New Honda Fit EV likely to cost less than Nissan LEAF

The New Honda Fit EV will go on sale for U.S. customers in 2012. By using the lighter Honda Fit platform, already in volume manufacturing, Honda could price the Fit EV at $29,900, less than the Nissan LEAF with a minimum price of $32,780.

The Fit EV was announced at the LA Auto Show as a concept. As crowds of reporters surrounded the car for photos, I could see that this new battery-electric car will be popular with current drivers of hot compact hatchbacks such as the Honda Fit, Toyota Yaris, Ford Fiesta, Chevy Cruze, and Mini-Cooper. In the next few months the Fit EV will hit the streets with real world daily driving at Stanford University, City of Torrance, and Google’s fleet and car share programs. The Fit EV will be introduced to the U.S. and Japan in 2012. The Fit EV will compete with the Nissan LEAF, Toyota FT-EV, Ford Focus Electric, and several others as competition heats for 2012 leadership.

This was the first time that a new global vehicle was personally announced by a Honda CEO at a U.S. show. Takanobu Ito, Honda Motor Co., Ltd. President and CEO. Stated, “We must advance from using less petroleum to no petroleum…. In Honda’s view, an electric vehicle must offer great utility and be fun to drive. Fit EV’s urban commuting capability will be a perfect addition to the full-function mobility of the plug-in hybrid and FCX Clarity fuel cell electric vehicle.”

Honda Fit EV is 100% Electric

I talked with Ben Knight, Honda’s Vice President of Engineering, about these new electric vehicles. Mr. Knight was proud that the electric drive system represent four generations of improvements for Honda starting with the Honda Plus EV in 1997 to Insight and Civic Hybrids to generations of advanced fuel cell vehicles with all-electric drives to the new CR-Z Hybrid. At optimal RPM, the new electric motors are up to 98 percent efficient. This is quite a contrast to the typical 15 percent efficiency of a gasoline engine.

The Fit EV is designed to meet the daily driving needs of the average metropolitan commuter and utilizes the same 5-passenger layout found in the popular Fit hatchback. The Fit EV is be powered by a lithium-ion battery and coaxial electric motor. The high-density motor, derived from the FCX Clarity fuel cell electric vehicle, delivers excellent efficiency and power while remaining quiet at high speeds. The Fit EV will have a top speed of 90 mph.

The Fit EV will achieve an estimated 100-mile driving range per charge using the US EPA LA4* city cycle (70 miles when applying EPA’s adjustment factor). Driving range can be maximized by use of an innovative 3-mode electric drive system, adapted from the 2011 Honda CR-Z sport hybrid. The system allows the driver to select between Econ, Normal, and Sport to instantly and seamlessly change the driving experience to maximize efficiency or improve acceleration. While in Econ mode, practical driving range can increase by as much as 17 percent compared to driving in Normal mode, and up to 25 percent compared to driving in Sport mode. The Nissan LEAF Eco mode only improves range by 10 percent. Acceleration improves significantly when in Sport mode, generating performance similar to a vehicle equipped with a 2.0-liter gasoline engine.

In addition to the 3-mode E-Drive system, the Fit EV will include several interactive coaching systems to assist the driver in maximizing battery range. A special meter display advises the driver when to shut off air conditioning and other accessories to conserve battery power.

Remote Control for New Electric Car

To help the driver manage the electric vehicle ownership experience, the Fit EV will have a standard connectivity system that allows the driver to stay connected through a smartphone and personal computer, or the Honda-exclusive interactive remote, while away from the vehicle. The pocket-friendly, interactive remote provides connectivity to the vehicle without the need for an internet connection or mobile phone signal. Through the connectivity system, drivers will be able to remotely view the vehicle’s state of charge, initiate charging and activate the air conditioning, even while connected to the grid, to reduce the drain on the battery at start-up. The mobile application and website also offers the ability to set charging notifications and alerts to optimize utility rates, and provides 24-hour roadside assistance, along with a public charging station locator. The Fit EV will come equipped with a standard Honda Satellite Linked Navigation System™ that includes a public charging-station locator capability.

The Fit EV is designed to be easy and convenient to charge. Battery recharging can be accomplished in less than 12 hours when using a conventional 120-volt outlet, and less than six hours when using a 240-volt outlet. The Fit EV has unique LED headlights, a chrome front fascia, aerodynamic bumper, clear LED taillights and EV decals. Inside, the Fit EV Concept is outfitted in an eco-friendly gray bio-fabric on the seating surfaces.

Displayed alongside the Fit EV Concept at the show is a prototype Honda charging stand. To begin charging, the driver swipes a card in front of the screen and then connects the charger to the vehicle. The Honda charging stand provides a glimpse at the future of an electric-charging infrastructure that is easy to use and intuitive for consumers.

Clean Fleet Report: Honda 2012 Plug-in Hybrid

Getting Lucky With Water Technologies

by Richard T. Stuebi

For cleantech investors in the water space, one of the most attractive aspects of the water technology sector is that there’s a well-established set of well-heeled companies with strong interests in building their water businesses via acquisitions.  This list includes most prominently General Electric (NYSE: GE), Siemens (NYSE: SI), and Veolia (NYSE: VE):  multi-billion dollar global corporations who are accustomed to buying smaller companies to achieve growth targets.

This list has recently grown:  the Korean conglomerate LG (KSE: 066570.KS), formerly known as Lucky Goldstar, recently announced their intentions to make a major move into water treatment technologies.  Their aspirations are very ambitious:  $400 million allocated for investments to reach a $7 billion revenue target by 2020.

The addition of LG further improves exit dynamics for water tech ventures.  It will be interesting to track M&A activity in the water arena in the coming years.

What’s Beyond Zero Emissions Vehicles?

by Paul Hirsch

The automotive industry has invested billions in alternative fuel technology since that first Prius rolled off its assembly line. And these days a growing portion of that investment has been focused on zero emission technologies, such as battery electric vehicles (EVs) and hydrogen fuel cells.

Yet as a professional tasked with commercializing the next generation of alternative fuel vehicles, I can’t help but feel like zero just isn’t good enough. Pushing emissions off board and upstream to a dirty power plant may solve the automaker’s problems, but it doesn’t solve the Earth’s.

Which is why I was truly excited when, last week at the Los Angeles Auto Show, Honda introduced their “total energy management system.” The system consists of an EV, like the electric Fit they debuted at the show, as well as a Honda-developed solar charging station. An experimental solar hydrogen station is already being used to power the company’s FCX Clarity fuel cell vehicle. Honda is not only thinking about how many EVs they can put on the streets, but how to guarantee their customers a clean energy commute day after day.

This is not the first attempt by an automaker to offer its customers a clean energy solution. Tesla Motors has promoted a Solar City charging station for its electric Roadster, demonstrating Elon Musk’s strategic interest in providing the clean electrons to power his clean car (Musk is CEO of Tesla and led the initial funding of Solar City). The Tesla-Solar City project and Honda’s recent announcement highlight a new opportunity for the auto industry – end-to-end sustainable personal mobility.

Where the industry goes from here is anyone’s guess, but the possibilities are promising. Toyota already operates a housing development subsidiary in Japan that offers homes equipped with solar panels and rainwater recycling systems. Imagine the experience if this business were integrated with Toyota’s automotive operations: when you buy into an “ecommunity” of carbon-neutral dwellings, selecting the battery range of your plug-in vehicle could become as routine as picking out your home’s paint color or bathroom tile. Or better yet, you could select to participate in a community car share program to accommodate a less frequent need for your own car.

This vertical integration of energy generation stations with the vehicles that demand their energy would go a long way toward aligning auto industry objectives with the needs of the planet. If automakers were also fueling their vehicles, they would have a strong incentive to make cars as efficient as possible. And that vertical integration would bring us much closer to a future of sustainable personal mobility.

