In the Beginning … All Costs Were External

By Ed Beardsworth

Are we in just another cycle, where we charge ahead with renewables and care for the environment, but then forget all about it when oil prices drop? The saga is all too familiar, and cynics can’t be blamed for seeing deja-vu all over again.

This time, however, it feels different. Reality seems to have penetrated so many layers and segments of society, government and business. What’s more, there is a very long standing historical trend that lends hope to the notion that we’re really doing it this time – the process of internalizing externalities.

Garret Hardin, famous for creating the concept of “tragedy of the commons”, published a (now out-of-print) book “Exploring New Ethics for Survival–The Voyage of the Spaceship Beagle” (1972). Reaching far into prehistory, he outlines the evolution of the process of “the internalization of so-called external costs” from early pre-history, the time of the cave-man.

The first “cost” to be “internalized” was probably the fruit on a tree. Someone said “mine”. Then, the red dirt you need to make iron. And on from there.

Cost of -When Internalized (approx)

Raw materials B.C.
Labor a.d. 1000-1862 (ending slavery)
Raising & Educating labor 1800-1900
Industrial Accidents 1875-1925
Industrial Diseases 1900 onward
Pollution cleanup yet to be internalized
Pollution prevention yet to be internalized

Each episode required a fundamental cultural “value shift”, as the established order fought the change bitterly, claiming bankruptcy and ruination would ensue. Each time, the fight was long, often lasting until the old order simply died out or was forced aside, unable to see the light or admit the errors of their ways.

Hardin’s development of these ideas is worth reading. Drastically summarizing, he argues that “right to throw way” into the air, water or onto the land, is perhaps the last major externality yet to be fully internalized, noting that on the “spaceship earth”, there is no place that is truly “away”. The struggle parallels exactly the process of change that took place in every previous episode of internalization.

Perhaps he would be somewhat optimistic now, all these years later farther along in the struggle, that progress is being made.

I wrote these words in 1996. OK, probably a bit overly optimistic then, but an understatement if anything of what we’re seeing today:

Perspectives on Externalities

There is a world wide movement underway to begin thinking about externalities in new and many would say more enlightened ways, as an aspect of industrial, business and social activity that is no longer just the province of environmental idealists and idealogues. Major corporations are starting to realize profound economic implications (e.g. higher profits!) of taking a more comprehensive (holistic) view of production systems, and are adopting strategies that take into account, for example, the “cradle to grave” aspects of their products, from what resources are used to make them, to how they are used, to their ultimate disposal.

Ed Beardsworth is a long time fixture in the cleantech sector, is the Research Director of Cleantech.org and the Director of the Hub Lab. He was formerly with EPRI and Brookhaven, and has a PhD in Physics from Rutgers.

2010 Cars Deliver Performance and Fuel Economy

This is my first time to drive on a race track and I’m wondering if these are my final moments on planet earth. Here at the Mazda Raceway Laguna Seca I take the Andretti Hairpin and learn to accelerate in successive turns. After accelerating uphill, I enter “The Corkscrew” where I cannot see the sharp downhill turn to the left until I am in the middle of it. As I get into this sharp turn, I need to prepare for the sequence of curves that immediately follow. Yes, it’s a corkscrew.

I try to remember the coaching that I received. Hold the steering wheel with something less than a death grip. Breathe. Look ahead – but looking ahead at the top of the Corkscrew I only see blue sky. Looking ahead to my future, I only see darkness.

The 2009 BMW 335d that I am driving handles beautifully, offers more turbodiesel acceleration than I care to try, and I guarantee you that the brakes work.

After three laps, I exit the track, park the BMW, remove my helmet as I leave the car, and resist kissing the ground in front of real drivers. I have been invited to test drive new vehicles with the Western Automotive Journalists, even though I write about green cars and clean transportation. I long for yesterday.

Yesterday, I tested cars with good fuel economy on streets with posted speed limits. Drives included three cars that made the list of Top 10 Low Carbon Footprint Cars. Yesterday, the 20 mile test drives were along the ocean in Monterey and on beautiful tree lined roads where I could easily see the next turn.

The 2010 Ford (F) Fusion Hybrid easily seats five, has plenty of trunk storage, and actually delivers better mileage than the MINI due to Ford’s impressive hybrid drive system. The new Ford midsized sedan that I drove has an EPA certified 41 mpg rating in the city and 36 mpg on the highway. The base suggested price is $27,995.

It may prove to be popular with anyone considering the Toyota (TM) Camry Hybrid; Ford delivers equal room, safety, and comfort with better rated mileage. Although the Fusion Hybrid has a better mileage rating than the Camry Hybrid, that advantage is not always delivered in real world driving. Edmonds Test Drive

In theory, the Ford Fusion Hybrid can travel up to 47 miles per hour in electric mode; I could only sustain the engine-off mode when gliding downhill. Even on flat roads driving 25 mph, the engine would engage.

Ford does a nice job of encouraging drivers to get better fuel economy. The SmartGage had a display section that filled with green leaves as I drove with a light touch that reduced demands on the 2.5L engine. The Ford Fusion Hybrid delivered the smoothest driving experience of any hybrid which I have driven. I did not notice the transitions from gas to electric mode. The transitions were seamless.

Even better mileage was delivered by the 2010 Honda (HMC) Insight EX which I drove in Monterey. It is rated 43 mpg highway and 40 mpg city. The Insight’s combined EPA rating of 41 contrasts with the 2010 Prius expected rating of at least 50 mpg. The Honda Insight has an aerodynamic body similar to the Prius. Although the two five-door hatchbacks look similar, the Prius is a longer midsized car. In theory, the Honda Insight pricing starts at $19,800 which has pressured Toyota to offer a Prius with a base price only $2,000 higher. The 2010 Insight that I drove included upgrades such as a navigation system and six speaker audio system. The vehicle price, including pre-delivery service, was $23,770.

I started the Insight, and then touched the ECO button. Even in that mode, I had enough acceleration to get on any freeway in a hurry. The ECO mode helped me minimize demands on the 1.3L gasoline engine as I navigated the roads hugging Monterey’s dramatic coast. Like the Ford Fusion Hybrid, I was rewarded with a display of green leaves for my eco-driving behavior. Handling was smooth and a bit sporty.

Driving the Honda Insight was smooth and quiet even when I went up a sustained 16 percent grade, demonstrating that its electric motor is quite effective in blending power with the 98 hp engine.

Price will definitely be a factor in buyers deciding between the Honda Insight and the Toyota Prius. In some markets, such as California, another factor may be the ability to get an HOV sticker with the Insight. For my money, if I could get a larger more fuel efficient Prius for only $2,000 more, then I would get the Prius. On the other hand, if there was a $5,000 price differential at the dealer, then I would go with the Insight. All in all, both are wonderful cars.

