$2 Bil Wind Acquisition

The cleantech sector received a huge boost this week from the news that Portugal’s EDP anounced the acquisition of Texas based Horizon Wind for a price of over $2 Bil. EDP operates globally in Spain, Portugal and Brazil.

One of the intriguing aspects of this deal is the history. Horizon Wind was formerly Zilkha Renewable Energy, before it was purchased by Goldman Sachs in 2005.

According to their websites Selim and Michael Zilkha were the previous owners of Zilkha Energy, which started in the mid 1980s and grew to be one of the largest privately held independent E&P companies in Texas, before selling it to Sonat in 1998 for $1.04 billion plus debt. Zilkha primarily operated in the shallow water Gulf of Mexico, and was one of the early users of 3D seismic on a large scale.

Starting after that 1998 sale they moved into renewables, and built Zilkha Renewable Energy into a sizeable player in the wind market before selling to Goldman Sachs in 2005. The Zilkhas are now involved in a biomass power business. It is interesting to note that both Zilkha Energy and Zilkha Renewables’ claim to fame was having gotten in early and built an aggressive leasehold position. In some respects, they grew their wind business in many respects like a traditional oil exploration company, build a large lease portfolio first, prioritize your development resources, apply best available technology, build out your infrastructure.

It is also highly instructive to see traditional energy capital plowed into a wind company, only to sell it to a major Wall Street firm, which after additional investment subsequently flipped the business in less than 2 years to a major European utility. Texas oil money makes good in renewables? No wonder Texas has passed California in wind energy generation. Perhaps we are finally entering a new era of maturity in renewables.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.

White Appliances

by Heather Rae

I went to Sears. I went to Home Depot. I went to the regional appliance store, Agren Appliance, and drooled over a Fisher & Paykel refrigerator.

Agren had already sold me a Fisher & Paykel clothes washer and dryer. I opted for an older washer model, the same one that I had bought for a house in Denver several years ago. It’s an energy-efficient top loader and in the passing years, its price had come down $100, and there was a small rebate. This old house did not come with a washer and dryer, so there was no fretting about replacement costs, and that Fisher & Paykel washer had been a beautiful workhorse, so the choice of what to buy was easy.

The old Kenmore refrigerator in this old house, though, had to go — not because it was energy inefficient (it was) but because the compressor cycling on and off in the the middle the night repeatedly jolted me awake. The speckles of rust on the front door didn’t help its survivability.

At Agren, I oggled their wood-panelled Sub Zero refrigerator in the demonstration kitchen, opening and closing the refrigerator’s doors the way other people might open and close the doors of fancy cars with out-of-reach price tags — it’s the solid thud that gets me.

I opened the doors of every refrigerator in every one of those stores and read the average annual kWh consumption printed on their yellow Energy Guide tags. I consoled myself that I could not even consider purchasing a high-end refrigerator — basically anything with side-by-side doors and a through-the-door water/ice dispenser, because, comparatively speaking, they consume too much electricity. That was my rationale, anyway. As with most everything in fixing up this house, the refrigerator would be a compromise of desire, quality and price.

There’s lots of information on energy-efficient refrigerators on the web, but a couple of resources came in very useful. One is a calculator on the Home Energy Magazine website that told me whether replacing the old refrigerator would be cost-effective: “Below is a calculator to find out if you can buy a new refrigerator with the energy savings from recycling your old unit. Just fill out the tables below with the information requested. If you don’t know the energy rating of your current refrigerator check out if it is listed in the refrigerator database.” I plugged in the numbers for my rusty Sears Kenmore Coldspot 20 side-by-side (model number 106.8490010). The affirmative answer fueled my mission to rid the beast from the house. (OK, so I fudged the number of years I thought it would last, reducing them until I got my answer.)

On outings to appliance stores, I carried a list of EPA’s Energy Star-rated refrigerators. The list was long. It also created a quandary, the kind that deepens the crease in my brow. I am like the dumb cartoon character who figures out he’s the butt of a joke and, finally catching on and peeved, grumbles, hey, wait a minute!

If I were to buy a refrigerator on the low end of the price spectrum (a top freezer model) it would more than likely be more energy efficient than all of the high-end Energy Star-rated side-by-sides and some of the bottom freezer models — even if it did not carry the Energy Star label. I started to wonder, does the Energy Star label mean anything? Really? I set an artifical annual kWh limit of 500kWh/year. The new refrigerator couldn’t go over that limit, but I got so tired of reading labels and poking around that I just wanted to punt: If I could find a bottom-freezer unit that I liked and it had the Energy Star label, it wouldn’t necessarily be the most energy-efficient choice, but I could feel good about it.

John Rooks of Dwell Creative might put my buying rationale in the “Hummer in the Whole Foods parking lot” category.

In the midst of the Great Refrigerator Hunt, a man who works for an appliance store, replacing refrigerators for low-income weatherization programs, just happened to stop to look at the brae bio-bus. We got to talking. I described my refrigerator travails. “Energy Star-rated refrigerators are a joke,” he harumphed.

But I just couldn’t see myself NOT buying an Energy Star-rated appliance…and there would be the burden of explaining the whole Energy Star low-end, high-end ridiculousness to the energy efficiency folks with whom I work. While opening and closing those refrigerator doors, I started to call the Energy Star label “beaucoup de caca.” You can do the translation.

An LG Energy Star-rated refrigerator with bottom-mounted freezer, automatic defrost and no through-the-door-ice service stands in my kitchen. Its Energy Guide says: “This model uses 482 kWh/year” — one kWh below the lowest in the range of all similar models. It’s gorgeous. It’s quiet. I’m content. And now that I’m in Maine, I’ve begun to fill it with eggs and other produce from Goranson’s Farm‘s “community-supported agriculture” about two miles from this old house. That’s 69 acres of vegetables, berries and hay in certified organic production. If I’m down in Portland, I’ll stop by the Whole Foods that opened there recently and whose parking lot is always full. A small consolation, I won’t be driving a Hummer to get there.

