Will the 21st Century be the Fossil Fuel Century?

Will the 21st century be the fossil fuel century?

Whether it’s peak oilers, climate scientists, renewable and sustainable gurus, or cleantech venture capitalists, we all talk like that’s not an option.  We’ve preordained that the 21st century is a green energy, renewable power, cleantech century.

And I’d like to believe that.  But it’s not a done deal yet.  There are 3 points all of us need to keep in mind before declaring victory.

  1. China, the second largest and fastest growing large economy in the world consumes half the global coal consumption, powered in part by North American and Australian coal supplies, and by a huge increase in Chinese domestic coal production.  This year’s EIA reference case 2035 projection has China’s coal consumption doubling by 2035, driving most of a 50% increase in world coal consumption – and virtually no change in coal’s proportion of the energy equation.  Powered of course with current recoverable coal reserves at some 900 billion tons, or 120+ years of current production.
  2. Brazil, the poster child of biofuels potential the last 10 years, is making a play with its deep water subsalt discoveries to be one of the oil exporting superpowers.  And check out the announcement of its $224 Billion 5 year oil investment program.  That’s like a couple of thousand ethanol plants ,or one major oil company.  The Brazilian offshore finds to date represent production something like 5-10x the current Brazilian ethanol production.  Some poster child.
  3. And then there’s shale gas, its potential exemplified by the Marcellus Shale.  By some estimates this resource is big enough to change the entire game in fuels for power. And most of it’s located right down the street from the heart of the US population centers, just like the coal beds were.  Hard to see how electricity prices keep rising to help renewables in the face of that, with natural gas prices being  moderate and all, (unless of course China eats all the coal and drives coal prices up –  a global fossil fuels century either way?).

Imagine a 21st energy century where the US growth is powered by cheap natural gas, and exports our coal to China to even out the balance of payments.  Where increases in ethanol production and offshore oil production and slightly higher gasoline prices and mpgs balance out most of the transport fuel equation. A world where renewables play an important part, but still stay at margin of the King Fossil.

It’s not a world unimaginable.  And it’s not much different that the imagination might have done seen in 2000, or 1990, or 2050.  This shouldn’t be doom and gloom, nor should it be time to declare a cleantech victory.   The 21st energy century will be a long century.  And it’s just business as usual.

Will Cleantech Open to Open Source?

by David Niebauer

Although it initially came as a shock, and was actually intended to subvert the accepted order of things, open source software has arrived at a place of respectability in the software industry.  The idea is bizarre on first blush and even today non-software oriented business people profess not to understand how it works – or how it could work. We are conditioned to expect intellectual property to be aggressively protected and that without such protection, no sane investor would ever support the development of a new technology.  In the world of non-software invention, entrepreneurs rush to file patents in order to secure for themselves a place at the financing table.  Patent(s) in hand, they enter the fund-raising process in the hopes of raising sufficient capital to develop prototypes and eventually sell products into the market.  The patent protection provides a mini-monopoly which gives everyone comfort that capital can be deployed without a competitor coming along and doing it better or cheaper.

The software world has turned this process on its head, at least with respect to certain types of fundamental technology.  Open source software has come to play a significant role in the infrastructure of the Internet and open source programs such as Linux, Apache and BIND are commonly used tools in the Internet and business systems. (for a good background article, see Kennedy, A Primer on Open Source Legal Issues.) Leading software companies with proprietary technology portfolios, such as IBM, Novell, and Oracle have learned to work with open source programs and even to profit from them.  See Koenig, Open Source Business Strategies. Not to mention the successful enterprises founded with the goal of supporting, integrating and maintaining open source platforms (Red Hat, Progeny, 10X Software).

Open source business strategies are based on innovative licensing models, and they are intended to make money for all involved.  The open nature is more a matter of access to technology and the intention to empower a community of users than it is about anarchy.  The open source movement is also motivated by the conviction that innovation is a fundamental human activity and that the fruits of innovation should be made available for the common good.  And it counters an intellectual property regime that at times stymies the very invention that it is supposed to foster.

The open source movement is making inroads in all types of industries.  In fact, it is starting to feel like a rising tide.  Open source hardware firms develop and sell electronics products using open source licenses. EDAG, a production design studio, has developed an open source concept car.  There are even proponents of what is being called open source biology that treats DNA as software source code for living systems, encouraging a community of scientists and genetic engineers to develop new drugs using open source licensing models.  See Open Source Biology by Andrew Hessel in Open Source 2.0, O’Reilly Media.

Is It Time For An Open Source Cleantech Movement?

There is no question that the world is hungering for technological advancement in this area.  The electric generation and transmission system has not changed substantially since its invention and deployment in the mid 19th Century.  These methods are gradually degrading our living environment and an increasing number of people, both scientists and non-scientists, are convinced that unless we learn to live sustainably on the planet, our time here will quickly run out. However, research and development in cleantech, especially in the renewable energy field, is significantly different than software development.  Rather than writing code, scientists in this field must work with mechanical systems, and when dealing with electricity these systems are complex and capital intensive.  Also, in software development, the source code is the product – a software company sells copies of its original product.  Most non-software cleantech businesses must express the invention in a patent and then build products based on that invention.  The capital required to build products is significantly greater than what is necessary to copy a set of code.  Perhaps a model is emerging that will allow the significant capital investments necessary to develop products in the cleantech area to be recouped.  The open source licensing model will not work with every cleantech invention, but there seem to be a few candidates for experimentation.

Two Possible Examples

I provide here two examples of possible open source business models, one employing open source development and one employing open source distribution.  The development model would appear to be ideal for genuine game-changing discoveries that might create an entire new platform for energy generation.  I am thinking here of things like zero-point energy, cold fusion, a storage breakthrough or a working magnetic engine.  My friend and colleague Ed Beardsworth, a physicist who investigates such things, urges me to imagine trying to conceive of nuclear energy in the year 1900 – genuine paradigm shifting inventions that are still over the horizon.

An open source model of development for such discoveries could harness the Internet for collaboration and information sharing in ways that would inspire a new community of investigators.  The filing of an open patent around fundamental technology might ignite a worldwide search for applications.  A licensing model that follows the GNU General Public License would encourage publication and sharing of improvements and derivatives to the technology.  An entirely new industry might grow up around real-world applications, maintenance, manufacturing and distribution of products.  The industry would borrow from software open source business models and would undoubtedly create many new ones unique to the particular technological advancement.

Another area that may overlap the world-changing discovery, but is distinct in many ways, is innovation in distributed generation (DG).  DG describes technologies and processes that allow energy to be generated at or near where it is used.  These technologies are generally small-scale, permitting direct application by businesses and homes.  The universe of present technologies is small (e.g., wind, solar PV, combined heat and power (CHP)) and the cost is still higher than subsidized central power, but this could change radically in the years ahead.

