“Long-term technological transformation”

Wednesday, May 31st

A rabid dog with an old bone, Competitive Enterprise Institute won’t drop the anti-climate change science diatribe.* Instead of carbon constraints, CEI and its major backer, ExxonMobil, extol “long-term technological transformation” and “resiliency in societies by increasing wealth.”

What might that mean, precisely, when it comes to a technology like ethanol, to these purveyors of the ‘free market’?

Ethanol is not disruptive; it fits comfortably into the industrial system: consistent, mechanized, predictable, interchangeable and economically scalable. (It’s not threatening in the same way as the fuel-switching electric car, now the subject of the film “Who Killed the Electric Car?) In The Omnivore’s Dilemma, A Natural History of Four Meals, journalism professor, Michael Pollan, writes, “everything about corn meshes smoothly with the gears of this great [industrial] machine.”

Ethanol from corn is no exception…or it shouldn’t be. The American Petroleum Institute, ExxonMobil’s trade association, intimates in the press that ethanol can’t perform; it supports the alternative fuel, but only as an additive to petrol. To drag feet on ethanol but champion technological transformation and resilient wealth is to jabber gibberish.

Ethanol was a golden queen showered with accolades at U.S. Senator Ken Salazar’s Renewable Energy Summit this year in Denver. It is fast on the lips of Senator Lugar Richard Lugar and New York Times columnist Thomas Friedman. It is an old technology (the first Model-T was built to run on ethanol), and with a still from Dogwood Energy, says Dogwood, you can make ethanol at home for 75 cents per gallon. Oil refiners will accept E85 (petrol that’s 85% ethanol). The balancing act between supply (the gas station owners who must pay for retrofitting pumps for ethanol) and demand (the number of drivers seeking ethanol at the pump) has begun. Marketplace drivers are priming getting-cheaper-than-petrol (and subsidized) ethanol to compete with volatile (and heavily subsidized) petrol.

And it will help farmers, right?

Crack open Pollan’s The Omnivore’s Dilemma. Corn takes up the entire first chapter. Dilemma is not about bio-fuels – cellulosic or otherwise – yet it goes a long way to explain the farming system in the U.S., and why it will be large corporations who (corporations being persons under the law) will benefit from refining corn and corn stalks into ethanol.

“Beginning in the 1980s, big buyers of grain like Cargill and Archer Daniels Midland (ADM) took a hand in shaping the farm bills, which predictably came to reflect their interests more closely than those of the farmers…It’s not all that clear that very many American farmers know exactly what hit them, even now. The rhetoric of competitiveness and free trade persuaded many of them that cheap corn would be their salvation, and several putative farmers’ organizations have bought into the virtues of cheap corn…So the plague of cheap corn goes on, impoverishing farmers (both here and in the countries to which we export it), degrading the land, polluting the water, and bleeding the federal treasury, which now spends up to $5 billion a year subsidizing cheap corn. But though those subsidy checks go to the farmer (and represents nearly half of the net farm income today), what the Treasury is really subsidizing are the buyers of all that cheap corn. [Says Iowa farmer George Naylor], ‘Agriculture’s always going to be organized by the government; the question is, organized for whose benefit? Now it’s for Cargill and Coca-Cola. It’s certainly not for the farmer.”

And one day, certain oil companies.

First, the hard work gets done by most everyone else: grassroots early adopters retrofit “flex-fuel” vehicles and home-distill fuel; alternative fuel activists on non-profit salaries lobby politicians; mid-western governors mandate E85; millions are spent on “flex-fuel” car advertising; Team Ethanol NASCAR races cars; farmers invest in farmer-owned bio-refineries. When the risks of the technology wane and the last easy-and-cheap-access drops of oil are pumped from the ground, the champions of “technological transformation” and “resilient wealth” will come around to ethanol. They will look to the money to be made in fertilizers and ethanol processing–and perhaps owning bio-refineries outright in competition with ADM and Cargill. Perhaps they’ll buy ADM or Cargill.

Ooh, la la! This is what CEI is jabbering about. Transformation (like transforming corn into ethanol) means resilient wealth for corporations, but not necessarily for farmers. It means a ‘free market’ that drags its feet…holds out a hand for subsidies…supports import tariffs…blocks stricter CAFE standards…and drives farmers and nature to the bottom. Rising like cream on corn-based ethanol profits–after years of obstruction–the likes of ExxonMobil will, in turn, funnel funds to the likes of CEI or some other ‘free market’ chirper to advertise the wonders of unfettered consumption, transforming technologies and resilient wealth. “Hooey on global warming, hooray for America’s birthright to consume,” it will exclaim. “Look at ethanol!”

Implausible? It’s a parable for making a market for cleantech, even for a technology like ethanol that fits neatly into the industrial systems. Imagine the difficulty in making markets for cleantech that does not transform but disrupts.

* CEI’s ad campaign looks even more like the corporate chimera it is when juxtaposed with a straightforward British Petroleum print ad: “Fuel made from corn adds less CO2 to the atmosphere. That’s biofuel for thought. In 2005, BP fuels contained more than 575 million gallons of biofuels in the U.S., eliminating about one million tons of carbon dioxide. It’s a start.”

More Capital Markets Stories for Cleantech in Ethanol

Ethanol stories, along with solar, continue to drive the cleantech market upwards, securing aggressive valuations. Unlike the solar industry, with many of its major IPOs overseas, ethanol still has big appeal as a homegrown US industry. Check out some of the numerous ethanol posts on Cleantech Investing blog, investor debate, ethanol IPOs.
Last week Pacific Ethanol, Inc. (Nasdaq:PEIX) announced a $145 mm PIPE.

VeraSun, which had filed for an IPO in March for $150 mm, has announced it has upped its IPO proceeds to $300 mm. It is anticipating pricing at $18-20/share. See my previous blog on an analysis of VeraSun’s IPO. I still think this one and most the others are priced on the high side.

Also, check out the Energy Blog’s article on Goldman Sach’s investment in Iogen. Iogen is a fully-integrated cellulosic ethanol play.

Interestingly enough, I had an opportunity to review the ethanol case investment model being developed by scientists at NREL last week. They are looking to model the way investors analyze investment into ethanol technology and plants to evaluate future supply of ethanol and the ability of the private sector to meet the DOE’s 30/30 target for ethanol production (30% of current gas use by 2030). The discussion gave me a great overview of the issues surrounding the growth of the ethanol industry. The NREL team has obviously done a lot of homework. A couple of interesting concepts we discussed made me come away from the discussion with a greater respect for corn-based ethanol, and a healthy skepticsm for cellulosic ethanol.

Item 1: The DOE (and others) are pushing cellulosic ethanol because of a concern that corn supplies available for ethanol production will top out at c. 10 to 20 billion gallons per year based on on current corn supplies available without signficant increase in food costs.

Item 2. The logic runs that therefore, cellulosic ethanol will be needed to fill the gap, not withstanding the fact that while corn ethanol currently is somewhat on par with gas prices based on c. $50 /bbl of oil, cellulosic is still well out of the money. This alone made me ask why we are even bothering with cellulosic ethanol, when corn-based is working economically today.

Item 3. Part of my comfort with corn is that I do not buy the limit on corn-based supplies that are driving the push for cellulosic ethanol. We produce something on the order of 11 billion bushels of corn per year. Currently about 80+% of that goes to animal feed – cows and sheep predominantly. According to NREL’s model, to meet the 30 billion gallon per year target, we would need on the order of 50+% of that 11 billion bushels per year. However, animal feed is a very price sensitive market, and while we do not import corn today, we do import beef. My feeling is that the market is quite able to substitute a reduction in corn for animal feed to support corn as a fuel feedstock, with a price rise of well less than 50%+ increase the NREL models say would force us towards cellulosic. Basically, instead of importing foreign oil, we’d import foreign beef (or export less), or run more cows on winter grass and hay, and switch that corn supply to feedstocks. Having grown up with a family cow-calf operation, I can tell you that substitution happens at a much lower price increase than NREL is concerned about.

Item 4. The NREL team pointed out a few facts that I consider serious threats to cellulosic (though NREL does not currently consider them as critical as I do). While we think of corn as a regional commodity, corn is a very transportable feedstock relative to things like switchgrass and residual biomass that are expected to be the major feedstocks for cellulosic ethanol. The cellulosic feedstocks are extremely costly and difficult to transport. The general rule of thumb is 50-75 miles. And in that 50-75 mile radius, even a small scale plant (well less than the size of the corn ethanol plants today), will need c. 10-20%+ of the total productive land planted in its feedstock to maintain its supply. That’s a lot of risk for an operator of a cellulosic plant. Imagine a 3 year drought wiping out the economics on your plant. And keep in mind, we are still talking plants on the scale of 5-10% of the size of typical oil refinery. Unless feedstock transport becomes a lot cheaper, all ethanol plants, but cellulosic ethanol in particular, will have a very hard time reaching economies of scale at any given plant.

The parallel is biomass power. Today biomass is the largest non-hydro renewable power source in the US. Like cellulosic ethanol plants, biomass power plants are out of the money on cost, and have signficant feedstock transportation issues (limited to a similar size range). The industry’s answer? Virtually all of the biomass power plants in the US are captive. They are built adjacent to a pulp mill or carpet mill or other facility with its own long-term supply of fuel, eliminating fuel and transport risk.