Paul Hirsch is a Senior Product Planner at Toyota.

Toyota Readies 3 Electric Cars for 2012 Dealer Sales

600 Toyota Prius Plug-in Hybrids are now being driven daily in the U.S., Europe, and Japan. Commercial, government, and university fleets and individual drivers are putting this advanced Prius through its paces. Toyota is targeting 50,000 unit commercial sales in 2012 of this PHEV with a 14-mile electric range. Toyota is discussing a price of over $30,00 for the Prius Plug-in, even though it has only 5 kWh lithium battery pack in comparison to 16 kWh in the Chevrolet Volt with its 40 mile electric range and 24kWh in the Nissan LEAF with its 100 mile electric range.

The RAV4 EV Powered by Tesla was Toyota’s center stage announcement here at the Los Angeles Auto Show. In 1997, 1,484 RAV4 EVs were sold. Remarkably half of these early EVs are still in use and their owners love them. Toyota, which owns 2 percent of Tesla, is bringing back this popular SUV in a stylish new body. It will have an electric range of 80 to 110 miles using 30 to 40 kWh of Panasonic battery cells integrated into a Tesla pack – impressive for an SUV. The body will be built by Toyota in Canada, the drive system by Tesla in California, and the final assembly site has yet to be determined.

In 2012, a stylish city car iQ-based EV will also be introduced in the U.S., Japan and Europe. Launch preparations call for road trials in Japan, U.S., and Europe starting in 2011. Launch in China is also being considered, with road trials planned for 2011.

Toyota’s Future Advanced Energy Storage

Toyota is putting 100 electric SUVs on the road each with a range of over 400 miles. Fleets will include the Port Authority of New Jersey, San Hydro, my Alma Mater University of California at Irvin and other fleets that have 10,000 psi hydrogen fueling stations. TMC is continuing development of a sedan-type fuel-cell hybrid vehicle (FCHV), with sales aimed to start in around 2015 in Japan, the U.S. and Europe. I was impressed with my test drive of the previous generation Toyota FCHV.

TMC is researching development of next-generation secondary batteries with performance that greatly exceeds that of lithium-ion batteries.  Such research is aimed to help bring about the revolutionary advances in battery performance that will be necessary for the broad adoption of electric-motor-propelled eco-cars.

  • Solid-state batteries: TMC has successfully reduced what is known as particle resistance and has made progress toward creating full solid-state batteries in a promising compact package.
  • Metal-air batteries: TMC has determined the reaction mechanism of lithium-air batteries and has clarified its research policy regarding the batteries as rechargeable secondary batteries.
  • TMC established a division charged with studying production of next-generation batteries.  The division, with a staff of approximately 100 researchers, is accelerating its research.

TMC believes that eco-cars can have a positive impact on the environment only if they are widely used.  TMC will continue to improve the fuel efficiency of its conventional combustion-engine cars, which account for the majority of its sales, while raising performance, reducing costs and expanding the company’s product lineup.  Within these efforts, hybrid technologies—consisting of the basic technologies necessary for development of various eco-cars—are positioned as key technologies to achieve both high fuel efficiency and driving performance, and to facilitate the use of various fuels with the aim of creating a low-carbon society through response to the need to diversify energy sources.

Toyota plans to extend its leadership with 11 new hybrids from Toyota and Lexus.

Burger, Not Well Done

by Richard T. Stuebi

Last week, First Energy (NYSE: FE) announced that it was pulling the plug on a planned biomass conversion of its R.E. Burger coal powerplant.

This proposed project had been a source of controversy since it was first unveiled in April 2009.  At that time, special favorable treatment was being offered by the state of Ohio to the proposed project, wherein First Energy was to have received additional renewable energy credits (RECs) for agreeing to burn woody biomass instead of coal at the Burger plant.  This granting of so-called “bonus RECs” was accomplished by tucking a line-item into a completely unrelated bill, which was passed by the Ohio Assembly and signed into law by Governor Ted Strickland as part of a brokered deal with First Energy and local officials and labor leaders seeking to preserve employment at the beleaguered plant in depressed southeastern Ohio.

Alas, to many observers, the deal smelled a lot more like manure than burning wood:  a recent analysis by Bloomberg New Energy Finance hinted that the bonus REC provisions associated with the planned Burger biomass repowering could have potentially “obliterated” the Ohio renewable energy markets — a market that had only been created the prior year with the passage of SB 221 including the creation of a renewable portfolio standard (RPS) requirement for Ohio utilities.  The glut of extra RECs associated with the Burger biomass repowering would likely have fulfilled First Energy’s RPS requirements for years to come, thereby kneecapping the development of other worthy renewable energy projects in Ohio — which was, after all, the intent of the SB 221 RPS.

Assessing the aftermath of the Burger debacle:  Ohio lawmakers have created an unfortunate precedent for making exceptions to the RPS bill for politically-preferred projects.  First Energy spent a reported $15 million on engineering work for a project that has now died — and I’m guessing that First Energy’s customers will likely foot the bill for work that turns out to be irrelevant.  Lastly, plant employees find out that the grand pronouncements of the past year turned out to be hollow, and the economic promises were in vain. 

All in all, a story with no real winners and lots of losers.

The Triple Crown in Solar

Like it or not, solar is still the crown jewel in cleantech.  Whither goes solar, there goes cleantech.  So I got to thinking about the next decade in solar, and what will determine which companies achieve primacy.  I think there are three races in solar technology to watch these days.  Call it the Solar Triple Crown.  The three races that matter.

Yield! Yield! Yield! – The race to yield performance at volume in thin film.  In thin film, getting the best performing device has never been the issue.  Getting a repeatable process, at scale, on the second and third plant, with solid performance, but most importantly yield, yield, and yield has always been the issue.  We’ll call this our Kentucky Derby of solar, and First Solar has just about won it.   Whether anyone else ever catches them may even be considered irrevelant to the solar industry as a whole now, the race has been run.

Thin X Marks the Spot – The crystalline race to thin.  I was quoted a while back saying that the future of solar in the US was all about thin film, since we’d missed the boat on building a solar manufacturing base in the first wave, and everything else was about fighting low cost manufacturing in China, where we were unlikely to win.  I’ve got a caveat to that now.  A friend of mine in the solar test equipment business told me about a year ago that he knew of a large number of crystalline companies whose research programs were targeting taking two-thirds to an order of magnitude out of the thickness of their technology, in an effort to stay relevant in an increasingly thin film ruled world.  Then at the Cleantech Open Gala I emceed last week, the people’s choice winner was announcing the same thing, a path to higher performance at one quarter thickness.  In crystalline, thickness generally equals cost.  And the materials cost difference between the devices was the core value propostion thin film always pitched over crystalline.  So I’ll caveat my earlier comments that the US solar future is all about thin film.  Maybe it’s about the race to thin in crystalline.  If they can, the thin film (or First Solar if you prefer) Triple Crown coronation might not be cake walk, Kentucky Derby win or not.  We’ll call this the Solar Preakness.  It’s a little longer, a little tougher, and it’s still being run.

Tracker, tracker burning bright – The race to the perfect moving part.  But thin film versus crystalline is no longer the only game in town.  Now it’s about trackers, too.  I never liked trackers.  I always felt one big advantage of solar as a long lived, low operating cost technology was its lack of moving parts.  Using trackers of course, would eliminate that.  But I’ve started changing my thinking.  As the winners of the first two races emerge, trackers become the next big thing.  The technology that makes all others better.  The next largest area of potential performance and $/kwh performance improvement. Serious power for serious people.  The long race, that’s less flashy, and more a grind than the first two.  The Belmont of Solar.  And in trackers, it’s going to be about simplicity, yes, cost, yes, but just like the Belmont, mainly about longevity.  11 horses have won the Kentucky Derby and the Preakness since Affirmed last won the Triple Crown in 1978.  All fell short to the grind of the Belmont.

