pass through Congress before yearend?

Mr. Borgia: Several times in past years, Congress has passed a PTC extension with just days before its scheduled expiration. This ensures some projects are built in the following year, but growth is minimal because the uncertainty required developers to hesitate in their planning during the previous year. It’s possible Congress will do the same this year, after the election, but by then the damage will already be done: Projects will have been placed on the back burner and 2013 growth will be diminished.

Other energy sources do not have to manage this kind of uncertainty. Many incentives for oil and gas, coal and nuclear power have been in place for decades. These incentives are much larger than those provided to renewables, and their stability provides certainty that fosters growth in those sectors. Using temporary tax incentives for renewables politicizes the process and creates unnecessary economic instability.

Crain’s: Are there any developments at the state level that are making it attractive for business owners or entrepreneurs to pursue wind-energy opportunities in Illinois despite what’s happening in Washington?

Mr. Borgia: Well, the big incentive is at the federal level, but Illinois (like most states) has a renewable energy standard, which requires utilities in the state to buy a percentage of renewable power. The cost of implementing this law will rise if the PTC expires. But by design, costs of the RES are capped for ratepayers, so the cost will only increase to a certain point. Once the cost cap has been reached, utilities are allowed to stop buying renewables. So without the PTC, Illinois utilities will buy much less renewable power, and this reduces opportunities for businesses involved in the wind sector.

Crain’s: What advice do you have for entrepreneurs who are on the sidelines deciding whether they should venture into the wind-energy sector?

Mr. Borgia: Be patient but aware. Congress has extended the PTC at the last minute several times, and hopefully will make the right decision again this year. The best thing you can do is get involved and make it clear to your representatives in Congress that the wind PTC helps your business and fosters growth in today’s tough economy.

 

To read more, check out this Feb. 16 report from Crain’s. A snippet:

The wind-power industry employs about 1,500 directly in Illinois, plus another 3,800 among local suppliers, according to a Navigant Consulting Inc. study for the American Wind Energy Association. The study predicts a drop to about 800 direct jobs and 1,100 supplier jobs by next year if the tax credit expires.

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This week’s Green Scene column in Crain’s Chicago Business: Evanston architect gets kudos for first North Shore LEED Platinum house


The Glencoe house

Nate Kipnis isn’t the sort of architect who builds eco-friendly houses for the sake of bragging about the latest green bells and whistles he’s added.

In fact, he makes a bigger deal about employing ancient energy-efficient design techniques, such as slanting roofs and overhangs and positioning windows to maximize a home’s access to the sun’s passive energy. Mr. Kipnis, 50, principal of Kipnis Architecture & Planning in Evanston, sometimes persuades clients not to adopt some systems, such as geothermal. He argues they’re not always worth the upfront investment.


Nate Kipnis

So at first blush, it may have surprised some to learn he was getting accolades late last month for designing only the second new home in Illinois that was awarded the U.S. Green Building Council’s LEED Platinum certification, the highest level possible. (The first one is on Chicago’s North Side.) But the home, on a corner lot in Glencoe, received that designation because of the extensive green features adopted, both tried and true, as well as newer technologies. They included a green roof, natural daylight, radiant floor heating, LED recessed lighting, a compact plumbing core design and passive whole-house ventilation. (LEED is short for Leadership in Energy and Environmental Design.)

Mr. Kipnis is involved in many green initiatives in Evanston beyond his primary craft of designing and building eco-friendly homes.

He’s one of the founders of Citizens’ Greener Evanston (which was originally the Network for Evanston’s Future), and he came up with the idea for the Evanston Offshore Wind Farm in 2007. The 200-megawatt project calls for 40 turbines that would be located seven to nine miles east of Northwestern University on Lake Michigan. The initiative is popular among many Evanston residents who want to be less reliant on fossil fuels, but it has its opponents, too.

Regardless of local opinions, progress is stalled in part because of developments in Washington. The federal Production Tax Credit for wind, which would have been instrumental in helping finance the offshore endeavor, is set to expire at yearend, and efforts to extend it face an uncertain future in Congress.

In the wake of his Glencoe project’s LEED recognition, Crain’s met with Mr. Kipnis to learn more about the home and other green efforts he’s pursuing.

Crain’s: You’ve been building green homes for a long time. Was it important for you to finally design one that was awarded LEED Platinum certification?