Bottom line: the corn market is extremely liquid, has lots of ability to hedge price, ability to secure supply in a spot market, and is much, much more weather proof than the cellulosic feedstock will become anytime soon. And its cheaper.

My Predictions on the Ethanol Market:

The corn market will likely be able to handle significantly more corn based ethanol production through substituting corn from the animal feed market than is currently anticipated.

Cellulosic ethanol will come on line to replace a lot slower than anticipated – even when the technology arrives.

The early cellulosic plants will likely be residual based, perhaps corn stover from fields already producing for corn ethanol – NOT purpose planted fuel crops.

Cellulosic technologies that allow fuel switching and co-firing will have an advantage.
Because of the transport issues – cellulosic ethanol will be relegated primarily to vertically integrated plants like the biomass power industry for the near future (where the operator owns its own fuel supply). They will struggle to compete on price with corn based ethanol.
And if ethanol succeeds like DOE expects, our beef prices are headed up.

New Nukes

Of all subjects in the energy industry, few inspire such controversy as nuclear energy.

The facts about the current nuclear fleet are worth revisiting:

  • The existing plants were generally very expensive to build. Most of the plants had significant cost overruns – some due to required design changes in the wake of Three Mile Island, some due to construction management incompetence. What was portrayed as “too cheap to meter” turned out to be “too expensive to imagine”.
  • Now that the plants are almost fully amortized, their operating costs are very low. The variable cost of nuclear generation is generally less than 2 cents/kwh – lower than pretty much any other baseload (i.e., dependable 24 x 7) generation source.
  • Operating performance and reliability have dramatically improved. Whereas capacity factors during the 1980’s were below 60%, the nuclear fleet now runs nearly 90% of the time. Few powerplants run at this level of availability, and it is due to impressive overhauls in operational and management practices during the 1990’s.
  • CO2 emissions are nil. Even environmentalists must agree that nuclear power contributes nothing to the climate change issue. Only renewables (such as wind and solar) can also make this claim.
  • Wastes from these plants have been an intractable problem. The Yucca Mountain repository has been in the planning stages for over 20 years, with no opening date in sight. A solution like Yucca Mountain (deep underground inert storage) is necessary for our nuclear plants, not so much because of the radioactive products (half-life of 300 years) but because of the “transuranic” heavy metals that are highly toxic for 10,000 years.
  • Security concerns are also a major problem. The nuclear cycle used in the current fleet, based on U235 (uranium 235 isotope), inevitably produces weapons-grade material that would be exceedingly dangerous in the wrong hands.
  • Public perception of nuclear is skittish. The Three Mile Island incident effectively shut down the nuclear industry in the U.S.; Chernobyl in Europe. People will need a lot of convincing that nuclear powerplant designs are truly “inherently safe”.

Clearly, the existing nuclear plants will run as long as they viably can, but the question remains: is there a viable future for new nuclear plants?

Most observers would say that any new generation of nuclear plants would require a very different design. While uranium generally is not particularly scarce, U235 will become much scarcer in coming decades as its supply is depleted, putting significant upward pressure on the currently low operating cost structure, and thereby making the already dubious total economics of nuclear even more challenging.

This past week, I participated in a very interesting discussion at NASA’s Glenn Research Center of novel advanced nuclear energy designs. These designs address the full set of current concerns about nuclear: economics, environmental, and safety.

There were two main possibilities covered:

  • One is to modify the design of the nuclear cycle so that spent fuel is reprocessed rather than merely used once and then stored for disposal. The efforts of the DOE’s Global Nuclear Energy Partnership include the development of Advanced Burner Reactors that will produce energy during fuel reprocessing, return usable fuel, and reduce the amount of toxic and radioactive wastes to be stored. This program is large and long-lived, with billions of dollars of research dollars anticipated through the next 12+ years.
  • In my view, the other angle was much more promising: to start from a “clean-sheet” and employ a fission cycle based on thorium. Note that the current nuclear fleet based on U235 was the result of an explicit decision to create a commercial nuclear industry as a direct synergistic pairing with the weapons-production programs of the 1950’s. Thus, the current nuclear approach inextricably poses nasty proliferation and waste problems. On the other hand, the thorium cycle is fundamentally benign. It produces a waste product without any heavy metals that have long-lived toxicity. It does not produce any weapons-quality fission materials. It is a “slow” process, at low temperatures and a negative criticality gradient that ensures it shuts itself down with a failure, rather than a “fast” process (as is the case with U235) that can “run away” in failure mode. And, unlike U235, thorium is incredibly abundant in its supply.

A lot of people think the thorium cycle is too exotic to take seriously. It does sound almost too good to be true, but it ought to be worth a lot more investigation than it seems to be getting — which is approximately none. If success were to be achieved with thorium, many of our energy problems could be solved.

DOD Reduces Dependency on Oil

the Department of Defense (DoD), is exploring the use of hydrogen and other forms of clean transportation. One major motivation is that the fuel which runs U.S. Defense operations comes from oil. That oil is increasingly controlled by countries that have declared their animosity to the United States. If military fuel is controlled by the enemy, then our ability to defend this country is crippled.

World War II provides a valuable history lesson. On December 7, 1941 Japan attacked the United States at Pearl Harbor. The United States entered World War II. It quickly became apparent that worldwide natural rubber supplies were limited, and by mid-1942 most of the rubber-producing regions were under Japanese control. Military trucks needed rubber for tires, and rubber was used in almost every other war machine.

In 1942, synthetic rubber was considered too expensive for wide usage just as hydrogen is now considered too expensive. The US government launched a major effort to increase synthetic rubber production. By 1944, a total of 50 factories were manufacturing it, pouring out a volume of the material twice that of the world’s natural rubber production before the beginning of the war.

Now at Pearl Harbor, history is in a sense repeating itself. Hickam Air Force Base is putting into service a hydrogen fuel cell bus and a hydrogen fuel cell van. This hydrogen is sourced from U.S. natural gas reformed with steam. This hydrogen and other uses of alt-fuels are steps towards energy independence.

Energy independence is a key objective of the U.S. military. Military vehicles can broadly be classified as either tactical or commercial. Tactical includes all the vehicles that are deployed in war and expeditionary environments including humvees, tanks, amphibious vehicles and helicopters. Commercial vehicles handle much of the transportation and goods movement here in the USA. DoD is taking major steps towards energy independence with commercial vehicles

An obstacle to being free of dependence on foreign oil is that all tactical vehicles have been required to use an oil-derived jet fuel JP-8. In some ways, the use of this single fuel simplifies logistics. But using JP-8 creates serious problems. Consider this irony. Fuel from oil constitutes 70% of the U.S. military’s total weight that must be transported into battle for transportation and stationary power. Our battles are increasingly about the oil that is converted into that fuel. We now have an opportunity to transition to hydrogen that is lighter to transport, does not make us vulnerable to foreign suppliers, and is not a cause of war.

In California, U.S. Marine Corp Camp Pendleton, as part of the Department of the Navy, demonstrates the shift to using less oil. I recently spent over two hours at Camp Pendleton with Gary Funk, Regional Fleet Manager for Marine Corps West. Camp Pendleton follows the EPAC objective that 75% of commercial garrison mobile equipment purchases will be alt-fuel. With long-term buying contracts and five-year planning cycles, 75% will not happen overnight, but the shift to clean vehicles is taking place. At Camp Pendleton, there are over 320 electric vehicles (EV). Over 200 are electric scooters. 120 are GEMs, the 35 mph General Motors vehicle. The EVs use an 8 station charger that is solar powered.

Camp Pendleton also uses hundreds of CNG vehicles. Camp Pendleton is the nation’s largest buyer of biodiesel with annual purchasing of over one million gallons of B20. These one million gallons from virgin soy is a million less gallons of diesel from oil. The use of B20 has been relatively problem free. Some commercial vehicles, such as buses, have fewer problems with B20 than JP-8.

Full Article

“Carbon Dioxide. They Call it Pollution. We call it life.”

Wednesday, May 24

Competitive Enterprise Institute, a non-profit funded by several large foundations and corporations such as Coca-Cola and ExxonMobil, announced on its website that it “has produced two 60-second television spots focusing on the alleged global warming crisis and the calls by some environmental groups and politicians for reduced energy use.”

Myron Ebell, the Institute’s Director of Global Warming, also chairs the Cooler Heads Coalition which “comprises over two dozen non-profit groups in this country and abroad that question global warming alarmism and oppose energy rationing policies” – and snagged the URL, globalwarming.org.

Says Competitive Enterprise Institute (CEI): “Although global warming has been described as the greatest threat facing mankind, the policies designed to address global warming actually pose a greater threat. The Kyoto Protocol and similar domestic schemes to ration carbon-based energy use would do little to slow carbon dioxide emissions, but would have enormous costs. These costs would eventually fall most heavily on the poorest nations in the world. Luckily, predictions of the extent of future warming are based on implausible scientific and economic assumptions, and the negative impacts of predicted warming have been vastly exaggerated. In the unlikely event that global warming turns out to be a problem, the correct approach is not energy rationing, but rather long-term technological transformation and building resiliency in societies by increasing wealth. CEI has been a leader in the fight against the global warming scare.”

