PowerShares Global Transportation

By John Addison (7/27/09). The transportation industry is beginning the biggest transformation since Henry Ford started making cars affordable for the mass market. Hybrids, plug-in hybrids, and electric vehicles point to a long-term transition from inefficient mechanical drive systems to efficient electrical systems. Engines powered by petroleum fuels are being replaced with electric motors powered by renewable energy. A growing amount of goods movement is by rail and moving people by high-speed rail.

A portfolio of companies that participate in these long-term trends comprise the portfolio of Invesco PowerShares Global Transportation (PTRP) – an electronically tradable fund (ETF). The fund is based on the Wilder NASDAQ OMX Global Energy Efficient Transport Index(sm). The Index includes global companies engaged in businesses that are likely to benefit from a transition toward using cleaner, less costly and more efficient means of transportation.

The fund attempts to rebalance quarterly with 25 percent holdings in each of four sectors which it defines: alternative vehicles, rail and subway systems, intermodal, and transportation innovation. The clean transportation companies are headquartered in many countries and participate in many sectors:

Country
United States 37.10%
Japan 12.61%
United Kingdom 8.02%
Taiwan 7.99%
Italy 5.81%
France 5.55%
Germany 5.42%
Canada 4.80%
China 4.41%
Chile 2.91%
*as of 7/24/09

Top Holdings
BYD Co. Ltd. 4.41%
Giant Manufacturing Co. Ltd. 4.03%
Merida Industry Co. Ltd. 3.95%
GS Yuasa Corp. 3.85%
Shimano Inc. 3.74%
Maxwell Technologies Inc. 3.71%
Wabco Holdings Inc. 3.45%
Fuel Systems Solutions Inc. 3.29%
Alstom S.A. 3.16%
Piaggio & C.S.p.A. 3.05%

The fund is likely to gain from the growing success of high-speed rail which provides hundreds of millions of annual rides in Japan, France, and Spain, and is destined from major growth in other countries such as China and the United States. Holdings include Alstom, Kinki Sharyo, and Bombardier. Other holdings will benefit from the shift of goods movement from truck and plane to more efficient rail: CSX, Norfolk Southern, Union Pacific, Burlington Northern, and Canadian National Railway.

Over a billion people own bicycles or scooters – e-bikes and e-scooters are high-growth segments of this industry. The fund includes major players such as Giant, Piaggo, Merida, and Shimano.

Lithium batteries and ultracapacitors are integral to hybrids and electric vehicles. The fund includes BYD, GS Yuasa, Maxwell, Ener1, and Saft. Energy storage dominates the business models of these companies. Missing from the fund are electronic giants, where batteries are only part of their business such as Panasonic, Sanyo, Hitachi, NEC, and several others.

Disclosure: I own shares in this fund, as well as Alstom and Giant. Investing in this fund has a number of risks. It is concentrated. Most holdings are international. Illiquidity is a concern with few shares trading daily. Automobile manufacturers, except for BYD, are notably absent from the fund. Nevertheless, its 34 holdings provide some diversified global exposure into key players in the future of transportation.

Fidelity Select Automotive (FSAVX), representing a more traditional automotive portfolio, is up 86% year-to-date. iShares Dow Jones Transportation (IYT), with diversified goods movement and transportation services holdings, is up about 2% year-to-date. PowerShares Global Transportation (PRTP) is up about 27% year-to-date. As we transition to more efficient transportation with a smaller carbon footprint, PRTP may have long-term potential.

John Addison publishes the Clean Fleet Report. A number of his articles have also appeared in Cleantech Blog and Seeking Alpha. On August 22 he will present Cleantech ETF Investing at the SF Money Show.

Renewable Fuel — Without Biomass

by Richard T. Stuebi

In recent years, there’s been a major push for renewable fuels — to reduce our needs for petroleum, as well as to reduce the carbon footprint associated with burning petroleum-based fuels.

The common thread of all of these renewable fuels has been the use of some sort of carbonaceous feedstock — typically biological organisms, till now agricultural crops like corn and soybean, and moving towards cellulosic wastes and algae — from which to produce a liquid fuel for vehicles. In other words, sunlight begets botanical growth begets fuel.

Now comes word of a company emerging from stealth-mode called Joule Biotechnologies, based in Cambridge MA and funded by Flagship Ventures, which has developed what the company is calling the “Helioculture” process for making fuels directly from the photosynthetic conversion of sunlight and CO2 — without requiring any biomass (nor any water, for that matter).

According to its press release, the company’s “SolarFuel” will satisfy current vehicle specifications. Although still a few years away from commercial production, Joule is projecting yields of more than 20,000 gallons per acre per year at long-run economics competitive with oil at $50/barrel.

Of course, entrepreneurs and inventors love to tout new ideas with great potential — potential that is often never achieved. But this idea at least has considerable intuitive appeal, and is very out-of-the-box relative to much of the innovation being pursued in the transportation fuels arena, which makes Joule definitely worth watching in the coming years.

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. Effective September 1, he will also become Managing Director of Early Stage Partners.

Ford Returns to Profitability with Improved Mileage

By John Addison (7/23/09). Ford has returned to profitability, benefiting from increased market share which is the likely result of improved mileage. Ford earned almost $2.4 billion for the quarter, but it was the result of a large one-time gain associated with the debt reduction actions completed in April. The pre-tax operating losses were $424 million; an improvement of $609 million from year-ago results.

Ford has gained U.S. market share for January through June 2009. Wards Six month market share:

GM 19.8%
Toyota (TM) 16.1%
Ford (F) 15.9%
Honda (HMC) 11.1%
Chrysler 9.8%

Ford also gained share in Europe and Asia, boosted by the fuel efficient Fiesta.

In contrast with GM and Chrysler, Ford is the only U.S.-headquartered manufacturer with vehicles qualifying for the Clean Fleet Report Cars with the Lowest Greenhouse Gas Emissions. Both the Ford Fusion Hybrid and Ford Escape Hybrid are in the top 10 list.