Mr. Kipnis: I studied architecture with an environmental concentration in the 1980’s, so I’ve been hardwired forever to design green homes. I don’t typically design the super-expensive homes, and it takes money to do a LEED home; extra dollars have to be spent on certification and other things.


Inside the Glencoe house

In this case, the client was pushing for it. He had seen the Al Gore movie (“An Inconvenient Truth”), and it blew his mind. He came to me and said he wanted to do a LEED home. He didn’t want to just say he had a green home. We built him a house that was priced at the Glencoe market rate, but we didn’t give him a crazy home theater or over-the-top cabinets, even though he got a really nice kitchen.

You don’t really know it’s a green house until you start to learn about it. The more you learn, the better the story gets. We’ve had about 1,000 people go through the home during several open houses we’ve been asked to have (by the U.S. Green Building Council to promote more green homes and LEED certification).

Crain’s: Why have there been so few LEED constructions for new homes in Illinois?

Mr. Kipnis: That’s a great question. I’m not sure about this. The USGBC publishes lists of how many homes have been LEED-certified at different levels in various states.

States such as California, Texas, Hawaii, New Mexico, Pennsylvania, Washington and Colorado have a tremendous amount of LEED homes, and have most of the Platinum level ones. It might be that Chicago is a “mature” city and as such there are fewer new homes built here than out West. I’m not sure about that, but it might be true.

Crain’s: I know you’re keen on getting the offshore wind farm approved. How much energy can it potentially generate for Evanston residents and businesses?

Mr. Kipnis: The power production depends to a very large degree on the actual wind speed out at the turbine locations. We feel that it is very likely that the wind speed will be on average around 17-18 mph, and possibly more. Wind power goes to the cube of wind speed, so a little increase in wind speed is a very large increase in power.

At 18 mph, the 40 turbines would produce about 15.8 gigawatts of power, which would offset about 59,000 homes. Evanston, for reference, has about 30,000 homes. The CO2 reduction would be equal to about 490,000 tons of CO2. This is 350 percent of the Evanston Climate Action Plan target. The numbers at 20 mph wind are way higher.

Crain’s: Are you hopeful the offshore wind farm will eventually get built near Evanston?

Mr. Kipnis: Yes, but it will probably be built many years down the line. In the meantime, two members of the CGE’s renewable-energy task force met with (Illinois) Rep. Robyn Gabel and then (Illinois) Sen. Jeff Schoenberg. They crafted bills that would establish a board made up of representatives from various interest groups to lay out how an offshore wind farm would be permitted and the steps that would be involved.

The bills went through and the governor signed it, which established the Illinois State Lake Michigan Offshore Wind Energy Advisory Board. The board is currently moving towards finishing their work, probably in the next month or so.

It would be great if we could make our own energy and create our own jobs here to support the project. If that federal tax credit is cut, it will kill so many jobs, and all because of the politics of climate change. We can’t keep using limited fossil fuels. We continue to use it at our own peril.

Crain’s: What other environmental efforts are you and CGE working on?

Mr. Kipnis: Our group is working on a community aggregation initiative to lower electricity rates in Evanston. Power is deregulated in Illinois so you can use any provider you want. When you get a community together, you can negotiate the best rates, and you can choose the source of your power. About 22 communities in Illinois have already done this. Oak Park went 100 percent green power and residents there have been saving close to 25 percent on energy costs.

The Evanston initiative is on the March 20 ballot. If it passes, it will authorize the city to move forward with negotiations and we could have it up and running by the summer. We’d love to have 100 percent green power, but no matter what, this will help Evanston lower its carbon dioxide footprint. We won’t know the actual dollar savings until we go and lock in rates in the market.

We’re getting a website up now to make sure everyone is educated. Our goal is to get the highest percentage of people in Evanston to be in favor of this community aggregation initiative — please tell me who would prefer more expensive, dirty power? If we can have a mandate here, it puts some emphasis behind other things we want to work on and it will give us great momentum.

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This week’s Green Scene column in Crain’s Chicago Business: Tenants finally stream into Green Exchange


The long-awaited Green Exchange is finally buzzing as more eco-minded businesses started moving in just after the new year.

You’ve probably seen it hundreds of times from the Kennedy Expressway, jutting out to the east on Diversey Avenue. The rehab project of the old Cooper Lamp Factory was announced with much fanfare about five years ago as the anticipated largest hub of green businesses under one roof anywhere in the country. Baum Development, which purchased the 272,000-square-foot historic landmark building, quickly hoisted a massive Green Exchange sign atop the structure. Baum went to work on a major conversion, with plans to add many green and energy efficient features to the structure as well.