The ads are airing in 14 U.S. cities from May 18 to May 28, 2006: Albany, NY; Albuquerque, NM; Anchorage, AK; Austin, TX; Charleston, WVA; Dallas, TX; Dayton, OH; Denver, CO; Harrisburg, PA; Phoenix, AZ; Sacramento and Santa Barbara, CA; Springfield, IL, and Washington D.C.

CEI has trotted out this aging tactic of dis’ing the science of climate change with the intent of provoking public uncertainty – and counts on an American revulsion to “rationing.” (Note, CEI does not use the term, energy efficiency, or even the other “C” word, conservation.) Yet, climate change isn’t the real issue at hand; the issue is any science, belief, fact, fiction, or new technology that threatens, or appears to threaten, the system by which CEI’s members make money. Calling themselves ‘free marketers,’ they are, more accurately, pro-big business. (‘Free marketers’ chirped the virtues of free markets at high-profile sustainability meetings in Washington, DC in the ’90s. They were, almost all, hefty white males, easily identified in their dark suits, and for whose benefit I would quote Amory Lovins: “Markets are meant to be efficient, not sufficient; greedy, not fair.”) The free market ought to compete on a level playing field. CEI’s members have lots of advantages on an uneven field and lots of reasons to oppose a disruptive grazing – like government policies around climate change. Therefore, global warming is bunk. And, energy-efficient cleantech might as well be, too…

Were it not for the likes of CEI, we might have enjoyed an English Isles’ placidity in the face of climate change, bereft of icons, idolatry, aspersions against scientists, and the Jaws-like music of An Inconvenient Truth. But this is America where critical concerns about our way of life must erupt volcanic before they can be heard above the fat cats of growth and consumption (and a decibel higher again above the MP3 players and game stations). It’s clear who has engaged the entertainers, produced the fanfare, evoked an enteric scare, and elicited the laughs, and who is more likely heard by younger generations. Take Al Gore on Saturday Night Live. (Now imagine CEI’s Myron Ebell on SNL. Can’t!) Gore dishes up facetious and humble humor to a savvy audience. The message about climate change and the state of the nation is clear even when dripping with irony. In contrast, we have CEI with its video stream of beautiful blue-skied sunny days and its “long-term technological transformation” and “resiliency in societies by increasing wealth.”

What do those words mean, exactly? To an ExxonMobil or a Coca-Cola when it comes to a new technology, what constitutes technological transformation, and who’s getting resiliently wealthy? I thought I’d apply their words to ethanol…next week.

Deutsche Wind

In the past month, I’ve visited not one but both of the major wind energy trade fairs in Germany, in Hannover and Hamburg. Why there are two trade shows targeting the same audience less than a month apart is a long and silly story – suffice it to say that Americans have no monopoly on pettiness.

Germany has about 20,000 installed megawatts of wind capacity. There’s a wind turbine seemingly every kilometer in the northern half of the country. Many of the world’s major wind turbine manufacturers are either based in Germany or have a major factory there. Thus, Germany can be fairly considered the epicenter of the wind industry.

From this central vantage point, what’s up in wind?

1. Continued consolidation of the manufacturers is expected. There are many manufacturers, but relatively few with long-term staying power. The survivors could include GE, Siemens, Vestas, Gamesa, Enercon and Suzlon. But, even six majors is probably too many in a fully mature market, meaning that it’s even more difficult to see less well-capitalized players as Nordex, REpower, Fuhrlander, Ecotecnia and the like as remaining independent.

2. Can newbies succeed? The most visible newcomer to the wind party is Clipper, founded by Jim Dahlsen, who previously founded Zond (which became Enron, and is now GE). Dahlsen is back and has what he claims is a better mousetrap for many different reasons. However, no matter how good the promises, developers and financiers are leery of buying/installing new wind turbine designs, until they’ve been shown to work well in the field for extended periods. In a market of this type, it’s very hard for new entrants to penetrate. Good luck to Clipper: they may in fact succeed because of Dahlsen’s track record, which has enabled them to raise enough capital to finance some of their own wind projects to demonstrate their technology. Other potential entrants may not be so fortunate – unless the market remains desperate for turbine supply, in which case some buyers may be inclined to take a risk on a new turbine design.

3. Vestas on the wane? Even though Vestas is number one in market share, it’s clear that Vestas is no longer viewed as the darling of the industry. It’s said to be having serial problems with one of its more recent and widely-used designs. Furthermore, by several accounts, Vestas is losing its corporate shirt from its recent offshore efforts (more on this below). Vestas has been talked about as a takeover candidate for a while now, but the most recent rumor has shifted from Shell to Chevron as the potential suitor.

4. Suzlon on the rise? In contrast to Vestas, Suzlon really appears to be seizing leadership in the industry. Its production in India enables a much lower cost structure (wages about 40% of German levels), and whereas most turbine companies in the industry are alleged to be making mediocre profits (or worse), even in a tight market where pricing is not under pressure, Suzlon is said to be able to generate operating margins on the order of 25%. If that’s accurate, wow!

5. Improved US wind policy is expected. As everyone knows, the on-off nature of the PTC over the past several years has caused the entire global wind industry to go through booms and busts of tightness and slackness. Most everyone believes that the PTC will in fact be extended beyond 2007, although there is also a recognition that it will (should?) be on a declining basis, to wean the industry off of subsidy-dependency. Seemingly, that would be acceptable to the players – they just want predictability of policy rather than short fits and starts. For some reason, Bush’s almost passing comment a few weeks ago about the potential for 20% of US electricity supply from wind by 2020 seems to be viewed by the wind industry with a great deal of seriousness, as an indicator of a real and major policy shift. I don’t see it, but, OK, whatever.

6. More turbine manufacturing is likely in the US. While the US is still viewed with wariness, because of the inconstant history of the PTC, everyone recognizes the massive size of the potential market, and the limited remaining upside to the market in Europe. Right now, almost all turbines are manufactured in Europe, thus implying that all US windfarms are composed of imported equipment. If wind economics in the US are really to improve, the cost structure has to be lowered, and more of the major (heavy, difficult to transport) components must be produced domestically. I believe you’ll see several announcements of US facility decisions in the next year or so.

7. New (but well-proven) names likely coming to the US wind market. Some of the major European turbine manufacturers have been largely foreclosed to date from the US market by GE’s holding of a US patent that has been ruled (by the US PTO) to be infringed by several of the most common and successful European designs (especially Enercon, but also Nordex, REpower and Fuhrlander). The remaining time on the patent is running down, meaning that GE is probably more in a mood to negotiate. Further, with the US wind market being the world’s largest and with lots of remaining growth in the foreseeable future, any serious wind player cannot afford to be shut out for much longer. Thus, it would seem that commercial arrangements between GE and other players to accommodate their entry into the US can be anticipated.

8. Offshore recedes into the future. In Europe, offshore wind has been seen as the savior of the local market, as most good on-shore opportunities have already been captured. However, I got the sense from most of the parties and observers that the limited offshore efforts pursued to date have been far more challenging than expected. Vestas and GE are said to be suffering acutely from their high-profile projects, with Vestas specifically stopping those efforts to focus on its on-shore issues. Enercon’s massive 4.5 megawatt machine has turned out to be too heavy for offshore application and they are now repositioning it as an on-shore product (but where?!). By one well-placed veteran’s perspective, only Siemens has a credible offshore offering, but even then the economics are strained. As a result, most of the turbine manufacturers are backtracking, and now see offshore as a post-2010 phenomenon even in Europe, so expect it later in the US (where there are many more remaining onshore opportunities).

Nuclear debate rages on in Australia

This week the Nuclear debate is back on the table in Australia after Australian PM John Howard made recent comments to the Canadian PM . Various political proponents here in Australia have taken positions on the topic from “requires consideration” to an “outright no”. My personal opinion for John Howards stance is that raising the issue may help fuel the worldwide interest in nuclear energy as an approach to reducing world wide emissions, but also to the benefit of Australia selling our uranium resources to the world.

As for Australia’s domestic political reasoning, based on our markets I don’t think nuclear is going to be a solution for the next 15 years for Australia. But something has to replace emission based coal generation in that timeframe. Initiating the debate is important in order to help determine where we should direct large scale energy financing over the next 10 years. A debate about nuclear energy is a debate about energy and will hopefully fuel a balanced discussion.

My opinion of what will happen in Australia is on the basis that:

  • We have no existing nuclear energy generation, nuclear energy industry or personnel, asides from a small medical and research reactor at Lucas Heights
  • We do not have an impending problem with supply of energy.
  • We have 40% of the known reserves of uranium.
  • There’s no net technology export from Australia in nuclear
  • We rely heavily on coal and petrochemicals for our energy production, yet only around 35% of our emissions come from electricity generation.