Ford is on target to meeting CAFÉ with average fuel economy in 2010 being 20 % better than 2005.

The Focus will be increasingly important to Ford’s success as it lowers manufacturing cost with a global version and when it offers an electric version in 2011.

In 2012, the Ford Escape Hybrid, already the most fuel efficient SUV, will get a lot more efficient by also being available as a plug-in hybrid. The PHEV Escape Hybrid is already being tested in a number of fleets. By 2012, Ford will offer multiple

EcoBoost engines will be delivered in over 1 million vehicles globally, delivering better mileage through turbocharging and direct fuel injection.

Ford could have greater market share than GM by 2012, unless GM transforms its entrenched culture centered on large heavy vehicles as the only way to generate adequate profit margins. In the next few years, Ford will face increased competition with Toyota and Honda both offering hybrids for less than $20,000. Ford will also face intense EV competition with Nissan (NSANY), BYD, and a number of emerging electric vehicle makers.

In the future, oil price increases and oil shocks will deliver market share to makers who minimize consumption of petroleum fuels. Winners will build the best hybrids, plug-in hybrids, and electric vehicles. Ford is investing nearly $14 billion in the U.S. over the next seven years on advanced technology vehicles, including $5.9 billion in loans from the U.S. Department of Energy for advanced fuel-saving vehicles.

“In 10 years, 12 years, you are going to see a major portion of our portfolio move to electric vehicles,” Ford CEO Alan Mulally stated earlier this year. Now Ford is executing its electrification strategy.

Ford Q2 Earnings Presentation

Earnings Transcript

By John Addison. John Addison publishes the Clean Fleet Report and speaks at conferences. He is the author of the new book – Save Gas, Save the Planet – now selling at Amazon and other booksellers.

Concentrating PV – The Artificial Industry

About 2 to 3 years ago, CPV was all the rage among solar startups and especially their venture investors.

But none of them ever came to market. I’ve been calling this one a siren’s song since the beginning. An artificial market enabled by venture capitalists desperate to find the next big thing.

The story ran something like this:

  • “Glass and metal are cheaper than silicon”
  • “At the levels the ultra high efficiency cells are moving to, CPV will be cheaper than flat plate x-SI”
  • “It’s just engineering to get product out the door”
  • “In two years we can match today’s power output and cost”

And so everyone needed a CPV deal. But what really happened was classic.

  • The EU feed in tariffs created a fast acting demand bubble.
  • The silicon suppliers refused to invest ahead of the curve.
  • The module manufacturers couldn’t keep up because of shortages of silicon supply, so their prices and margins shot up.
  • New companies popped up claiming the world therefore needs modules, especially high power ones.
  • And since glass is cheaper than silicon . . .
  • We should concentrate the sun and make a better product.
  • And venture capitalists needed a different story, since they missed the money being made in the silicon shortage/FIT boom.

However:

  • The silicon shortage was not fundamental (as everyone knew), and now the module margins eroded moving the cost bar back down drastically
  • As one hope would, thin film supply did come on, and flat plate got better and better, moving the bar again
  • The high efficiency cells came on slower and shorter (never seen THAT happen before), gutting the rose colored business cases for high concentrating CPV
  • The bar moved in efficiency and cost (both at cell, module, inverter, tracker, et al level)
  • Putting moving parts on solar systems seems to gut the advantage of glass is cheaper than silicon and gee whiz, engineering does take some time (never could have imagined THAT either).

It’s actually pretty simple – if you believed the solar industry could continue to take costs out and improve, then CPV never had a real place. If you believe it couldn’t, why invest in solar at all?

Moral: Technology and venture capitalits do not create markets in solar. FITs do. The best technology / product available at the time of the FIT makes a fortune since it takes a while for other products and the supply chain to catch up. Those chasing it lose a fortune.

Neal Dikeman is a partner at Jane Capital Partners, and has cofounded, run, invested in, or served as a director of multiple startups in cleantech and technology. He is Chairman of Carbonflow and Cleantech.org, and a Texas Aggie.

Ah, Chu

by Richard T. Stuebi

As Secretary of the Department of Energy, Steven Chu is a breath of fresh air. As a recent profile in The Economist noted, “Wags used to say that the one essential qualification for being energy secretary was not to know anything about energy.” Well, that definitely doesn’t apply to Dr. Chu.

A winner of the 1997 Nobel Prize for physics, and former Director of the Lawrence Berkeley National Laboratory, Steven Chu is by far the most expert energy secretary the U.S. has had since the founding of the Department of Energy in 1977. (See the list of other predecessors.)

Of course, in Washington, it’s not always the case that knowledge and experience begets success. But any failures that Chu might experience can’t be attributed to lack of resources.

Clearly, Secretary Chu has a lot of money to play with these days: in addition to annual budget of $26 billion (which is certain to increase substantially in coming years), over $38 billion was authorized to DOE as a result of the American Recovery and Reinvestment Act. So far, only about $7 billion of the ARRA monies has been awarded, and a measly $243 million has been actually spent, so Chu has a lot of “dry powder” left.

Let’s hope he puts it to good use, because the public sector is a notoriously poor selector of winners and losers — among technologies and among businesses. Chu is obviously a bright guy; let’s hope he’s smart enough to know what he doesn’t know. (Of course, the last guy to notably discuss the concept of “unknown unknowns” — former Secretary of Defense Donald Rumsfeld — was no dummy, and we all know how well his efforts panned out.)

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 Managing Director of Early Stage Partners.

BlogRoll Review: Coal, Corn, and Creativity

Coal Revolt

In the US, several state governments have made efforts to stop the construction of new coal plants. Even major creditors like BofA are refusing to finance these projects.

Now, city governments are getting into the act. Maria Energia says:

The city decided to make the switch to avoid paying more for fossil fuel electricity in the future, when carbon regulations (both California’s state regulations and federal ones, like a cap-and-trade policy) increase the cost of doing business with fossil fuels. Not to mention the “costs to society,” like higher medical bills for lung-related diseases such as asthma.