The project was moving forward until the fall of 2008, when the financial markets crashed and Baum found itself without a lender for the rehab, according to David Baum, co-developer of the exchange. He recounts that money for construction dried up and he struggled for the next two years to cobble together financing to keep the renovation afloat.

“It was an extremely stressful time for us, just like everyone else,” he recalls.

By the end of 2009, Baum closed on a construction loan for the Green Exchange. Mr. Baum says he has lots of his own equity tied up in the building too, but won’t say how much.

Since then, Baum Development signed Coyote Logistics, a transportation logistics firm, as the anchor tenant, and proceeded to attract more businesses to fill up more than 85% of the exchange. The quiet space of the cavernous building was finally pierced last June when Coyote Logistics moved in and took over the entire third floor and part of the fourth floor. GreenChoice Bank moved in late last summer.

The most recent tenants who opened shop there over the last few weeks include 2 Point Perspective, an architectural firm that specializes in green design, Pivotal Production, a social media and green event planning company, and Purple Asparagus, a nonprofit that educates children and families about healthy, local food. Greenhouse Loft, an eco-friendly event space, and others moved in last fall.

Aside from the workers’ private offices, there is lots of room for communal gathering. There will be conference rooms for sharing. A rooftop deck will support an outdoor public area, a green roof, an organic vegetable garden, and a bee co-op for producing honey. And there are plans for a restaurant that will be headed by a well-known Chicago chef. Mr. Baum says that announcement is forthcoming in the next few weeks.

Crain’s met with him this week to learn more about the Green Exchange.

Crain’s: What was your original vision for the Green Exchange?


David Baum

Mr. Baum: Five years ago, we saw there were people starting green businesses but everyone was operating on their own. we thought if we could aggregate these folks and they could share resources, they could be more successful in a collective environment.

We thought they could benefit from certain economies of scale, like shared conference rooms, an event space, a speakers forum, and a website. And then there’s a more abstract idea about shared referrals. We’ve created a community of like-minded tenants that can help one another.

Did you consider constructing a new LEED-certified building with all the latest green bells and whistles?

Mr. Baum: I’m a fan of LEED (Leadership in Energy and Environmental Design) and LEED standards (by the U.S. Green Building Council), but the greenest building you can build is the one you don’t knock down. To work with something that already exists was a very sustainable way to go.

Crain’s: Can you list some of the greenest features in the Green Exchange building (aside from the tenants)?

Mr. Baum: We have a 41,000-gallon rain cistern on the roof that will collect rain water and pump it through the building for our plant garden, our green roof and an organic working garden. We’re working with the Chicago Honey Co-op to have a beehive for honey on our roof. We’ll be growing some of our own food with WeFarm America that will be watered with recycled water and used at the restaurant. Leftover food from the restaurant will be used as compost for our gardens. It’s all very symbiotic.

We have an escalator that uses 30% less energy than regular ones. We have recycled wood in the building from barns, tiles that are recycled from aluminum cans. We even have a fantastic piece of art work by a Chicago artist made from 1,500 washers. We’ll also have electric charging stations in our parking lot and I-Go Car Sharing will be there too.

Crain’s: Did your tenants have to pass some “greenness” test to qualify for a spot in the building?

Mr. Baum: We’re not the green police. We went to Delta Institute to be the arbiters of green, but only used them once. The people we get are so mission-focused that there was never really an issue about whether they’re green. If you’re greenwashing, you don’t want to be here.

Crain’s: It’s ironic that such a green-focused building isn’t really conveniently located to great public transportation. How are you addressing that problem?

Mr. Baum: We agree, but there are ways to improve it. There is a bus route that stops in front of the building. We also run a shuttle during rush hour that picks up at the Metra, and at the blue line and red line el stops nearby. It’s not a hybrid shuttle bus, but at least it keeps people out of their cars.

We also have a bike room that holds 100 bikes, and a shower room, too.

Crain’s: Is there a model for this type of green business hub in other cities?

Mr. Baum: The closest thing to it I’ve seen is the Jean Vollum Natural Capital Center in Portland, Ore. But it’s only 65,000 square feet. There’s nothing in the country on the scale of the Green Exchange.

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This week’s Green Scene column in Crain’s Chicago Business: Green Delete wipes data from hard drives for safer IT recycling


Green Delete Inc. picked a pretty good time to hang out its shingle. The Chicago-based firm, which has been open a year, helps other companies erase data on computer hard drives and servers before they get rid of the equipment.