Here, an open source software distribution model is the best analogy.  I can conceive of DG technology developers, in particular, utilizing a modified dual licensing approach for patents, similar to what is presently employed by software developers employing copyright law. In the software model, the developer offers two separate licenses.  One is royalty-free, but contains limitations.  The other is a commercial license (including a royalty) with full functionality.  Free use carries certain conditions – typically, all modifications or derivatives must also be made public and open to all, and companies are prohibited from using the free version as a component of any product or solution they commercialize.  The commercial license generates traditional royalty fee revenue.  Supporting the open license generates more service-oriented revenue.

For a cleantech DG invention, a similar dual-licensing approach could be followed.  The basic foundational patent would be offered royalty free for anyone to make use of, test, explore and utilize for its own purposes.  Any modifications or derivatives would also be made available in an open manner and no commercialization or distribution would be permitted. Also, a licensee of the open version of the patent could deploy the technology for its own energy needs without having to pay a royalty to the patent holder.  This model might work well for all types of distributed applications: energy generation, efficiency, storage, monitoring, etc.

Why would anyone pay for a commercial license when access to the same technology could be had for free? One obvious reason is that the commercial license would permit manufacture and distribution, so that a complete turnkey solution could be developed and offered for sale to end-users.  Many commercial enterprises would likely choose this alternative. Even businesses that avail themselves of the royalty-free version might also wish to engage the licensor in a technical advisory capacity, for maintenance and support or for other reasons (e.g., warranty or IP protection).  The software world is replete with open source business models that generate significant revenue for the developers.

Conclusion

These are only a couple of ideas that emerge when thinking about open source cleantech.  A recent blog on this site by Jason Barkeloo has suggested that electrons are in some sense analogous to software source code and that the business of how we value electrons is perhaps poised for a complete re-thinking. The world awaits not only the technologies of tomorrow, but the business models and practices that will usher in this new world.

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


Renewable Energy Almost Equals Nuclear Energy in USA

According to the most recent issue of the “Monthly Energy Review” by the U.S. Energy Information Administration (EIA), “nuclear electric power accounted for 11% of primary energy production and renewable energy accounted for 11% of primary energy production” during the first nine months of 2010 (the most recent period for which data have been released).

More specifically, renewable energy sources (i.e., biomass/biofuels, geothermal, solar, water, and wind) accounted for 10.9% of domestic energy production and increased by 5.7% compared to the same period in 2009. Meanwhile, nuclear power accounted for 11.4% of domestic energy production but provided 0.5% less energy than a year earlier.

And according to EIA’s latest “Electric Power Monthly,” renewable energy sources accounted for 10.18% of U.S. electrical generation during the first three-quarters of 2010. Compared to the same period in 2009, renewables – including hydropower – grew by 2.2%. While conventional hydropower dropped by 5.2%, non-hydro renewable used in electrical generation expanded by 16.8% with geothermal growing by 4.9%, biomass by 5.5%, wind by 27.3%, and solar by 47.1%. Non-hydro renewables accounted for 3.9% of total electrical generation from January 1 – September 30, 2010 — up from 3.5% the year before.

Preliminary data also show that fossil fuels accounted for 78% of primary energy production. Overall, U.S. primary energy production rose by 2% compared with the first nine months of 2009. The report also showed that consumption of oil, including imported oil, has declined due to more fuel-efficient vehicles and because vehicle miles traveled peaked in the U.S. in 2005.

“Members of the incoming Congress are proposing to slash cost-effective funding for rapidly expanding renewable energy technologies while foolishly plowing ever-more federal dollars into the nuclear power black hole,” said Ken Bossong, Executive Director of the SUN DAY Campaign. The Southern Company was recently provided with $8.4 billion in federal loan guarantees to build two new nuclear reactors. The guarantees could cost taxpayers $8.4 billion should the project later be cancelled due to cost overruns. Congress is considering over $40 billion for new nuclear reactors.

5 Cleantech Wishes for 2011

Five things I’d like to see in cleantech 2011.

  1. A fuel cell in one of my blogger’s houses.  This one’s actually in progress, so hopefully it’s a gimme.  So come on Marc, we’re waiting for the pictures and the blog!
  2. More cleantech IPOs.  Come on guys, the market’s been rolling, we ought to be able to deliver ONE good IPO or two?  We did see RigNet (NASDAQ:RNET) get out in a $60 mm IPO.  RigNet’s a telecommunications for remote and offshore oil and gas markets but maybe no one outside of Texas counts it.  Of course, a nine year old c. $80 mm in revenues/$25 mm in EBITDA company backed by long time cleantech investor Altira, ought to to make the list.  And Chinese LED maker SemiLEDS (NASDAQ:LEDS) made it out in an $89 mm IPO.  So maybe the IPO market isn’t dead to cleantech, and after market performance is guaranteed to go badly, at least for profitable companies.
  3. And speaking of LEDs, I’d like to see lots more of them next year – in houses, on street lights, hanging from Christmas trees.  And I’d like to see them brighter and cheaper.  And I probably will!
  4. A major cleantech conference in Houston.  Perhaps someday rivaling the OTC – Offshore Technology Conference.  When that happens, perhaps we’ll know cleantech has arrived as a real sector.
  5. Lots of EVs!  I admit it, I don’t think much of venture backed EV startups, but I’m really excited to see some EVs.  I imagine them like the herd of tractors in the tractor tipping scene from the movie Cars (don’t ask why, that’s just the mental image I have).  And since I’m testing driving an Nissan Leaf Electric Vehicle a couple of weeks, this wish is bound to come true.  I will definitely be blogging it.

Here’s thanking all our Cleantech Blog and readers and Cleantech.org members for your support. Happy holidays, and good luck in a new year!

Right Time for Better Place?

by Richard T. Stuebi

Although the benefits of electric vehicles (EVs) have long been intuitively understood, EV market adoption has been limited by various issues associated with batteries.  Batteries cost too much and are too heavy/bulky, the operating range an EV is too short, and there’s no convenient way to recharge batteries with the speed and ubiquity of filling up a gas tank.

Well, there’s a lot of money being invested in many companies to address the first set of issues concerning battery cost and performance.  However, there hasn’t generally been a lot of attention paid to the question of how excellent/cheap batteries will get recharged – even though the lack of a solution on this issue would completely nullify the value of any progress on battery technologies for EVs.

Enter a company called Better Place.

Having secured $350 million of new investment in early 2010, led by HSBC (London: HSBA), Palo Alto-based Better Place is developing proprietary technology and installing infrastructure to streamline the process by which electric vehicle (EV) owners recharge batteries.

I recently had the opportunity to visit the research and testing facility for Better Place, which is located just north of Tel Aviv in Israel.  At this facility, Better Place allows visitors to test-drive a near-production prototype EV made by Renault (Euronext:  RNO), with whom Better Place is working closely.  It’s a fun exercise to gun an air conditioned mid-size five-passenger sedan up to 60 mph in a few seconds with no transmission shifts and virtually no sound, although Better Place has virtually nothing to do with the EV or the battery within it.

More interestingly, the facility lets future would-be EV drivers interface with how the battery pack would be recharged – if the vision of Better Place gets adopted.