So given theres no impending energy problem what we are more likely to see in Australia is a repricing that will occur due to a emissions targets, carbon price or increasing demand. Hence our current cheap energy is likely to go up in price and that will influence the investment case for renewables, efficiency adoption in business, new research etc, which is good for the domestic renewable industry.

Looking at the rest of the world, in a recent article in New Scientist Magazine (22 April – apol: online article is paid sub) the question of the economics of nuclear came up and its a good read. The article states that a good deal of the resurgence in the US and UK at the moment into nuclear is to replace aging reactors around the world to avoid a gap in generation. Countries that are investing heavily are China, Japan, Russia and India.

More renewable MW of wind generation were put into Spain and Germany in 2004 than MW of nuclear generation will be added from 2000 to 2010. Industry projections indicate that by 2010, renewable and low-carbon sources will offer 177 times as much added capacity as nuclear”

The other side of the coin is the ‘negawatt’ effect, or the ability to reduce consumption of energy. According to the New Scientist article energy some US states have had significant success with this, ie consumption in California has been flat for 30 years. I don’t have any Australian Stats, but I believe that Australian industry can achieve the same savings.

The nuclear debate here in Australia is important to have and lets hope that we can broaden it to discuss investment into our clean energy industry and find a way to reduce our emissions, build export capability in Cleantech and maintain Australia’s economic prosperity.

—————————————————–
Nick Bruse is the General Manager of Clean Technology AustralAsia Pty Ltd, the organiser of the AustralAsian Cleantech Forums and Dealer Forums, and the leading advocate of Cleantech in Australia. Nick does a weekly blog column on Cleantechblog profiling innovative Australian cleantech, energy, water and environmental technology companies.


Applied Materials & Solar – What’s Going On in Cleantech?

On May 11 I did a blog Applied Material’s stealth entry into the solar market. The column ended up being close to the mark, and was picked up around the blog world, including at Rob Day’s Cleantech Investing blog.

On May 4, AMAT announced it was acquiring Applied Films for $464 mm. Big news for cleantech.

From the press release:

“The acquisition is also anticipated to provide growth opportunities for Applied Materials in solar cell as well as flexible electronics applications where our combined knowledge and capabilities will enable us to bring a new level of expertise to these expanding markets,” said Mark Pinto, senior vice president and chief technical officer of Applied Materials. “In solar cell manufacturing, we expect to help customers deliver higher levels of output at lower production cost — a critical step to making alternative forms of clean energy more available and affordable. By combining Applied Films’ existing platforms with Applied Materials’ broad process portfolio and global customer relationships, we can also accelerate a number of new applications for electronics on flexible substrates.”

Remember, you heard it here first. In any case, this deal has been making the rounds in blog world, including on ChipShots, and definitely validates our earlier assertion that AMAT was entering the photovoltaic equipment end of the cleantech market.

Interestingly enough, I could find no US patents or applications by Applied Films mentioning solar. Perhaps their program is too new.

But that’s not the end of the story.

Applied Films makes the ATON product line, a sputtering systems that uses Physical Vapor Deposition. But it’s not my any means a large business for them yet, with a total installed base of around 10 systems, 15% market share, and only 5-10% of the company’s revenues by it’s own statements. At $2-4 mm/system, that’s $20-$40 mm of total installed base, which represents a minisicule fraction of Applied Material’s business. I cannot believe that AMAT has been spending time and money on a solar group just to evaluate an acquisition of a product line that small.

To follow on that information however, I received another rumour (unconfirmed) that Moser Baer, an Indian manufacturer of removable optical storage devices, is anticipating using AMAT to develop the production line for its announced 80 MW CdTe photovoltaic market entry, targeted in 2007. This would fit of AMAT’s typical practice of entering new markets on the back of a joint development effort with an initial customer. Moser Baer announced its solar plans in October 2005, though no mention of CdTe. Moser Baer did announce that expected project cost was US$58 mm, and that they were investing $25 mm in a subsidiary to kick it off, expected $150-$200 mm in revenues by 2008. This would put them in the top 10 producers globally. A couple of side tidbits, in April 2005 SunPower hired PM Pai, the former President of Moser Baer India Ltd, as COO. Incestuous world, I guess. Also, like with Applied Films, I could find no mention of any US patents or applications by Moser Baer relating to solar.

An AMAT CdTe angle would be intriguing on a number of fronts. Number one, CdTe is a bit afar afield from the what Applied Films seems to have been doing, as well as the process engineer job descriptions that AMAT has out. The Moser Baer rumor and the job ads, as well as AMAT’s patent solar portfolio would also seem to predate the Applied Films deal.

CdTe, a thin film solar process whose largest proponent currently is First Solar, has the theoretical advantage of being significantly lower cost than most solar processes. However, like many thin film processes, it has proven very tricky to do in volume while maintaining product quality, and does make not a particularly high efficiency cell. As most of the main issues in CdTe boil down to control and process consistency, areas where AMAT is particularly good, it would be interesting to see if AMAT were doing work in this area. That could be big news for the solar and cleantech industry.

It also continues to confirm my thesis that it is going to get harder and harder for venture backed startups to compete in solar. As big players enter the market, the window is tightening.

While I’m still trying to verify much of this information, my guess is Applied Materials is after a much bigger play, and that we should expect additional announcements over the coming months.

Neal M. Dikeman is a partner at Jane Capital Partners, a San Francisco merchant bank focused on energy technologies and cleantech.

Accelerated Cryogenics and Cryogenic Materials R&D Needed for Success of Superconducting Electric Power Technologies

Most of the considerable public attention, and more of the modest government funding on high temperature superconductor technologies for power systems, has centered on superconducting materials, wires, and device development. However, superconductors operate only at very low temperatures, typically below the boiling point of liquid nitrogen. I wanted to share a summary of an op-ed piece by Michael J. Gouge, Applied Superconductivity Group, Oak Ridge National Laboratory, that appeared recently in Superconductor Week discussing the need for an increased national focus on cryogenic technologies.

Michael J. Gouge writes:

Superconducting-based systems on the electric grid require three enabling technologies: the superconducting wire or tape, a cryogenic cooling system, and high-voltage cryogenic dielectrics. Most of the R&D effort is going into development of the superconductor, second generation (YBCO) tape in case of HTS. This is understandable as there are no grid-based applications without a cost effective and capable superconductor.

Little resources, however, are being applied to development of the other two areas: cryogenic cooling and high voltage dielectrics. In part, this is due to the perception that there are available systems and materials that can be made to work, at least in short term demonstrations. Lurking below the surface, however, are several technical issues that need to be addressed for utility acceptance of HTS grid devices.

In the cryogenics area the three major issues are reliability, efficiency and cost. In the most important area, reliability, the performance of cryogenic systems to date has ranged from 95 to 99% reliable. This needs to improve significantly to 99.5 to 99.9% if the HTS devices are to be seamlessly inserted into the US grid.

The needed improvements in efficiency are also substantial. Present closed-cycle cryogenic cooling systems have thermodynamic efficiencies from 10 to 15% of ideal Carnot efficiency. This needs to about double if the overall HTS system efficiency gains due to superconductivity are to be realized.

Finally, the cost per watt of cooling needs to be reduced by a factor of 2 to 4, depending on the application. This can best be done with the economy of scale that should come from a large production base.

If HTS products are to be routinely accepted on the grid in the next 5-10 years, the level of effort in cryogenics and cryogenic dielectrics R&D by the government and industrial sectors should be expanded to address and solve the issues discussed above.

Mark Bitterman, Executive Editor, Superconductor Week
http://www.superconductorweek.com

Whole Brand is More than Organics

Wednesday, May 17, 2006 (my birthday!)

Connected Organizations for a Responsible Economy (CORE) is a Colorado cleantech and sustainability business trade organization. This week, its Boulder Business Breakfast topic was “Healthy and Natural Eating – Functional Foods, Dietary Supplements, and Organic Claims.” An attorney from Patton Boggs spoke on the three federal agencies (USDA, FTC, FDA) that govern and monitor natural and healthy foods, their claims and advertisements. This week, The New Yorker published “Paradise Sold, What are you buying when you buy organic?” which reviews three books criticizing the mainstreaming of the organic food movement and focuses on Whole Foods. The Wal-Mart announcement to offer organic food continues to get press. And, a Harper’s Magazine article, “Swine of the Times, The Making of the Modern Pig,” in the May issue is a stomach-turner that may keep you off pork until the details are banished to a recess of the brain. Little about the industrialization of mass food production will surprise if you’ve read “Fast Food Nation, The Dark Side of the all-American Meal” or some of Michael Pollan’s books and articles (“Power Steer” for starters).

The point in “Paradise Sold,” (and exemplified by Whole Foods and Wal-Mart organic food suppliers) is that organic, once counterculture, has attained “cultural legitimacy” and “cherished ideals have simply become part of the sales pitch.” Organics avoid synthetic fertilizers, as well as toxic pesticides, fumigants and herbicides, gene modification and irradiation. But compliance with the USDA’s standards for organic does not ensure the food is produced locally or with sustainable practices by a small producer.