If you want great fuel economy, few compromises, and driving pleasure, test drive the latest hybrids from automakers like Toyota, Honda, and Ford. The intensified competition between them is bringing better performance and safety and economy.

Complete Article including MINI Cooper test drive.

John Addison publishes the Clean Fleet Report and is the author of Save Gas, Save the Planet.

Gridlock Windblock

by Richard T. Stuebi

I don’t know if it’s a myth, but I’ve heard it said that a city’s suicide rates and average wind speeds are correlated. According to the claim, there may be something fundamental about human biology – perhaps within the inner ear – that makes windiness tend to drive people crazy.

Whether it’s true or not, it’s indisputable that, where there’s lots of wind, there tends to be few people. And, vice versa: where there’s a lot of people, there tends to be little wind.

A casual look at a U.S. wind map confirms this: most of the best wind resources are in the middle of the country, from West Texas in the South to the Dakotas in the North. If you’ve ever driven in any of these parts, you know that this is an endless expanse of desolate, sparsely-populated land.

Unsurprisingly, it’s also the case that, where there are few people, there tend to be few electric transmission lines. Logically, it follows then that there is little electric transmission capacity in the places where wind resources are greatest.

So, when parts of the Great Plains get touted as the “Saudi Arabia of wind”, it may be true, but imagine the need to build a big set of pipelines to get that useful wind energy to customers in Minneapolis, Chicago and points further East and South.

Ask any wind developer about their business prospects, and it doesn’t take long for the conversation to turn to transmission – or, more precisely, the lack of enough of it.

Look at the study “20% Wind Energy by 2030” released in 2008 by the U.S. Department of Energy to envision the implications of supplying 20% of the nation’s electricity needs by 2030 from wind. Oh, there’s plenty of wind to actually supply the electricity, no problem. It’s just that tons of new transmission capacity would be needed.

And there’s the rub. It’s only marginally easier to site and build a new transmission line than a new nuclear powerplant. Transmission lines take many years and sometimes even decades to get done, due to a variety of NIMBY forces and overlapping regulatory regimes at the local, state and federal levels. And, they cost a fortune, easily a million dollars a mile, often considerably more.

So, that “pipeline” from Dakota to Chicago is on the order of a billion dollars of merely enabling infrastructure – and since there are many pinchpoints in the national power grid, that wind power probably couldn’t go much further than the terminating point anyway.

(From a technical standpoint, I’m massively oversimplifying here by comparing the power grid to a commodity pipeline, but the gist of the conclusion is essentially sound.)

Last year, most of the transmission grid operators from the Eastern half of the U.S. convened for the first time (that’s scary, isn’t it?) to develop what has come to be called the Joint Coordinated System Plan (JCSP) 2008. The JCSP report suggests that 10,000 new miles of transmission lines, at an investment of about $50 billion, will be needed east of the Rocky Mountains over the next 15 years just to meet expected load growth and current renewable portfolio standards on the books. Little of this required expansion is much beyond the drawing board.

The JCSP’s 20% wind scenario is even more daunting: 15,000 miles and $80 billion of capital. The map associated with this scenario is especially intriguing, with three major new hypothetical 800 kV DC corridors drawn right across Northeast Ohio to New York City. (No doubt, the nightmare of the August 2003 Northeastern blackout still sends nightmares through these transmission planners.)

Sorry, I just don’t see this happening in my lifetime.

In passing, the authors point out that neither energy efficiency nor offshore wind resources were investigated to alleviate these transmission requirements. My guess is that inclusion of these possibilities would change the results – a lot.

Significant penetration of energy efficiency could probably seriously reduce the quantity of new wind generation required to make up 20% of the region’s supply. Instead of nearly 230 gigawatts (!) of projected new wind capacity in the Eastern U.S. by 2024, my guess is that concerted exploitation of cost-effective energy efficiency opportunities could cut that investment requirement in half.

As for the 100+ gigawatts of new wind turbines in the Eastern U.S., it might be cheaper overall to put higher-cost installations offshore in the Great Lakes and in the Atlantic to avoid facing the perhaps impossible prospect of building lots of expensive new transmission lines to import onshore wind from the Great Plains.

The inability to expand transmission is a major impediment to the onshore wind business, and while it might be mitigated (slightly) with some regulatory reform, I don’t see it going away. Offshore wind may have its own development challenges, but for those in the wind industry, going offshore should become an increasingly interesting way to skirt the gridlock problem.

Richard T. Stuebi is the Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director of Early Stage Partners.

The REAL Story on Moore’s Law for Solar

All new industries seem to think they deserve a Moore’s Law. The photovoltaic solar really, really thinks it deserves one, since it kind of sort of looks like a semiconductor business: Photovoltaic Moore’s Law Will Make Solar Competitive by 2015, IEEE.org, Understanding Moore’s Law, DistributedEnergy.com, and Silicon Valley Starts to Turn Its Face to the Sun, NY Times.

However the nuances are mischevious. The cost implications of Moore’s Law at heart are built around a constant rate of technology performance improvement (2x transistors every 2 years), implying certain cost improvements. PV’s falling costs curves have had more variables at play. In fact, the real equivalent to Moore’s Law in solar would be to say that cell efficiency or a similiar measure doubles every x years. Most people have tried to apply a Moore’s Law like concept in solar directly to the cost curve, not the technology improvement curve. In fact, the solar costs “Moore’s Law” that seemed the simplest was the idea that every doubling of industry size equaled 10% in cost reductions. But that is not a Moore’s Law, that’s mainly just a description of the supply curve shape and shift, it’s a totally different animal.

I’ve been researching this topic for some time, trying to develop a simple conceptual model to understand falling solar cost curves and their impacts, and I update my cost analysis spreadsheets based on numerous inputs from energy companies, solar developers, solar integrators, as well as module manufacturers. I think I now have a simple, economically sound model with good explanatory power, that allows us to shed some light on why and how the cost curves fall.

We’ll call it the Dikeman Solar Cost Model – DiSoCo Model, and it’s somewhat simple and axiomatic: the value on the supply side = the value on the demand side, broken down into fixed, sticky, and variable components, by market segment.

Over the last couple of years, I’d argue that roughly half of the cost reduction in solar have come from massive increases in larger installations (primarily spreading NRE and installation cost across a larger projects at the installations, as well as dealing improved economics of scale in manufacturing), not really from solar costs themselves. And roughly the other half from actual technology cost reductions.

This is an important distinction as it means that arguably with say 2003 solar technology, if the subsidies and demand had been there to build a whole bunch of 10 MW PV farms, a similiar cost could have been achieved to today’s costs, at least within striking distance (as opposed to a Moore’s law industry where the fundamental technology performance curves would have been 8x better, with drastic cost improvements resulting). Technology costs haven’t necessarily fallen as much as we think, so much as the scale has changed, making costs look like they’ve fallen a significant amount.