Green electrons are better than brown ones!

Corn Debate

While there is strong evidence that ethanol produced from fermentation of corn sugars is not likely to reduce GHG emissions, there is greater hope that ethanol produced from cellulosic could be a sustainable solution for creating biofuels. Yet, there are many uncertainties in this process.

On company, POET, claims they have a cellulosic breakthrough. Robert Rapier at the R-Squared blog conducted an extensive interview with POET’s VP of Science and Technology Dr. Mark Stower on their process.

This is really a fascinating and technically rigorous analysis of the corn ethanol debate. Great discussion on the socioeconomic implications as well. Thanks a lot, Robert!

Creative Sustainability

Patents are certainly a necessary aspect for innovation but in some ways it has been a hinderance when it comes to solutions needed for sustainability. In order to accelerate the transfer of ideas, other modalities of information sharing may complement and overcome some of the limitations of the existing patent system.

Joel Makower discusses these concepts through the GreenXchange.

** Also, the Green Agenda notes that the military is becoming increasingly concerned about the consequences of climate change.

** CleantechGreentech talked about PG&E’s effort to power homes with cow dung.

** It’s getting windy in Israel.

Cap-and-Trade: How it works and why it’s the been the option of choice

In the run up to Copenhagen and the debate over Waxman-Markey, I think it’s worth laying out some of the key debating points on how cap and trade works and why it’s been our weapon of choice to date in the climate change fight.

I like to think of our carbon and energy problem as follows. We built the first industrial economies and long term economic growth model in all of human history in the last 200 years on a cheap, available energy base, in part by effectively running down our existing inventories of energy stocks from the least cost to the most expensive. We now need a lot more inventory each year (since we’ve been successful and are a lot bigger), and we’re into the expensive layer of our inventory, so it’s hitting our global cost of goods heavier than before. And we know we need to find more sources to replenish inventories, and we know that if we move immediately to higher cost sources we’ll pay the price in GDP.

We also know that producing and using those inventories had a non zero (and we argue about the level) cost to our environment that we have not measured well, but have been working on reducing for the last three decades. But we’ve now run into a new part of that cost with carbon or GHGs that’s very large, and is going to take a much larger and bigger hit to take care of, and depending on your view, has an aggressive time fuse on it. Essentially this means pricing carbon into our economy – which will basically add a whole new cost in all of our supply chains, a cost that varies from country to country and industry to industry, and will shake up comparative advantage in trade. And because it’s global, as far as the environment is concerned, for carbon, unlike most environmental pollutants, it doesn’t matter where in the world it’s emitted or reduced. So our problem is China’s problem is Europe’s problem is our problem.

So we start with a first climate change goal: to reduce the carbon emissions levels in the economy, by a level that we all debate by a point in time that we all debate. But we have to realize that while we do this, we do need to replace those energy supply inventories to both keep us where we are in GDP, and find new ones to sustain growth, or we’ll solve our GHG problem simply by being really poor. And we have to remember that adding costs has to be paid for, and it isn’t “business” that pays for it, it’s us, with business as our proxy.

So my corollary is the goal should be to squeeze carbon emissions out of the global economy in the fastest, least cost path, and as fairly as possible. Sorting out what that means and how to do so is the rub. But part of fair should mean a “do no harm” principal for the economy as well as the environment – meaning that when we start, as far as possible no country or group or industry or company within industries gets penalized out of the gate without either compensation or enough time to adjust. Think of it like eminent domain. If we give something up to the greater good, we deserve to get paid for it.

We have two main ways to go about it, place a tax or penalty on the emissions, or constrain the emissions factors (like power generation, driving, etc.) Cap and trade is essentially a hybrid of the two. The cost of such carbon reduction, because of the ubiquitous nature of carbon, and typically inelastic demand curves for most energy and carbon intensive products, is spread across all consumers in any scenario, but depending on system design can be borne disproportionately by some groups, industries or countries. Our special challenge is because of that global nature, we literally HAVE to have a solution that can engage and work in every country. Unlike cleaning up a local toxic spill, where we can fix ours without our trading partners, in carbon, if China fails, we fail. So if we try and succeed, and China does not try, the environment loses, and we lose worse.

Carbon Tax – Basically with carbon tax the government picks a series of carbon intensive industries or products, assigns a carbon value to them by one of a number of methods, and levies a tax on them. It’s often touted by economists as theoretically the cheapest method, and generally an industry favorite because they know how much they’ll have to pay and can plan.

But carbon taxes have big drawbacks. You can’t be sure you’ll actually get the level of reductions you want, because the tax fixes price, not volume. Worse, carbon is a global problem, and getting global tax codes to mesh together is virtually impossible (we can’t even do it inside the US), which means we may end up with everybody paying a different price of carbon and a complete mess. That certainly would throw the efficiency argument out the window. The next big disadvantage is that if you don’t get the tax level and structure exactly right, businesses and consumers get hurt in unpredictable ways, and have little room to adjust if we get it wrong. So while theoretically better, it’s not a very “fault tolerant” plan.

Main advantage is that you have a known cost to industry (which is why most industry prefers tax to trade or command and control). Next main advantage is that the the government gets lots and lots of revenue, which is why many politicians favor it.

The second option is classic environmental “command and control”, if you’ll excuse the perjorative sounding nature of that term. Esstentially the EPA or equivalent simply regulates every one who produces GHGs, and tells them how much they can produce through a permitting process.

The advantage is that you know exactly how much emissions reduction you are going to get. The disadvantage is that you may pay much more than you thought, and sink your economy, especially if your trading partners are more lax on either regulation or enforcement, and you let the EPA pick the winners and losers. The other disadvantage is that there is no upside. Under no circumstances will you ever get more reductions than you thought, unlike cap and trade, where done right, you may.