Heather Rae, a contributor to cleantechblog.com, manages a ‘whole house’ home performance program in Maine. In 2006, she built a biobus and drove it from Colorado to Maine. In 2007, she begins renovation of an 1880 farmhouse using building science and green building principles.

Goring Gore

by Richard T. Stuebi

In the past few weeks, not even March Madness has matched the competitive intensity with which climate skeptics have piled on Al Gore for his personal energy consumption patterns.

In the unlikely event that you’ve missed this story, the Tennessee Center for Policy Research (TCPR) reviewed Gore’s electricity bills from his Nashville mansion and calculated his energy consumption levels at 20 times the national norm.

Clearly, TCPR had been awaiting the right time to release their findings for maximum embarrassment to Gore, seeking to undermine his credibility on the issue of climate change, as they just happened to announce their findings on February 27: the day after Gore and his colleagues had won the Academy Award for Best Documentary for An Inconvenient Truth.

TCPR release

TCPR didn’t even try to appear unbiased: instead of just laying out the facts, they revealed their open contempt for Gore in the first sentence by opining that he “deserves a gold statue for hypocracy.”

The story tapped a groundswell of public opinion, and seems to have legs: last week, Gore testified on climate change at the U.S. Senate, and had to endure the humiliating fate of being chastised for his energy use by the infamous Senator James Imhofe, who stands by his claim that climate change is the biggest hoax ever perpetrated on Americans.

MSNBC story

Gore pointed out in his testimony that he purchases carbon offsets to neutralize the emissions impact of his energy comsumption. That set in motion another investigative feeding frenzy, which surfaced that these offsets were purchased from a company in which Gore had an interest.

WorldNetDaily posting

I continue to be annoyed and frustrated with the novel ways in which the climate change debate gets sidetracked due to red herrings. Whatever Gore’s personal decisions, it doesn’t change the bigger picture: the scientific basis for climate change is getting increasingly clear, the prospects for accelerating climate change are increasingly becoming locked in, and the mandate for taking actions to combat climate change are thus increasingly urgent.

But, I’m also very disappointed in Al Gore. In my view, there really is no excuse for the excessive energy consumption at his Nashville home. With this irresponsibility, he opened himself — and his cause, an extremely critical cause — to ridicule and doubt.

In my view, Gore’s rebuttal that he neutralizes his energy consumption with carbon offsets doesn’t fully wash. It is hypocritical to completely shun personal responsibility for energy conservation, and then ease one’s conscience by spending a few dollars of one’s enormous wealth to mitigate the waste. And, this practice imposes an economic cost to society: if everyone were to wastefully consume energy and buy offsets as Gore does, the market prices for offsets would rise far more than otherwise would have been the case than if everyone were prudent consumers of energy.

Further, if it’s true that Gore buys his carbon offsets from a company in which he has a stake….well, there’s nothing illegal about that, but the optics sure don’t look good. Gore’s too smart to be this stupid. But then again, let’s not forget that Gore was somehow able to lose an election to George W. Bush — George W. Bush! — even when Gore held the massive advantages of incumbency and the strong tailwinds of 8 years of peace and economic health in the U.S.

The spate of recent bad press about Gore serves to impede the growth of a vibrant carbon offset market. Most Americans haven’t heard of or don’t understand carbon offsets, and they will have a “bad taste in their mouth” about them as a result of this high-visibility exposure.

More significantly, the TCPR findings have created a new tactic for climate change deniers to pursue. Their message: even Al Gore can’t “walk the talk”, therefore, we don’t have to do anything about climate change. Hopefully, the lack of logic in this argument will reveal itself quickly to the American public. As Abraham Lincoln said, “You can fool all of the people some of the time, and you can fool some of the people all of the time, but you can’t fool all of the people all of the time.”

However, shame on Gore for putting us all through this by his ill-advised energy choices. With his Oscar win, it seems as if he’s truly joined the Hollywood “limousine liberals” who are viewed with contempt — and whose positions are therefore summarily dismissed — by many due to their perceived “out-of-touchness” with common Americans.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is the Founder and President of NextWave Energy, Inc.

Fuel Tech – Driving Profits by Cleaning up Coal

Fuel Tech (Nasdaq: FTEK) is one of the fast growing public greentech / cleantech companies focused on cleaning up dirty coal.

I have known John Norris, the CEO of Fuel Tech, and his family for years, and have had the pleasure of following his career for some time. He’s one of the many former nuclear engineers that grew up in the electric utility industry. He has held utility executive positions including CEO of Duke Engineering & Services, SVP and CEO of Duke Energy Global Asset Development, and Senior Vice President, Operations and Technical Services, at American Electric Power (AEP).

He took the reins at Fuel Tech early last (the stock promptly started climbing), and when I ran into him at a recent conference, filled me in on the goings on at this cleantech company that I not previously followed. I had a chance to chat with John for the record on Cleantech Blog about Fuel Tech in specific, and his thoughts on emissions technologies, carbon and greenhouse gases, and cleaning up electric utilities. I hope you enjoy.

You are relatively new to Fuel Tech, what compelled you to join the company?

I started with Fuel Tech as an Executive Consultant in April of 2005 to try to open doors with utility execs. When the Board approached me late that year about becoming the CEO, I thought about what I had seen over that last 8 months and really liked the prospects for growth. I have had the opportunity in the past to build high growth, highly profitable enterprises including one the most fun periods in my life in leading Duke Engineering & Services. This reminded me a lot of that experience, although I think Fuel Tech has even better prospects than DE&S had when I first got there.

What are the key drivers an investor should understand for the recent and continuing growth of the business?

There are several. On the Air Pollution Control (capital projects) side, investors should watch for market penetration of Ultra systems in the China/Pacific Rim market as well as a broader acceptance our all our NOx reduction technologies in the US market. They will be able to track this by watching for our announcements regarding contract wins. On the Fuel Chem (specialty chemical) side, the key driver is market acceptance by utility coal units. Again they can track this through our announcements.

And in short – what did cause the recent revenue growth?