And we have to be careful about making generalizations of the technology cost reductions, too. A large chunk of the technology cost reductions at scale (perhaps 50%?) have come from one company, First Solar, out of the hundreds that manufacture PV products. If you take them out of the equation, the falling technology cost curves don’t look so great.

But I’ll posit a cost reduction law for solar that may hold. Roughly speaking, the per unit solar industry costs at a system level fall every year in line with the reduction in per unit subsidies for the key solar subsidy programs in that year, adjusted for interest rates and margin changes. Because if they don’t, they don’t sell product.

Why? We argue that the market is basically willing to pay a set rate per kwh for solar that is reasonably constant over time. The underlying conceptual DiSoCo Model is this: the market’s set rate for solar + the cost of capital + the per unit subsidy = solar system cost + solar system embedded margin. My primary use of the model has been to break out each component, market by market, segment by segment, and analyze how fixed, variable, or sticky they are, to better understand their interactions as conditions change. If this is true, then for a given set rate, same interest rates as last year, then changes in the subsidy either come out of cost or margin. If margin were mature and fixed, then cost changes would equal subsidy changes.

We could extend the model by suggesting that changes in the market set rate is a function of retail and wholesale energy prices, and non direct subsidy programs like a RPSs and RECs, and non market based buyers willing to accept low equity ROEs. We could further extend it by suggesting that some subsidies, like the ITC, may manifest in the cost of capital, not the per unit of subsidy.

In a real life example, when the subsidy programs have built in per unit reductions in them over time or volume (like the Japanese industry maker did, and California does, and many of the FITs do), then the industry has to find a way to take enough costs out to match the reduction, otherwise the margin gets hammered. This suggests that market won’t actually see the cost reductions until the subsidy ends, except where the industry cost reductions exceed the subsidy reductions in a given period (in fact, this was true, and available manufacturing capacity seems to have a big impact on this component also, as for several years, the manufacturer’s didn’t pass on ANY technology costs reductions, but fattened margins and prices instead).

And extending on that, we realize that the swing variable has been manufacturer’s margin at the ingot/wafer, cell, and module levels, not cost, which has tended to be more fixed or sticky than we thought. And in a period of tight supply, as we had in the silicon refining shortage, margin goes up, all else equal, and in period of oversupply, where we are moving too, margin goes down, since the other major components (including, unlike the corollary to Moore’s Law, technology cost) are relatively fixed or sticky over short time frames. The market still only pays what it will pay per kwh, and the subsidies and interest rates are what they are, and so known coming reductions /volumes in per unit subsidies force the industry to find a way to take it out of costs, see margin suffer, or find new markets with new subsidies. Hence, the model allows us to posit the law that the real long term linkage is subsidy reductions to cost reductions, adjusted for swings in margins.

This would help explain the rise of the grid linked industrial market in California and Germany, effectively as a partnership between public policy, manufacturers with limited near term technology cost reduction potential needing economies of scale, and the rise of the PPA/developer model as the facilitator between the two, and explain the continual skinny economics for end users/PPA owners, despite falling costs.

We could further extend that last point by suggesting it can be applied niche by niche, country by country. And better understand the market by realizing that manufacturers, starting with the Japanese firms 5 years ago when the Japen rebates rolled off, and extending currently to First Solar’s and Suntech’s et al moves into power plant development, effectively applied this model on a country by country, niche by niche approach seeking new markets as the subsidies fall and move, in a bid to maintain margins while cost curves were steady.

So the DiSoCo Model is simple enough, it states that the value on the supply side = the value on the demand side, and when breaking the components out and evaluating market by market which are fixed in the short term and which are variable, it has seemed to us to shed some light on why the solar markets have moved the way they’ve moved. And it posits that a market set price exists segment by segment, and therefore that if margins are normal in that segment, reductions in the per unit subsidy levels roughly equal reductions in cost, and only when reductions in cost drastically exceed those of subsidy levels, can price be effected.

And it gives us a very different picture of falling cost curves and price implications than pretending Moore’s Law works for solar.

Neal Dikeman is CEO fo Carbonflow, Inc., a Partner at Jane Capital Partners LLC, the Chairman of Cleantech.org, and the founding contributor to CleantechBlog.com.

Cleantech Blog Power 5 – Top Investors in Cleantech

I’ve been warning about a massive mispricing of risk in cleantech investing for years.

Cleantech Venture Capitalists Beware – What You Don’t Know About Energy Can Kill You

Beware the Allure of Ethanol Investing

Is there a cleantech bubble? Experts don’t think so

That certainly doesn’t mean that cleantech investing is bad. On the contrary, I’m very very bullish on cleantech. The question is which cleantech investors are following my rules on what’s good about investing in cleantech, and which ones are just following the old style IT rules of venture capital and taking that mispriced risk for their LPs.

In the cattle business, a bad rancher judges the cow by the quality of cow, a good rancher judges the cow by the quality of the calf. That’s how this Power 5 Ranking and Big 5 Question Mark Ranking of cleantech investors was constructed. Quality of the calf.

The Cleantech Blog Power 5

  1. GFI Energy – The top private equity shop in cleantech in my opinion. Caminus, Noreseco, Xantrex, et al. Been doing it quietly for over a decade creating great companies. A shop that doesn’t miss often, and doesn’t bother to show up at the cleantech conference circuit. Maybe they don’t need to.
  2. MissionPoint Capital Management – SunEdison, Ecosecurities, APX et al. Great discipline, great picks. They actually seem to know something about the areas they invest in.
  3. Clean Pacific Ventures – Early stage, see things others are going to see about 4 months before they do. Backed one of my companies. Show the love.
  4. Acorn Energy – The place where Comverge was borne. Publicly traded, now investing in cleantech. I love this portfolio. John Moore has a nose for deals. His card says “CEO and Evangelist”. Most people will ignore him because he’s publicly traded. But if it works, so what?
  5. Goldman Sachs – Their name is on or in half of the marquee deals in the sector from First Solar to SunEdison, Horizon Wind, Suntech. Hard to leave them out.

Honorable mention goes to the AIM market. The whole market. It’s better for founders, better for investors, took HUGE market share from the venture capital community in cleantech. All around eating VC lunch for breakfast. And yes, there is liquidity. Stop saying there’s not in the same breath you ask me to sell you preferred stock with cosale rights. It’s obnoxious.