Cap and trade is the middle ground (which is why it keeps coming up). With cap and trade, the system operator (UN, EU, EPA, CARB etc) designates how many credits can enter the system, and prints, them like money. It then designates how many credits a company must turn in each year or period per unit of production (ie 0.5 tons/MWH of power produced), and penalizes or shuts down the company if they don’t turn in enough to meet their obligation. So no more emissions from a regulated sector will occur than credits (often called allowances) exist.

Then the regulator decides whether to sell the credits to the industry that needs them, or to simply allocate them (often based on some measure of current production). Both methods have pros and cons, and in practice have nothing to do with environmental protection or the price of carbon (the total level of credits and the relative level of credits to demand sets that) and more with subsidizing one industry vs another, or collecting revenue for the government.

Finally, the regulator can let offset credits be produced from the remaining unregulated sectors (or from inside a regulated or “capped” sector if appropriate adjustments are made), and sold to the emitters (it simply adjusts the cap so that the total level is where we want it to be). The advantage of this is that the regulations can be phased in easier, and we get a more equal price of carbon.

And what happens is that in unregulated sectors any time potential reductions exist (eg, a very inefficient emitter that could be shut down or run more efficiently), carbon developers pay up for the rights to the reduction, and that emitter finds it’s more profitable to do the right thing. The downside is that it looks like emitters are getting a profit off emissions. In reality, they are getting paid to reduce emissions for you and I, at just the right price.

Then emitters and financial parties buy and sell these credits from the government or each other or develop offset credits in a race to pay the least. And since the regulator starts reducing the number of credits it puts into the system, it’s kind of like musical chairs, the slowest, most carbon inefficient company gets left out and has to shut down, or shifts to a lower carbon production in order to stay in business.

The main advantages of cap and trade – 1) it assures us that we will meet our target goals like command and control 2) but it allows industry the flexibility to figure how to meet them cheapest (which is good for all of us), 3) it tells us what the real price (or cost) of carbon actually is, 4) and it’s better at equalizing the price of carbon so everyone pays the same across different industries and geographies, 5) in practice it costs less, and is easier to implement in a multicountry environment than command and control or tax.

Main disadvantages, it takes some time to get up and running, and makes it look like (not really true), that emitters are making money off it. Trust me, if they thought it was a profit center, they’d be all over it. The final disadvantage is it depends on the government operator to manage a market, something where we’ve had some good success (like NOX and SOX trading and up until recently the Fed), but can be susceptible to politics as usual.

In essence, you can think of cap and trade as a carbon tax with a tax rate that varies with the market (going up if industry is worse at producing carbon reductions than the government thought and down if they are better, and similiarly going down when the economy is bad and we can’t afford it and up when the economy is strong) and a tax base that is higher for emitters and emissions intensive industries than for those more efficient.

In any case, all three options need a lot of money spent on new technology and good measurement and verification. All three options will be expensive, and will be paid for by you and I at somepoint. And in practice, we are doing all three options to varying degrees right now.

Neal

Walmart Product Ecolabel Drive – The Good and the Impossible?

Walmat announced this week a drive to survey, and create from their supplies a comprehensive database and index of the environmental footprint of the products it carries.

Given the heft of Walmart and the ubiquity of its supply chain, I’d argue that its move may be the only way to bring such an index into being. For pushing for ecolabels they deserve a huge amount of credit.

But issues abound. The effort is essentially what is known as a lifecycle analysis (LCA), calculating for a given product or process the environmental footprint of the product and its own supply chain (its embedded or embodied energy, environmental or emissions content, as the case may be).

The problem is that with LCA the devil’s always in the details, a combination of the three things 1) data quality, 2) what conversion factors to use, and 3) what is known as the boundary conditions, ie, what is appropriate to count.

You know the joke about economists, put 3 of them in a room, ask 1 question, get 10 correct answers. Well with lifecycle analysts, those same 3 people give you 547 correct answers, not 10. Because those three items, especially number 3, tend to have lots of shades of legitimate gray.

That’s why rigorous lifecycle analysts generally shy away from using LCA techniques to compare 2 products or processes, as opposed to using them to assess trends in a single product. Because two products, both with perfectly reasonable assumptions as to what should be counted, often mean a “right” answer for one is not equivalent to a “right” answer for another. In fact, you know you have an idiot for a lifecycle analyst, if he or she tells you his or her answer is right, and product A is better than product B.

A simplistic example, let’s say you have a plant in Thailand, that ships 1 mm cotton shirts a year to several vendors, including Walmart, and uses 1 mm kwh of energy a year. Should the energy allocation be then 1 kwh/shirt? What if 20% of those shirts are extra large? Should the XLs get a higher allocation because they’re bigger? Do you make that allocation based on size, %, square footage, time to manufacture, or cost, or a combination? Even financial inventory accounting leaves room for differences. What if some shirts cost less than others to produce, should cost be included as a variable in the allocation, and if so, should average, LIFO, or FIFO be used? What if only 30% of the shirts go Walmart, and the others go to a place that doesn’t have ecolabels? How do we account for shifting allocations over time if products in one batch come up with different labels, or get shipped by different ships? What if one ship is 20% full and the other 100% full? And how do you allocate the energy footprint for product returns, shrinkage, or wastage? What periodicity do you pick? Allocate quarterly, monthly, annually? Not every answer is material, and not every answer is difficult in every case. That’s the whole point, it varies. All of these can have legitimately different answers depending on the nature of the business (and if we get comments on this article explaining the “right” answer, that will just highlight the point), and when you consider that multiple companies or plants supply components, and therefore part of the answer to each other to calculate the final footprint, the permutations of “right” blow out fast.

Part of the solution boils to down to better data and better standards, for which the Walmart effort will be a huge help. And don’t get me wrong, the LCA community and hundreds of different LCA databases and models have been wrestling with these issues for decades, and have a lot of experience setting standards, and are always hungry for more data. Unfortunately, the standards as a matter of necessity leave enough room for judgement to be applied, so that eco comparability across products may always be in the eye of the beholder. Bottom line: know the limitations of your data.