In January, Illinois joined at least 30 other states in enacting stringent new rules on the disposal of electronic equipment. Companies also must erase data on disposed computer hard drives to ensure privacy protection or face tough fines.

That means many more computers are likely to be recycled and reused instead of being hauled to landfills. And the law is intended to ensure private information isn’t passed along and shared with outside parties. Software programs that wipe out data on hard drives aren’t foolproof: Anyone with basic data-retrieval skills can extract information from a hard drive that has been scrubbed with one of those programs, warns Marilyn Slavin, Green Delete’s founder and CEO.

Green Delete is the first U.S. company that’s certified by the National Association for Information Destruction to perform onsite data eradication for clients. Green Delete ensures that any information it cleans out from computers and servers is gone for good.

An added bonus: Once a hard drive is completely sanitized, it can be resold.

Ms. Slavin, 48, has worked in the information technology industry for 25 years, spending most of that time selling and implementing Microsoft solutions for large corporations. For about 15 years at Microsoft, she worked often with Greg Reuter, another Green Delete co-founder and its chief technology officer.

She declined to provide revenues but said the company is projecting 30 percent sales growth in its second fiscal year, beginning this month. Some of that expansion is likely to come from new partnerships with national electronics outfits that recycle computers and resell them. In addition, Green Delete is partnering with IT consulting firms to help companies ensure their data is secure and private.

The company so far is working with eight large-scale customers, including a few national financial services entities and two universities.

Green Delete has 10 trained technicians on staff and has access to at least 20 more such specialists when demand grows for its services. The company is already garnering interest overseas, especially in London, where even stricter laws mandate data scrubbing from hard drives before companies can unload their IT equipment, she says.

If you think data eradication isn’t much of a problem, consider the headline on a news story published in PC Pro Magazine in December 2010: “NASA Sells Off PCs with Secret Shuttle Data”. Apparently, the Office of the Inspector General found that some very smart folks at NASA had neglected to properly erase potentially classified data from close to a dozen computers used in the Space Shuttle program before they were sold to local second-hand computer shops in the Cape Kennedy area.

(For an even more recent — and nearby — example, check out this headline from ChicagoBusiness.com this week: “Tablet snafu: Motorola says not all data wiped from refurbished devices.”)

Crain’s met with Ms. Slavin recently to learn more about how Green Delete helps clients avoid the same kind of mishap.

Crain’s: How did you get the idea for this company?

Ms. Slavin: At Microsoft, we worked on rolling out large solutions to global companies, but I didn’t know what they were doing with all this old equipment. We started to see that most of them didn’t have a plan, or the plan was to throw them to a recycler and hope for the best.


Slavin

In some cases, companies did software swiping, which takes it down to the operating level, but anyone with an IT background can get to this data, so it’s not really secure. When I go to privacy conferences, the experts there say this type of data breach is a problem and that data can be stolen. We saw a problem and decided to solve it.

Crain’s: What’s so unique about your data eradication services that companies couldn’t do on their own?

Ms. Slavin: Our biggest selling point is that we can do it a lot faster than other services. We do it onsite, so it’s done before the equipment leaves the company. We bring their equipment in another room, we pull out the hard drive and can do 30 to 60 computers at a time. It happens off the network so there’s no interruption in the operation of the business.

Companies are now realizing they have to budget for data eradication, but chief security officers are seeing they can get a return on investment for data eradication because they can resell their hard drives in a secondary market and get about a third of their costs back.

Crain’s: What else do you offer companies aside from cleaning out their data?

Ms. Slavin: We have asset management services that help companies save lots of money, too. For example, we can pull the licensing keys off the hard drives when we’re doing the eradication so they can be saved and reused in other hard drives. A licensing key comes with every piece of software, which enables anyone to download that software once again in a new system. We’ve saved companies $10,000 to $15,000 just by doing that.

Crain’s: What’s the green connection to the services you provide?

Ms. Slavin: Our service doesn’t break the hard drive and it can be reused, while others shred the hard drive. We hook companies up with the recyclers and we only work with certified e-Stewards recyclers because we know they’re recycling responsibly.

We also educate companies about why they should consider donating or selling their hard drives once our work is done. There’s lots of harmful chemicals in hard drives if they’re opened and you don’t want them in landfills because they might leach into the water supply. That’s one of the reasons all these states have anti-dumping laws.

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