And the Big 5 Question Marks

  1. KPCB – Bloom Energy? EEStor? 5 different stealth thin film plays? Et al. How many stealth science projects in cleantech can dance on the head of a pin? Let’s work on a very mixed metaphor/cliché of sorts – you shall not crucify this crown of venture upon a cross of cleantech. Too many of the technologies in Kleiner deals are only sexy because Kleiner’s name is attached. Come on guys, you’re better than this.
  2. Google.org – The world is rooting for you to succeed. And Silicon Valley needs a poster child for cleantech. How about articulating a strategy that the market understands? Maybe “sustainably energizing the web” or some such? When people ask me what does Google.org invest in and why, there should be a clear answer.
  3. Khosla Ventures – How many odd ways are there to invest in ethanol? Do we really think being in refining is a good business? And no, it’s not cheaper than gasoline. Can we lobby our way out of it? There are some gems in here, but the weighting may catch him. Kudos though for doing it with large chunks his own money instead of my grandmother’s pension fund’s money.
  4. VantagePoint Venture Partners – The anti Kleiner? Lots of strategics involved, and taking very, very large, very, very risky bets. Perhaps they better hope Vinod’s lobbying comes through. But it only takes one, right? If they can find the discipline of the Power 5, this could be good.
  5. Nth Power – Where’d you go? You were the acknowledged market leader when cleantech started in the first part of this decade. At one time virtually every strategic that mattered was an LP. The cleantech market needs you to be bigger than you are today.

So yes, invest in cleantech. But pay attention to the risk not just the management fees when it’s OPM.

Neal Dikeman is a partner at Jane Capital Partners LLC, and Chairman of Carbonflow and Cleantech.org. And he has the utmost respect for the guys behind these firms, regardless of whether or not he thinks their investment strategies are pricing risk well.

Cleantech Blog "Power 10" Ranking Vol II 2009

Last year I did my first “Power 10” ranking for 2008 of cleantech companies, and the response was so good we’re doing it again.

I spend most of my day meeting and talking to companies in the cleantech sector. And those of you who know me know I have opinions on who is doing it right, and who is doing it wrong.

As before this is the Cleantech Blog Power 10 Ranking of cleantech companies doing it right.

Eligibility for inclusion in the ranking requires meeting a 6 point test. Suggestions for inclusions in future volumes are welcome. The 6 point test:
1. The company is energy or environmental technology related
2. I like their products
3. The market needs them
4. The company is smart about building their business
5. I’d like to own the company if I could (for the right price, of course!)
6. It is not already one of mine (my apologies to my friends Zenergy Power)

I have included cleantech companies big and small.

  1. Sharp – Makes the list again as top dog battling to hold its crown in solar PV. Keep on trucking.
  2. GE – Their M&A strategy delivered venture like returns, and they still hold power positions in wind, T&D, clean gensets, and water capital equipment. Hard to dethrone.
  3. Iberdrola – Barely didn’t make the cut last year. Largest wind operator in the world now. Deserves it.
  4. First Solar (NASDAQ:FSLR) – Still the low cost producer in PV and growing. Smart move swapping expensive stock for the Optisolar project pipeline. Keep those factories full!
  5. Goldman Sachs (NYSE:GS) -The only investor to merit consideration, but area a part of too many power plays in cleantech to leave off this time.
  6. DNV – Their auditors underpin roughly half of the carbon markets. In carbon, audit and verification is everything. Their market share slipped some, but they hold their crown as the only one of the big carbon auditors yet aggressively investing in the US.
  7. Applied Materials – The future of thin film if they can deliver on their strategic moves. But I need to see some of your customer’s production taking serious market share, or making next year’s list could be tough.
  8. Cleantech Group – The business is now definitely more than just a conference operator. Despite massive competition in conferences (long a cash cow for them), the Cleantech Group hasn’t lost its footing as the preeminent brand. And now seems to be learning how to play well with others. Great job guys on both creating an asset class AND building a cool company.
  9. Bayard Group/Landis Gyr – Smart grid is the big cleantech play along with carbon and solar. Bayard, now branded around Landis Gyr, is a global Metering/Smart Grid roll up powerhouse. Bought Cellnet, Hunt, Enermet, and Landis Gyr et al.
  10. Valero – Texas refiner’s acquisition of VeraSun and move into renewable fuels gets it the nod. Now where to from here?

Honorable mention to Zenergy Power plc (AIM: ZEN.L), one I helped cofound. I couldn’t resist this year since the team is making hay off of fault current limiter technology we bet on in 2004, and deserves the nod. Also to Smart Fuel Cell (XETRA:F3C.DE) – Still the most mature fuel cell company in the world by a mile. But revenues flattened in 2008 and it made no moves allowing it to stave off the newcomers to Power 10. 2009 is the make or break year. And finally to Sindicatum – Mover of the year in carbon in 2008. Raised a warchest into the teeth of a tough carbon market. Now we’ll see what they can do with it.

Also on our watchlist for next year: Abengoa, Acciona, SGS, Duke Energy, SoCal Edison, Origin Energy, Ecosecurities, Q-Cells, SunPower, Oerlikon, ConocoPhillips, BP, Shell.

Of note, no CIGS or solar thermal this year. The list is indicative of a shift towards carbon and projects. Still no cellulosic, and I can’t bring myself to add EVs to the Power 10 until somebody shows something real. Perhaps the 2013 list?

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, Chairman of Cleantech.org, and the Chairman of Carbonflow, Inc..

Superconducting Blackout Protection Device for Smart Grid

Today, Zenergy Power plc (AIM:ZEN), a company I am a cofounder of, announced that ConEd, one of thought leaders in the utility sector on transmission & distribution technology (conventional wisdom says they have to be, as given its tremendous load in a small area, the Manhattan grid is devilishly tricky to operate), has agreed to a deal to put in a new kind of fault current limiter, using high temperature superconducting technology.

This is hit number two in FCLs for Zenergy, which last month announced the first ever HTS FCL implementation into the grid with SoCal Edison, another of the global utility thoughtleaders.

Neal Dikeman is a partner at Jane Capital Partners, the editor of CleantechBlog.com, and Chairman of Carbonflow, Inc. and Cleantech.org.

The Role of Government in Advancing the Green Economy

by Richard T. Stuebi

as posted to Huffington Post

Last week, I wrote a sizable check to the IRS. I wasn’t exactly happy about it, but I was happy for the fact that it stemmed from a nice payday in 2008 from one of my investments. Ah, the joys of capitalism, and the obligations of responsible citizenship.

This particular investment is advancing the cause of clean energy, as it involved the sale of interests in a pre-development windfarm to another firm that will (hopefully) take the project to fruition.

Clearly, the public sector played some factor in the fundamentals of my investment. States have imposed renewable portfolio standards driving the market for new windfarms to be developed, and the Federal production tax credit represents a significant portion of the financial value of an operating windfarm to its owner.

But, by and large, it was the forces of the marketplace – entrepreneurs, suppliers, landowners, financiers, customers – that drove the underlying business opportunity, the transaction, and its associated value-creation.

I hope that those days aren’t long gone.

Over the past year, there has unquestionably been a shift towards more government intervention in virtually all markets. It’s far beyond the scope of one blog post to delve into all of the causes and effects and all of the pros and cons of this shift.

In the cleantech realm, the tendency for increased intervention has been especially aggressive. The chatter in political circles is the notion of pushing forcefully towards the new energy economy – to achieve the admirable environmental benefits, but more for the prospect of creating some arbitrarily-large number of so-called “green jobs”.