Better Place envisions that EV drivers would buy a monthly subscription to Better Place recharging services.  At parking spaces hosted by Better Place, there is a post about one meter in height, in which is embedded a retractable cord to plug into the EV for battery recharging while the car is parked.  The retractable cord is unlocked by an electronic key card that the Better Place subscriber waves in front of the charging post.  (I wish I had asked what happens if a non-subscriber occupies a Better Place parking spot, or if a user forgets to disconnect their EV from the charging cord before driving away.)

This is all well and good for commuters or around-towners that have ample parked-car time for a recharge, but Better Place also has a solution to the EV challenge of quick recharging for long-distance trips.  Better Place has developed a service station design involving robotic arms in underground bays to reach under a parked EV, extract the depleted battery, and replace it with a fully-charged battery – all within a couple minutes. Thus, an EV-driver can be back on the road as quickly as refilling a gas tank, without even having to get out of the car.

Additionally, Better Place is developing software to facilitate vehicle-to-grid (V2G) utilization, wherein the customer would enable the EV’s batteries to sell power back to the grid during high-value peak periods.  Each customer would set his/her own parameters as to when Better Place would allow the grid to tap the EVs batteries for resale to the grid:  some customers would be willing to save (or even make) a few dollars by letting the grid utilize the EV for power supply pretty much anytime, whereas other customers wouldn’t want to risk depleting the EV batteries (and hence EV range) for any price.

The Better Place business model has many interesting and compelling aspects to it – recurring revenues, different price points and subscription packages – but it has one very scary element:  there is no avoiding its capital intensity.

In essence, Better Place strives to become an unregulated utility, with massive infrastructure deployment in its parking recharge posts and service stations.  Better Place needs to gain sufficient critical mass of customers in relatively dense geographic areas in order for the infrastructure investments to pay off.  Over time, Better Place can stitch together multiple clusters into pan-reginoal and eventually national ubiquity.

Although smart money is making a big bet on Better Place, only time will tell.  Be on the lookout for a Better Place regional pilot taxi program in the San Francisco Bay Area in early 2011.

A Cleantech Energy Funding Adventure

by Jason Barkeloo, CEO of Pilus Energy

My business partners and I discovered an innovative way to unlock energy stored in carbon compounds. After a little back-slapping and “atta-boys,” we sought to raise the capital to launch a pilot. This led to another discovery; the destructive impact the economic crisis is having upon the capital markets. This means innovation, which requires capital, does not have the fast movement opportunity to market that capital provides.

It is a long way from the days when a business plan with a dot com name could attract large amounts of capital. Many funders are accustomed to the software funding model. It is very different from funding a cleantech energy company. Cleantech energy producing firms may have software, but they may also have hardware, which requires manufacturing. Most funders do not like manufacturing. They prefer software. The funding requirements for energy production are substantially different because they require more time and capital. More time means the return on investment (ROI) will take longer. Consequently, their capital will be tied up longer. More time and capital mean more risk. Investors seek to reduce or avoid risk.

Cleantech innovations for distributed production remind me of the evolution from centralized servers and node computing models to the distributed Internet. As personal computer functionality increased, the computing power of the server was distributed to the edge of the network. Similarly, energy production will distribute as new innovative technologies develop. This is an opportunity for investors. If you did not recognize the transition from centralized computing to distributed computing, this is the opportunity to realize the distribution of energy production.

Before we get to a distributed-centric model, we will have a hybrid model. This will be an intermediate position before distributed becomes the norm.

Funding Structure Changes: The Vacuum
Generally speaking, Limited Partners (LPs) are significantly disappointed with the returns their venture capitalist (VC) money managers have provided. As a result, less capital is flowing into VCs. The vacancies along Sand Hill Lane in Menlo Park, CA attest to this. The seeming capital availability growth in China also provides insight into the changing VC landscape in America.

The population of VCs that remain is smaller. As one of my entrepreneurial colleagues told me last week, “It is one thing to kiss a lot of frogs to find a funding prince, but it’s a whole lot harder finding them when they are vanishing.” It struck me that amphibians in the natural world are also becoming extinct. Now, before we try to get VCs on the Endangered Species list, it is important to mention that their industry is evolving. In the interim though, there is a vacuum.

Our firm attracted enough pre-Seed funding to find and protect an important discovery. The amount of pre-Seed funding we needed for our cleantech discovery was significantly more than a friends-and-family round a software firm would raise. However, when our Company scales, our visionary investors will be rewarded handsomely, as well they should be.

The Company’s next milestone is revenues from a pilot. We must do this with our breakthrough technology as a minimum viable product. We will need more funding than most traditional angels will risk. If we could find a VC that would partner with a pre-revenue cleantech energy producing firm, the amount needed would be too low. As we are pre-revenue, going straight to a Series A with a VC is about as probable as getting Republicans and Democrats to [fill in the blank].

The funny thing is, governments are starting to fill the due diligence and risk reduction activities that angels need. No experienced angel is going to make a significant investment if there is no VC to fund the next level of a Company’s growth. Therefore, angels are starting to look to government for the nod and wink as to who are the winners and losers. I do not make a habit of saying things about an endorser’s expertise to conduct endorsement activities. Suffice it for me, if an angel is comfortable, then I am comfortable.

As part of the evolution of the capital landscape, I see an enhanced role for corporate joint ventures (JV). This may require a bit more “corporate” flexibility of the entrepreneur than s/he is accustomed. However, the corporation likely has resources and expertise than can assist the company’s growth. Of course the corporation gets the first right of refusal for licensing, product distribution, marketing, sales, and even liquidity. Since I am presently in such discussions it is best to shut my thoughts (aka, my mouth).

Back to the governmental funding role for a moment. Tax-payer funded programs like the small business innovative research program (SBIR), and similar programs, can be a very slow road to growth. We are fortunate. Our research team is well versed in grant writing. Surviving in academia requires the ability to pursue and manage grants. We were luckier still to get a top-notch writer who can do science, technical writing, and journal authorship. As a grant-writing company we accept, begrudgingly, that our deployment timeline is painfully lengthened by this funding strategy. We estimate an added twelve to eighteen months over angel funding to get a pilot completed. Speed is critical to capture markets. Hopefully, our competitors are experiencing the same slog.

The other downside is that grant requests for proposals (RFPs) serve as the starting point for grants. Those RFPs are usually not issued for breakthrough technologies. It is a breakthrough because no one else thought of it; hence no RFPs are issued in advance. Being ahead with innovation can slow down the startup even further. Securing a grant for an innovation will require political help expanding unsolicited RFP Programs and reducing the timelines.

The danger with this phase of capital market evolution is the vacuum left by vanishing VCs and angels who feed deals to VCs. Filling the vacuum requires time and experience. The time lost filling the vacuum results in less innovation to help grow the economy. Innovation keeps our economy healthy (or regain its health). Innovation begins with education and free markets. Funding innovation should not have government competing against the market. Perhaps government can participate in the innovation market?