I tend to credit the good looks of the CEO, but others do not necessarily support that conclusion. [Note to readers: John’s picture is on their website, so you can judge his conclusions for yourself!] — I think the real reason is that we have better defined our products and services and have recognized a much broader market for those services. We have a more focused R&D effort to bring solutions to client problems quickly. And it doesn’t hurt that customers are looking more earnestly for ways to reduce pollution and increase efficiency. All of these have come together for us in sort of a “perfect storm”. Still, we have to deliver results for our customers and for our investors.

Do you view Fuel Tech as part of the emerging cleantech investment theme?

Very much so, but also maybe with an important difference. Too often the greentech sector has, in my opinion, over-promised and under-delivered for clients and for investors. We aim to be a different breed in those regards.

If I understand correctly, Fuel Tech has long been a leader in post combustion pollutant reduction systems, and pre-combustion technologies are a newer business for you. Is this correct? What does the future hold? Where is the industry going?

Fuel Tech has long been a leader in post-combustion NOx control as you mention. Our Fuel Chem product line is really a combustion/post-combustion technology that helps reduce slag problems, dramatically reduce SO3 emissions (both in the boiler and across an SCR), and improve plant efficiency thus reducing CO2 emissions in the process. These latter two items have only recently (in the last few years) become important to customers. I think in the future clients will much more strongly focus on all these and other environmental and operational issues, both domestically and internationally.

Can you give us some color on the overall direction and key issues in the regulatory environment for these pollutants?

For all air pollutants the direction is towards dramatic reduction. You can sense that the whole world is looking to clean up the environment and they are not so much focused on CO2 but rather all the more serious pollutants (SOx, NOx and Hg especially).

You reported all time high international sales for 2006. How much of the business do you expect to be from overseas in the next 2 to 3 years? What has happened on that front? Has the growth been because it is a newer area of focus for the company, or because the overseas markets are growing? And how does China play into the company plan?

Our dramatic international revenue growth in 2006 really came from our projects in China. I expect China and the Pacific Rim to become a much larger part of our business going forward. China consumes more coal today than we do in the US and within a decade they will be using about 3 times the coal we use. The Chinese have now recognized the pollution issues of smog and acid-rain (from NOx and SOx emissions) and are working hard to do something about that. The upcoming Olympic games has heightened the sense of urgency to clean up the air and water. We have worked hard for a number of years to establish our credibility there and to demonstrate our technologies. In 2005 we won two major contracts to demonstrate our NOxOut SNCR and eventually our NOXOUT Cascade technologies and then earlier this year we won two major contracts to install our NOxOUT ULTRA urea to ammonia system on new plants who have the catalyst NOx control technology installed (SCR). Those wins position us well to really make this a major and growing part of our business going forward.

What about C02? In a Kyoto world, is Fuel Tech looking at C02 reduction, sequestration, or capture technologies? If so, what can you share about that?

Our Fuel Chem targeted injections can typically reduce CO2 emissions by 1 to 1.5% for coal utility plants, while dramatically reducing slag and SO3 operational issues and emissions. That may not sound like much but it very hard to make any significant CO2 reductions in plants and our reductions can be achieved while actually REDUCING plant costs. A 1.5% CO2 reduction for a 500 MW plant would be a reduction of about 8 tons/hr or about 65,000 tons per year of CO2 emissions. That is not insignificant and there is much interest in this in China and India especially where we can sell the emission reduction credits on the European Kyoto market (if done thru our Italian subsidiary).

A large portion of your business has been focused on cleaning up NOx or other pollutants at coal fired power plants. With low-carbon power likely to be a larger and larger portion of the global generation mix, what does this mean for the coal-fired pollution control sector?

While I strongly support the push for more renewable energy sources and a renewed push for nuclear power (I am a nuclear engineer as you know), the reality is that for our lifetimes and beyond fossil fuels will supply most of our energy needs. I think our company has a long and exciting future in making those energy sources cleaner and more efficient and thus making this planet a better place.

You announced not to long ago a series of company firsts, among others:

– Installation of a NOx Out Cascade System on a Coal fired boiler

– Commercial SNCR/RRI project

– SNCR lignite fired application

What does this actually mean for company?

We are looking with great haste and much effort for ways we can provide a much broader array of solutions for clients in pollution control, efficiency gains, and operations and maintenance cost reductions. We have a dedicated R&D team of our best and brightest folks focused on this effort and their work has paid off. One technology that you did not mention is our Targeted Corrosion Inhibition Program was introduced in 2006 and which is aimed at helping municipal solid waste plants dramatically reduce the corrosion rates in their boilers. Our patent in this area was but one of 7 patents applied for or granted here in the US and another 12 internationally. We are on the leading edge of technologies in these areas and we intend to stay on that leading edge.

Revenues are obviously up, and you’ve said you expect revenues to increase 20-27% in 2007, with growth from both technology segments. What about 2008, 2009 and beyond, what markets and which products do you expect to deliver the longer term growth?

We do intend to grow but have provided no guidance beyond 2007.

In 2006 compared to 2005, the gross margins were down in the NOx Reduction business, but up in the Fuel Treatment business. Net income for the 4th quarter was down year over year, even though 2006 vs 2005 was up significantly. Can you talk a little about this, as well as tell us what the long term margin objectives are for the company?

First, our revenue for 2006 was up 42% over 2005 and our pre-tax income in 2006 was up 64% vs 2005. (These results were above our guidance.) The net income (after tax) blip you mentioned is that in 2005 we recorded $4.3 million in non-cash tax benefits related to the anticipated utilization of new operating loss and tax credit carryforwards. So we believe our performance in 2006 was considerably better than 2005 and has positioned us to do even better in 2007.

You keep a healthy amount of cash and no debt on your balance sheet. What is your view on the company’s capital structure?

I love our capital structure—lots of cash, no debt, unsecured borrowing ability and a business model that is delivering rapid growth in revenues, profits and cash.

And I know you’ve had to discuss this a lot lately, but the stock price has doubled in the last year, and P/E and valuation metrics are looking rich. What is your view on how the capital markets should look at the stock and valuation?