Though I admire visionaries like Van Jones who newly brought the green job notion to the forefront of the public discourse just a few years ago, I’ve decried the excessive hype and the weak analytics behind the claimed magnitudes of green jobs that may or will emerge. I don’t doubt that many new green jobs will emerge, and I think they will be great for this country. It’s just that I don’t put any validity on any of the estimates of job creation, and I also acknowledge that there will be some job losses in other sectors that also need to be considered (but often aren’t).

I also lament the way in which many public sector leaders talk about “creating” green jobs, as if the job positions can somehow be invented by the government itself through the stroke of a pen or the wave of a wand.

Unless we want to move to a command-and-control economy where the government dictates the majority of all economic activity (remember the Soviet Union?), large-scale job creation is a private-sector phenomenon. In turn, the private sector (i.e., investors) must spot an opportunity to earn favorable returns, to generate attractive profits, in order for them to incur the costs of hiring people to perform work. In other words, value-creation (or at least the promise thereof) must precede job creation.

If a government throws money at inventing jobs that the market won’t somehow sustain after they’re created, this can’t be legitimately called job creation; it’s “make-work”. (And, never forget: the government doesn’t have any money of its own; it’s actually your money that the government is spending.)

In my humble opinion, the role of government is not to try to create jobs. Rather, governments should establish the playing field in such a way that the private sector will operate in its ruthlessly efficient manner to exploit – and, in so doing, hire a lot of people.

Governments can never match the intensity and the innovation of millions of properly-motivated private sector actors. Instead, governments should focus on aligning and harnessing these interests in ways that drive the system towards outcomes that are good for the public.

To be sure, the government has a key role – indeed, a responsibility – for setting policies that serve, advance and protect the public’s interests in transitioning towards an energy system that is more sustainable from both a supply and environmental standpoint. But, in the name of green jobs, the case is sometimes being stretched too far. An article in the April 4 edition of The Economist is particularly illuminating.

Spain is often touted as a model for how the public sector can exert leadership in setting a whole host of progressive policies (mainly generous subsidies) for rapidly pushing a move to green energy and creating many jobs while doing so. Yet, according to a recent study by a professor at King Juan Carlos University in Madrid, this way of building an industry is more than twice as costly on a per-job basis than if the private sector were to act on its own. Put another way, the study finds that, for every green job created by public sector prodding in Spain, more than two run-of-the-mill jobs were destroyed in the private sector. Ouch.

There’s a lot of talk in Washington about industrial policy these days. I’m a skeptic. I see Japan, and while it’s true that the Japanese industrial sector was the world’s envy in the 1980’s due to its strong government intervention, I also see nearly 20 years of uninterrupted economic stagnation now.

In sum, I just don’t think the public sector can actually build an industry better than the private sector can. In my ideal world, I would like to see the government intervene in the energy markets, for environmental and supply security, in one (and only one) simple way: high taxes on fossil fuel burn, to account for the social costs of climate change and dino-resource depletion.

High fuel taxes! The horror! The horror!

It’s lonely for me to write this, but the biggest problem facing the U.S. energy system is the enduring insistence of a “low price at any cost” energy policy, and the customer entitlement that bestows.

I see public service announcements (PSAs) about the little things that a viewer can do to become green, like changing from incandescent to fluorescent light bulbs, or using a reusable canvas shopping bag instead of use-and-chuck plastic bags. I understand that the average American needs to get engaged and feel like they can do something, even if it’s something simple and small, to contribute to the solution, but…. Please. Really. Enough feel-good talk about these piddling things.

I’d like to see some frank PSAs that confront the big issue head-on: higher energy prices, get used to it.

Obviously, a move to higher energy taxes will be unpopular, so we need some set of respected or well-liked voices in the public starting to lay the groundwork for its actual desirability, if not inevitability. In the grand scheme of things, shifting the U.S. mindset on the topic of energy taxes is much more important than urging people to put a recycling bin in the garage.

With energy prices that are predictably much higher, via a big jump in fossil fuel taxes, the private sector can go to work, busily eliminating wasteful energy consumption and developing new technologies that reduce fossil fuel requirements.

The twist is that the revenues collected from higher energy taxes can be offset by dramatic reductions in income and capital gains taxes. The way I figure it: we shouldn’t be heavily taxing things that are supposed to be good – such as income and savings – while undertaxing things that are supposed to be bad – like burning non-repletable fossil fuels that damage the atmosphere.

In the future, I want to get more good-sized checks from my cleantech investments, and I want all of you to get some checks from cleantech investments too. I also don’t want to send as big a chunk of those checks to the IRS. In return, I am willing to spend a lot more at the gas pump and in my utility bills.

Besides, I use my credit card when I buy those things, so higher energy prices means accumulating more points. In the move to the green economy, it’s important to always looking for the silver lining in every cloud encountered.

Richard T. Stuebi is the Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director of Early Stage Partners.

Waxman-Markey and REDD

By David Niebauer

In late March Congressmen Henry Waxman and Ed Markey released the first draft of a climate bill that presents three mechanisms designed to provide funding for reducing tropical deforestation: offsets, a supplemental pollution reduction program, and strategic reserve auctions. Full text of bill can be found at:

The bill would permit 2 billion tons of CO2e reductions to come from offsets, one half of which could be generated from international sources. The number (2 billion), while presumably not arbitrary, could be increased or decreased upon the President’s recommendation, allowing for adjustments due to market factors or where the cap is ultimately set. Of these international offsets, reduced emissions from deforestation and degradation (REDD) credits are specifically mentioned and permitted. A conversion would be applied of 1.25 offset credits in lieu of an emission allowance – the discount apparently designed to ensure that real reductions are achieved from the offsetting activity, and that the credits are accounted for in a conservative manner. The use of offsets will be increased and phased in such that a covered entity could satisfy 15% of its emission reduction obligation using offsets in 2012, progressively increasing to 33% by 2050. Certain relatively strict criteria would be applied to REDD credits, including agreements between the US and the developing country from which credits would be generated, monitoring and measurement capacity, and establishment of national deforestation baselines. The bill takes a “sector” approach, or country by country, as opposed to a strictly project-by-project approach.

The supplemental pollution reduction program would provide additional incentives for tropical forest preservation. From 2012 through 2025, EPA would set aside emission allowances to be used to support reduced deforestation in developing countries. The bill provides that EPA would transfer these allowances to countries that enter into and implement unilateral (with the US) or multilateral agreements or arrangements relating to reduced deforestation.

Finally, the Waxman Markey bill provides for what is termed strategic reserve auctions.
The reserve would be made up of allowances that are banked by the system and would be additional to regular emission allowances. Reserve allowances could be purchased at auction by covered entities to meet a small portion of their emission reduction obligations. The proceeds from this special auction would be used to purchase and retire international offset credits issued for reduced deforestation activities.