So huge massive kudos to Walmart for driving the world forward, again, but the real devil is that comparability within the bounds of the margin of error is virtually impossible to achieve. And it’s ripe for gaming.

Neal Dikeman is a partner at Jane Capital Partners, and has cofounded, run, invested in, or served as a director of multiple startups in cleantech and technology. He is Chairman of Carbonflow and Cleantech.org, and a Texas Aggie.

Getting Smart About Agriculture

Nine months ago, I joined Terraqualo, a new startup aimed at helping growers of specialty crops make best irrigation decisions, using a cost-effective wireless network of sensors and actuators. In this new weekly column on “Sustainable Agriculture on Cleantech Blog”, I will share some of the lessons I have learned, and invite you to contribute as well in the form of comments. 

Whether you are an investor looking to invest in an agriculture technology startup, or an engineer with a high-tech idea for agriculture, eventually, you are going to need to do your homework, and understand the business of agriculture. As I have discovered, getting into the field of agriculture high-tech  requires the ability to grasp multiple disciplines, and a good dose of humility. Before you go out and talk to the experts, UC Davis professors, farm advisors, commodity groups, and growers, I suggest you get smart very quickly, using the vast knowledge available online. Here are some of my favorite sources,
USDA websites:
  • NASS (National Agricultural Statistics Service)
  • ARS (Agricultural Research Service)
  • NRCS (Natural Resources Conservation Service)
  • ERS (Economic Research Service)
  • Census
UC  ANR (Division of Agriculture and Natural Resources) 
Scientific papers:
Farmers’ publications:
Happy research!
Marguerite Manteau-Rao is VP Marketing for Terraqualo, a new venture in precision irrigation for growers of specialty crops. Marguerite is the creator of  La Marguerite, a popular environmental blog, and has written extensively for a number of other blogs, including Huffington Post Green. She has a multidisciplinary background as an engineer, marketer, and  social worker. You can follow her on Twitter .

Piss-Powered Cars Move Closer to Reality

by Richard T. Stuebi

Although I pride myself a little bit on some of the titles for my posts (I was a headline writer for my high school newspaper), even I couldn’t make this one up.

Credit must be given where credit is due: earlier this month, Fast Company hosted a research note by Ariel Schwartz about the development of an approach to produce hydrogen from urine that requires much less voltage than is necessary to electrolyze pure water.

Yes, that’s right: hydrogen produced cheaply from urine, one of the most renewable of all resources.

I’ve written previously about piss-poor cars, but someday in the future, we may be talking about piss-powered cars.

Thanks to Kristi Spears Tanner of the Ohio Business Development Coalition for making me aware of this development, via a link on her Facebook page. Always looking for good things to promote from Ohio, Kristi noted that it should be no surprise that this whizzy technical innovation was made by researcher Geraldine Botte at Ohio University.

So, to do your part to move us towards the hydrogen economy, all you may have to do is go down to your local pub and have a few. After all, you don’t ever actually buy beer, you just rent it.

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 Managing Director of Early Stage Partners.

Blogroll Review: P-Power, B-Buy, C-Can

P-Power

Pee power. Scientists may have found a way to extract hydrogen from urea, one of the main major components in ordinary pee. That compounds is way for the body to get rid of toxic ammonia that comes out at the end of various metabolic processes.

In many rural areas, urea would be the ideal source of nitrogen for fertilizing plants but it may also be a source of power one day.

Hank Greek at EcoGeek says:

Gerardine Botte at Ohio University has figured out an easy and efficient way to break the bonds in urea to produce hydrogen. The process consumes roughly one quarter of the energy needed to electrolyze water. And, yes, the world has a fairly plentiful (and renewable) supply of urea. Maybe not enough to power all our cars, but it’s a start.

And all this time, I was only interested in the nitrogen. 🙂

B-Buy

Best Buy! This next story is about the role of national retailers in transforming the economy to greenness. Joel Makower gives us Best Buy as an example. He sums it up really nice as to the role of these big companies:

While cutting-edge innovation will likely come from countless start-ups, it will be up to the mass merchandisers to accelerate market uptake beyond the green devotees and early adopters.

C-Can

Canadians can! The country up north is one of my favorite countries. I’ve also wondering what the government was doing to encourage corporate sustainability. Our friend Tyler Hamilton at Cleanbreak has a summary.

In other news, Robert Rapier reminds us that thermodynamics wins.

Celcias reports that the 100th coal plant has been defeated. I’m sure Lester Brown would be proud!

Finally, is the big battle between Google and Microsoft? Earth2Tech suggests otherwise.

Boone Pickens Mega Texas Wind Farm on Ice

Short and sweet.

Boone Pickens announced this week that his mega wind farm was icing an eventual 4,000 MW windfarm this week. Apparently he’s looking for buyers for $2 Bill in turbines. A far cry from a year ago when your credibility as a wind developer hung in part on whether or not you had turbine supply.

As difficulty constructing the transmission lines was the stated reason for the the about face, I guess even Texas can’t always throw up a transmission line wherever it wants. California utilities have been struggling with this issue for years.

T&D remains the seminal issue, second only to how big are the subsidies and RPS requirements, in building renewables into true scale.

And for those of you who haven’t read the Pickens Plan to switch a chunk of our power sector from gas to wind, and a chunk of our transport sector from oil to gas, details here.

Neal Dikeman is a partner at Jane Capital Partners, and has cofounded, run, invested in, or served as a director of multiple startups in cleantech and technology. He is Chairman of Carbonflow and Cleantech.org, and Texas Aggie.

The Past Few Hectic Weeks in Climate Change

The last few weeks have seen a number of big moves in climate policy.

US EPA Lets California Regulate GHG Emissions in Cars – On June 30, 2009, the US EPA backed off and let California Air Resources Board proceed with its longstanding plans to regulate greenhouse emissions from cars, after long resistance from the Bush Whitehouse.