Personally I think this is a great buying opportunity (and I just recently did so in my personal accounts). If you believe that we can and will execute our business plan and grow this company rapidly and profitably then today’s stock price is not over-valued at all. If you don’t believe that we can and will execute and achieve the results, then the stock price is already too high. It all depends on what you believe about the Fuel Tech team.

And if I was an investor interested in the company, what should I be looking for over the next 6 to 12 months?

You should be watching for contract announcements to see if we are winning in the market-place. The first quarter will be the hardest for us from a results point of view but the orders need to come over the next 6 months if we are going to deliver this year’s revenue and profit results. We are working hard to make that happen, but until the contracts are in hand it is just talk.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.

Renovation: Do No Harm

The physician’s credo “first, do no harm” could be the first rule of home renovation.

I took a crowbar to the 1/8″ plywood that a previous owner had nailed over the original floor-to-ceiling bead board in the summer kitchen of this 1880 house. Yanking and cracking, wearing a face mask, and blaspheming, it darts through my head that the second and third rules of renovation are: undo all previous harm — like this blasted plywood — and don’t harm yourself in the process.

Going ‘back to the bones’ is a challenge compounded when thoughts turn to stewardship and waste streams. I removed a wall — a random new wall in the ell — and saved the 2x4s and screws. I carefully broke down the sheetrock though a sledge hammer tempted. I debated taking down the lead-caked, rodent infested cupboards, wondering if their wood and square nails could be saved. They couldn’t. That wood now lies in a neat pile waiting to be hauled to a transfer station down the road. Most else goes in the dumpster in the driveway. The old furnace in the basement is to be reclaimed by a metal scrapper and the small torpedo propane tank that services nothing goes back to the fuel company.

There is heavy, dense-packed insulation, soft like lamb’s wool, in the exterior walls. Somebody got it right, once, though what is in that insulation is anybody’s guess. Somebody else chose to line the walls of the workshop extending off the ell with plastic bread bags from the A&P (39 cents a loaf). Flattened cardboard boxes were nailed over the bread bags which now crumble to the touch. One of the cardboard boxes was labelled Asbestocell, a Johns Manville pipe wrap. Googling Asbestocell produces nothing more than an asbestos abatement manual.

The ducts in this house are not wrapped in asbestos as were those in my house in Denver, however the old horse hair plaster in this house may contain arsenic and asbestos, and there is that lead paint on the cupboards that will wind up in a landfill. The local utility reports on levels of lead and other contaminants in the municipal water supply. The levels are below EPA regulatory levels, but Federal regulatory levels don’t console me. Another report crosses my
desk stating that the land at the origins of the Androscoggin and the Kennebec have high levels of lead. (My father tells me that when his grandfather lived in Livermore Falls, the Androscoggin ran yellow from the waste of the paper mills. That river and those people have had it bad.)

It’s moments like these, when deconstructing to the bone that I wonder what harm has been done in the past in the name of progress and I worry about harm I may do going forward — in the name of progress. For example, I’m installing CFLs in the house, fully aware that there is no process in place to reclaim these bulbs and the mercury inside of them. Word is that the amount of mercury in the bulbs is less than that which would be emitted by a coal-fired plant for the equivalent kWh of electricity.

When it comes to “do no harm,” I can’t help but wonder, what is the next asbestos? Does a lesser bad mean a greater good?

Other Goings on This Week
In the same week that I’m replacing my light bulbs, Matthew Wald writes in the New York Times about an effort to ban incandescent bulbs. (Sorry, Times Select access only.) In the article General Electric is quoted: ”It’s shortsighted to freeze technology in favor of today’s high-efficiency compact fluorescent lamps…We’d rather keep innovating and offering traditional, commercial and industrial consumers more energy-efficient choices — not fewer choices.”

That same week, my brother in New York City calls. He circulates in a world far from mine: squash games on Fifth Avenue, deals over lunch and office retreats in Palm Beach. In the past, he’s introduced me to a thermal energy storage start-up. More recently, he’s hung out with an importer of ethanol from Brazil. This week, he’s connected me with a friend of his who’s connected with a manufacturer of LED products. There’s hope when Wall Street/Fifth Avenue players finger the corporate giants working against new entrants into the cleantech sector. In other words, someone else is also laughing at GE’s claims to innovation.

Heather Rae, a contributor to cleantechblog.com, manages a ‘whole house’ home performance program in Maine. In 2006, she built a biobus and drove it from Colorado to Maine. In 2007, she begins renovation of an 1880 farmhouse using building science and green building principles.

AQMD Orders 30 more PHEV

By John Addison (3/19/07) South Coast Air Quality Management District (AQMD) is ordering 30 more plug-in hybrid electric vehicles (PHEV) that are likely to achieve over 100 mpg. Ten will be Toyota (TM) Priuses converted to PHEV by Hymotion using A123 5kWh lithium nanophosphate polymer batteries. 20 will be Ford (F) Escapes converted to PHEV by Quantum (QTWW) using Advanced Lithium Power batteries.

Total investment in the 30 vehicles and charging stations will be $3,777,843. AQMD will contribute most of the money. The vehicles will be placed with cities and commercial fleets that will pay the normal price of the hybrid vehicles. The recent contract award gives AQMD participants the opportunity to make additional purchases of the awarded vehicles. The winning vendors will also participate in cost sharing.

If you drive 10,000 miles per year, then you average about 27 miles per day. 80% of the time, a U.S. driver does not exceed 50 vehicle miles in one day. Since most U.S. households have two vehicles, millions could have one be an electric vehicle with a range of greater than 50 miles. The gasoline powered vehicle could take care of the occasional distance trips. Yet, families and friends resist the idea of sharing cars. Many also insist that each car be ready to go hundreds of miles on a moments notice.

Southern California is home to thousands of battery electric vehicles (BEV). Most are specialized utility vehicles limited in range and in speeds of 25 mph. New EVs with greater range and freeway speeds are coming from companies like Phoenix Motorcars and Tesla Motors.