Size and Scope

To some extent, Waxman-Markey can be seen as a response to scientific data on the role of tropical forests in climate change. A recent report published in the journal Nature and reported in Science Daily provides some sense of the scope of the problem. The Intergovernmental Panel on Climate Change (IPCCC) reports that globally human activity emits 32 billion tonnes of CO2 each year – roughly half stays in the atmosphere; the other half is absorbed by the oceans and on land in vegetation and soils – mostly in tropical forests. Tropical forests remove approximately 4.8 billion tones of CO2 emissions from the atmosphere each year.

Tropical forests cover 17.8 million km2 worldwide. Approximately 50% of the world’s tropical forests are in South America, 30% in Africa and the rest elsewhere, mostly in SE Asia. The IPCC shows that land-use change, which is mostly tropical deforestation, emits 5.9 billion tonnes CO2 per year (20% of all human CO2 emissions).

A US cap-and-trade legislation that includes tropical avoided deforestation credits, despite its many methodological challenges, is critical in addressing global climate change. We will watch the progress of this bill with great interest.

David Niebauer is a corporate and transaction attorney, located in San Francisco, whose practice is focused on clean energy and environmental technologies. www.niebauer.net.

BlogRoll Review: Space Beams, Leaded Batteries, and Sins

This seems like something out of a James Bond movie. There is a startup, Solaren, which is trying to build panels in space that converts sunlight into a radio frequency beam aimed at a receiving station near Fresno. The station then converts the radio waves into electricity.

Megan Treacy at EcoGeek says:

“If everything goes according to plan, this will be the first real-world application of space solar power, with power delivery starting in 2016. I’m keeping my fingers crossed that this works out. The technology has been experimented with for a while and has a lot of potential and, let’s face it, running your home on “space power” would be really cool.”

If anyone is worried that the beam is gonna fry birds or planes that fly into its path, apparently the company has done analysis to show that radiation is not intense enough to cause harm.

Still, the thought of fried chicken falling out of the sky is kind of cool. 🙂

In other news…

While not the most attractive of technologies, lead acid batteries are certainly robust…and they may still have a promising future. On CleanBreak, Tyler discussed Axion’s lead battery technology that lasts three times longer than conventional ones.

* It looks like the folks at Google think lead is the way to go, too. AltEnergy Stocks agrees.

* I don’t remember how many ways you can sin, but Joel Makower talked about the Seven Sins of Greenwashing.

* Maria talked about Cap-and-Trade on TV.

* Simon says efficiency is still promising.

* Is natural gas a better standard than oil? Rob Day ponders.

The World’s First Clean Motocross Race On Electric Bikes

by Cristina Foung

Last Saturday and Sunday, April 4th to 5th, about 50 motocross riders participated in the first 24 hour long endurance race….on electric motorcycles. The event, 24 Hours of Electricross, was hosted by Zero Motorcycles, the creators of the Zero X motorcycle, an off-road electric bike, and the soon-to-come Zero S street legal motorcycle. From 11 a.m. on Saturday to 11 a.m. on Sunday, 10 teams competed to see which could complete the most laps on one Zero X motorcycle. With a maximum of 3 batteries, the teams had to consider their speed, use of their braking systems, and how often to switch out and charge their batteries. As the motorcycles are all electric, their energy consumption compared to gas-powered bikes is amazingly low. In fact, only $100 worth of electricity was needed to power all 10 bikes for the entire race. To make the event even cleaner, Akeena Solar provided solar charging stations on Saturday.

I was lucky enough to check out the race down at the San Jose fair grounds Sunday morning. The riders and the Zero Motorcycles staff were plenty tired by that time but the leading team Hotchalk was just shy of breaking 1000 laps – or 500 miles. The 10 teams came from the San Francisco Bay Area, New Mexico, even Canada and the UK. And all told, the race was the largest of its kind (in fact, it was the first of its kind) and set the Guinness World Record for the largest all-electric off road race. Each team was formed around one Zero X motorcycle and the love of electric bikes.

I chatted with Scott Snaith, the captain of the 50 Cycles team who came all the way from England to participate in the race. Snaith and 50cycles.com are soon to be dealers for the Zero motorcycles in the UK. He said, “We’ve been selling bikes for about five years…this is the sort of technology we’ve been waiting for in regards to the battery technology and the motor.”

Given that the bikes are electric (and therefore, sublimely quiet compared to gas-powered bikes), there was just a slight whir or hum around the track. The lack of noise was the reason the race was allowed to continue for 24 hours, even with the close proximity to luxury apartment buildings. And in fact, when the racing Zero X bikes were put to the test on a decibel meter, they came in below the level of normal conversation. Snaith said all the riders thought it was “nice to be able to talk during the race.”

I also got a chance to talk to Neal Saiki, the inventor and founder of Zero Motorcycles, while he was taking a bit of a break from helping out the teams make small repairs to their bikes. He said the motorcycles had been holding up really well and all the riders were still going fast (the Zero X gets up to 50 MPH top speed; and on the motocross track, most riders were getting up to about 30 MPH). Neal said, “[The event is] setting a world record and really setting a trend because you can talk to all these racers out here. They had a great time and everyone is just astounded with how fast they’re going on these motorcycles and how durable they are, lasting 24 hours. So it’s really a a great thing and without a lot of noise and no pollution, it’s really changing the way we do racing.”

To check out some footage from the race, more of Neal and Scott’s interviews, and a quick walk around the Zero X, check out my original post about the Zero Motorcycles’ 24 Hours of Electricross at the Green Home Huddle.

Besides her green products column on Cleantech Blog, Cristina is a passionate advocate for green living at the Green Home Huddle at Huddler.com, which focuses on electric cars, organic personal care, and other green products.