According to Wikipedia, as of 2008 3,889 horses had entered one of the three races.  274 horses have won a race.  50 have won two legs.  Only 11 have won the Triple Crown.  I think in the Solar Triple Crown the Kentucky Derby’s been run and won.  Maybe still a fight, but the we’re largely on to the next race now. The Preakness is just beginning, and no clear winner has yet emerged.  And Belmont hasn’t really started.  But it will.

And that’s good news for all of us in the industry.

The “Smart Grid”: An Overview

By David Niebauer

The electricity transmission and distribution grid in North America is awe-inspiring.  Often called the “world’s largest machine”, the Grid connects huge power generating facilities with end users (both residential and commercial) in a system that would have been considered magic only 150 years ago.

The big news of the 21st Century is that the Machine is getting a significant upgrade.  The electricity grid was designed to distribute power, and power only, in one direction:  from generation to end-user.  This system worked fine when electricity was a novel resource and relatively abundant, but it is rife with waste and inefficiency. Because there is no practical way to store electricity, the Grid was built with a capacity to meet the absolute peak demand.  And because utilities are paid to sell electricity, they have historically had little incentive to find ways to conserve.  Today, the accumulated hit to environmental quality caused by this inefficiency, together with the cost of constructing and operating generation assets, has reached the limits of what is tolerable.

The new “Smart Grid” is being designed to allow information flows, as well as energy, to reach all parts of the system.  The information available to system operators at present is limited.  When and how the power is used, where congestion might occur, how usage might be curtailed at critical times  – the system is essentially blind to these and many other important data points.  A more intelligent system, enhanced by developments in telecommunications and information technology, will allow the system to operate more efficiently, with corresponding benefits to society.

It is estimated that electricity transmission infrastructure investment will exceed $600 billion by 2020.  In addition to spending by utilities, the venture capital community investment in the space is accelerating, and large U.S. companies such as Microsoft, Google and Oracle are beginning to stake claims.  The vision is of a more sentient Power Machine that organizes the flow of energy and information through all of its limbs for the benefit of all who touch it.  There is even a nascent movement calling for the interconnection of a global power grid.  Essentially, the Smart Grid will allow utilities to proactively manage demand, re-route power around disturbances, integrate distributed renewables and electric transportation and continue to offer reliable and affordable electricity into the foreseeable future.

Following the excellent work of David J. Leeds of Greentech Media in his report The Smart Grid in 2010: Market Segments, Applications and Industry Players we will divide this discussion into four segments:  Advanced Metering Infrastructure (AMI), Demand Response (DR), Grid Optimization and Energy Storage.

Advanced Metering Infrastructure (AMI)

Advanced Metering Infrastructure, as its name suggests, is focused on the meter – that is, at the point of consumption.  AMI deployment is replacing mechanical meters with digital meters that allow for two-way communication.  By providing information as well as energy, the consumer is empowered to shift consumption patterns away from peak-demand periods when prices are high and system reliability is low.  Utilities are also able to collect usage data that can be used to provide more efficiency and less waste.
The Obama administration famously called for the installation of 40 million Smart Meters in US homes and businesses by 2015 and has backed up this pledge with funding from the American Recovery and Reinvestment Act.  AMI has received the lion’s share of venture investment to date and leads the Smart Grid deployment.

“AMI can best be seen as a transformative application since the AMI/FAN [Field Area Network] communication network necessary to run advanced metering applications can also be used to transport data for all kinds of other emerging Smart Grid applications.” Leeds, p.7.

Demand Response (DR)

Because electricity must be used when generated, providing sufficient power for “peak” demand periods is an ongoing problem for utilities.  The problem has been traditionally addressed with so-called “peaker plants” that are brought on-line only when needed – when demand is expected to spike, such as during a hot summer afternoon when air conditioners are sucking energy to keep things cool.  Peaker plants are generally old, inefficient, expensive and dirty to operate.  Demand Response is an alternative solution that is enabled by the Smart Grid.

DR allows a customer to reduce its use of energy during these peak periods, lowering cost for the consumer and allowing the utility to re-route the electricity where it is needed – without having to rely on starting up its peakers.  DR is cheaper, faster, cleaner and more reliable.

To date, most DR solutions have been deployed by large commercial energy users.  But with the widespread integration of Smart Meters, the practice can now begin to be rolled out for residential consumers as well.

DR is implemented by third party aggregators who enter into contracts with consumers that allow the aggregator to reduce the consumers’ energy usage during peak hours (using thermostats and intelligent grid-aware devices).  The aggregated “virtual peak power” is then sold to the utility.

Grid Optimization

Grid Optimization is all about making the distribution network more efficient through the use of information management and system controls.  Rather than focusing on changing consumer behavior, which is essentially the goal of AMI, Grid Optimization enables utilities to clean up their side of the street – distribution from the substation to the point of use.

There are a wealth of devices and technologies that are contributing to Grid Optimization, and more will be developed as the Smart Grid is built out.  Some of the many benefits include monitoring grid assets, decreasing faults and outages, rerouting power to maximize efficiency, minimizing congestion, determining when to bring renewables online and generally allowing proactive management of generation and distribution assets.  (Leeds p. 60-61).  Leeds anticipates that Grid Optimization and its cousin, Distribution Automation, will be the fastest growing market segment over the next five years.

Energy Storage

Anyone working in the renewables field (solar, wind, etc.) can immediately see that a breakthrough in energy storage would revolutionize the industry.  Renewables are referred to as “intermittent” resources because they only generate some of the time – when the sun shines or the wind blows.  If only we had an economical way to store electrons, renewable energy could begin to supply base load, and that would change the game forever.
But this is going to require a true technological breakthrough.  The available options at present are woefully inadequate.  Energy storage, such as pumped storage (hydro and air), thermal storage and flywheels, provide the best solutions, but even they have severe limitations (cost, scalability, geography, etc.)  Electricity storage –batteries (Lead Acid, sodium-sulfur, Lithium ion, etc.) and supercapacitors are worse:  expensive and inefficient.

What is needed is a distributed storage solution allowing energy to be stored at the point of use and relayed through Smart Grid management when and where it is needed.  Energy storage is getting the attention of investors and major players (such as GE and AEP), but clearly more can and needs to be done.

Conclusion

The Age of the Smart Grid is upon us.  Huge amounts of capital are being and will be deployed over the next decade and beyond in upgrading the nation’s power grid.  Both the political and financial will appears to be behind Smart Grid deployment.  Fortunes will be made in this arena, and our lives will all be changed for the better through the intelligent delivery of more efficient and cleaner energy.

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

Branding Solar Energy

by Richard T. Stuebi

One of the biggest challenges facing cleantech, relative to other forms of technological innovation, is that the basic markets being served are widely viewed as commodities.

In high-tech, many people are willing to pay very high (and profitable) prices for new gadgets with cool functionality.  Witness just about everything that Apple makes, along with anything in the videogame sector.

In health care and life sciences, cost is often not much of an object.  When you face the prospect of (for instance) prostate cancer treatments, you might be willing to pay a LOT more for a non-invasive approach.  I know I would.

However, rarely does anyone want to pay one iota more than necessary for something like energy.  And, that creates a huge problem for those who are trying to sell into these markets but have high cost structures. 

In the photovoltaics industry, German companies that dominated the sector have now given way to Chinese module manufacturers that can kill them on price and cost.  As this recent article from the New York Times discusses, the German players are attempting to maintain share and profitability by positioning themselves as premium products, worth paying more to obtain.

I wish them well, but I think it’s going to be a tough sell.  In my view, the only way possible to fetch a price premium is to make the case that the full life-cycle ownership cost is lower (i.e., less maintenance, more power production) when the higher-priced product is bought.