The plug-in hybrid electric vehicle (PHEV) may be ideal for people who like the green benefits of running on electricity, but require extended range. PHEVs can potentially handle most trips in electric-only mode. The Priuses ordered by AQMD only run in electric mode at least than 35 miles per hour. PHEVs can be plugged into garage outlets for evening recharging. PHEVs can plug into other charging stations, although there is a lack of industry standards.

AQMD has been achieving over 100 mpg in its test of a Toyota Priuses modified to be a PHEV using Valence batteries. AQMD has also seen success with two PHEV DaimlerChrysler Sprinter Vans. One uses NiMH batteries. The other Saft li-ion batteries. Five more PHEV Sprinter Vans are planned for carrying passengers. Major Southern California electric utilities and the City of Santa Monica have also been early owners of PHEVs.

The idea of plugging-in is not new. We are in the habit of recharging our mobile phone every night. Soon, we may also be recharging our vehicle every night. Hymotion is planning on making PHEV conversion kits available to consumers later in 2007. Hymotion is targeting a price of $9,500 installed for the Prius. PHEV enthusiasts are likely to convert. Since the conversions normally void Toyota and Ford factory warranties, many consumers will wait for the OEMs to make their own offerings. Fleet conversion kits are now offered. Green Car Congress Article

PHEV awards are being made in increasing quantities. These financial awards and the successful implementation of the vehicles will encourage major automotive OEMs to start selling their own PHEVs. Toyota and GM have formally announced PHEV development. GM owns about 15% of Quantum, which in turn owns 19.9% of Advanced Lithium Power. No OEM has committed to a specific timeframe for PHEV commercial sales. Mitsubishi will start selling a commercial EV in 2010 in Japan; target price is under $20,000.

This article is copyright John Addison with permission to excerpt, reproduce and publish. This article appears in full at the Clean Fleet Report. http://www.cleanfleetreport.com

John Addison is the author of the upcoming book Save Gas, Save the Planet. John is looking for added stories about how people are using their EVs, PHEVs, couples who share one car, and people who live car-free. If you have a story that you are willing to share in the book, please contact John at johnaddison1@gmail.com.

Clean Coal Developments, or Lack Thereof

by Richard T. Stuebi

This past week, the nation’s largest utility American Electric Power (NYSE: AEP) announced that it was installing carbon capture and sequestration technology from Alstom (Paris: ALO) at two of its large coal fired powerplants, Mountaineer in West Virginia and Northeastern in Oklahoma.

In AEP’s press release, AEP CEO Mike Morris was quoted as saying “With Congress expected to take action on greenhouse gas issues in climate legislation, it’s time to advance this technology for commercial use.”

As Alstom’s press release indicates, the demonstration projects will employ chilled ammonia to capture CO2 from the flue stream for injection into underground saline aquifers (at Mountaineer) and for enhanced oil recovery (at Northeastern).

Just a day previously, however, my illustrious alma mater The Massachusetts Institute of Technology (MIT) released a new report entitled The Future of Coal, which calls U.S. efforts so far to develop and commercialize clean-coal technologies “completely inadequate”.

I couldn’t agree more. Like it or not, coal is going to be a huge part of our energy future. We need to figure out how to use it in an environmentally-sustainable manner, and right now we’re mainly paying lip-service to our intentions for clean-coal research. Time to up the ante.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is the Founder and President of NextWave Energy, Inc.

Global Warming Solutions – Dell Style

Dell (Nasdaq:DELL), not known as a cleantech company, but long known for being a supply chain expert and direct marketing leader in PCs and electronic devices, is turning its attention to global warming – or at least working to provide consumers some greener product options and more consumer information.

Earlier this year, Dell announced its Plant a Tree For Me program. www.dell.com/plantatree

“LAS VEGAS, Jan. 9, 2007 — Michael Dell today announced a global carbon-neutral initiative that plants trees for customers to offset the carbon impact of electricity required to power their systems. The first of its kind program, announced at the Consumer Electronics Show here, underscores Dell’s commitment to continued broad environmental stewardship.”

I had a chance to speak to one of their public relations specialists and get a little color.

The program is rolling out in stages (global roll-out is next). It launched in January to provide customers the option to buy offsets of kwh required to power computer systems. Dell is passing through all the payments a customer makes to its partners – Conservation Fund and CarbonFund.org. [Note: There are an increasing number of for profit and non profit entities like these two that will buy carbon offsets made in a variety of ways to sell to companies like Dell to “green up” products.] They are not yet attempting to calculate the emissions required to make a Dell product, just use.

I asked about assumptions in program. Basically they are offsetting 3 years of average power usage. “The donation amounts for ‘Plant a Tree for Me’ are based on expected average CO2 emissions from the production of electricity needed to power the systems over three years – for example, a notebook emits .42 tons and a desktop 1.26 tons. The cost of the carbon offset is $4.75 per ton. It costs approximately $6.31 per tree planted. On average a new tree will sequester 1.33 tons of CO2 over 70 years through the program.

The specific energy values are based on EPA estimates provided by the EPA and Lawrence Berkely Labs. Conversion of energy consumption values to CO2 equivalents is done per WRI/WBCSD standard protocol (world resources institute/world business council for sustainable development). The cost for the carbon offset is set by our partners at $4.75 per ton.”

I asked why sinks? Why not energy efficiency credits or some other way of reducing carbon? Planting trees to create a carbon sink sometimes gets dinged for not being “permanent” enough of a reduction, e.g. if the forest burns down, all that carbon goes straight back into the air. But they tend to be the cheapest credits available. They didn’t have especially insightful answers, but low cost and ease of availability probably play into it.

The reason for doing this?

Apparently Dell feels its customers are interested in greener products. However, while Dell says it is “encouraged by the response”, they would not quote me any numbers of the level of uptake achieved or the targets they were hoping for.

In another area of note, Dell is rolling out an Energy Smart Program. through a wide range of product areas.