As it turns out, the government is already participating in the market. Starting with innovation incubators like the Department of Defense (DoD) Defense Advanced Research Projects Agency (DARPA) and its two year old Department of Energy (DoE) twin, the Advanced Research Projects Agency for Energy (ARPA-E), to development stage programs like SBIR, to its own VCs like In-Q-Tel. What is needed now is to reduce the timelines for awards. Providing ROI mechanisms for tax payers beyond the promise of jobs may help streamline the process.

Additionally, government can encourage large firms sitting on capital to invest in startup innovations. Startup entrepreneurs can also encourage corporations to invest.

Conclusion
The longer it takes to fill the funding vacuum, the further American innovation will lag. Capital does not respect human borders. It will flow where it can grow. Entrepreneurs have a responsibility to their investors to follow the money. Therefore, innovation will follow the money too.

America is at risk of losing its cleantech innovation advantage. While America waits for the void of innovation funders to be filled, other countries are moving forward. American Federal and State governments might consider fast-tracking their cleantech funding programs. The United States Patent Office (USPTO) offers a fast-track cleantech energy patenting process. However, most of us understand the dangers associated with a fast-tracked patent when it comes to defending it, particularly for re-examination. However, the USPTO is commended for taking a leadership role in trying to maintain the innovation pipeline. The thinking is that a company with an issued patent is more fundable than one without.

Lastly, the American governments might also encourage established firms to take risks with innovative startups. If existing corporations can fill the funding vacuum, innovations might come to market more quickly. Such a strategy might also rapidly increase American economic health. How do you think Federal and State governments can incentivize cash-rich corporations to take investment partnership risks with startups?

UK’s New Incentives for Electric Cars and Charging Network

During the 2012 Summer Olympics in London, as visitors sail from Heathrow Airport in electric personal rapid transit (PRT), and look out the window at electric buses using hydrogen fuel cell to run 16 hours daily, they will see thousands of electric cars. It will be quite a contrast to the current winter of discontent, as snow storms close roads and airports. London is saving EV and PHEV buyers over $10,000 with new grants, exemptions from congestion fees, and over 1,000 charging stations with a low cost annual subscription.

Nine models of electric and ultra-low emission cars will be eligible for grants of up to £5,000, the government has announced. The grants will be available to motorists across the UK. The first nine cars to become eligible for eco-friendly car grants are:

  • Mitsubishi iMiEV
  • smart fortwo electric drive
  • Peugeot iON
  • Citroen CZero
  • Nissan Leaf
  • Tata Vista EV
  • Toyota Prius Plug-in
  • Vauxhall Ampera
  • Chevrolet Volt

More will follow next year. Program Details

The grant will cover the following types of cars:

  • Electric vehicles (EVs) – these run completely on batteries and are plugged into the mains to be recharged
  • Plug-in hybrid electric vehicles (PHEVs) – these use a petrol or diesel engine combined with a battery that plugs into the mains
  • Hydrogen fuel cell vehicles and other technologies may be considered

The grant will be available to motorists across the UK from 1 January 2011, reducing the cost of eligible cars up to a quarter, up to a maximum of £5,000.

London’s citywide electric vehicle charging network, ‘’, will launch in Spring 2011, the Mayor of London, Boris Johnson announced today.

, which will deliver 1,300 public charging points across London by 2013, is part of the Mayor’s plans for London to become the electric vehicle capital of Europe. The network will create a single visual identity for electric driving across the capital, and allow members to charge their vehicles at any one of these public charging points for no more than an £100 annual membership fee. Currently electric vehicle drivers have to register in each separate borough they want to use charge points in. In preparation for this new network a website, www.sourcelondon.net, has also been launched providing a ‘one stop shop’ of information on electric vehicles, including charge point locations across the city. Once has been launched in Spring 2011 drivers will be able to sign up for the scheme online.

The development of , has been led by Transport for London in close collaboration with the London boroughs and a wide range of private sector partners – who will play a key part in funding and providing locations for the network’s charge points. Discussions are now taking place with other UK cities developing charge point networks to ensure they can be used seamlessly by electric vehicle drivers and to ensure London’s work can contribute to a national network of charge points.

The Mayor has recently reaffirmed a 100 per cent discount from the congestion charge for electric drivers in the capital, as well as other low emission vehicles, which offers electric vehicle owners using the zone a potential saving of more than £2000 a year.

Beyond London, other areas are installing charging networks in streets, car parks and commercial retail and leisure facilities. These areas are the Midlands, Greater Manchester, East of England, Scotland and Northern Ireland.

Nissan’s CEO, Carlos Ghosn, sited the congestion fee in London and other cities as a  reason to invest billions in early electric car leadership starting with the LEAF. The UK has given auto executives greater reason to accelerate EV plans. The UK encourages all of us to prepare for an electric Olympic Games in 2012.

Peak Oil: Objects in Mirror May Be Closer Than They Appear

by Richard T. Stuebi

One of my favorite PowerPoint slides about the peak oil phenomenon comes from the dearly-departed Matt Simmons.  The slide depicted a mountain peak in an automobile rearview mirror, the implication being that we would only know for sure when peak oil production has been achieved after it has been achieved and followed by the inevitable decline.

Over the past decade, there has been a lot of debate as to when the date of peak oil would occur.  (It is worth noting that most of the argument has been about when, not whether, peak oil would occur.  Some of the more optimistic forecasters, such as Cambridge Energy Research Associates, have consistently projected peak oil a few decades out.  Some of the more pessimistic observers, such as long-time oilman Simmons himself, worried that peak oil would come much sooner, perhaps within a few years.

Now, according to a new parsing of the data in the World Energy Outlook 2010 by the International Energy Agency (IEA), it might be that peak oil production actually occurred in 2006 at about 70 million barrels per day.  This is a big shift from the IEA’s prior analysis in 2008, in which it projected that conventional oil production would slowly climb for decades to come.

To be clear, there is a bit of semantics at work here.  “Conventional” oil production represents black crude coming out of the ground in liquid form via wells, and that type of oil production may have peaked.  For sure, it’s getting harder to get:  big finds of conventional oil these days are the exclusive domain of multi-billion dollar big oil companies, working in the deepest places in the remotest places on the globe.

But, as you might have guessed by now, demand for transportation fuels (which historically are derived almost solely from oil) hasn’t peaked.  So, what’s backfilling the decline in conventional oil production?  Unconventional oil production – primarily tar sands from places like Alberta, and to a lesser extent natural gas liquids and (maybe more in the future?) coal-to-liquids – and biofuels are making up the difference.

What can declining conventional oil production mean?  For sure, it can only mean upward pressure on crude oil prices.  It also means that alternatives for crude oil in transportation markets become more economically appealing and more widely utilized.

However, the economics and availability of substitutes for conventional oil remains a great concern.  According to a recent study published in Environmental Science and Technology by researchers at the University of California, Davis, the stock market is projecting that the substitutes will not be economically-viable in large quantities at anywhere near the pace that they may be demanded.

Of course, the stock market is not a perfect predictor of anything.  However, if one accepts that the stock market reflects an incredible quantity of information processed by many very sophisticated market participants and further that on average stock prices are properly valued, the findings suggest that the market in aggregate isn’t seeing any huge near-term opportunities to replace oil in a major way.