Otherwise, branding in the solar energy field will be extremely challenging.  You might look cool driving a Porsche, and might get an ego stroke from wearing a Hermes tie, but I’m having a very hard time imagining you’ll get any psychic benefit from buying a higher-priced solar panel — no matter what a well-paid pitchman may say.

GE Buys 12,000 Chevrolet Volts

GE Announces Largest Single Electric Vehicle Commitment

GE will purchase 25,000 electric vehicles by 2015 for its own fleet and through its Capital Fleet Services business – the largest-ever electric car commitment. GE will convert most of its 30,000 global fleet and will partner with fleet customers to deploy a total of 25,000 electric vehicles by 2015. GE will initially purchase 12,000 GM vehicles, beginning with the Chevrolet Volt in 2011, and will add other vehicles as manufacturers expand their electric vehicle portfolios.

Chevrolet Volts will roll off production lines this month and other automakers are bringing electric vehicles to market. As this occurs, GE is in a strong position to help deploy the supporting infrastructure to help its 65,000 global fleet customers convert and manage their fleets.

Wide-scale EV use to bring GE $500 million in near-term business

GE owns one of the world’s largest fleets, operates a leading global fleet management business, and offers a portfolio of product solutions including charging stations, circuit protection equipment and transformers that touch every part of electric vehicle infrastructure development. This enables GE to lead wide-scale electric vehicle adoption and generate growth for its businesses.

“Electric vehicle technology is real and ready for deployment and we are embracing the transformation with partners like GM and our fleet customers,” said GE Chairman and CEO Jeff Immelt. “By electrifying our own fleet, we will accelerate the adoption curve, drive scale, and move electric vehicles from anticipation to action.

“We make technology that touches every point of the electric vehicle infrastructure and are leading the transformation to a smarter electrical grid,” Immelt said. “This transformation will be good for our businesses and for our shareowners. Wide-scale adoption of electric vehicles will also drive clean energy innovation, strengthen energy security and deliver economic value.”

GE businesses including Capital Fleet Services, Energy and GE (NYSE: GE) will purchase 25,000 EV including electric cars and plug-in hybrids by 2015 for its own fleet and through its Capital Fleet Services business – the largest-ever single electric vehicle commitment. Licensing & Trading will benefit from an emerging electric vehicle market that could deliver up to $500 million in GE revenue over the next three years. This includes rapidly developing markets for GE’s charging station, the WattStation.

GM CEO Dan Akerson said, “GE’s commitment reflects confidence that electric vehicles are a real-world technology that can reduce both emissions and our dependence on oil. It is also a vote of confidence in the Chevrolet Volt, which we will begin delivering to retail customers by the end of this year. We are pleased that the Volt will play a major role in this program, which will spur innovation and benefit our companies, our customers, and society as a whole.”

FedEx Chairman, President and CEO, and Electrification Coalition member Fred Smith said, “With more than 16.3 million vehicles in operation in 2009, the nation’s fleet can drive initial ramp-up scale in the battery industry and OEM supply chains. By buying these vehicles, GE is helping ramp up production which will help lower the price of vehicles and their components and make electric vehicles more visible and acceptable to the public at large. This is good for GE, good for our economy, and good for our nation.”

GE also announced today two electric vehicle customer experience and learning centers to provide customers, employees and researchers first-hand access to electric vehicles and developing technologies. One will be located outside of Detroit, in Van Buren Township, Michigan, as part of GE’s Advanced Manufacturing and Software Technology Center. The other will be located at GE Capital’s Fleet Services business headquarters in Eden Prairie, Minnesota, with several other centers to be announced in 2011. The centers will monitor and evaluate vehicle performance and charging behaviors, driver experiences, service requirements, and operational efficiencies, while also affording the opportunity to experience a variety of manufacturers and models, and gain insights on electric vehicle deployment.

GE is launching this comprehensive electric vehicle program as part of its ecomagination business strategy to accelerate the development and deployment of clean energy technology though innovation and R&D investment. In support of the announcement today, an electric vehicle readiness toolkit has been launched on ecomagination.com to help municipalities, customers, and individuals prepare for wide-scale electric vehicle deployment.

GE Bets $10 Billion on Digital Energy

How P2P car sharing could impact Zipcar IPO

Its CEO received an accolade last week. Yet, with 7,000 vehicles and more than 400,000 members, car sharing service Zipcar has struggled to reach profitability.

A slump in average revenue per member over the last year and mounting fleet costs spelled a net loss for Zipcar of $4.67 million in 2009. And according to recent company filings, it’s now losing $4M-$5M a quarter with no guarantee of achieving profitability in 2010 or even 2011 … a familiar story from another large recent clean transportation IPO: Tesla.

Now, a handful of so-called peer-to-peer (P2P) car-sharing startups think they have a solution that could let them become profitable faster, while bringing car sharing to more markets and more potential users. Are they friend or foe to car sharing companies like Zipcar?

P2P models
While “traditional” car-sharing companies such as Zipcar acquire a fleet of vehicles that they then distribute, maintain, fuel, insure, and rent to drivers, P2P car-share companies like Whipcar (UK), RelayRides (Boston) and Spride (San Francisco) skip the ownership step. Instead, they aim to manage the relationship between car owners and drivers, much in the way that vacation rental services like VRBO connect vacationers with home and apartment owners.

The model isn’t just about cutting operating costs, though. P2P car sharing aims to capture two segments of the market left out of traditional car sharing:

  • Commuters who use a vehicle to get to and from work; whose vehicles sit in an office parking lot all day and in the garage all weekend, and
  • Drivers in less-dense areas who haven’t had access to car-sharing services at all

Little innovation needed
The ecosystem surrounding P2P car sharing is nearly identical to that for fleet-based car sharing, and relatively mature. The software and hardware components are largely in place—system operators need only make tweaks to off-the-shelf products from manufacturers and service providers. From in-car devices that operate vehicle permissions over cell networks to the data pricing plans carriers charge fleet operators to the online reservation systems for users, most of the plumbing exists.

An exception, however, is insurance. While homeowners can purchase insurance products that allow them to maintain coverage on a personal property when it is rented out to a vacationer, car owners can not. Lloyd’s of London currently offers car sharing insurance to WhipCar and RelayRides where they operate, but many states allow insurers to invalidate personal auto insurance if the vehicle is used for commercial purposes (such as a car sharing program).

How P2P companies could benefit Zipcar
The better known fleet-owning car share companies like Zipcar could become formidable allies and exit partners for the smaller P2P startups. As one CEO pointed out to us recently, the market for P2P car sharing has a strong bias toward a single, trusted brand. Cars are costly personal investments; the company that is able to garner users’ trust will be well positioned to capture a sizeable share of the market. Startups like RelayRides and Spride hope to capitalize on this kind of first-mover advantage. On the other hand, Zipcar already has a known brand.

In many ways, P2P sharing is a natural extension of traditional car sharing services, as it could allow them to offer their service in less dense areas than the urban cores and college campuses they currently serve. Unused vehicles are a financial albatross for car-sharing companies, making vehicle utilization rates a limiting factor for expansion; leveraging privately owned vehicles in markets with low utilization rates could be one solution. Similarly, privately-owned commuter vehicles could be used to expand the fleet during business hours in commercial districts, or on the weekends in residential neighborhoods.

P2P could also help speed returns on car sharing companies’ non-vehicle investments. Zipcar’s IPO filing revealed fleet operations costs of $93.36 million in 2009—nearly 70% of its total operating costs. Expanding revenue-generating services without a proportional increase in vehicle costs could be an attractive option. (Similarly, Zipcar recently began offering its reservation software to fleet operators as a way to boost revenue without accruing additional vehicle costs.) While Zipcar hasn’t publicly expressed interest in offering a P2P component to its service, others have. CityCar Share in the San Francisco Bay Area, for example, is partnering with Spride in an effort to bring P2P car-sharing to its members.

