It’s that time of year, when we look backwards over the past orbit of the sun, elevate above the mundane of the day-to-day, and take stock of long-term trends.
I’ll take my turn: in the world of clean energy, here’s what I’ll remember about 2006, Letterman-style (though, alas, not as wittily):
10. Oil addiction. In his January 2006 State of the Union speech, President Bush acknowledged what had long been largely ignored but what should really have been obvious to any sentient being: that “America is addicted to oil” to fuel our transportation, and thereby our economy and society. It was a useful slap in the face of the citizenry: in America, with our short attention spans and predilection for glossing over unpleasantries, we can never have enough wake-up calls. An admission of addiction, coming from a man who is linked in the public eye to the oil industry, was strong stuff to many.
9. Biofuel boom. It seemed like every day during 2006 I’d read about something new in the biofuel world. Either it was a big oil company like BP (NYSE: BP) or Chevron (NYSE: CVX) announcing a major research initiative, yet another business plan seeking capital for a biofuel refinery, some scientist in an academic setting working on a new way of converting feedstocks to fuel, or a capitalist like Vinod Khosla going hyperbolic about the future for ethanol. Everyone’s jumping — or jumped — onto the biofuel bandwagon, as a key means of reducing our oil addiction. The main catalyst was the alternative fuel requirements of the Energy Policy Act of 2005, which mandate 7.5 billions of gallons of new annual ethanol and biodiesel supply by 2012, and the current players are having trouble ramping up fast enough to meet demand.
8. Sizzling solar. With $60+ oil, retail investors were clamoring for alternative energy plays, and after biofuels they went straight to photovoltaics: solar energy is where people seem to instinctively look they think of alternative energy. Capitalizing on these robust (some would say, “frothy”) market conditions, we saw a number of sizable IPOs such as First Solar (NASDAQ: FSLR) and Renewable Energy Corp (OL: REC), and a corresponding resurgence of venture capital investment in PV (seeking to achieve an exit before the fickle financial fates close the window). The additional capital is being poured into innovative R&D and new production facilities — the former to achieve major economic/performance breakthroughs, the latter to debottleneck the recently-constrained industry and alleviate near-term shortages and upward price pressures. If the PV market/sector doesn’t make major strides in coming years, it won’t be because of capital starvation.
8. 20% from wind by 2030. Offhandedly, President Bush mused in a May 2006 speech on energy that “it’s worth trying to find out” if wind could provide 20% of the U.S. electricity requirements. This remark has sent the wind community into a tizzy. Taking Bush’s comment seriously, DOE and NREL are now developing a roadmap characterizing how the wind industry could supply 20% of the U.S. electricity requirement. This would imply hundreds of gigawatts of wind generating capacity across the U.S., which would require a new wind turbine to be installed every 15 minutes, every hour of the day, for many years. With this level of penetration, you wouldn’t be able to drive very far across our country without seeing a turbine, just like the case today in Germany, and I’d bet we’d see a lot of turbines out on the Great Lakes too. If we even get halfway to the pseudo-vision suggested by Bush, wind will become a really big player in the energy industry — “alternative” no longer.
7. 25 x ’25. Putting together these three renewable thrusts — biofuels, solar and wind — the common element is lots of land. Thus, the segment of interests that own muchs of the land in the U.S. — the agricultural community of ranchers and farmers — has put its weight behind the vision of “25 x ’25”: 25% of the U.S. energy supply from renewable sources by 2025. This initiative is less green than it is red-white-and-blue, as a means to reduce our reliance on imported energy. However, for the first time, this puts a large mainstream conservative force on the cleantech side, potentially a harbinger of an important realignment of interests in the energy debates. It’s one thing for Ms. Birkenstock Hippie from Berkeley to argue for renewable energy; another thing entirely when it’s Mr. Meat-and-Potatoes from Des Moines making the case.
6. What happened to efficiency? Renewable energy is wonderful and did well in the past year, but unfortunately, there were few significant developments on the energy efficiency front. Oh, sure, there were more LEED buildings, fluorescent light sales continued to increase, and hybrid cars are no longer a curiosity. But, there was really no defining moment for the demand-side arguing for an upcoming step-change. Pity, because we need this side of the energy equation to be far more robust — the opportunities here are enormous, and often more cost-effective than renewables.
5. Whither hydrogen? While fuel cells continue to attract substantial R&D dollars and attention, more and more the so-called “hydrogen economy” is fading into the future. An increasing body of observers are recognizing that the challenges of economically producing, transporting, storing, and utilizing hydrogen may well be too daunting. Thus, the fuel cell community is generally moving away from tackling the mass-market transportation application that would entail displacing petroleum-based fuels with hydrogen, and instead focusing on applications with narrower niches where fuel cell performance characteristics (small size, modularity, no emissions, low noise, etc.) are highly desired by customers — often, in military settings. Maybe someday hydrogen will be ubiquitous as a fuel, but fewer and fewer people are betting their careers on it.
4. The Stern report. The U.K. government commissioned a study by Sir Nicholas Stern to assess the economics of climate change. When issued in the fall of 2006, the report was a blockbuster, arguing that the costs of dealing with climate change now were small in comparison to the enormous economic consequences that would accrue later from not addressing climate change. With each ice shelf that slips into the ocean, and each inch of sea-level rise, the costs of do-nothing are getting more apparent every day.
3. Thomas Friedman. Long one of the most influential observers of the Middle East scene, the widely-read op-ed columnist in the New York Times and best-selling author (The World Is Flat, The Lexus and the Olive Tree, From Beirut to Jerusalem) is making energy and the environment the cornerstone of many of his recent essays. When Friedman says/writes something, many thought-leaders get it, some for the first time. The clean energy community could not have a better spokesman.
2. An Inconvenient Truth. Al Gore goes from inventing the Internet, and losing (somehow, ever-more-incredibly in retrospect) the Presidential race to George Bush in 2000, to becoming a movie star in a “talking head” role, educating viewers on one of the least-sexy and most-wonkish topics known to man: climate change. Yet, the movie drew an audience of millions, and perhaps more importantly, generated lots of ink and an increased throbbing in the public consciousness concerning the reality and severity of the threat. When you see sports media talking about climate change in a meaningful way, you know that awareness is improving and perceptions are changing: it’s not just the tree-huggers anymore. Bet on some more exposure come Oscar night in a few months.
1. A new political landscape. The citizens of the United States spoke loud and clear on November 7: pretty much a landslide victory for the Democrats, a trouncing of the Republicans. There’s lots of conjecture as to why this occurred: was it “Just Say No” to Bush and Iraq, or was it a more systemic shift to the left? However, there’s no doubt that, for the next few years at least, the new political scene is more conducive to more favorable clean energy policy of all sorts — not only at the Federal level, but in many states as well (such as here in Ohio). Best of all, Senator James Imhofe (R-OK) — who is on record as stating that “climate change is the greatest hoax ever perpetrated on the American people” — will be deposed from Chairing the Committee for Environment and Public Works, where he has been (in my view) an embarassment. I doubt we’ll get climate change legislation during the Bush Administration, but at least we’ll get less airing of bunk from fictional author Michael Crichton passing off as climate science.
All in all, 2006 was a step in the right direction for the clean energy arena — but definitely not far enough, not fast enough. Here’s hoping that we can make more progress — on technology R&D, on financing, on human capital, on policy — in 2007 than we did in 2006.