“Dell made significant progress during 2006 against its goal to deliver customers the most energy-efficient products in the industry. Since announcing the strategy and customer energy resource calculators at www.dell.com/energy in September 2006, we have rolled Energy Smart settings across the latest models of our OptiPlexTM desktop line to enable up to 70 percent system power savings for the OptiPlex 7451. We also recently introduced two PowerEdge products with Energy Smart settings with energy savings of up to 25% accompanied by performance enhancements that afford up to 3X increase in performance per watt over previous generations.

The desktop figures are based on an average unit cost of energy of $0.10/KWh and assume an Annual Usage Profiles of 1 hour max performance, 7 hours office productivity, 1 hour idle and 15 hours sleep state for 264 days a year; 24 hours sleep state for 101 days. The server values assume a 24/7 duty cycle.”

At the same time, Dell is making available on their website a series of online calculators for energy efficiency, along with making the “energy consumption spec” for a wide range of products.

While the devil is always in the details on the assumptions used, I find it refreshing that Dell is putting this level of effort into providing consumer information on the green and energy impacts of its products – kind of like a restaurant providing us information. I am also refreshed to see Dell say that they are passing all the cost through, and are not taking a margin. While I am very excited about the potential to profitably market carbon credits to consumers, Dell’s move tells me they view greening their products as a requirement to be in the business and a benchmark for product quality that they intend to meet, not just an extra option to add more margin to existing products.

I will be even more intrigued if Dell starts to publish or commit to customer uptake numbers on its carbon credit roll-out (like it would if I were an analyst asking for targets and uptake on units sold of a new product line).

And I will be elated if Dell starts to use its strenght in supply chain management to force the carbon credit suppliers into more transparency and standarization (a chronic problem in the market today).

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.

Green Theory, Green Practice.

by Heather Rae

The bank and I closed on the 1880 Federal-style house two weeks ago. The renovation possibilities that earlier filled me with giddy excitement are now all around me: the old wood floors, the near floor-to-ceiling windows, the high ceilings and the old summer kitchen that juts out behind the boxy structure of the main house. Today, I’m a little less giddy.

During the bidding process, I asked two home performance contractors to walk through the house with me. For this, I donned new Carhartt bibs and jacket – both a bit big for my frame and building ambitions. On a cold winter day, the roof covered in snow, the first home performance (HP) contractor, a former homebuilder, checked the integrity of the fieldstone and brick foundation, the horizontal ThermaPride furnace, the electrical system, and the wood framing and clapboard. He observed things like the plastic sheets on the dirt floor of the half-height basement, serving to block moisture gain in the living areas of the house. He said the electrical could not handle electric heat. At $.15 a kWh, it and the electrical space heaters promoted by the local utility, for me anyway, are non-starters. The big stuff looked OK, so I made a bid…a really, really low one, a bid so low that it insulted the seller’s agent. Nice foot to start on in a very small community. The seller came down slightly and the bargaining game and inspections began.

During the inspection process, I did not hire a home inspector. I hired a plumber, a chimney inspector and the second HP contractor whom I met at a HP training session last August. For $100, the plumber told me the plumbing was old and no plumber was going to fix anything without replacing it. (Perhaps it was a wasted $100, but there it was, spoken.) For $300, the chimney guys cleaned out the old chimnney and performed a Type II inspection. The vent connector had been blocked 90% by the debris falling down the interior of the un-lined and ill-maintained chimney. Which had to go. At least the top half. Maybe a $2000 job for new chimney and flue liner. It is not the price of the chimney that set me off: It was the poor maintenance that could be a health hazard, potentially poisoning people (like me and the previous renters) with carbon monoxide.

The HP contractor arrived with an infrared camera. We had agreed to skip the “blower door” test at this stage. The “blower door” measures the leakage of the house. We would do the test later, both before and after improvements had been made to the shell of the house. The infrared screen showed black where there was no insulation in the walls of the house’s thermal boundary. There were few missed spots. I was quietly hoping there would be NO insulation and then the house would be prime for well-installed dense-pack insulation, performed by someone I knew was trained and certified in “whole-house” HP. And I could be there monitoring the insulation job with an infrared – a contractor’s worst nightmare of a client.

The HP contractor checked for moisture in the attic. With a smoke stick, he tested holes in the plaster walls and around the attic access. I pointed out the bathroom exhaust vent that features a view between the blades to the outdoors. From the walkthrough, I know warm air is rising into spaces it shouldn’t, like the attic — a huge, glorious, uninhabited space smelling of old-world carpentry. I also know the roof is getting on and should be replaced. I’ve often said that I love standing seam metal roofs for their ‘green-ness’ and their aesthetic. Yet, for this house, it will be architectural asphalt with a projected 30-year lifespan.

On an entirely other level of dreams, perhaps the roof would be standing seam metal. And, I would replace the forced air furnace with a super-efficient EnergyKinetics System 2000 radiant system bringing elegant warmth to flat, wall-mounted radiators in every room, even upstairs where the ducts do not venture. The old summer kitchen would run off of solar thermal and PV. And, the attic, growing dormers with views of the Kennebec River, would be a hide-away for (someone else’s) grandchildren or for writers to write. In practice, these dreams, like my dreams of a green renovation are tempered by lathe and plaster, old pipes and a limited budget.

Next: Demolition!

* Check out the photo of wind turbines on the front page of the Carhartt website.

Heather Rae, a contributor to cleantechblog.com, manages a ‘whole house’ home performance program in Maine. In 2006, she built a biobus and drove it from Colorado to Maine. In 2007, she begins renovation of an 1880 farmhouse using building science and green building principles.

Sports and Climate Change

by Richard T. Stuebi

I suspect I’m one of relatively few people who’s both very concerned about climate change and crazy about sports.

By my experience, most environmental advocates are not die-hard sports fanatics. And, generally speaking, most sports fans do not seem highly attuned to environmental issues.

The former saddens me a little: I’d like to be able to speak about baseball spring training and NCAA brackets to more of my green friends. However, the latter worries me a lot, because it’s inescapably true that the ardent sports follower is a huge segment of the population — one which the environmental community has not been able to penetrate very effectively.