WhipCar RelayRides Spride
Location London Boston San Francisco
Car owners Free to join. Vehicles are screened by VIN for make/model/year and accident history. No safety checks are performed, and WhipCar relies heavily on self-reporting by vehicle owners. Free to join. Vehicles must pass and maintain a current safety screening (within two years from approved mechanic). N/A – service does not currently exist.
Drivers Free to join. Drivers must have a clean driving record in order to book a vehicle. $25 annual membership fee. Drivers must have a clean driving record in order to join the service. N/A — service does not currently exist.
Insurance Included. Commercial insurance provided by Lloyd’s covers drivers. Included. Commercial insurance provided by Lloyd’s covers drivers. Last month, California passed AB 1871, allowing commercial insurance coverage of private vehicles without invalidating private insurance coverage. First bill of its kind in the U.S.
Fuel Not included in rental price. Vehicles must have at least ¼ tank at pickup, and drivers must return cars with same amount of fuel as at pickup. Included in rental price. Fuel cards are included in all vehicles, and gas charges are deducted from owners monthly earnings. N/A
Rental rates Rates set by owner, based on location, make and model, as well as maintenance costs. Rates set by owner, based on location, make and model, as well as fuel and maintenance costs. N/A
Key exchange In person. Drivers and owners meet at a pre-arranged location to exchange keys for pickup and drop-off. Remote: RelayRides installs a digital controller in each vehicle (like that used by Zipcar and other traditional car sharing providers) that authorizes keycard access to vehicles during specified reservation periods. N/A, but likely to use remote system.
Partners N/A N/A City CarShare
Revenue model 15% commission on rentals, plus  users pay a £2.50 booking fee. 15% commission on rentals, plus drivers pay an annual $25 membership fee, waived during pilot. N/A

Source: Kachan & Co.

For more analysis of the expected impacts of P2P car sharing, or of other developments in the wider clean transportation sector, contact us.

(This article was originally published here. Reposted by permission.)

A former managing director of the Cleantech Group, Dallas Kachan is now managing partner of Kachan & Co., a cleantech research and advisory firm that does business worldwide from San Francisco, Toronto and Vancouver. Its staff have been covering, publishing about and helping propel clean technology since 2006. Kachan & Co. offers cleantech research reports, consulting and other services that help accelerate its clients’ success in clean technology. Details at www.kachan.com.

Nissan LEAF with Baby Car Seats

Keo, at age 3 months, started his Nissan LEAF test ride with a yawn, gurgled his approval during the ride, then wisely left the car buying decision to his parents.  Grace and Susan Stanat brought their son along for the test drive. They arrived with Keo, baby seat, and stroller. Although three adults can squeeze into the back seat of the LEAF, two babies are another matter.

Grace told me of his high-hopes for getting an electric car, because he cares about his kids future and because he works in Silicon Valley high-tech and is excited about our electric future.

Nissan is taking about a dozen LEAFs around the country, letting people take a LEAF for a driven. To its credit, Nissan allows people to bring their family. When Grace and Susan were ready for their test drive, Nissan patiently allowed the baby seat to be placed in the back and secured with the seat belt, allowed Keo to be secured in his car seat, and even allowed the stroller to go in the new trunk. Nissan wants people to know what they’re getting and to decide without any pressure if this new compact electric vehicle meets their needs.

When I talked with Grace and Susan, it was clear that both cared a great deal about the future for their two children. The parents want to minimize their greenhouse gas emissions and be appropriate role models for Keo and Exie, who also requires a car seat. Living in the university town of Palo Alto, they find that they can walk to many stores, services, and schools. Like many university towns, Palo Alto has bike lanes and transit that connects to regional rail. Grace and Susan have reduced their carbon footprint by sharing a single vehicle.

After the ride, Grace and Susan were disappointed. Although the LEAF handled well and meets their range needs, it was a little too small for a couple with two young children. Yes, the back seat will hold the two car seats needed in this family, but the seats press against the front seat. They can already feel their two-and-a-half year old Exie’s kicking in their Honda and worried that it would be the same problem in the LEAF.

Nissan LEAF trunk stroller 150x150 Nissan LEAF with Baby Car Seats and StrollersThe LEAF’s trunk, however, was too small for two strollers. Grace commented, “The trunk was almost too small for one stroller.” This is a common issue in compact cars and smaller. Although Nissan has done an excellent job of packaging the 24kWh battery back under the floor and behind the back seat, it has a small trunk. The 60/40 fold-down rear seat expands cargo space when only one or zero people are in the back seat.

Nissan Leaf Review and Specs

Even though Susan and Grace are on Nissan’s wait list with their $99 deposit, they have decided to look at bigger hybrid cars; they do not see a currently available electric car that meets their needs. We discussed the Toyota Prius and Ford Fusion Hybrid as possibilities. I said that it was too bad that Chrysler cancelled the plug-in hybrid Town and Country. Grace replied, “Yea, but with a minivan we would need to get a white picket fence.”Best Hybrids

Grace and Susan may lease for two years, or until they no longer use car seats and strollers.

By the time that Keo is ready to drive, there will be hundreds of choices in electric cars of every shape and size. California’s energy mix will be at least 33 percent renewable, with most smart charging occurring when the wind is blowing or the sun is shining. Thanks to choices made by families like the Stanats, the future may be a little brighter for all of us.

Drill, Baby, D’Oh!

by Richard T. Stuebi

Unlike many in the cleantech community, I’m not averse to increased drilling for oil in the U.S. 

I recognize that we’re not going to be able to leapfrog out of the corner into which we’ve painted ourselves over the past few decades, and that we’re going to need oil, gas and coal – and probably as much of it as we can prudently get, especially from domestic sources – for a long time to come as a consequence of the accumulation of our past decisions and investments regarding energy. 

As the most thoughtful segment of energy sector observers frequently notes, our energy challenges in the coming decades are so significant that we’re going to need just about everything we have at our disposal to meet the challenges.

But, as Einstein said, “insanity is doing the same thing over and over and expecting a different result”, and betting our entire national energy strategy solely or at least mainly on increasing production from our fossil fuel resources is a losing proposition that will only further exacerbate the challenges we now face. 

Furthermore, the opportunity may very well not be all it’s cracked up to be.  For instance, last month the U.S. Geological Survey released a revised assessment of the remaining resources in the National Petroleum Reserve of Alaska – which you’ll no doubt remember has long been viewed by many to be the savior of all our energy travails.

Oops!  Instead of a mean estimate of 10.6 billion barrels, it now looks like there’s really only about 900 million barrels up there to be recovered – less than 10% of what was formerly thought.

Now, that resource may still be well worth recovering; it’s certainly worth a lot of money.  The environmental community is largely opposed to going for it, and maybe that position is too hard-line.  Yet, it should also be recognized that there’s no panacea for American energy policy up there on the North Slope.  After all, even if fully captured (which is implausible), 900 million barrels is only equivalent to less than fifty days of U.S. oil consumption – not exactly a history-altering development.

And, logic alone shows that there’s no panacea if all of the reasonable conventional oil/gas exploration possibilities are pursued.  The planet is a finite sphere, and organic matter is not being transformed by geologic forces into fossil fuels as quickly as they are being depleted by manmade extraction and consumption. 

Furthermore, as we all know, fossil fuel resources are not evenly distributed across the planet.  While the U.S. is responsible for about 20% of global demand for oil, our national endowment of petroleum reserves only represents about 2% of total supply on Earth.  Perhaps if we’re lucky, we might find an unexpected field somewhere on our property, possibly deep off our coasts (presuming we can avoid Deepwater Horizon Part II), but we can’t expect surprises to change our fortunes by an order of magnitude.