Quick & Dirty Analysis – When it comes to the environment, where goes California, goes the US, eventually, and in climate policy where goes the US goes the world, probably. At the very least this plus a California low carbon fuel policy will make for interesting auto industry machinations at least.

Waxman-Markey Passess – This month, the US climate change bill Waxman Markey passed the House. On to the real battle, in the Senate.

Quick & Dirty Analysis – We’re out of the House, but the battle’s begun. Compromises are good, since it was never going to get through the Senate without them, especially since the US has a huge geographic divide over the economic impacts of cap and trade. The bill is a study in compromise, but this was a big, big test ahead of Copenhagen.

And the G8 starts thinking climate change.

Quick & Dirty Analysis – This is good. Climate change solutions are are heart a trade problem, not a local environmental protection problem like NOx, SOx, et al. The Bush policy, and the Clinton policy (both of them), and the McCain policy, and hopefully the Obama policy, was always to circle up the big emitters, including China, Russia, India, Brazil + the rest in the G8, and get on the same page. Until that happens. No nice for saving the world.

Neal Dikeman is a partner at Jane Capital Partners, and has cofounded, run, invested in, or served as a director of multiple startups in cleantech and technology. He is Chairman of Carbonflow and Cleantech.org, and Texas Aggie.

Ford Grabs Market Share

If you are working at Ford (F), it looks like the downturn in auto sales is ending. In June, sales fell only 11 percent over a year ago. Optimism does not permeate all of Detroit; General Motors (GM) sales feel 33 percent for the month; Chrysler, 48 percent. Even Toyota (TM) U.S. sales were down 32 percent June over June last year.

Ford is the only one of the Big Three Detroit auto makers that avoided bankruptcy and a federal bailout.

Ford ended June with a 60-day supply of vehicles on hand, down 38 percent from a year ago. Fewer inventories could lead to improved profit margins. Those inventories will shrink with a new “cash for clunkers” program that provides added government discounts of up to $4,500 for trade-in vehicles getting less than 19 mpg. It’s not all rosy, however, with many potential buyers being unable to get an auto loan.

Fuel Economy

Oil prices have doubled – fuel economy is back in. Ford helps at the pump with new EcoBoost technology and hybrid technology. Ford is the only Detroit maker that was on Clean Fleet Report’s Vehicles with the Lowest Carbon Emissions.

June sales of the company’s hybrid vehicles totaled 3,649, up 91 percent versus a year ago. Ford will extend its current hybrid success with added models. During my recent test-drive of several vehicles that already meet the 2016 CAFE requirements, the midsized Ford Fusion Hybrid demonstrated that you can enjoy fuel economy in a larger car with comfort and safety. The Ford Fusion Hybrid has an EPA certified rating of 41 mpg in the city and 36 mpg on the highway. The car can be driven up to 47 mph in electric mode with no gasoline being consumed. Ford will start selling pure battery electric vehicles next year that will lower its fleet mileage average. CAFÉ

As gas prices increase, the Ford Ranger pickup sales also increased. The model with a 2.3L engine and stick shift gets the best gas mileage of any U.S. pickup at 23 mpg. Ford has the mileage champions in both pickups and SUVs.

The best mileage SUV on the market is the Ford Escape Hybrid with 32 mpg. In 2012, Ford will also offer a plug-in version of the Escape Hybrid that will blow-away the 35.5 mile standard.

Electric Future

The expansion of hybrid, plug-in hybrid, and battery-electric offerings will be helped by Ford recently securing $5.9 billion in federal loans with a lower 5 percent interest rate.

Ford’s first EV will be the new battery-electric Transit Connect vans. These city vans will appeal to green retailers and service companies that make deliveries and follow routes that match the 100 mile range of the electric vans. The vans are made in collaboration with Tanfield’s (TAN.L) Smith Electric are now selling in Europe and will start U.S. sales next year.

In 2011 Ford will offer a new battery-electric Focus sedan made in collaboration with Magna International (MGA). Now that most U.S. citizens live in urban settings, the idea of a primary or secondary car that never needs gasoline will have growing appeal.
In 2011 Ford will offer a new battery-electric Focus sedan made in collaboration with Magna International. Now that most U.S. citizens live in urban settings, the idea of a primary or secondary car that never needs gasoline will have growing appeal. Although Nissan will have a head start with thousands of freeway-speed electric vehicles already in use by U.S. customers, Ford could catch-up if it offers the Focus EV for less than $30,000.

The competition will boost revenues for Ford battery supplier Johnson Controls-SAFT; Nissan is in a li-ion JV with NEC.

In 2012, the Ford Escape Hybrid, already the most fuel efficient SUV, will get a lot more efficient by also being available as a plug-in hybrid. The PHEV Escape Hybrid is already being tested in a number of fleets.

“In 10 years, 12 years, you are going to see a major portion of our portfolio move to electric vehicles,” Ford CEO Alan Mulally stated earlier this year. Now Ford is executing its electrification strategy.

By John Addison. John Addison publishes the Clean Fleet Report and speaks at conferences. He is the author of the new book about the future of transportation – Save Gas, Save the Planet – now selling at Amazon and other booksellers.

The Rules in Cleantech

I’ve now been asked enough times, that at the risk of destroying what little edge Jane Capital may have in cleantech, I finally got around to blogging our “Rules” in cleantech investing and business in general. Hopefully it will stimulate some good debate.

One of the things that makes cleantech different from other investing areas, is the best practice rules are the opposite of what the best investors have grown up with. Maybe that’s because cleantech IS energy and energy IS different.