Wal-Mart is to organic food as Kmart and Martha Stewart are to fine living: ersatz, lucrative. But what of Real Food, Whole Foods, Wild Oats and the companies they have gobbled up along the way (Fresh Fields, Bread and Circuses)? There’s something else in their brand and marketing – beyond organics and free-ranging chickens and pigs – that keeps me opening my wallet…wide. There’s something more to it than a cheaper bag of Earthbound organic lettuce (the Wal-Mart pitch).

I was raised a “foodie.” My mother, a gourmet, whips up hollandaise, boeuf bourguignon and sweetbreads as easily as other parents deliver dinner in a paper bag. She did treat us to McD’s now and then; Yodels and Ring Dings, New England processed food staples, weighed down the lunch boxes. Those treats were sanctioned no-no’s – so good and so bad for you; their unhealthy, sugary bad selves were never considered real food. My mother brought home metal milk cans of unpasteurized cow’s milk from the farmer in Waccabuc, New York – this, before a developer leveled the barn. She altered her commute home to stop at Maneros Steak House in Greenwich for filet mignon which she showed us how to thinly slice and eat raw. She introduced us to artichokes and steak tar-tar early on, instructing how to pull the leaves down to the heart of the artichoke and how to blend the egg yolk and capers into the raw red meat of tar-tar. Dinner themes were often influenced by the boyfriend du jour (kilbasa with the Polish guy, borscht – borş – with the Romanian tennis player). Cheese came from the local cheese shop in Katonah. With home-rolled sushi and a tasting dinner of abalone, squid, and octopus from the fish market in Mount Kisco, she expanded our land-locked horizons. She made sticky buns with guava jelly and popovers from scratch which we lathered with butter. Salad dressings started with garlic, olive oil, a wooden spoon and a seasoned bowl. Meat loaf started in the Hamilton Beach grinder. On her less-than-an-acre homestead just 40 miles from Manhattan, we had eggs from chickens, and lots of manure from her horses for a prolific garden of basil, tomatoes, Brussels sprouts, asparagus, zucchini, yellow squash, carrots and snap peas. We didn’t utter the words organic or natural. It just was.

In my mid-teens in the mid-70s, I was a farm hand for two doctors in Pound Ridge, New York. Drs. Mary Alice White and Jan Duker (psychologist and psychiatrist, respectively) fertilized their extensive organic garden with chicken manure (I shoveled mounds of it from the back of the coop they cleverly designed). During my breaks, they fed me herbal tea and soy nuts by a wood burning stove (I lugged cords upon cords of wood to feed the stove and an outdoor sauna). They supplemented the chicken manure garden fertilizer with mail-order seaweed and manure from my mother’s horses (I hauled mounds of, what I consider to be the true, black gold.) When the doctors moved to Lakeville, Connecticut to an exquisite old farmhouse, the garden grew exponentially, as did Dr. Duker’s apiary. There, they fed me Skinner’s Raisin Bran with goat’s milk, drizzled with Duker-harvested honey. (Skinner’s Raisin Bran with local goat’s milk is as far from Cocoa Puffs and BHT cow’s milk as a girl can get, and I held my nose to get it down.) The doctors mail ordered their canned goods from Walnut Acres. And when their chickens stopped laying eggs, they were slaughtered, as humanely, they explained, as possible: the old hens were calmed with coos and hung upside down by their feet; the doctors slit the artery in the neck, and drove a knife up through the brain; once the blood drained, the bodies were dunked in a kettle of boiling water to loosen the feathers which were removed and the chicken was prepared for freezing. The night of my first (and only) chicken killing – 25 hens – the farmer across the road, a single woman, prepared fried chicken. I couldn’t eat it. The doctors chuckled and gave me a pass. Dr. Mary Alice White, now gone, is the mother of Christopher Kimball, the founder, editor and publisher of Cook’s Illustrated magazine and host of the syndicated PBS cooking show America’s Test Kitchen. It was a strained relationship (she was quite headstrong), but both Dr. White and her son express a grand appreciation for food quality, in ingredients, preparation and presentation.

So when I pass through the doors of a Whole Foods, I am reminded of the connection to the earth, to real food. The hyper-lit, hyper-sanitized, hyper-refrigerated aisles of Wal-Mart, Safeway, King Soopers, etc. contrast starkly with the abundant colors, soft sounds and alluring smells of Whole Foods – which may not sell the true-blue natural foods of the doctors and my mother. It may be a bit of marketing palaver and some of the real thing, but in a life where my gardens have come and gone in painful separations, where my choices to live close the earth are limited, Whole Foods is as close as I can get before mail-ordering my meat from, say, James Ranch, or driving 14 miles to my favorite boutique cheese shop, St. Killians, or waiting for the Cherry Creek farmer’s market to roll around in the spring and summer months. (And, hey, it’s not lost on me that those natural food vendors at the farmer’s markets drove a long way to get to here – whether it be Union Square in Manhattan or Cherry Creek in Denver.) It isn’t just about the food, either. Whole Foods purchases renewable energy credits (green tags) to off-set 100% of its electricity. I’ve yet to engage with an employee who is anything but pleasant and present. Grazing the aisles, particularly around holidays, is a filling and scrumptious exercise (and, great marketing, naturally).

I recently moved into my boyfriend’s house in southeast Denver. It’s in a 70s suburban development and the very idea of it made me cry (much as I love my boyfriend). But get this: I can walk to a brand new Whole Foods. Today I sat at its café counter and plugged into its (free) Wi-Fi – under a large sign listing the high performance (green) building principles used in the construction of the building…Marmoleum, 3-Form resin, low-VOC paints, toxin-free particle-board substitute. All materials found in my bio-bus…all reasons why it’s more than organics that gets me through the door.

DOE SBIR Spending Light on Hydrogen, Heavy on Nuclear

I read through the award list for the DOE 2005 SBIR Phase IIs. Total dollars awarded was around $70 mm. What was really interesting, and a bit of change from previous years, little SBIR money in hydrogen or conventional oil & gas, and heavy in nuclear, fusion, high energy physics and carbon/greenhouse gas research.

Of the 120 awards, 51 were in nuclear, fusion, or high energy physics (42%). 13 were in carbon or greenhouse gas (11%), only 4 in fossil fuels, 6 in solar, and 7 in fuel cells/hydrogen (total of 14%).

The tremendous numbers of SBIRs in fuel cells and hydrogen of previous years appear to have tailed off significantly. Interesting enough, also a small handful of DOE SBIRs in ethanol or biofuels.

Check out the list here.

Vanity Fair’s Green Issue

The May 2006 issue of Vanity Fair has been dubbed its first “green” issue. It easily stands out from the magazine racks — the cover photo of Al Gore, George Clooney, Julia Roberts and Robert Kennedy is tinged in deep and pervasive green.

Inside the issue, VF trumpets 22 eco-heroes, including many of the usual suspects. Frankly, I’m exhausted of hero worship, and I find the celebrity idolatry of periodicals such as this one to be yet one more element of 21st Century American culture gone seriously awry.

Yet, this issue of VF does one very useful service: it paints a picture of what the world might look like in the future: specifically, how Manhattan might look, with sea level rise from global warming.

Manhattan Underwater from Global Change

They say a picture’s worth a thousand words. If seen by enough eyeballs, disturbing images like these can perhaps shock the public into more serious thinking, conversation and action on the critical energy and environmental matters that face us for the foreseeable horizon. Have a look and forward it on.

Waves of Energy and Water

As a surfer, and with limited time on my hands im always checking the web swell forecast to see whether its worth heading down to Bells Beach (yes it’s always busy). Luckily using swell maps and now dedicated surfer websites you can actively predict days its worth grabbing the board and heading out for a few waves. When your out on your board looking across the sea, its not hard to wonder just how much energy is wrapped up in each line of swell that stretches out to the edge of your vision. Im obviously not the only one to have thought this, because as we know there have been numerous attempts to capture this energy with wave conversion devices. Energetech, is the latest Australian company that is having significant success in this field.

Excluding tidal, ocean current and thermal ocean devices, the types of technology we have had (off the top of my head)

  • Hinged systems that float on the surface driving hydraulic or linear generation devices as they flex (eg. Ocean Powers – Pelamic )
  • Tethered systems that capture the forces generated by buoyancy and wave oscillation, and
  • Blow hole devices that utilise wave oscillations and an air column to drive a wind turbine, or
  • basic variations of the above

The latter type blow hole device has been attempted a number of times with limited efficiencies. This has been primarily to do with the challenge of extracting energy from a wind stream that varies in direction and power. Energetechs’ system utilises a turbine blade with variable pitch control that ensures it only ever rotates in one direction and adjusts its vane pitch as the wind speed changes to achieve greatest power generation. Standard propellers/turbines would have to reverse direction and have a small power band in a similar situation.The company then couples this turbine technology with a generator and mounts it onto large wave focusing collector which directs the incident wave power into a vertical blowhole chamber. The clever thing that Energetech has done beyond this is that they have connected a pump and desalination system.

The system now allows them to site energy generation or water purification systems off the coasts of Australia and other countries to provide pure drinking water at very low cost because the intensive energy/emission demands of desalination are taken care of. Secondly, offshore siting results in less waste brine disposal issues and shoreline land allocation issues. Plus that long term predicability I was talking about earlier means that power network integration is less of an issue and the device can be turned on and off instantly to cope with demand.