True, there are wild cards.  We can supply the needs we currently meet with petroleum by utilizing other minerals.  For instance, the U.S. clearly has immense coal reserves.  To date, they have been used solely for power generation and industrial production (e.g., coking for steel).  However, it’s been known for decades that coal can be converted into transportation fuels through the Fischer-Tropsch process.  Coal could thus be a transitional source for moving the U.S. off reliance on foreign oil.

In addition, the U.S. has an immense quantity of so-called “unconventional” oil resources:  stuff that doesn’t come out of the ground as crude, but which can be processed into fuels.  The largest of these is the shale resources of the Piceance Creek basin in Colorado, Wyoming and Utah, which are estimated to contain over 1 trillion barrels of oil equivalent.  (In case you accidentally missed that number, it’s over 1000 times bigger than the revised estimate of the resources in Alaska.)

There are other technological approaches:  second-generation biofuels, electrification of vehicles and shifting electricity generation from fossil fuels, and so on.  

Alas, the problem with alternative sources of transportation fuel is that they are both very capital intensive and have higher variable costs than conventional oil/gas production.  Consequently, neither coal-to-liquids nor shale (nor other alternatives) will be pursued with vigor by the private sector unless there is greater certainty that oil prices will remain high enough for long enough to merit the enormous investments required.  Given the oligopolistic oil marketplace, controlled by the OPEC cartel which can depress prices at any time (for at least awhile) by temporarily flooding the markets with the inexpensive-to-produce oil they now are fortunate to have (for at least awhile), no such certainty exists.

As a result, until then, under a status quo energy policy based primarily upon an overly simplistic “drill, baby, drill” mentality, these types of energy sources will not come to market.

Frankly, even then, these unconventional supplies of fuels are just delaying tactics.  Whether one decade or five or ten, it’s only a matter of time before we are compelled to move to an energy system that is truly renewable and sustainable, as opposed to a system based on a “use it and lose it” premise.  

Until we have the foresight and will to do something different, we’ll simply be stuck “over a barrel”.

Cleantech Success Formula = EE + ROI + 0 Capex

Cleantech Growth for Energy Efficiency, Smart Grid, Distributed Solar

metro la rooftop1 300x217 Cleantech Growth for Energy Efficiency, Smart Grid, Distributed SolarBy John Addison (11/5/10)

Energy Efficiency with Fast ROI Voted Most Likely to Succeed

Venture capitalists, cleantech executives, and technology experts gathered this week for GreenBeat 2010, hosted by SSE Labs of Stanford University andVentureBeat.

John Doerr, Partner KPCB, is optimistic about cleantech. He is one of the most successful venture capitalists of all time, backing Google, Amazon, and my alma mater Sun Microsystems. He has made six new cleantech investments this year. KPCB cleantech investmentsinclude Silver Springs Networks, Amyris, Mascoma, Ausra, Bloom Energy, and Fisker Automotive with ambitions to surpass Tesla.

Mr. Doerr is enthusiastic about cleantech in California, where voters this Tuesday defeated proposition 23, effectively showing that 60 percent of voters favor California’s climate cap-and-trade program. The oil industry proposition threatened hundreds of cleantech companies and ultimately hundreds of thousands of future jobs.

Nationally, however, the voters sent a clear message that they want fiscal responsibility and an economy that creates jobs.  Projects that need billions in federal funds or billions in loan guarantees are likely to go nowhere including nuclear, so-called clean coal, and utility-scale solar.

Distributed Solar and Energy Efficiency

Solar experts from SunRun, Sungevity, and SolarBridge observe that business is growing rapidly for distributed solar, confirming our solar energy report that distributed solar will grow over 40 percent annually. Commercial rooftops can support 100 kW to 20 MW solar projects located where power is consumed. Distribution investment is minimized. In contrast, utility-scale solar in the desert is more expensive to site, according to the industry panel, requires major high-voltage line and distribution investment, and can face years of NIMBY opposition. All this adds cost, risk, and project finance difficulty. These same factors can allow local solar, more expensive per kWh, to compete against remote coal and natural gas. A cap-trade fee for carbon emissions provides added distributed solar advantage over fossil fuel plants.

Negawatts are cheaper than megawatts. The biggest opportunities are in helping commercial customers and consumers reduce their electricity and heating bills. The Empire State Building will save over $4 million per year through energy saving initiatives such as installing 6,500 dual pane windows from Serious Materials whose CEO, Kevin Surace, reports that he already has 400 employees and is adding jobs.

Optimal energy savings occurs where energy technology converges with information technology to manage everything in buildings and homes from HVAC to lighting. Energy savings of 10 and 20 percent were reported without asking people to change behavior. Customers want these savings without capital expenditure (capex). Innovative companies that provide solutions as services win. Even better is when they implement demand response solutions that make the customer money.

Smart Grid to Grow to Billions of Nodes

Smart grid technology will ultimately be used to manage billions of points of energy generation and consumption. The first payoff of smart grids is allowing electric utilities to be more efficient and avoid payroll costs of manual meter readers and technicians that turn-on home power. So far, the utilities are saving and the ratepayers are footing the bill for smart meters. Consumers are starting to benefit as they get information about where they are losing energy money. Bill Weihl, Green Energy Czar for Google reports a large number of users, with hundreds commenting about saving money.

The “killer app” for the smart grid may be electric cars. By charging cars off-peak, utilities will find a home for electricity generated in power plants that like to run 24/7. Consumers, using smart charging and friendly charging apps and net tools, will save with low time-of-use rates for nighttime charging instead of expensive trips to the gas station.

Ten cleantech start-ups presented to a panel of venture capitalists at GreenBeat 2010. The winner was Redwood Systems, an intelligent lighting provider. Redwood is already saving money for giant customers like Flour. Redwood provides LED lighting networked with sensors and software for monitoring, control, and automated lighting. The VCs liked that Redwood addressed the need for energy efficiency with a high ROI, low barriers of entry in the built environment, and no big capex decision by the customer.

RPAG – Renewable Power at Scale = Scotland?

Comments by Alex Salmond, Scotland’s First Minister, were a highlight of my fascinating introduction to RPAG – Renewable Power at Scale, this week.  With 206 GW of offshore renewable energy potential (wind and marine), despite it’s small size, Scotland has 25% of Europe’s wind power potential and 25% of its tidal resource potential.

Keep in mind, this is place with an average total demand of 6 GW of power, and already has almost that much in wind power under consent or in development, primarily offshore.  Part of a targeted 7,000 offshore wind turbine rollout in process around the British Isles over the next decade.  These are numbers that both in aggregate and relative size to their grid dwarf the last decade of renewables.  Already a net exporter of power, Scotland is basically planning on meeting the UK renewables requirements all by its lonesome, and export power across the Continent as well, if the proposed North Sea SuperGrid ever gets built.

This renewables push anchors the Scotland and UK climate change planning, with Scotland targeting 80% renewables by 2020, 31% by 2011 (11% hydro, the rest offshore wind). It was at 25% in 2008.  This compares to UK overall 32% renewable by 2020, currently at 6%.

The next couple offshore wind development licensing rounds in the UK and Scotland total numbers in the like 50 GW range.  It took me several presentations on the subject before I was comfortable typing a number that large, as it boggles the mind.