Here is our version of the Rules:

  1. Energy is slow and big – Energy technology R&D and commercialization time frames are longer and costs higher
  2. Technology is “cheap”, the scale up is where all the risk is
  3. There is no disruptive technology in energy, only disruptive policies and resource shocks that make certain technologies look disruptive after the fact – aka, “it’s the policies (and subsidies), stupid”
  4. At scale, there is no capital efficient investing in energy
  5. Commodity prices and policy tend to be more important variables than technology and management
  6. Energy is at heart a resource play, the price you pay matters more than what you do with the resource

As a result we’ve worked out a strategic playbook:

  1. Look for mature technologies – if it’s not 10 year old technology, don’t touch it.
    Limit scale up risk and look for technology with few dependencies for scale
  2. Embrace policy – solid policy frameworks are much better bets than great technologies. In fact, most of the serious money in cleantech has been made by being in the right place when the policies or subsidies hit critical mass, not by developing technologies after the fact.
  3. Expect lower exit multiples, and target lower burn rates over a longer commercialization time as a result
  4. Discipline wins. Think Stage Gate and SPC instead of venture style “massively parallel” R&D commercialization strategies
  5. Don’t be afraid to play a diversified investment strategy
  6. Don’t ignore Acquisition & Development as a viable growth strategy
  7. Don’t be afraid of good low tech deals, that’s where many the cleantech hits have been (if we haven’t heard “that’s not a venture bet” 3 times, we tend to stay away.)
  8. “Powder dry approach” – deploy limited capital early on for larger stakes and focus on returning capital quickly, not rapidly deploying capital
  9. Secure vastly superior market intelligence before moving – stealth is pretty much a worthless strategy, you’re too likely to miss key things that way.

And I thought I’d share a few paraphrased quotes told to me over the years that have helped bring these thoughts home:

A former boss, now an executive at a major utility – “the only thing that matters to the bottom line of the company are the rate cases in front of us. Nothing else we can do with customers, finance, or technology will make a difference if those don’t go well.”

A former head of oil company venture fund on why it takes so long to get technology into the energy sector – “we figure we are taking enough risk just letting a vendor touch our $1 billion platform.”

My father in law, a long time refinery engineer and manager on what small scale means in energy – “let me take you on a refinery tour during a turnaround sometime and show you what half a billion looks like lying on the ground.” Corollary, “you can’t do anything serious at a refinery for less than $100 mm.”

Electrochemist and long time fuel cell researcher on the challenges of making a FC last – “if you could perfectly control humidity and temperature, a PEMFC will run forever.” He was pointing out that it’s much easier said than done.

Energy company technology head – “I don’t want to see the business plan, just show me the energy balance and the engineering behind it, and the data backing it up.”

I’d welcome other people’s thoughts on investing in cleantech and energy technology. So comment away.

Neal Dikeman is a partner at Jane Capital Partners, and has cofounded, run, invested in, or served as a director of multiple startups in cleantech and technology. He is Chairman of Carbonflow and Cleantech.org, and Texas Aggie.

Climate Change Legislation and the Midwest

by Richard T. Stuebi

As virtually every reader of this blog probably knows, Congress has recently made more progress on climate change legislation than it had ever before achieved. The House has now passed the American Clean Energy and Security Act (H.R. 2454), more commonly known as the Waxman-Markey bill.

The path forward for this bill is likely to be torturous. In the Senate, conventional wisdom is that passage is within reach if all Democratic Senators vote for a bill (augmented perhaps by a few Republican votes). But there’s a significant swath of Democratic Senators who are, at best, “on the fence” about supporting climate legislation.

Many of these swing votes reside in the Midwest, where a group of Senators loosely called the “Gang of 16” have publicly raised concerns about the prospect of climate legislation. As you might expect, their concerns largely stem from the potential economic harm that might be borne by Midwestern interests — through higher electricity prices and reduced global competitiveness in industrial markets — as a result of policies adopted by the U.S. to reduce carbon emissions.

Against this backdrop, over the past year, the Chicago Council on Global Affairs convened a Task Force, comprised of regional thought-leaders in the private, academic and non-profit sectors, to consider the challenges facing the Midwest in moving to a carbon-constrained world. The goal: to make a public statement to elected officials from the Midwest on appropriate directions for climate policy.

In June, the Task Force released its report “Embracing the Future: The Midwest and a New National Energy Policy”, which represented a synthesis of the perspectives of the Task Force members (of which I was privileged to be one).

The report is based on the presumption that human-induced climate change is occurring, and a national policy to mitigate emissions contributing to climate change is appropriate to put in place. The report offers no safe haven to those who believe climate change is bunk — or even if real, is not worth doing anything about. Rather, the question that the report wrestles with is what kind of climate policy should be put in place that will maximize opportunities for Midwestern economic revitalization while minimizing the downsides to the Midwest, given the region’s inherited assets and liabilities.

The summary findings of the report contain little that is groundbreaking:

1. “The Midwest can and must turn the challenge of changing energy and climate policy to its economic advantage.”
2. “Prompt enactment of national climate change legislation is essential to the Midwest’s future prosperity and competitiveness.”
3. “Regional and local action [in the Midwest] is likewise essential.”
4. “Addressing carbon emissions will not be cheap.”

To the last point, the report emphasizes the urgency of capturing the full range of economically-attractive energy efficiency opportunities — many of which are available at negative cost to society — or else the costs of climate policy are likely to be much higher. Ditto, the report advocates that emissions offsets be allowed in climate policy so as to enable economic sectors (e.g., agriculture) offering low-cost emission reduction possibilities to contribute to the overall solution at reduced societal cost.

Arguably, more important than what the report says is who the Task Force represents. The Task Force was co-chaired by John Rowe, Chairman and CEO of Exelon (NYSE: EXC), and included active participation by senior executives from such industrial stalwarts as Arcelor Mittal (NYSE: MT), Caterpillar (NYSE: CAT), Duke Energy (NYSE: DUK), Ford (NYSE: F), and Johnson Controls (NYSE: JCI).

Opponents of Waxman-Markey, or of any climate change legislation, will have difficulty claiming that these Midwestern industrial employers don’t accurately reflect the interests of old-line manufacturing concerns. If these companies are saying we can cost-effectively — and therefore should — do something to address climate change, it adds a lot of credibility to the position of taking definitive action.