Energetech have an operational full scale ocean trial system operating of Pt Kembla in Australia, which will produce well over 500MW annually.

“Energetech has released plans to site wave generation plants in Portland. Energetech, a privately owned company, is going through planning approvals for a 1.5 to 2-megawatt wave generation plant and negotiating with a major power group to build a 20-megawatt plant.

A Victorian state government spokesman said Energetech had held discussions with Sustainability Victoria about the plans but it had not yet reached the public discussion phase. Talks have reportedly also been held with the Portland aluminium smelter about the supply of power.

Future facilities will cost about A$2 million per megawatt of capacity to build, according to the company. This compares with A$1.8 million for wind power and A$1 million for gas-fired generation.” source:Freehills

Energetech plans a listing on the ASX (Australian Stock Exchange) in 2007. CEO, Tom Engelsman from Energetech will be presenting at the AustralAsian Cleantech Finance & Investment Forum, Aug 22nd 2006.

——————————————————
Nick Bruse is the General Manager of
Clean Technology AustralAsia Pty Ltd, the organiser of the AustralAsian Cleantech Forums and Dealer Forums, and the leading advocate of Cleantech in Australia. Nick does a weekly blog column on Cleantechblog profiling innovative Australian cleantech, energy, water and environmental technology companies.

Superconductivity Awards Go to Leaders in Energy Technologies

An independent panel of leaders in science and industry have determined the winners of Superconductor Industry Awards for 2005. Interestingly, the panel has chosen to call attention to two different dimensions of the superconductor industry: a leader in the field of high temperature superconductivity (HTS), which has applications in advanced power technologies relevant to cleantech has been chosen as “Superconductor Industry Person of the Year.” On the other side of the industry, a leader in low temperature superconductivity (LTS), which is used primarily in medical and scientific research applications, has been chosen for the “Superconductor Industry Lifetime Achievement Award.” LTS wire is also used in the massive magnet coils for the large-scale plasma physics research behind the holy grail of all cleantech concepts: zero emission, virtually limitless, fusion energy.

The award for “Superconductor Industry Person of the Year,” was given to Dr. Yuh Shiohara, Director of the Superconducting Tapes and Wires Division of the Superconductivity Research Laboratory at the International Superconductivity Technology Center (ISTEC) in Japan. The “Superconductor Industry Lifetime Achievement Award” went to Seung Hong, Vice President of Engineering at Oxford Instruments (LSE:OXIG.L) Superconducting Technology business (OST).

Shiohara was selected for the award in recognition by top peers in the industry for his broad vision and effective leadership at the head of Japan’s national effort to develop high temperature superconducting (HTS) wire. Much of the global effort to commercialize low-cost, high-performance HTS wire is centered on second generation (2G), YBCO coated conductor development. Shiohara’s leadership in 2005 was essential to the impressive progress in 2G wire development reported by ISTEC last year, and also aided the two major industrial HTS wire manufacturers in Japan, Fujikura Ltd. and Sumitomo Electric Industries Ltd (TSE: 5802). He was recognized in particular for his ability to effectively coordinate industrial, university, and governmental organizations.

Leader in Low Temperature Superconductors Wins Lifetime Achievement

Dr. Hong led superconductor development and engineering at OST for 25 years. His technical and business leadership has contributed as much as that of any person in history to the advancement of magnet applications. During his tenure at OST, the performance of both NbTi and Nb3Sn superconductor improved substantially, while production levels increased from a few tons to more than 500 tons per year. He continues to lead efforts to develop a new generation of higher field conductors based on HTS materials.

LTS wire is key to many of the most important technologies of our time. It is used to make magnets for MRI devices, the fastest growing diagnostic imaging modality, and also for magnets used in other growth industries including pharmaceuticals and materials research, and industrial processing. Fields such as high energy physics and fusion research such as the $10 billion ITER project also use LTS wire.

Hong has been the Vice President of Engineering at Oxford Superconducting Technology (OST) since 1989. During his tenure of technical and business management, OST has become the largest supplier of superconductor in the world.

The winners of Superconductor Week’s Superconductor Industry Awards were determined by a panel of nine leading experts in science and industry from around the world working in every field of superconductivity. For information on the panel, visit here. Additional information on the awardees and panel members is available at www.superconductorweek.com/scipoy.

Last year’s winners were Alex Malozemof, American Superconductor (Nasdaq: AMSC) , and Venkat “Selva” Selvamanickam, Intermagnetics General’s energy technology business, SuperPower (Nasdaq: IMGC).

I will be presenting the awards to the winners at the Applied Superconductivity Conference in Seattle, WA this August.

Mark Bitterman, Executive Editor, Superconductor Week
http://www.superconductorweek.com/

Primitive Inventions

Let me set the stage. I’m flipping through the May issue of Wired, the one with a close-up of baby blue eyes (Al Gore) on the cover. “Climate Crisis! The Pro-Growth, Pro-Tech Fight to Stop Global Warming,” cries the lead article. As I write, Michael Klare, author of “Blood and Oil: The Dangers and Consequences of America’s Growing Dependency on Imported Petroleum,” speaks via the web about the geopolitical aftermath of oil exploration. “All of us [oil] addicts are increasing our military activity in these dangerous oil producing regions. So in my mind, it’s this aspect of the post-peak moment that should worry us the most, at least until the global warming effects become more profound.”

I figure this issue of Wired, of all issues, will be chock full of cleantech promotions. This is what I find:

Positioned in choice magazine real estate is a GM “Live Green, Go Yellow” campaign ad which reads, “Energy Independence? The answer may be growing in our own backyard.” The second ad in the magazine, on the very next page? GMC’s ad for a big old “all-new 2007 Yukon with available FlexFuel technology, engineered to run on either gasoline [you don’t say?] or E85 (85% ethanol/15% gasoline) made mostly from U.S.-grown corn.” “When it comes to alternative fuel options, we’re all ears.” A glistening ear of yellow corn embellishes the background. MPG with this baby? It’s TBD…MIA.

Flip to the Chevron ad wafered between the Contents pages. “Russia, Iran and Qatar have 58% of the world’s natural gas reserves. The U.S. has 3%. So what does that mean for us?” Presumably, “us” is Chevron. The ad bullets a few steps the gas/oil company (with its serious operating problems in Africa and South America) has taken: “planning to invest more than 10 billion in developing gas projects over the next five years” and “created a four country partnership to build West Africa’s first regional gas pipeline.” Chevron’s ad campaign displays “open letters” from the company. (I must ask, who reads these letters…other than energy wing nuts?) This particular letter calls for increasing supplies of natural gas and, in consuming countries, “building the related infrastructure, including LNG terminals. This in turn, will require coastal communities to allow these necessary, but not necessarily pretty, facilities to be built in their backyards.” OK, one point for honesty; these facilities aren’t pretty. Much of this business (war, social and environmental degradation, sprawl, human rights violations) is anything but pretty, as Michael Klare is illustrating. A tear of paper clipped to the letter in the ad directs us to “willyoujoinus.com” where Chevron urges, “voice your opinion today and help create solutions for the future.” The opinions posted on the website don’t appear to be sanitized. Chevron’s ads (also available on the website) are, as one might expect, alluring and professional….pretty. But, to the heart of the matter, can this pony possibly find a new trick – one that doesn’t involve drilling and distribution of un-pretty petrol and gas?

Flip to the very next page. “The seeds of ecomagination have been sown…GE proudly salutes the next best things and the people that make them possible:” desalination technology, fuel-efficient and quieter aircraft engines, and fuel-efficient locomotives that exceed EPA emissions standards. GE says, “Take a look at the fruits of our labor.” Here’s the jig on GE. I grew up in New York, and no matter how many ‘good things it brings to life,’ I still associate GE with the Hudson River which it contaminated with PCBs. Adding insult to contamination, former GE CEO, Jack Welch, applied his corporate cockiness to the PCB problem on “60 Minutes.” That flew like a dead duck…and on heels of his divorce – the first one, but who’s counting – an unpleasant wrangle over assets that didn’t sit well with female contingents in Manhattan and Fairfield County. His latest personal imbroglio unraveled the marriage of a mellow and sweet former schoolmate. Sans Jack, I might “eco imagine” a brighter future for the company, encouraged by its financing of projects like 11MW of solar in Portugal.

Flip, flip to find a large, smiling Muppet, Kermit the Frog: “I guess it’s easy being green.” “Presenting the 36 mpg Ford Escape Hybrid, the most fuel-efficient SUV on Earth.* How green is that?” Don’t even ask, Kermit.

Flip, flip. “The Spallinos aren’t just the first fuel-cell family on their block. They’re the first in the world…Amazingly, the only by-product of the FCX [Honda’s hydrogen-powered vehicle] is a little water. Imagine a world with cars that don’t run on oil and don’t pollute. With the help of the Spallino family today, Honda is on the way to helping assure blue skies for all of us tomorrow.” What the…? Honda, Honda, Honda! Did the hydrogen just fall from that blue sky? Take this ad the extra mile. Put in a word about hydrogen derived from non-fossil fuel sources…and the potential for MPG ranges the likes of which we’ve never seen before.