If peak oil has indeed already occurred and if alternatives aren’t at the ready at competitive price points in meaningful volumes, then it is almost a virtual certainty that we will see some combination of significantly higher oil prices and/or oil demand destruction through reduced economic activity. 

It’s not a pretty picture staring back at us in the mirror.

And the Climate Company of the Year Is . . . – The COP I’d like to See

If you read the mainstream press, environmental blogs or my own favorite trailing indicator – the rolling Facebook wall of the politico-commercial climate elite – the pleasant surprise of finding agreement at the Cancun COP re-affirms both the relevance and utility of the UN climate negotiating process. The success is generally attributed to the negotiating skill of the Mexican hosts, an out of the blue clever intervention from India, a partial redefinition of the word “consensus” and the stylistic leadership differences of the Figueres UNFCCC Secretariat. And make no mistake, it is a success. Huzzahs, hoorays and yippees are indeed in order, because a year ago in Copenhagen, the outlook for going forward in any form was indeed bleak.

However, you actually scratch the surface and try to divine what Cancun means – or what impact it will have – the conversation gets fuzzier quickly. The state of the UN climate dialogue had descended to such a state that anything short of abject collapse is now seen as triumph. Considering the result through a different lens, the “success” required every diplomatic tool in our arsenal – coupled with a collective willingness to sigh, squint and accept a seriously bland and anodyne agreement. Drop either of those by a fraction, and Cancun and Copenhagen share more than a common first vowel.

Since the Bali Action Plan three years ago, the diplomatic and associated participants that make up the UNFCCC process have collectively flown tens of millions of miles and spent tens of thousands of man-years in dialogue, debate and engagement. Yet the best result we can imagine today is not dissimilar to pulling the Monopoly card “Roll Again”. To those who think the climate change clock is about five minutes before midnight, this is both depressing and terrifying.

Both opinions are correct. It is indeed a triumph and everybody involved should have a small smile of satisfaction. Failure would have been horrific – and creating as many commonalities as possible for the world’s nations to agree on cannot be a bad thing. But on a macro basis, it also highlights the frustrations of relying strictly on the UN process – at least in its current construct – to manage the climate issue. Little in the COP process gives one hope that it can remotely operate on the timeline that mainstream science urgently demands.

While the political side of COP seems a coin flip between disaster and modest incrementalism, a more positive change can be noted – but outside the negotiating walls. Throughout the 11 COPs I’ve attended, the sidelines have always been a buzzing dialogue amongst academics, NGOs and trade associations others. But now, they are joined by serious corporate presence -not just in the form of policy trackers, but from C-suite level presence (Coca-Cola, Dow, Duke Energy, Siemens , Virgin Group, Deutsche Bank, among others) and glitzy corporate bragfests about carbon accomplishments, commitments and challenges. The Gigaton Awards were launched  – in just one category, you had Toyota, Nike, Panasonic, Walt Disney and Sony strutting their bona fides. A company less known to the general public – Hara – announced an energy efficiency deal with the UAE worth several billion dollars. And this barely scratches the surface of the hundreds of companies who either showed up themselves or signed on to urgent appeals to get the process moving so they could really start out innovating and out investing each other in making the low carbon world.

So, here’s what I’d like to see – I’d like the see the UN process embrace that dynamic and make it their own. Instead of only herding cats to the lowest common denominator, I’d like to see the UNFCCC also take on the role of global cheerleader – and maybe even matchmaker. Make the COP not just about the political dialogue, but about openly celebrating the low carbon innovation that is emerging in front of our eyes – in policies, technologies, projects, initiatives. As an eminent friend of mine put it last week, have it be the world’s biggest Show and Tell.  There should be a constant stream of awards throughout the two weeks – best agricultural policy in an LDC, best VC cleantech investment, most innovative climate bond financing, Asian climate NGO of the year, Latin American carbon entrepreneur of the year and probably a hundred others. Because that is the scale of both the problem and the solution. Climate Company of the Year and Climate Country of the Year would have to bracket the proceedings, one way or the other.

Like it or not, we are a competitive species and if staring into the maw of planetary disaster can’t get us to collaborate faster, maybe having us compete toward the top is an idea we should embrace.  Any fan of Freakonomics can tell you that human beings are completely irrational (on a cost-benefit basis) when it comes to prizes and incentives. Let’s add an arrow to our holster and give the press and the public a platform for the success stories as well. Because there is nowhere better than a COP to get out the word. And no better place to market your wares to a germane and interested audience.

On a broader basis, the UNFCCC’s day to day relevance must move towards an ability to help countries and companies find paths to low carbon prosperity.   Bracketed texts and caffeine fueled all nighters are increasingly isolated from the carbon innovation economy. If a government, company or advocacy organization wants to know what kinds of tools – technology, implementation, policy, finance – have worked in what kinds of situations, the UNFCCC should be the first port of call. If you’ve ever tried to navigate its website, I think you’ll agree that is not the current situation.

I can lie on my back blindfolded under a basketball hoop and -while keeping my hands at my side and using only my feet – probably eventually make a shot. That’s not indicative of a predictable process, but rather – as my mother used to say – evidence even a blind pig finds an acorn every now and then. There are just too many inherent handicaps in the 200 country UN process to count on it exclusively, despite the heroic efforts of so many who serve honorably within its confines. Keep it going – for sure – but open other fronts that play to different parts of our species unique psyche as well.

Valuing the Electron

I am struggling to find a single function in our society that is not impacted by the electron. The electron is a negatively charged particle that fuels digital work. It makes software work on hardware. It powers motors and manufacturing. It lights our bulbs and amplifies our sound. In my opinion, the electron is the unsung hero of the Internet age.

If the generation, distribution, storage, potential work, and informatics of the electron were properly valued by the market beyond just metering it, a new market and industry could erupt.

Thus far, the electron is not valued for its ability to enable our society to function. Because electrons cost money to generate, distribute, and store, a commodity metering model developed at the founding of the industry. That model is due for a change. It is outdated and does not truly reflect the important role the electron now serves as a platform. As a necessary service, regulations overtook the industry. More on this later.

It might seem strange in the digital computer and Internet age that the value of the electron was not measured in it’s ability to do the digital work. Outside the some 150 utility companies in the USA, its genesis and work value was ignored. But what happens if you start valuing the electron for the work it can perform, just like software as a service might be valued?

I am not proposing that utilities be valued like Internet service providers (ISPs). Rather, I suggest the genesis, storage, and/or transmission of the electron be valued relative to the criticality of the digital work the electron performs. A distributed electricity producer or centralized utility are creating a platform. The market has not valued this. Or has it and the Genie just needs to be released?

The electron enables fascinating technologies. Generating and distributing electrons remains archaic, inefficient, and undervalued. Most do not know that nearly fifty percent of centrally generated energy is lost in vampire effects ranging from friction in power lines to voltage step-down to the appliance plug.