High-Speed Rail Unlocks Intermodal Potential

By John Addison. Intermodal solutions allow people to effectively navigate major cities such as New York, Washington D.C., Paris, Madrid, and Tokyo. Subway and light-rail are especially effective, but expensive to build. As cities grow, change, and morph, not every potential route can be served with subway and light-rail. Bus rapid transit is a cost effective way to duplicate some of the benefits of light-rail, at a fraction of the capital expenditure. Buses, taxis, car sharing, bicycling, and walking are all parts of the solution. For many, cars are their preferred way to get around, yet if all transportation were cars then cities would be frozen in gridlock.
High-speed rail integrates all these systems together and moves people from city to city at high-speed. When the distance is only a few hundred miles, high-speed rail coupled with city transit beats airplane and car every time.
Now an 800 mile high-speed rail network is being started in California. Because it depends on local and public-private partnership funding, as well as state and federal funding, it will be built in sections. First online are likely to be areas that are currently overwhelmed with passenger vehicles crawling on freeways that should be renamed “slowways.” Likely to be among the first in service are the Orange County – Los Angeles section and the San Jose – San Francisco section.
San Jose provides an example of current transportation problems as well as the future promise of high-speed rail integrated with intermodal solutions. Currently, during rush hour, cars crawl from all directions into San Jose, the self-proclaimed capital of Silicon Valley. Vehicles overload some of the nation’s busiest highways – 680, 880, 101, 280, 87, and 17.
Commuters to and from San Jose have a number of options. Many require multiple transit agencies and added time to reach their destination. Caltrain services cities from San Francisco to San Jose, at times taking only an hour, at other times being less frequent and taking much longer. Several transit agencies have special commuter shuttles including AC Transit and Santa Cruz Metro.
Major San Jose employers promote carpool and van pool commute programs. Shuttle buses run to the nearby airport. Santa Clara Valley Transit Authority’s (VTA) light-rail and buses effectively cover major parts of the city and connect to other systems. A variety of private bus, shuttle, car sharing, taxi, and other services all help. A network of bicycle trails and paths helps some enjoy their commute and stay in shape.
A central hub for VTA, Caltrain, and Amtrak is the Diridon Station in San Jose, named after Rod Diridon who provided leadership for the modern transportation system in the greater area as six-time chairperson of the Santa Clara County Board of Supervisors and Transit Board. He has also been chair of the American Public Transit Association; he is the Executive Director of the Mineta Transportation Institute and Chair Emeritus of the California High-Speed Rail Authority (CAHSR).
When I met with Rod Diridon last month he was optimistic about CAHSR breaking ground within two years, and carrying a high volume of riders on at least one segment within ten years. The reasons for success are compelling: high-speed rail is less expensive than freeway expansion, less expensive than airport expansion, secured voter approval during a severe recession, will create up to 400,000 new jobs, integrates all of California’s major transit systems, reduces petroleum use, and helps prevent increased climate change damage. Mr. Diridon feels that support is also strong, because each year of delay could add millions to the ultimate cost of the 800 mile system.
In ten years, the Diridon Station is likely to see high volumes of travelers as high-speed rail shuttles people to and from San Francisco in 30 minutes. The CAHSR system will share the corridor currently in place for Caltrain. The station will allow passengers to board Amtrak and continue on to places like Los Angeles and Sacramento. Eventually, the high-speed rail will continue to those destinations, as all right-of-way and not-in-my-backyard (NIMBY) issues are resolved.
In ten years, increased VTA light-rail traffic will flow through the system as San Jose continues to grow. VTA Transportation Planner Jason Tyree described how light-rail will be supplemented with advanced bus-rapid transit that will rapidly move people with modern features such as level boarding, automated fare handling, signal prioritization, and potentially dedicated lane sections. The 60-foot buses will be hybrid diesel.
People from the East Bay area may connect to the station via an extension to BART. Feeding off BART will be AC Transit’s ultramodern buses including its expanded fleet of hydrogen fuel cell buses.
The Diridon Station ten-years from now could well have zero-emission electric bus shuttles from the nearby airport or even a more advanced people-mover service. Preferred car parking at the station is likely to be for electric and plug-in hybrid vehicles. San Jose, home to advanced vehicle and technology companies like Tesla, is committed to an extensive city-wide vehicle charging infrastructure.
Although many electric vehicles are criticized for only having less than 100 mile in range per battery charge, such range is good for several days when combined with effective public transportation systems. Another way to cover the last miles to and from home and work is the good old bicycle. Bicycle boarding will be permitted on high-speed rail and the other public transportation systems.
As cities are connected with high-speed rail, similar multimodal systems will also be connected in San Francisco, Los Angeles, Orange County, San Diego, Sacramento, and other major cities in this state of 40 million people; soon to be 50 million people.
The new high-speed rail and the light-rail transit systems use electricity not petroleum. Electric rail is many times more efficient than diesel engine drive systems. In ten years, by law 33 percent of the electricity will be from renewable sources such as wind, solar, and geothermal. In 20 years, especially with the benefit of California’s new cap-and-trade of greenhouse gases, renewable energy is likely to be less expensive than natural gas and nuclear, with coal already being phased out in California. In other words, the high growth part of California transportation is likely to be zero-emission providing significant relief in emissions and energy security.
Combining improved multimodal transportation with high-speed rail with renewable energy is bringing climate solutions just in time. California’s busy Highway 101, which stretches over 800 miles and which carries millions daily, will find major sections under water if the sea rises only 16 inches.
As leading delegates from 175 nations now meet to discuss climate solutions scientist agree that global warming is accelerating and the artic ice cap is disappearing.
The multimodal transportation that serves millions of Americans is experiencing record use and provides the foundation for a more promising future.

John Addison is the author of the new book – Save Gas, Save the Planet.

Texas Excess

by Richard T. Stuebi

Over my spring break vacation, I had the pleasure of reading The Big Rich: The Rise and Fall of the Greatest Texas Oil Fortunes by Bryan Burroughs. It was one of those books I just couldn’t put down.

The Big Rich profiles the saga of the so-called Big Four of the Texas oil bid-ness — Roy Cullen, H.L. Hunt, Clint Murchison and Sid Richardson. Though hardly household names, these four amassed gi-normous fortunes under the radar screen during the 1930’s and 1940’s, while the rest of the U.S. and the world was focused on the Great Depression and World War II.

Only Hunt Oil remains as a direct consequence of this era. However, in their heyday, the Big Four were responsible for some major forces that continue to shape the world we know today, including:

  • Supplying the preponderence of oil to fuel the Allied war machine in World War II — a huge factor in the success in defeating the Axis
  • Launching the religious right as a force in American media, culture and politics
  • Setting the precedents to ensure that large quantities of money from the oil industry became an enduring feature of the American political process — propelling the careers of Dwight D. Eisenhower and Lyndon B. Johnson (and, of course, the Bush dynasty)
  • Elevating conspicuous consumption to a form of high art to be envied by the masses, as a result of their affiliations with Hollywood and the Dallas Cowboys
  • Accelerating the shift of the U.S. power base and population out of the Northeast and down to the Southwest

A native Texan, Burroughs casts an unflinching eye at his home state. The book is essential reading for those who want to truly understand the U.S. in the early 21st Century.

Richard T. Stuebi is the Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will become a Managing Director at Early Stage Partners.

Ford Expands Hybrid Success to Electric Vehicles

By John Addison. Toyota’s (TM) global market share leadership has been helped by the success of its hybrids. Looking to a future that will increasingly emphasize fuel economy and lower emissions, Toyota will put 500 plug-in hybrid Priuses on the road in 2009.

Competition is just getting started in hybrids, plug-in hybrids, and electric vehicles. One company that Toyota must watch carefully is Ford (F). It is Ford with the world’s most fuel-efficient SUV – the Ford Escape Hybrid. It is Ford that is now selling a mid-sized hybrid which can be driven to 47 mph in electric vehicle mode – the Ford Fusion Hybrid. It is Ford that is successfully testing the Ford Escape Plug-in Hybrid with major electrical utilities across the nation. It is Ford, not Toyota, which will be selling commercial electric vehicles in the United States in 2010.