However, and it’s a big however – the industry has a long way to go.  Three key challenges, which will not be a surprise to any renewables industry aficionado:

  1. There currently isn’t anywhere near the grid required: either in offshore infrastructure to reach the locations, nor in modern onshore grid capable of accepting and exporting power from offshore.
  2. Once T&D is solved, the industry to deliver this scale needs to go to deeper waters, bigger and lighter turbines, and a roll-out speed approaching call it 5-10 turbine installs offshore per week within a few years, and no part of the supply chain is yet ready to handle that.
  3. And finally, export market integration.  If places like Scotland are going to be the Saudi Arabia of renewable electricity, the markets have to be open to cross-border trade and export.  For example, assuming it has T&D lines to get it there, and a supply chain to build it, can a Scottish wind farm sell renewable power to pick you favorite EU country and meet their RPS requirements?  Currently, that just ain’t happening.  No open power markets in Europe outside of the UK means no real cross-border market for renewable electricity.

But, it’s hard to utter anything other than OMG, as the number of roll-outs todate, the amount of development resource in process, and headlong sprint in the supply chain compared to 5-10 years ago, means the potential for offshore wind to deliver RPAG within this decade is really, really awesome.

Financing Energy Innovation in the Midwest

by Richard T. Stuebi

A few weeks ago, the Chicago Council on Global Affairs (CCGA) and NorTech collaborated to throw an event in Cleveland entitled “Financing the Midwest Energy Transition”.  I was asked to wrap up the session with some concluding remarks.  Normally, I don’t script out my talks, but for this occasion I did, and so I’m presenting my prepared comments on this topic as today’s blog post.

*   *   *

I’ve been working in Ohio for almost five years to help accelerate our region’s transition to an advanced energy economy.  My work has been driven by four considerations:

One, diversification.  Our transportation system in the Midwest is virtually entirely dependent upon oil, and our electricity supply is nearly 90% reliant on coal.

Two, environmental.  Obviously, we burn a lot of fossil fuels, and would benefit from reducing that burn.

Three, economic.  The prices we pay for fossil fuel energy are likely to rise as the supply-demand balance tightens — there are only finite quantities of these fuels, while demand continues to grow — and as environmental regulations tighten.

Fourth, also economic:  We see tremendous opportunity to create new industries in support of the future energy sector, employing thousands of people, based on our region’s inherent skills and advantages. 

About two years ago, I was pleased to be invited by the Chicago Council on Global Affairs to represent Ohio interests on a regional task force chartered to outline the energy challenges and imperatives facing the Midwest.  I am glad they asked me to join their effort because I have long felt that we in the Midwest — from Cleveland to Chicago, and all parts in between and surrounding us — need to work together to pursue our common opportunities and overcome our collective challenges.  

We in the Midwest can’t succeed as independent islands.

When the task force completed its report in June 2009, the CCGA held a great event in Chicago to present the findings.  I thought we should do something similar here in Cleveland – hence our collaboration to convene this event today.  But rather than covering the whole waterfront of issues relating to advanced energy, I thought we should focus on just one.

To me, the biggest one:  Capital.

Energy is an incredibly capital intensive industry, perhaps like no other.  A couple of years ago, the International Energy Agency estimated that about $1 trillion per year of capital will be required globally over the next 20 years to replace and/or extend the current asset base to meet growing demands for energy. 

And, that’s just for a status quo energy sector.

If we want to transition to an advanced energy economy, a host new technologies will have to be commercialized – and this commercialization process takes additional capital for R&D.  Lots of it.

I heard a speech given last week by the head of ARPA-E — DOE’s center for innovative energy R&D — in which it was said that the U.S. annually spends less on energy R&D than on potato chips, and less on electricity R&D than on dog food.

Obviously, this will have to change if the U.S. is to avoid being reliant on other countries to provide a reliable energy supply in a world constrained by dwindling fossil fuel supplies and tightening environmental pressures.

Where will this capital come from to build the new energy sector?

And, what should we be doing in the Midwest to address this capital challenge – both for global energy opportunities, and for the need to transform our own regional energy sector?

Those questions are the crux of what brings us here today.  Based on what we heard and discussed today, I’d like to offer some closing thoughts on future directions for us in the U.S. Midwest.

We know we’re not Wall Street, and we’re not Silicon Valley, but we do have important financial institutions that we need to leverage.  For instance, we have two Federal Reserve Bank branches – in Cleveland and Chicago – and we need to figure out a way to get them into this conversation about the energy transition.  We also have large commercial banks such as Key Bank (NYSE: KEY), many of whom have dedicated energy-related practices, and we want to see them become major players in advanced energy financing.

The corporate titans of the Midwest – both industrial giants and large utilities – can benefit from the advanced energy transition if they take proactive actions to prepare and gain competitive advantage.  They can create wealth and increase profits via new business lines.  They can also lose if they stay mired in the status quo and fight change.  We need to help these companies see the first perspective, and move off the latter perspective, as these corporates have large capital resources to put behind the energy transition.

With our collective universities – not to mention other institutions such as NASA’s Glenn Research Center, Argonne National Labs, Battelle and so on – the Midwest may be unparalleled in its research capabilities.  We need to help these institutions gain more and better access to DOE and NSF funding on energy-related topics. In turn, this requires that these universities make energy-related research a higher priority – and pick focal areas for them to become distinctive winners. 

These institutions, and other Midwestern parties that can’t pick up and move also need to start allocating some of their investment portfolios to local opportunities.  In particular, we need more Midwestern venture capital funding regional entrepreneurs and innovation. 

This is a particular passion of mine.  Early-stage venture capital is a local phenomenon, requiring a lot of interaction between investor and management.  But, as Frank Samuel has pointed out with his recent research at Brookings, we have a huge deficit in Midwestern venture capital — which translates to a huge deficit in Midwestern entrepreneurship.  While we might want to attract venture capital to the Midwest from outside the region, that capital is not likely to come from without if it’s not first coming from within. 

To start this process, states and municipalities with pension funds and other asset pools can and should require a percentage of their dollars to be deployed locally.  If they’re not willing to do this, then they’re not investing in their own futures.  In which case, I would say:  Shame on them.

And, though I’m a devout capitalist, yes, there is also a crucial role for government.  We need policies – at the local, state, and Federal level – that push us here in the Midwest towards the new energy future.  Both positive pressures (incentives/subsidies) and negative pressures (penalties and requirements) imposed by the government would shift capital towards the opportunities and the needs for new energy in the Midwest.

You’ll notice that, in all of the thoughts I’ve just expressed, I use the word “we”.

Well, who exactly is “we”? 

I think it’s us, here in this room, to start.  And, clearly, we need to expand the circle.

So, as you go home tonight, and to work tomorrow, be thinking about new actions you can take to expand the pool of energy capital flowing to our region.  Ask yourself the following two questions:

What did I learn today that might be able to make me or my organization a good return on investment?

And, who else do I know that should have been here today, but wasn’t?

Really think about answers to those questions, and then go forth and act upon them.  In so doing, let’s reclaim for the Midwest the leadership that made this region great in the mid 20th Century:  serious industriousness, innovation and wealth-creation to invent the economic system that enables the next phase of global prosperity and peace.

Richard T. Stuebi is a founding Principal at NorTech Energy Enterprise, where he is on loan as the Fellow for Energy and Environmental Advancement at the Cleveland Foundation.  He is also a Managing Director at the Cleveland-based venture capital firm Early Stage Partners, where he leads the firm’s cleantech investment activities.

Cleantech Meets Heavy Steel

I had a fascinating presentation today from John Robertson, managing director of BiFab, one of the first movers in offshore wind platform fabrications.  They just rolled off doing a 31 unit, 14 month project for Vattenfall’s 150 MW Ormonde project (which still counts as large in the offshore wind business), and built the original Beatrice prototype jackets.  They also sold 15% of the company to offshore wind developer SSE, essentially a vertical integration highlighting just how fragile the supply chain actually is.

There are three types of offshore mounting systems for wind 1) monopile (think big cylinder), 2) jacket, or 3) floating (of which the only prototyped system, though not yet at full scale,  is a spar (floating upright hollow cylinder).  Essentially those are in order of depth capability, with the 50-200 foot range the province of jackets, shallower water for monopiles, and at the 150 foot+ range a floating system is needed.