So, I was very pleased to see this week that this week’s edition of Sports Illustrated — a periodical with huge circulation, found in doctor’s offices, barber shops, airplane seatbacks and tire change centers across the U.S. — features climate change as its cover story.

In my view, this is a very positive development for taking the issue of climate change further mainstream. When NASCAR dads and NFL junkies start really caring about climate change, real public sector action to deal with climate change can’t be far behind.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also Founder and President of NextWave Energy, Inc.

Actress Q’orianka Kilcher Now Drives a Zero-Emission Honda FCX

By John Addison. Q’orianka Kilcher was acclaimed for her starring role as Pocahontas in the 2005 film The New World. The National Board of Review awarded her Best Breakthrough Performance by an Actress. Ms. Kilcher was recognized as the Outstanding Actress in a Motion Picture by the American Latino Media Arts Awards.

Q’orianka Kilcher is now turning heads as she silently drives by in her new hydrogen fuel cell vehicle, the Honda FCX. The car’s only emission is water vapor. Honda’s advanced fuel cell technology program has been praised by fleet users during the last five years, typically leasing the vehicles for $500 per month. Several fleets have allowed a number of drivers to use the vehicles by making them part of employee pools. Two years ago, the Spallino family became the first retail customers for a fuel cell vehicle. 17-year-old Q’orianka Kilcher is now the youngest customer.

Ms. Kilcher took the keys to vehicle in Hollywood. Nearby, she will find a number of places to fill the vehicle in the Los Angeles area. The station at LA Airport is public. Others are for community fleets with limited public access requiring authorization.

“The best way to demonstrate the importance of next generation vehicles like the Honda FCX is to put the next generation of drivers behind the wheel,” said John Mendel, senior vice president of American Honda (HMC).

“As a young person today, I feel it is important to take initiative toward seeking positive solutions and stepping up the quest toward clean energy and environmental preservation,” said Q’orianka Kilcher. “When I first started pursuing my dream of a zero emissions vehicle as my first car, it seemed like a pretty unrealistic dream. With Honda’s innovation and support, my dream of helping the environment became a reality!”

John Addison is the author of the upcoming book Save Gas, Save the Planet. This article is copyright John Addison with permission to publish. John serves on the Board of the California Hydrogen Business Council. http://www.californiahydrogen.org

Cleantech: The Problem and Solution

Two interesting cleantech reports came out in the last couple of days. One talking about the problem, the other the solution.

On the problem side, as reported in USA Today, a team of researchers working at Texas A&M found that increased pollution in Asia, primarily from the rise of industrialism in China over the last 10 years, is affecting weather patterns over the Pacific and even into the US West Coast.

I guess the last 10 years of environmentalists harping over the growth in “dirty Chinese coal plants” had some real merit.

On the solution side, the 2007 Clean Energy Trends report authored by Clean Edge, came out this week.

The highlights from my review of their document:

$2.4 Billion in clean energy (as distinct from cleantech) venture capital investment in 2006, up 2.4x from 2005.

They project $220 Billion in market for Clean Energy by 2016.

Their 5 Trends to Watch:

  • Carbon Finally Has a Price…and a Market – They note the major advances including California’s GHG law push. We agree. But like wind and solar, we pioneered it, but Europe is leading it today.
  • Biorefineries Begin to Close the Loop – They are big on the advances of cellulosic ethanol. We remain cautious here.
  • Advanced Battery Makers Take Charge – They note the coming rise of lithium ion in the automotive sector. We agree.
  • Wal-Mart Becomes a Clean Energy Market Maker – They note major moves by Wal-Mart to go green. Long a shareholder of Wal-Mart myself, I definitely agree. We have been saying for a while that when it comes to cleantech, startups talk the talk, the big boys walk the walk.
  • Utilities Get Enlightened – They note that utilities are getting on the climate change band wagon. We would add that corporate venture is back, in a new and possibly smarter form.

You can download their report from the Clean Edge website. We have written on each of these topics before. Onwards and upwards in cleantech.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.

What to Make of the TXU Deal?

by Richard T. Stuebi

Last weekend, TXU Corporation (NYSE: TXU) made the stunning announcement that it would be acquired by two private equity giants — Kohlberg Kravis Roberts (KKR) and Texas Pacific Group (TPG) — in a transaction valued at $45 billion.

Press release

Two things leap out at me from the announced deal.

First, the investors are willing to pay a 25% premium over the recent share price, while at the same time committing to a 10% rate reduction for TXU’s residential electricity customers in Texas. KKR and TPG are no dummies: it must mean that they truly think they can run TXU much more efficiently than it has been run — even though TXU has been widely viewed as a glowing success story since the meltdown of the merchant power markets in 2002. If a “good” utility TXU can be taken over by a private equity group at a premium price and earn the required rates of return on invested capital while cutting prices to customers, pretty much any electric utility should be in the same boat. Conclusion: there must be a lot of fat in the utility industry that can be cut with more aggressive management. If I were a large institutional investor in an underperforming utility, I’d be pressing the executives to dress the company up for sale. If I were a senior manager in the utility sector, I’d be expecting to be pushed to a much higher degree of performance for shareholders. If I were a mid-manager or lower level employee at a utility, I’d become increasingly worried about my job.

Second, the investors are the prime movers in axing 8 of 11 announced coal fired powerplants from TXU’s growth ambitions, in lieu of increasing expenditures on customer efficiency by $400 million. This will be a major reversal for John Wilder, TXU’s CEO, who has been loudly touting a vision for massive coal expansion. I’m certain that Wilder’s rich payday from this lucrative deal will help soften the blow to his ego, but it will be interesting to see how Wilder copes under his new owners. These are smart investors, and they seem to be saying that energy efficiency (along with renewables) is a much better investment than new coal fired powerplants — especially in a world with likely future carbon restrictions. This deal no doubt sends a signal that the capital markets are increasingly unwilling to make big bets on continued status quo in the utility industry. Wall Street is saying that the utility industry must change, and that it isn’t just going to keep dumping money into utilities that want to perpetuate the 20th Century.