When the world is able to value the electron for the real value and future potential technologies, cleantech energy production will generate another Internet-like growth phenomenon. The value of the electron extends far beyond software and web pages. It is the platform that everything else in the modern technological world is built upon. Interject a solar flare, equipment failure, loss of fuel, or nuclear force, and the platform is disrupted and society stops. However, absent such events the electron moves on powering societies critical functions. The nice thing about the benevolent electron is anyone can build and monetize services upon it.

The highly regulated utility industry does not have the same unbridled freedom to monetize the platform it facilitates. Politically, it is realized the electron is critical to do work that maintains modern human life. It enables necessary functions from 911 telephone calls to heaters and air conditioners; from traffic lights to water purification. As a result, the production and distribution of the electron is classified as an essential service. This classification results in regulation. Highly regulated markets do not attract innovation because they can not attract capital. Capital investments are not made because the regulation prevents the proper monetization (such as valuing the electron as a platform). And so the circle continues. Meanwhile the infrastructure ages and begs for innovation.

Nordhaus and Shellenberger have it right. In their article, “How to Change the Global Energy Conversation” they argue that stimulating innovation in the energy production market is more effective than regulations such as emission caps (The Wall Street Journal, 29 Nov 2010). I add the following caveat. Allowing business model innovation is as equally important as technological innovation. For example, you might imagine getting your electricity for free in exchange for providing usage data the producer can monetize.

The lack of competition gives the impetus to a highly regulated environment. One can envision policy-makers grappling with the idea that an unregulated market would result in an extra abundance of overhead power lines. But what would happen if competition and market forces were unshackled electron generation and distribution? Perhaps distributed energy production would push forward and make overhead power cables obsolete?

Policy is often a preemptive action, or reaction, to the absence of a solution. That is, instead of entrepreneurial innovation being the response brought against the problem, a policy is crafted instead. In the case of the overhead power lines, historically there was little incentive for entrepreneurs to develop distributed power generation to get rid of those unsightly and expensive power lines. Getting into the power generating business is haunted by the shadow of regulation – and that keeps capital from enabling innovation. Everybody loses when such a closed environment surrounds such an open platform.

If the generation and distribution of electricity were opened it would incentivize the growth of the industry. This explosive growth would create multiple new industries and millions of new jobs.

For cleantech energy production to realize its market potential, the value of generating the electron must reflect its ability to foster technological progress. It is time to open the generated of electrons (electricity) so as to match the openness the electron itself enables. It is time to let markets and entrepreneurs solve energy production and distribution problems. The resulting industry will be an open platform. It will enable new industries and explosive job growth. This may include creating jobs to remove and recycle those nasty overhead power lines.

Guest blog bu Jason Barkeloo of Pilus Energy.

Meet the New Coal, Same as the Old Coal

by Richard T. Stuebi
 
One passage from the article stands out: “The expansion, the industry’s largest in two decades, represents an acknowledgement that highly touted ‘clean coal’ technology is still a long ways from becoming reality and underscores a renewed confidence among utilities that proposals to regulate carbon emissions will fail.”
Which, as we all know, they have.   And, the consensus is that carbon-limiting regulations will not be forthcoming in the U.S. for some time to come.
I posted a link to this article on my Facebook page, noting that investment decisions in new coal plants are typically a 50-year commitment, thereby further locking the U.S. into a carbon-intensive future for a long time to come.
This generated a few reactions from some friends. One, who works at a major U.S. utility, doubted some of the facts in the article. But, I don’t think he disputed the key messages.
Another, who works at another major utility, said it was far easier to be a critic as a spectator than as a company who is responsible for keeping the lights on. Fair enough.
I understand and respect many of the strategic and operating pressures facing electric utilities.  Many of these companies are just doing the best that they can while playing by the existing rules of the game — broken though they may be.
What I do find appalling is the lack of national will to change the rules of the game in such a way that it provides a clear framework for energy companies to invest in something other than mid-20th Century coal-burning technologies. 
It seems especially absurd to invest in new coal powerplants based on conventional technologies when so many existing coal powerplants of a pretty-darn-similar technological base are at risk of being retired in the coming years:  a study released last week by the Brattle Group indicates that U.S. utilities might shut down 50,000 megawatts of aging coal powerplants rather than invest in equipment upgrades to meet tightening EPA regulations.
And, I do criticize those companies who participate in the undermining of national will to take serious action to reduce carbon emissions, at the peril of our planet and of future generations. No doubt, some of those companies are those that are building coal powerplants without carbon capture and sequestration capability as we speak.
I remain optimistic that, someday, the U.S. will get serious in addressing carbon emissions. When that day comes, I won’t cry for those companies that acted to help entrench the status quo and in parallel made bets today that they will regret then.

Lincoln and Lexus Compete for Premium Hybrid Car Leadership

2011 Lincoln MKZ Hybrid’s Elegant Drive

This Lincoln MKZ Hybrid is delivering the most smooth and silent drive I’ve experienced. In stop-go LA traffic, I quietly move forward only using the two electric motors, with the gasoline engine off. When I accelerate around slow traffic the electric motors and gasoline engine blend power so smoothly that it would happen unnoticed unless you are doing a test drive.

The Lincoln MKZ is the premium hybrid car with the best fuel economy on the road. No other luxury or premium car gets the Lincoln MKZ’s 41 highway, 36 city, and 39 mpg combined fuel efficiency. The sticker price on this beautiful midsized four-door, five-seat, sedan is $34,333. How much more does this MKZ hybrid cost over the standard MKZ? Not a dime. Since the MKZ will save most drivers at least $1,000 per year over the non-hybrid, it practically makes this Lincoln a bargain.

As I sit behind in the Quietcraft Interior, admiring the Walnut Swirl steering wheel and dashboard, and adjust the fine leather seat to give me just the right support, I ask why Ford did not give this Lincoln a premium price. The answer is that Ford wants to sell more hybrids than Toyota. By 2020, Ford plans to have 10 to 25 percent of all its sales be hybrid, plug-in hybrid, and pure electric. If lithium battery prices keep dropping and oil prices keep rising with every drill and every oil spill, Ford will reach the 25 percent goal.

Ford Motor (NYSE:F) with this Lincoln MKZ hybrid is taking on Toyota Motor (NYSE:TM) with its five Lexus hybrid models. So far, Ford is beating Toyota at its own game. Powered by the proven Ford Fusion hybrid drive system, the Lincoln MKZ delivers 39 mpg combined beating the 35 mpg of its competitor the Lexus HS250h hybrid. The MZK has 8.8 more cubic feet of passenger room than the Lexus HS250h and still delivers better mileage. In Spring 2011, however, Lexus is again expected to take the lead at 42 mpg combined with the new CT200h compact hatchback.  The Lexus CT200h allows drivers to select from four modes – Normal, EV, ECO, and Sport. The Lincoln MKZ Hybrid keeps it simple. No selecting modes. Touch Start and drive.

As the Lincoln versus Lexus hybrid battle continues to unfold, Lincoln will emphasize their quiet, roomy, and luxurious ride. Lexus will focus on performance and a range of hybrid choices from hatchbacks to sedans to SUVs.