No need to flip ‘cause here is yet another car ad… “Corners and trees. Both deserve to be hugged. Introducing the [Lexus Hybrid Drive] GS 450h” “Never before have the road and the environment been so embraced by any one luxury sedan…with better mileage and lower emissions.” Gas mileage for this lovely jewel is 25 mpg city/ 28 mpg highway. Harrumph!

Lexus bought two ad pages. “Performance and Luxury in a Hybrid. An interview with Dave Hermance, Lexus Executive Engineer for Advanced Technology Vehicles, to discuss how Lexus delivers enhanced performance while increasing the environmental quotient.” So what might be the “environmental quotient”? Emissions. “All Lexus hybrid vehicles are certified to exhaust emission levels far below what’s required in California, which has the most stringent standards in the world. This results in 80% fewer smog forming emissions.** The best-in-class fuel economy of the Lexus hybrids substantially lowers greenhouse gas emissions. (** Than the average car.)” Why not just compare the Lexus GS 450h’s emissions to the average two-stroke Thai tuk-tuk and make the numbers sing operatic? Harrumph, again!

A Sun Microsystems ad features a server chained and locked to a tree in the woods. “Introducing the world’s first eco-responsible server.” “Powering technology isn’t just costing companies a lot of money. It’s costing the environment dearly. Let’s change this.” “We’re proving once and for all that faster can be cooler, better can be cleaner, and cheaper can be greener.” Go for it, Sun!

Flipping forward (but not before reading a great article on free markets, “Crushing Competition,” and passing a Toyota ad for Hybrid Synergy Drive), I finally reach editorial mecca, “The Next Green Revolution. How technology is leading environmentalism out of the anti-business, anti-consumer wilderness.”

In this article, Alex Nikolai Steffen writes, “Americans trash the planet not because we’re evil but because the industrial systems we’ve devised leave no other choice. Our ranch houses and high-rises, factories and farms, freeways and power plants were conceived before we had a clue how the planet works. They’re primitive inventions designed by people who didn’t fully grasp the consequences of their actions.

“Consider the unmitigated ecological disaster that is the automobile. Every time you turn on the ignition, you’re enmeshed in a system whose known outcomes include a polluted atmosphere, oil-slicked seas and desert wars. As comprehension of the stakes has grown, though, a market has emerged for a more sensible alternative. Today you can drive a Toyota Prius that burns far less gasoline than a conventional car. Tomorrow we might see vehicles that consume no fossil fuels and emit no greenhouse gases. Combine cars like that with smarter urban growth and we’re well on our way to sustainable transportation.”

Tally up the cleantech ads in the May 2006 issue of Wired – which companies bought ad space (primarily transport and oil/gas), what they said (and, importantly, what they didn’t say) about their self-proclaimed greenery. Consumers may fully grasp the consequences of our actions and addictions. But we are in a primitive age of cleantech invention and market competition, one that offers few truly meaningful options to consumers. That is, for now.

Post-Script
The Wired issue wasn’t a complete dud for cleantech. It covered a brain-popping clothes washer from Samsung that “taps the molecular structure of silver to disinfect your clothes. During the wash cycle, it electrifies to sterling plates, releasing silver ions into the water. The ions kill odor-causing bacteria without hot water or bleach. You can defunkify your gym socks without polluting the environment.”

There was also some cleantech chutzpah from down under. “Saving the planet can be a real pain in the butt. Just ask Peter Bethune, who’s powering his speedboat with biodiesel made for fat from his backside. In May, the 41-year-old New Zealander embarks on a voyage to promote the use of renewable fuels and to break the record for circumnavigating the globe…Bethune’s contribution amounts to only a liter of fuel; the rest comes from vegetable oils and other animal fats. Besides, liposuction hurts. ‘I was bruised all over,’ he says, ‘It was a personal sacrifice.’” Liposuctioned fuel and personal sacrifice…heavens, a virtue! Why does Dick Cheney come to mind?

And, finally, there is a tiny entry in this issue of Wired, buried on page 040. It’s worth noting in light of the lead article.
Wired surveyed 784 of its readers and asked, “What are you doing to participate in the new green movement.” 51% responded that they are consuming less. 32% are using public transit or driving less. 28% are doing nothing. 11% bought a hybrid and 3% have installed solar panels or a wind turbine. The first two solutions are not, necessarily, technology solutions, nor is the third – ‘doing nothing.’

I wonder, if a human being meditates in the woods, does s/he consume nothing?

Clean Energy / Cleantech Stock Indexing on the Rise – NASDAQ and AMEX

More evidence that cleantech and clean energy investing is moving in to the mainstream, Clean Edge, one of the firms our columnist Joel Makower is involved with, has announced today that it has launched a Clean Energy Stock Index, the NASDAQ® Clean Edge® U.S. Index.

From the press release:

“The NASDAQ Clean Edge U.S. Index is designed to track the performance of clean-energy companies that are publicly traded in the U.S. The NASDAQ Clean Edge U.S. Index includes companies engaged in the manufacturing, development, distribution, and installation of emerging clean-energy technologies such as solar photovoltaics, biofuels and advanced batteries. The five major sub-sectors that the index will cover are Renewable Electricity Generation, Renewable Fuels, Energy Storage & Conversion, Energy Intelligence and Advanced Energy-Related Materials.”

The index will begin on May 18, track under NASDAQ: CLNX (total return calculation basis), and NASDAQ: CLEN (price return calculation basis).

The Clean Edge/NASDAQ collaboration adds a high profile clean energy industry player to a mix of indices including the Wilder Hill New Energy Global Innovation Index (AMEX:NEX), the Wilder Hill Clean Energy Index (AMEX:ECO) and the Cleantech Capital Index, put out by the Wilder Hill and the Cleantech Venture Network in conjunction with the American Stock Exchange.

Slowly, but surely, whether you call them energy and environmental technologies, cleantech, clean energy, green power, green tech, renewable energy, alternative energy, or something else, the next generation of energy and environmental technologies are making themselves felt in the financial markets.

Friedman on Energy

Thomas Friedman of The New York Times is arguably the most widely-read and influential of the op-ed columnists in the business today, particularly in regards to geopolitics and the Middle East. His recent book, The World Is Flat, is dominating best-seller lists around the world. When he writes, people take note.

Over the past few months, he has gotten more and more vocal about energy-related matters. This past week, he wrote a column that brilliantly captured my heretofore-unexpressable angst about U.S. energy policy.

Basically, he said that Democrats and Republicans are united seemingly on only one point: to think about energy matters with gross ignorance, playing to short-term populism without offering any meaningful progress towards long-term solutions. To break the stalemate, a third-party with fresh ideas may be the only way out.

It’s probably hopelessly naive to think that a third-party is viable, but we need some bold thinking to get us out of the tight box we’ve painted ourselves into. I call on us to explore this possibility with some rigor and zest.

Friedman Column

Financing Renewable Energy Debrief

This week I thought I’d provide quick debrief on the Business Council of Sustainable Energy’s (BCSE) Financing Renewable Energy (RE) conference. The intention is to provide an overview to highlight any common ground of differences as seen from downunder.

The day long event was a side event to the 2 day National BCSE conference up in Brisbane, Australia. The ~40 attendees representing predominantly RE companies heard presentations from a range of speakers from the renewable energy industry, legal and government. In particular highlighting the key challenges for business about investment into RE and how the finance industry really does have that key role of “Investment”, ie taking a risk to develop something new, to deploy RE projects.

These highlights included:

  • The conference reiterated that sustainable energy companies and projects are well positioned to approach the investment community as part of the cleantech category class which is attractive to investors (not “envirotech”) if looking to raise capital
  • Cleantech investing is key to achieving sustainable development and will allow Australia to play a significant role in renewable energy markets in Asia
  • Australia’s project financing into RE developments is increasing significantly into the region. This includes financiers but also Australian companies establishing Clean Development Mechanism (CDM) projects under the Kyoto protocol in Signatory Countries. This involves utilising effective legal structures to allow Australian Companies to trade carbon emission reduction (CER) credits via european market. Two project examples were two hydro plants recently established in Fiji by Pacific Hydro

The key issues:

  • Lack of confidence and understanding in JV arrangements into China and India particularly in investment community.
  • Its easier for larger companies to establish in these markets than smaller ones on basis of setup cost, and relationship development and good (paid) financial and legal advice. But small companies can fill niches particularly in remote and rural tech.
  • The Australian market for RE deployment at consumer level is small due to its market size (20m people) with the exceptions of industrial RE eg in mining, cogeneration, waste to energy projects.
  • Australian companies have expertise across niche areas in areas of remote power, hydro, wave, and small scale implementation effective in rural and off grid applications. These tech’s have application through SE Asia, Islands, China and India.
  • In coming blogs I’ll profile a couple of the companies we met up in Brisbane. However it was clear at this event that local market knowledge, good legal advice, knowledgeable investors and experience were key to successfully capitalising on Asian market opportunities.