Based on initial reports, it appears that there are few hurdles to the deal being closed, but I remain curious as to how KKR and TPG expect to monetize their $45 billion investment. It seems like there are three possibilities: simply holding the company and recouping returns via dividends from improved operations, flipping the company to another owner (or re-taking the company public) at a higher price, or breaking the company apart and selling the pieces to more natural owners. I’m sure they have thought through these possibilities in great detail, though it’s not obvious to me.

The examples of private equity attempting to earn attractive returns through investments in the U.S. electric utility sector have, to date, been not very successful. Let’s hope this deal works out for the investors. I’d love to see many more utilities bought by private equity firms and shaken up. I bet that many utility CEO’s and management teams wouldn’t last long under the reins of more aggressive owners. And, I’d bet we’d see better environmental performance from these historically lethargic companies. I hope the TXU deal is the beginning of a trend.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

Will Small Wind Get the Love that Solar Has?

Investment and growth in the cleantech sector has been driven in the last 2 to 3 years by the solar photovoltaic, large scale wind, and ethanol sectors. For years solar PV has, on a per kw basis relative to other technologies, received massive rebates and tax credits that underpinned its growth, and large scale wind power has had its production tax credit to anchor the industries’ rise, but solar thermal and small wind systems have been largely left out in the cold in this cleantech boom.

Perhaps that is changing for micro wind?

The CEO of Mariah Power, one of the micro wind turbine startups we follow, turned me on to a recent bill in Congress that might even the playing field for small wind. I’ve excerpted his notes in quotes below.

“Recently, Senator Ken Salazar (D-Colo.), along with Senator Gordon Smith (R-Ore.) introduced a bill that would provide $1500 per 1/2 kilowatt (kW) of capacity to customers seeking to purchase a small wind turbine, the same credit that solar is currently pursuing. In addition to this credit, the bill would provide accelerated 3-year depreciation and an Alternative Minimum Tax exemption.

A press release on this bill, S. 673, the Rural Wind Energy Development Act, can be found here.

This bill will provide an investment tax credit for the purchase of small wind systems (rated at 100 kilowatts and below) for homeowners, small businesses, and farmers. This credit is critical to sustaining the growth of this clean, renewable, and emissions-free energy technology while helping individuals and communities become more independent from unpredictable prices and supplies of traditional sources of energy.

Currently there is no federal support for small wind systems. Residential solar and fuel cell systems, however, which share the same competitive market as small wind, have been receiving a 30% federal tax credit. The federal Production Tax Credit (PTC) applies only to large utility-scale wind projects, not to individuals who want to install their own wind systems for on-site power. Federal support would help broaden the industry on a national scale.”

The growth of our cleantech and alternative energy industries have always been heavily influenced by the policy and subsidy environment, so how the debate plays out is critical to understanding where the product and investment opportunities may lie for any given clean technology.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.

The Trouble with Water

Previously posted on Inside Greentech.

There was an active discussion around water at the recent Cleantech Forum in San Francisco. As there always is.

Everyone knows the old joke, applied to just about everything at one time or another, that runs: “hydrogen is the fuel of the future… and always will be,” or “Brazil is the superpower of the future, and always will be.”

Well, I wonder if that applies to water.

Will water always remain the “problem of the future,” and not of the present? Despite the maxim that “water is the next oil,” nobody ever seems to put their money where their mouth is in the water sector.

The basic story goes like this:

  • The water industry is huge, mostly public owned by entities that have no money for the (pick your number of) billions in upgrades needed
  • Population is growing every year
  • Population is increasing most rapidly in driest regions
    Water is cheap, so no one conserves it (think about that statement as an economist and ask yourself if we really have a problem yet)
  • Water is even more important than energy as a “basic right,” so no government will let its population run short.

Therefore, investing in water technology (desalination, membranes, remediation, purification, metering, etc.) to create solutions to the coming problem is a good idea.

But it never happens. The investment community just doesn’t walk the walk when it comes to water. Why is that?

Some thoughts on why:

  • Motivation. The water industry, while huge, is not widely privatized and is very fragmented. It’s not been heavily “technology” driven to date, and has proven to be even more cumbersome than the electric utility market to break new technologies into. Investor owned utilities, which are now a very large portion of the electric and gas utility market, are just a few percentage points of the water market. So very few of the potential customers for technology are big enough and profit driven enough to care.
  • Maturity. The technologies these water companies use is relatively old. Membrane technology used in reverse osmosis and more efficient valves and even smart control systems are not new ideas. And a lot of potential “breakthroughs” have been beat out of the industry already. So unless price radically changes – as in several orders of magnitude, it’s likely that the technology we’ve got is “good enough” or at least hard to beat.
  • Price. Water is cheap (see above). Read: nobody’s bearing any real pain today in most of the industrialized world. I’m not. I don’t even get a water bill. I’ll cut my morning Starbucks before I reduce my water usage. It’s a bigger hit on my pocketbook. In pockets of the market, this may be changing (we do read about water crises in Australia from time to time, ultra clean water needed for semiconductor processes and additional water demand for a particular housing development in Southern California), but it is really hard to get a return on R&D when your customer is measured in “pockets” as opposed to “markets.”
  • Solar, ethanol and carbon. Three years ago, water was the buzz of the venture conferences. Money looked like it might flow. Then the solar and ethanol markets took off, carbon trading got traction and climate change grabbed the headlines and the political mindshare (including mandates, rebates, and subsidies). Water – both the problems and the solutions – fell out of vogue.
  • Size and capital intensity. Like energy projects, water projects are often really big and expensive. Scaling up ALWAYS has more risk than one thinks it does. Like in energy, one just doesn’t invest in a pilot for a new technology lightly. And just because one or two projects with a given technology are running does not a successful launch make. When 30 or 40 are running for 5 to 10 years, then you’ve broken through.

So I guess it remains to be seen if water is the problem of the future – or if it really is the next big thing. And it definitely remains to be seen if anyone can make big money investing in new water technologies and solutions.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.