The Lincoln hybrid system makes all the decisions about when to be in electric-only mode and when to engage the gasolineLincoln MKZ Hybrid 2011 Lincoln MKZ Hybrid Test Drive and Reviewengine. When stopped or accelerating carefully in the MKZ, I stay in stealth mode propelled with quiet electric motors. If I accelerate with care, I could reach 47 mph before the 2.5-liter four-cylinder engine is engaged. When I step on it, the gasoline engine and 40-horse electric motors work together taking me rapidly to the speed limit. Everything happens automatically – the MKZ’s computerized drive system decides when to engage motor, engine, or both.

The MKZ Hybrid includes an array of electronics for safer driving, navigation, and entertainment. The SmartGauge instrument cluster includes a keyless entry pad, display of growing leaves as you learn to drive without wasting fuel. Seat positions contoured to your comfort are remembered. The standard sound system is great and uses Synch to allow you to use your Droid, iPod, or other music system.

Although the Lincoln MKZ Hybrid costs no more than the standard MKZ, the standard includes 16 cubic feet of trunk space, while the hybrid only includes 11.8 cubic feet.

With the hybrid you sacrifice not having a 60/40 split rear seat that lowers. This matters to people that regularly need the option of added cargo space for sporting goods, home projects, and extra luggage. The standard Lincoln MKZ only delivers 21 mpg; the hybrid 39 mpg.

If you sometimes drive on snowy or icy roads, both the MKZ is available with optional AWD; the MKZ hybrid is not available with AWD. The Lincoln MKZ AWD delivers 19 mpg combined; the Lincoln MKS AWD delivers 20 mpg benefitting from a turbocharged 3.5L engine. Speaking of cold, the front seats of these Lincolns can be heated or cooled to individual comfort year round.

If you love the drive of this hybrid car, but can’t quite afford the $34,333, then you can save $7,000 and enjoy the Ford Fusion Hybrid. Of course, it won’t hurt to test drive the alternatives from Lexus and others. For premium features, a luxurious drive, and a non-premium price, the new Lincoln MKZ Hybrid is hard to beat.

Lincoln MKZ Hybrid Specifications

Bonn Voyage – Time to set sail to a new Climate Archipelago

In my last set of observations (see Kill Bill V2 and the Cancun COP), I tried to make the case that the 20 year old UN system that manages intergovernmental climate affairs is increasingly archaic.  Rather than just complain and wander off muttering under my breath, these next blog blasts represent a few ideas might  enable the UNFCCC to enhance its  relevance, while not asking it to undertake tasks it is ill equipped and underpowered for.  And I think it’s clear that we need to shake some things up – somehow or another.

As they say in real estate, location is everything.  The German government offered Bonn as the home for the UNFCCC Secretariat back in 1995 at the first Conference of Parties in Berlin.  Which, as an aside, was attended by all of 1000 people – fewer than 3% of those who attended Copenhagen last year.   Bonn was, of course, the capital of West Germany during the Cold War, but the reunified government had quickly committed to repatriating to its historic home of Berlin.  In a blink of an eye, Bonn moved from being the capital of the strongest economy in Europe to a city that probably doesn’t  even crack top ten in its own country.  Just for comparison sake, my list would be Berlin, Frankfurt, Munich, Cologne, Stuttgart, Hamburg, Dusseldorf for certain – and Bremen, Dortmund, Essen, Hanover, Leipzig, Heidelberg, Aachen, Karlsruhe and the like jousting with Bonn for the last three slots.

If the world community wants to send signal how important climate change is, housing this crucial function in Bonn is like sending a Lada with a broken exhaust to pick up the CEO at the airport after a 12 hour flight.  People get fired for doing things like that.  Staying with Bonn at this point just because it is there is a firable offense in my mind.  It shows we are not serious.

This goes beyond just the perception – there are functional problems in the fact that Bonn’s is little more than an innocuous northern European city.   Talented people choose not to apply for UNFCCC jobs simply because they involve Bonn postings.  Every time a meeting in Bonn crops up, one invariably finds multiple Facebook posts groaning about having to go to Bonn.  For most hard core climate negotiation participants, the idea of yet another stay at the Maritim hotel brings on thoughts of ritual seppuku.  OK, that’s a bit strong, but suffice to say few people get a perk in their step when receiving notice of yet another need to come to Bonn

The results are exceedingly problematic.  In the most interconnected issue the world has ever faced, our lead agency on the issue is inherently isolated and insular – largely due to the tyranny of geography and a choice made at a very different time.  Profound developments are occurring in low carbon technology, finance, business models and policy.  Yet the globetrotting class that is moving heaven and earth to develop these tools has utterly no reason to ever just schedule a side meeting and have a cup of coffee with the Secretariat to mutually learn.  One must always justify  a dedicated trip see the UNFCCC secretariat in its home environs  – a fundamentally irrational situation.  Because in the climate and cleantech space, there is utterly no other reason to ever go  to Bonn.  The result is a dysfunctional entente, in which the outside world and the UNFCCC have substantial mutual incomprehension of eachothers capabilities and roles.

While Bonn is undoubtedly the wrong place, that certain does not mean that there is a single right place.  The scope of the climate issue and mission has grown enormously over the past fifteen years and ideas are flowing from all corners of the globe.  Perhaps we need to rethink the UNFCCC Secretariat as a global archipelago of issue focused units.  One can imagine a half dozen plus of regional bases, bristling with high end video conferencing and other telecommunications.  Grab the the conceptual framework  of Richard Branson’s Carbon War Room (think about the situation room in 24) and ask Apple, Cisco, Google, IBM and SAP outfit the archipelago with every bit of relevant technology and database IP to make them an example of a truly global best working practice.

Current meetings that Bonn hosts could become partially virtual (with small groups of participants convening at the local regional hub).  We’d even probably save some greenhouse gases, though we might have the problem of Lufthansa demanding compensation for lost revenue.

What might this archipelago look like?  We’d probably want to look for cities that are already in the midst of key green transformations and have certain green reputation.  Purely off the top of the head, one might think Masdar City (sustainable cities), the San Francisco Presidio (R&D) Rio de Janeiro (biofuels)  San Jose, Costa Rica (development issues), Melbourne (clean coal), Shanghai (transportation)  and probably still Bonn (coordination and governance).   The real fight would, of course,  be for the finance seat.

Of course there will be overlap and turf battles – that happens in any dynamic work area.  But frankly, the UNFCCC could use a bit of dynamism and I’d rather have units stepping a bit on eachother’s toes for ideas and people, rather than abetting the idea that fighting climate is about setting up the right comprehensive bureaucracy.    Make it an exciting place to be – not another UN agency backwater.

To the good people and civic leaders of Bonn, I ask your forgiveness for my blunt words and I truly mean no disrespect.  Like many of my colleagues, I have walked your pleasant streets many times and had my fair share of your delicious fresh beer and streetside currywurst.  You are a good place and I believe you should continue to be a spoke in the climate world.  But it’s time to step up, be big and let the rest of the world share the burden – and the opportunity – that managing global climate change represents.  From Bonn, we must sail forward.