“In 10 years, 12 years, you are going to see a major portion of our portfolio move to electric vehicles,” Ford CEO Alan Mulally said at the Wall Street Journal ECO:nomics conference in Santa Barbara, California, this month. Ford will start selling commercial electric vehicle in 2010, a sedan EV in 2011, and a plug-in hybrid in 2012. “You’ll see more hybrids, but you will really see a lot more electric vehicles,” he said. Reuters

Last week, I discussed Ford’s plans with Nancy Gioia, Director, Sustainable Mobility Technologies and Hybrid Vehicle Programs at Ford.

This is the fifth year of success for the Ford Escape Hybrid and its cousins the Mercury Mariner Hybrid and Mazda Tribute Hybrid. The vehicle has enough passenger room and cargo space to be popular with families to taxi fleets. The SUV delivers an impressive 32 mpg. It is the only SUV that could make the list of Clean Fleet Report’s Top 10 Low Carbon Footprint Vehicles.

The new Ford Fusion Hybrid midsized sedan has an EPA certified 41 mpg rating in the city and 36 mpg on the highway, making it even more fuel efficient with less CO2e emissions than the Escape Hybrid. The Fusion Hybrid is powered by both an electric motor and by a 2.5L Atkinson-Cycle I-4 Hybrid engine. The advanced intake variable cam timing allows the Fusion and Milan hybrids to more seamlessly transition between gas and electric modes. The Fusion has a continuously variable transmission.

Fuel economy is not only a function of what we drive, but how we drive. Ford conducted a study that resulted in an average of 24 percent improvement in fuel economy when typical drivers were coached by eco-driving experts. With the Fusion, Ford introduces SmartGauge™ with EcoGuide, which coaches hybrid drivers to maximize fuel efficiency. In the future, SmartGauge will be included in a number of Ford vehicles.

In addition to the visual feedback with SmartGauge, the new Fusion Hybrid includes Ford’s MyKey™ , a programmable feature that allows drivers, parents, or fleet owners to limit top speed and audio volume of vehicles, and set speed alert chimes to encourage safer driving. Tire pressure monitoring is another new feature that helps improve mileage.

United States Infrastructure Company (USIC), a utility services business that operates a fleet of 3,500 vehicles nationwide, could benefit from using MyKey, said Phil Samuelson, USIC purchasing and asset manager. The company uses many Ford vehicles, and its drivers put an average of 24,000 miles on each vehicle every year. “Operating a fleet equipped with MyKey technology could be great for our business and our drivers,” Samuelson said. “By encouraging safety belt use and limiting the top speed and audio volume on our vehicles, we’d be better able to protect our employees and our fleet investment while potentially saving fuel, too.”

What Ford is not offering in its hybrids and plug-in hybrids is a flexfuel engine. The U.S. flexfuel offerings from any automaker have failed to deliver respectable mileage when running on gasoline. Typically their mileage is reduced 27 percent when running on the E85 ethanol blend.

Ford may make hybrids even more affordable in 2010 with a new Focus hybrid or other hybrid 4-door sedan. By 2012, Ford will have a new more fuel efficient hybrid drive system. Currently, Ford hybrids use NiMH batteries. The more expensive lithium-ion batteries are planned for the electric vehicle and plug-in hybrid offerings. By 2012, even the hybrid offerings may be lithium if a cost advantage can be secured. For 2012, Ford is evaluating battery technology and has not made final decisions, explained Nancy Gioia. Ford battery partner for the Escape PHEV is Johnson Controls-Saft (JCI, SGPEF).

A charging infrastructure will be critical to the success of plug-in hybrids and electric vehicles. “There are 247 million cars in the U.S., but only 53 million garages,” observes Richard Lowenthal, CEO of Coulomb Technologies. Because they need less range, urban dwellers are most likely to benefit from owning an EV, but least likely to own a garage. One U.C. Davis study determined that 80 percent of plug-in car owners want to charge more than once a day. That means we only have 12 percent of the charging stations that we need.

Electric utilities in many areas are not ready for the load of everyone in a neighborhood charging an EV, especially at peak-load hours. Utilities will want to encourage smart charging during the night, when excess electricity is often available. Since 2007, Ford has been working with utilities and research organizations to develop extensive data from demonstrations of prototype Ford Escape Plug-in Hybrids. Ford now has over ten partners including:

  • Southern California Edison
  • New York Power Authority
  • Consolidated Edison of New York
  • American Electric Power of Columbus, Ohio
  • Alabama Power of Birmingham, Ala.; and its parent, Atlanta-based Southern Company
  • Progress Energy of Raleigh, N.C.
  • DTE Energy of Detroit
  • National Grid of Waltham, Mass.
  • New York State Energy and Research Development Authority, a state agency.
  • Electric Power Research Institute (EPRI)

Utilities need to lead with a smart-charging infrastructure and communications standards. In addition to Ford’s official plug-in demonstrations, fleets and communities have converted Ford Escape Hybrids to be plug-in. Google uses Escape plug-ins that are solar charged. Xcel is evaluating vehicle-to-grid in its Smart Grid City.

Drivers of the demonstration Ford Escape PHEV will make far fewer trips to the gas station. It uses common household current (120 volts) for charging, with a full charge of the battery completed within six to eight hours. Look for faster charging 220 volt on-board charger in the future. When driven on surface streets for the first 30 miles following a full charge, the Ford Escape PHEV can achieve up to 120 mpg – roughly 4.5 times its traditional gas internal combustion engine-powered counterpart. A fully charged Ford Escape PHEV operates in two modes, electric drive and blended electric/engine drive.

Commercial sales of the Ford Escape PHEV are planned for 2012. Ford is not waiting until 2012 to start selling battery electric vehicles.

In 2010, Ford also plans to begin sales of zero-emission battery-electric vans. To speed time to market, Ford will be collaborating with Tanfield’s Smith Electric Vehicles to offer battery-electric versions of the Ford Transit and Transit Connect commercial vehicles for fleet customers in the UK and European markets. Smith Electric Vehicles will build the Transit Connect in Kansas City, Missouri.

Perhaps the biggest opportunity is in offering a 4-door sedan that can achieve freeway speeds and has a range of at least 100 miles. In the typical U.S. household with two vehicles, one of those vehicles almost never travels over 40 miles in a day. In 2011, using Magna International (MGA) to do the power system assembly, Ford will offer a C-sized 4-door sedan electric vehicle with both 110 and 220 volt on-board charging. The battery supplier is to be determined.

Through continued advances and strategic partnerships in hybrid-electric, plug-in hybrid, and battery-electric vehicles, Ford is positioned to compete and even lead in growth segments of the auto industry.

John Addison publishes the Clean Fleet Report and is the author of Save Gas, Save the Planet.