And right now we’re in the offshore wind’s infancy, still building one-offs.  At scale, this has to change. The wind turbine industry is already able to product final turbine assemblies within days to weeks. The rest of the supply chain for offshore is going to have to match that if the industry is to deliver the scale in the pipeline.

BiFab for example, builds jacket type mounting systems (basically four legged lattice tower) in Scotland for the offshore wind market in the North Sea.  Which sounds like a totally boring exercise.  Until you realize the following facts:

  • The offshore wind development pipeline in the UK is measured in multi-gigawatts, equaling 1,000+ plus platforms over the next 10 years.  Forget transmission constraints.  Just getting that much steel in the water fast enough at a low enough cost is an almost ungodly constraint.
  • The platforms are smaller, lighter, and have to cost much, much less, and be installed in a fraction of the time that the oil & gas industry has traditionally done.
  • Basically the fabrication shop has to learn to cookie cutter a product, not fabricate a series of one-off. Think order of magnitude three per week from a facility.  Nobody in the marine industry has done that since the Liberty Ships in World War II.  Nobody.  This is closer to manufacturing transformers or aircraft than it is shipbuilding or offshore construction except the end result has to in 50-150 feet of salt water.

I mean, when was the last time you heard a fabricator talking about manufacturing process technology, scale up and licensing designs.  They assemble steel.  Yet in offshore wind, that isn’t going to work.  Heavy steel has to meet cleantech for heavy steel to find new markets, and cleantech to reach scale.  It will be an interesting experience.

California TREC Decision Side-steps Energy Infrastructure of the Future

By David Niebauer

Most of the discussions of tradable renewable energy credits (TRECs) in California revolve around the extent to which the State’s large utilities can use TRECs for compliance with the California renewables portfolio standard (RPS) program.  The utilities would like a free hand to use as many RECs as possible, derived from sources both in-State and out-of-State – presumably RECs will be easier and cheaper to acquire than new renewable generating facilities are to build.  The interests of the utilities are balanced by those of rate-payers as well as policy initiatives, such as AB 32.  These interests move sometimes in opposite directions, one toward less expensive retail energy and one toward more environmentally sustainable energy generation.

As the revised decision on TRECs winds its slow and tortuous way through the California Public Utilities Commission (CPUC), it is becoming clear that there will be a price cap ($50) and there will be a limit on use (30% likely) and that the cap and limit will expire at the end of 2013 “to give Energy Division sufficient time to develop [an] evaluative framework” to make sure the system works without snafu.  See procedural trail to CPUC Proceeding R06-02-012.

Lost in the shuffle, however, is what many believe will be the energy infrastructure of the future – distributed generation (DG).  The California Energy Commission (CEC) defines DG in the California Distributed Energy Resource Guide as “small-scale power generation technologies (typically in the range of 3 to 10,000 kW) located close to where electricity is used (e.g., a home or business) to provide an alternative to or an enhancement of the traditional electric power system.” The term “distributed” is borrowed from the computer industry where it has long been recognized that widely disbursed or “distributed” computing is more economic, more efficient and more secure than centralized systems.

In energy generation, “distributed” means fewer centralized generation facilities and little or no transmission.  Utilities don’t like it, naturally, because a fully implemented distributed generation infrastructure would obviate the need for a publicly subsidized electric utility monopoly – the institution feels justifiably threatened.  Whether DG will ever supply all of our energy needs is a question for the future.  In the meantime, policy makers should guard against steering the market away from its proper implementation.

Because there are a number of technologies and a variety of ways to implement DG, the California Public Utilities Commission (CPUC) and the CEC have defined DG as those technologies and implementations that generate electricity on the “customer side of the meter”.   See the CEC’s Renewables Portfolio Standard Eligibility Guidebook (3d ed., December 2007), at 17-19. These would include home installations of solar photovoltaics (PV) and would also include commercial PV such as rooftop and ground-based solar being implemented by large energy users (food processing, cold storage, manufacturing, etc.) and others.  For this purpose, DG does not include solar rooftop programs being sponsored by the large utilities that utilize commercial rooftop space in order to generate energy that is then sold into the grid.  It is energy used on-site that does not require a central transmission and distribution system.

To some extent, DG has been an afterthought in the TREC considerations and decisions.  This is because the market is currently quite small compared with utility-scale projects.  However, it seems likely that DG is the next frontier in renewable energy generation.  As PV continues to drop in price, and new technologies are developed, more and more commercial enterprises will come to realize that generating their own energy from the sun (or from fuel cells or other new technologies) is simple, safe, and less expensive than being beholden to large utility monopolies.
The CEC is concerned that TRECs for DG would provide an excessive subsidy in light of current programs in place for such projects.  The CEC’s current position is as follows:

“Facilities that receive funding under the Energy Commission’s New Solar Homes Partnership program, Emerging Renewables Program, or Pilot Performance‐Based Incentive Program, under the CPUC‐approved Self Generation Incentive Program or California Solar Initiative, or any similar ratepayer‐funded program, and facilities that benefit from net metering programs or tariffs approved by the CPUC or any POU, are considered distributed generation and may not be certified as RPS‐eligible at this time.”  RPS Eligibility Guidebook p. 25.

However, as argued persuasively by the Solar Alliance in its comments on the revised RPS Eligibility Guidebook:  “given the reality that, as the incentives under the California Solar Initiative [and other programs] decline, the sale of TRECs is likely to become a critical means for financing distributed solar generation.” To meet the state’s aggressive RPS goals, it only makes sense to allow TRECs for DG.  The CPUC anticipates this eventuality as it takes great pains in the revised proposed decision of Commissioner Peevey to “clarify the relationship of [the CPUC’s] discussion of TRECs from DG sources to the CEC’s authority…to determine what resources are RPS eligible.” http://docs.cpuc.ca.gov/PUBLISHED/Graphics/125383.PDF

The CEC has also stated “[t]he Energy Commission will not certify distributed generation [DG] facilities as RPS-eligible unless the CPUC authorizes tradable RECs to be applied toward the RPS.”  This pronouncement, combined with the revised proposed decision on TRECs, which will permit tradable RECs to be applied toward the RPS, will presumably make customer-side DG eligible for the sale and trading of TRECs, notwithstanding the CEC’s concern over excessive rate-payer subsidies.

The numbers for DG are small at present.  As pointed out by the CPUC, the California Solar Initiative (CSI) will have provided incentives for approximately 1,100 GWh by 2011.  At $50 per TREC, this would amount to only about $50 million State-wide in additional financing for solar DG projects (1 TREC = 1,000 kW hrs of renewable generation).  However these numbers are anticipated to grow significantly.

It’s useful to look at TRECs for DG from a commercial application perspective.  A 250 kW solar PV system can be expected to generate at least 300,000 kWh per year in a relatively high solar radiation area, such as the LA basin.  Even at the $50 per TREC cap set by the CPUC, this is still $15,000 per year in new financing for a commercial system.  At $200 per TREC, it amounts to $40,000 per year.  Assuming the facility owner could forward-sell these TRECs, even discounted to present value, this is a significant amount of money that could be used to finance installation and maintenance of the system over its useful life – especially in the face of declining or vanishing solar incentives.

We agree with the Solar Alliance and others who urge the PUC and the CEC to coordinate their agency actions so as to accommodate TRECs for DG and to do it soon.  Other states are way ahead of California in allowing RECs to stimulate the renewable energy markets.  For example, New Jersey, which has a specific solar set-aside, has allowed RECs for RPS compliance for a number of years.  Solar RECs sold at auction in New Jersey were recently trading for as much as $600 per REC (see http://www.srectrade.com).  California cannot afford to continue to ignore the energy infrastructure of the future.

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