Clean Technology AustralAsia’s upcoming AustralAsian Cleantech Finance & Investment Forum, 22 August, Sofitel Melbourne 2006 will delve into some of the above issues and market characteristics. The main theme of the conference is Building Australia’s Cleantech Future. This encompasses providing a platform for investors and companies to discuss the challenges and learnings from Asian market experiences, and investigate how to leverage Australia’s large super/pension funds into project finance and cleantech company investments.

—————————————————————————————————————————
Nick Bruse is the General Manager of Clean Technology AustralAsia Pty Ltd, the organiser of the AustralAsian Cleantech Forums and Dealer Forums, and the leading advocate of Cleantech in Australia. Nick does a weekly blog column on Cleantechblog profiling innovative Australian cleantech, energy, water and environmental technology companies.

Location, Location, Location

There is uproar over the cost of gasoline. Congress is threatening a windfall tax on oil companies. State governments are suing. Even former oilman President George Bush announced that “we are addicted to oil.”
The IRS now lets us deduct 44.5 cents per mile for our business driving. Odds are that you are not making money on that, unless you drive a hybrid like the Toyota Prius that I own.
A hydrogen future is being promoted as a way to end our dependency on oil, but will hydrogen ever be less expensive than gasoline? The long-term answer is yes. Cheap hydrogen has the same theme as buying the right house – “location, location, location.” In Torrance, the major oil refiners use hydrogen to make our gasoline cleaner and high octane. In Torrance, there is a hydrogen pipeline. That pipeline is being extended to a new hydrogen fueling station, where hydrogen will be less expensive than gasoline. Hydrogen is expected to cost under $3 per gasoline gallon equivalent at the pump.
Also in Torrance is the U.S. headquarters of three leading vehicle corporations – Toyota, Nissan and Honda. Honda is leasing its FCX fuel cell vehicle for $600 per month including maintenance. Those driving the FCX a typical 1,000 miles per month are paying 60 cents per mile for vehicle costs and will pay another 5 cents per mile for fuel. At 65 cents per mile, the IRS is coming out ahead. But this is 2006, and we are just getting started.
Over the next five years, a number of factors will cut that cost in half. Volume manufacturing is far less expensive than the current one-at-a-time build by engineers. Scientists and engineers are reducing cost and complexity. Hydrogen PEM fuel cells now use less than 5% of the platinum of early designs. A Toyota engineer bragged that there fuel cell uses 70% fewer components than an earlier version they had used from Ballard.

General Motors will use a single chassis for a wide range of hydrogen vehicles including sedans, light trucks and SUVs. Range is being extended with light aerodynamic vehicles like the new Honda FCX Concept which will start limited commercial production around 2010. With new hydrogen storage it will have a cruising range of up to 350 miles. This excellent range is with hydrogen stored at 5,000 psi. Other vehicle makers are considering 10,000 psi.
More vehicles fleets will discover that they are in the right “location, location, location.” In Vancouver, Canada, hydrogen fleets are expanding in anticipation of the 2010 Winter Olympics. 200 kg/hour of hydrogen that is no being vented into the air will be captured and used to fuel vehicles. GE Power has announced plans to expand with large scale electrolyzers. Using GE wind turbines and GE electrolyzers, renewable hydrogen to the pump is forecasted at $3.50 per gasoline gallon equivalent at the pump.
When successful, disruptive technology often drops in cost by over 90%. This has been the case with photovoltaics, wind power, and most computer technology. Expect the same with hydrogen transportation.

John Addison is the author of the book Revenue Rocket (Executive Summary at www.optimarkworks.com). John Addison’s articles have appeared in H2Nation Magazine. Since 2002, John has been a Board member of the California Hydrogen Business Council. John Addison is president of OPTIMARK Inc. a firm that helps with marketing strategy and partner development. He teaches extension courses for the University of California at Davis and at Santa Cruz. He is a popular speaker in the Americas, Europe and Asia.

FIREd!*

Wednesday
May 3, 2006

Last week, I wrote a bit about Kevin Phillips’ attention to the U.S. debt in his book “American Theocracy” and asked—but didn’t answer—how that debt may impact cleantech marketing. (For a pictorial of debt in the real estate—‘rentier’—market, see the current issue of Harper’s magazine.) Along with debt, Phillips describes the U.S.’s dying manufacturing sector—another matter for cleantech marketers to consider.

Ø “The implosion of American manufacturing, while hardly planned, has manifestly been tolerated in the U.S. capital. Since the mid-1990s, as China has reemerged in the world economy, its massive, minimal-wage labor force has sat on any chance of a broad U.S. manufacturing reemergence.”

:: With a 2005 trade gap with the PRC of $200 billion, you’d think Washington could have coughed up a state dinner for PRC State Chairman Hu Jintao on his visit to the U.S. last month. ::

According to Phillips, the U.S. manufacturing sector is being replaced by finance, just as in the failing hegemonies of old.

Ø “In official statistics, the finance, insurance, and real estate (FIRE) sector of the U.S. economy swelled to 20 percent of the gross domestic product in 2000, jumping ahead of manufacturing, which slipped to 14.5 percent.”

The United States’ dying manufacturing base (see Phillips’ “the importance of hard industries”) looms large for marketers of cleantech. From a selfish perspective, it determines the size of opportunities for marketing U.S.-based cleantech—with real manufacturers, not those start-ups that flippity-floppity, floppity-flippity between patent ownership and manufacturing, all the while looking for a buyout from a large corporation that shelves the product.

Ø “Randall Isaac, former vice president for strategic alliances at IBM Technology, said, ‘You can’t do effective R&D if you don’t have the manufacturing to insure the R&D is actually relevant. If the United States loses its manufacturing lead, it will lose everything else with it.’”

:: If a large corporation uses its distribution channels and marketing to promote new cleantech product, great; otherwise, it’s just a FIRE game, and it does very little for those of us who want to market innovative cleantech and drive it to market adoption. ::

Companies like Sun Electric Systems of Colorado (which I mentioned last week) head to Germany to look at new solar technologies, because, as Phillips notes, countries like Germany, Switzerland and Japan have retained a manufacturing, and export, base.

Ø “Estimates [on exports] for 2004 provided by the CIA in mid-2005 put Germany first in the world with $893 billion in exports (mostly manufactured goods)—this from a population of 82 million.” The United States ranked second with $795 billion in exports, but “1) the United States had a population of 296 million and 2) these exports were dwarfed by $1.3 trillion worth of imports. The Japanese, chalking up the world’s third-highest export total, $538 billion, did so with a population of 127 million.”
Ø [Germany, Switzerland and Japan] have wages or overall production costs higher than those in the United States. All have reasonably successful financial sectors and postindustrial accomplishments (tourism, ecological awareness, and renewable-energy emphases—wind in Germany, solar power in Japan). However, they balance these with highly developed manufacturing industries. For Germany, machinery, vehicles, chemicals, metal products are the great exports; for Switzerland, chemicals, metal products, machinery, and mechanical-engineering products (especially clocks and watches); and for Japan, vehicles, electronics and computers. Each nation’s products command global respect for quality.”

One could argue that ‘renewable-energy emphases—wind in Germany, solar power in Japan’ are manufacturing, and they could become ‘highly developed’ in the U.S. It could happen…but count on the foreign companies first, reports Phillips, as they are more likely to invest in manufacturing in the U.S. than are U.S. companies. Phillips finds that U.S. investors see a more lucrative return on their foreign investments. He also finds that non-financial U.S. corporations have increased liquid assets but a fair amount is parked overseas in tax shelters—not invested in domestic manufacturing.

Ø “In 2004, for example, the total of U.S. direct foreign investment (ownership of plants, equipment, not local securities) was $3 trillion, roughly the size of foreign direct investment in the United States. The comparative returns, however, were a matter of night and day. Americans earned almost twice as much from their holdings, especially those in Asia, as foreigners did from their U.S. holdings.”

Debt and manufacturing losses raise questions for marketers (aside from ‘where are the cleantech marketing jobs?’—though it’s one I often ask myself.) If the endgame is mass market adoption, how will that market develop amidst the constraints of consumer debt and limited investment in manufacturing? Should the FIRE ignite, the bubbles burst (again), should mortgage foreclosures and credit card defaults be called in (without bankruptcy protection) what will it mean for marketers? In this down cycle, marketers will need to consider macro drivers bearing on micro differentiators, like the vast disparities between rich and poor, debt (for a select populace), loss of disposable income (for a select populace) and job loss (again, for a select populace).

Ø “In the words of Ray Dalio of Bridgewater Associates, a large Connecticut money-management firm, ‘The money that’s made from manufacturing stuff is a pittance in comparison to the amount of money made from shuffling money around. Forty-four percent of all corporate profits in the U.S. come from the financial sector compared with only 10% from the manufacturing sector.’”

I could settle for selling Chinese solar PV panels, or German and Japanese cleantech, to a limited market of the wealthy segments of U.S. society, but I was kind of hoping it could be so much more than that.

* All quotes from “American Theocracy” by Kevin Phillips.

PS I’m coining a new term: FIREd! When someone in the FIRE sector shuffles a pile of money (and vacates to Nantucket or Aspen for a respite), and you’re left holding a pink slip or an eviction notice, you’ve been FIREd!