Would it were that more Midwestern companies had the type of visible and proactive leadership exhibited by Mr. Rowe. At an event publicizing the release of the report on June 8 in Chicago, Mr. Rowe stated his strong support of Waxman-Markey (notwithstanding its imperfections), and urged those with close friends in D.C. to enlist more support. In the Senate, this means solidifying the positions of the Midwestern Gang of 16.

It will be an interesting summer here in the Midwest — the key battleground for the fate of climate change legislation.

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 Managing Director of Early Stage Partners.

The Colorado Cleantech Opportunity

By Joel Serface – July 2, 2009

In June, I took a great camping trip to a truly unique feature that many outside the state of Colorado know little about. It was the Great Sand Dunes National Park – the tallest sand dunes in North America with the backdrop of the Sangre de Cristo Mountains. I arrived at the perfect time of the year when the temperature was warm enough to simulate a beach environment (small waves included), but before the snowmelt ceased over the course of the summer. It was a fantastic experience, but few other than Coloradans knew about this well-kept secret nestled in the interior of a beautiful state.

I found this a good analogy for the Colorado cleantech opportunity. While I have been in Colorado for only a year, I feel that I arrived at that perfect time when all the conditions were right for a unique experience that could only happen here and that few outside of the state know about. Could it be the perfect time for everything to converge in Colorado allowing it to become the leading cleantech state?

When I arrived to Austin in 2006, I conducted an inventory of local cleantech companies. I found around 20 of what I considered viable cleantech start-ups in Austin and over the time I was there helped grow this to around 40 through starting, recruiting, or coaching companies into the community. When I arrived to Colorado, I found a very surprising thing. In the Front Range – the area stretching from Colorado Springs to Fort Collins – alone, I was able to inventory almost 200 cleantech companies (not including the many services companies that comprise almost 1,778 reported by the Pew Center / Cleantech Group in Colorado). After meeting with many of these companies and delving deeper, I found that there was an incredibly fertile environment for these companies in Colorado with only a few key limitations.

Let’s start with the strengths of Colorado that created this environment…

  • Energy and technology industry expertise – The Colorado Front Range boasts something that no other major population center does… A location where the technology industry and traditional energy industry coexist. This translates into one of the few centers where both talent for cleantech company development and project development can both be executed.

  • Ease of recruitment / low cost of doing business – Colorado is a state that carries significantly lower costs than other tech states such as California and Colorado. Colorado also boasts among the of the most highly-educated workforces. Because of the low cost of living, highly-educated workforce, and an environmentally-friendly culture that values outdoors and quality of life, it is not difficult to recruit people from all over the United States to move here.

  • State leadership – Colorado has had strong leadership at the state and national level for a number of years around renewable energy. By setting a 20% Renewable Portfolio Standard and a statewide solar rebate, the state has signaled that it is open for clean energy business. Bill Ritter, the Governor of Colorado, is one of the most progressive governors on renewable energy issues that I have met and has an excellent supporting executive team in its Governor’s Energy Office and Office of Economic Development. Because of their leadership and other factors above, Colorado has attracted major new renewable energy companies including Vestas, Siemens, ConocoPhillips, Abengoa Solar, and others to the state. They have also been successful in this despite the lack of other tools (see below) that other states have in place.

  • Thought leadership – In addition to research and state leadership, Colorado has a legacy of thought leadership in a number of areas such as green building, energy efficiency, smart grid, and energy analysis. Most already know the great work of Amory and Hunter Lovins and the Rocky Mountain Institute, but several other leading analyst firms exist. eSource, IDC Energy Insights, and Architectural Energy Corporation are all located in Boulder. NREL also maintains one of the largest renewable energy and energy efficiency analysts corps in the world in its Energy Analysis group.

  • City / community leadership – Boulder and several other communities have taken on leadership in vital areas such as its Smart Grid City efforts with Xcel Energy and in building efficiency standards and protection of open space. It is community and city leadership that are going to provide test beds for the integration of larger technologies at the city level. Denver, Fort Collins, Colorado Springs, and many smaller communities (including mountain communities that are seemingly off grid) each have their respective efforts around energy and environmental leadership.

It’s not all rosy in Colorado. One of the major complaints at the state level are that they have limited economic development funds to help attract or re-locate companies. In my conversations with leaders in the state, I have expressed that their leadership is much more important in creating markets for clean technologies than in providing cash incentives. Leadership, markets, and environment all combine to attract companies to the state; having a little bit more economic development funding could be helpful in rounding out that portfolio, but not a requirement in moving major companies to the state.

A further weakness in building early stage companies in the state is its lack of “domestic” venture capital. Given the ideaflow, creativity, and talent here, it is disappointing that there are no cleantech-focused investing professionals on the ground here to help build early-stage companies providing the coaching and governance necessary to move them to their next stage of development. Several local generalist firms have tipped their feet in the water, but have not made this a large portion of their portfolios. A leading energy technology fund in the state makes very few investments in the state and even fewer in early-stage clean technology companies. There is a robust angel community of former entrepreneurs in Colorado, and a few of them are ramping up their cleantech investments. But still, most of the cleantech venture capital in the state today still comes from coastal VCs.

Like Great Sand Dunes National Park, Colorado is a relatively unknown commodity in cleantech. Many investors on both coasts suspect it has tremendous potential and will occasionally make it to the state to look at opportunities. Unfortunately, unless the investor is on the ground or has native ties here, many of these opportunities will be overlooked.

After a year here, I can attest that this will become one of the best places to build clean technology companies in the United States as all the above conditions converge and successful role model companies emerge.

Joel Serface served as NREL’s first Entrepreneur in Residence with Kleiner Perkins Caufield & Byers. As an investor and entrepreneur, Joel has planted cleantech seeds in Massachusetts, California, Texas, and now Colorado. Since 2000, Joel has started or invested into more than 20 cleantech companies with 5 liquidity events so far and has catalyzed the formation of numerous supporting cleantech institutions and regional and national policy initiatives.