Landfills and Buggy Whips

Progress is never without a price. What we gain on one hand we lose on another. The hope is that when the dust has settled the gains outweigh the losses. The manufacturers of buggy whips didn’t want to go out of business when the automobile arrived on the market. They fought to maintain their market share, and dismissed the automobile as a fad that would pass. It did not pass however, and transportation was revolutionized. The same holds true for manufacturers of vacuum tubes, 8-tracks, VHS tapes, floppy discs, and the list goes on and on. With each leap forward we leave the old way of doing something behind so that we may move onto the better way that technological advance allows us to enjoy.

Since humans have been walking the earth we have been digging holes and burying our trash in them. The basic technique has not changed for thousands of years. You would be challenged to find an industry that has been around longer than the landfill industry. The way we bury has changed a bit since ancient time. We use liners, we mine methane, and we try to mitigate ground water contamination. But the basics are still the same. Dig a hole, fill it with garbage, then cover the hole.

There are more than 3,000 landfills operating in the United States. These landfills are operating under current EPA standards that try to minimize ground water contamination. There are over 50,000 closed landfills that meet no such requirements and have been potentially contaminating ground water for decades. The California State Department of Health estimated that 67% of these old landfills are emitting toxic solvents and gases. The California State Water Resources Control Board found that 83% of these old landfills contaminate ground water supplies.

So, with all the nasty things that go along with landfills, why do we still continue to bury our trash? The answer is two-fold. Just as the buggy whip manufacturers didn’t want to go out of business, neither do the owners and operators of landfills. Cities and towns used to operate their own landfills. From the ‘law of unintended consequences’ bag came the result of the EPA constantly upgrading the requirements governing landfills. Towns and cities began to sell or contract their landfills to private companies. These companies are to quote a landfill manager I spoke with a few months ago, “In the business of burying trash. We’re not interested in anything that will divert that tonnage out of our landfill.” This is where technology meets the buggy whip. Recycling is diverting more tonnage from landfills each year. As a result landfills are fighting back to maintain their tonnage needs. The ability to divert over 90% of the current MSW and C&D going into a landfill into useful products exists today, yet the will is not there because, by and large, communities no longer control the operating landfills. They do control the closed landfills that have long been out of operation. Many of these are off the radar and local officials have no desire to put them ‘on’ the radar and be subject to current EPA standards. A city government official I spoke with a few months ago said, “The EPA doesn’t know about our old landfill so we wouldn’t be interested in emptying it. If they found out about it, it would cost us a fortune.”

We have the ability to not only stop using landfills, but to empty the landfills that dot this country. What we need is the will to do it. With approximately 50,000 closed, old landfills and assuming a typical landfill life span of 40 years, taking in a conservative 65,000 tons per year, valued on the low side at $90 per ton once processed, we have buried treasure of 11.7 trillion dollars beneath our feet. This does not include the trash located and being buried daily in operational landfills today. To process this trash in a 50 year time span would require 4,000 recycling plants employing 900,000 people operating 24 hours a day, 7 days a week. Additionally the health benefits gained by the people living near these old landfills once the landfills are emptied cannot be calculated. It’s time we moved forward. It’s time to lay down the buggy whip that is our antiquated landfill system. It’s time we put people to work. It’s time we really started to recycle our waste, instead of just enough to say we’re doing it.

Guest blog by Don Willis of GreenUSARecycling.com

Smart Power – Our Future Whether You Like it or Not

I had a chance to meet Peter Fox-Penner, the Chairman Emeritus of the Brattle Group the other day, when he was announcing the launch of his new book, Smart PowerBrattle Group is a long time economic consulting group to the power industry.  Smart Power is about the emergence and issues around the smart grid.  I’m a huge proponent of intelligent energy systems, having cofounded one company building superconducting fault current limiters, and recently cofounded another one still in stealth commercializing distributed power flow controls for transmission lines.  Rather than just hammer out a book review, I’ve asked Peter to opine on a number of questions about electric power, and share some of his thoughts.  Hope you enjoy!

Peter, exactly where do you think the trillion dollar need laid out in your book is going to come from?  How much higher is it than our current spend?  What is the source of capital- IOU or private financial investors? New Entrants? Munis?

In 2008 The Brattle Group studied investment challenges for the utility industry and found that between $1.5 and $2.0 trillion was needed from 2010 to 2030 to maintain current levels of reliable energy service.  Several other sources have independently projected a similar level, most recently Credit Suisse.  For more information, see slide 4 here:

In our Brattle study, the majority of the investments were in generation and distribution.  Without taking carbon prices into account, around $500 billion dollars of investments were needed in both generation and distribution, while transmission investments came in at almost $300 billion.  The remaining investments were needed to implement advanced metering, energy efficiency, and demand response.

These are significant increases compared to our current levels of spending.  Investments in the utility industry have been steadily declining since the 1970s. What will be particularly challenging for the industry is that investments must be made as the electricity sales trend line goes flat.  Consequently, we can expect the financial health of utilities and the price of power to suffer if we don’t plan for these conditions. While the industry is seeing an influx of new entrants, especially in the smart grid area, utilities are still going to provide the capital for these investments and will have to ultimately pass the costs onto ratepayers through higher prices.

Our T&D grid has been underinvested for a long time.  We all know it, but still it’s underinvested.  What will make that change?

The transmission side of the grid is one of the industry’s areas experiencing rapid increases in investment.  In the 1990s we were investing $2 billion a year and now investments are around $8 billion a year. Looking forward, these investments are expected to triple to support the development of 3,000 miles of lines per year through 2017, compared to about 1,000 miles of lines per year over the last decade.[1] Many of these investments center on reliability projects and future transmission investments will yield more projects that support public policy goals. (For example, RPS will require new lines to reach renewable resources).

On the distribution side, new end-use technologies, including advanced metering and plug-in hybrid electric vehicles (PHEVs), will require new investments.  While the costs of smart meters are relatively small compared to the total industry investment needed, smart meters are the building blocks of smarter grid systems and an important trend to watch.  Policy goals, such as the administration’s target to deploy 40 million smart meters and recent ARRA funding, have been instrumental in supporting these investments.

California botched deregulation badly, and despite successes like Texas, that debacle chilled the deregulation push for a long time.  Without a new drive, can we really get the capital mobilized into new generation and T&D?

There isn’t a clear relationship between the two – deregulation on the retail side doesn’t necessarily equate with investment.  Utilities in California, which is still integrated, are investing; so is Texas, which is deintegrated.  In Smart Power I explain the complex interplay between vertical integration, deregulation, and the future regulation of the industry.

It is worth noting that historically large amounts of transmission investment are underway and planned – over $100 billion of new projects, by Brattle’s estimates, in North American.  The FERC is already creating “a new drive” for this investment.

As to distribution (i.e. low voltage grid) capital, the constraint on investment is mainly the financial health of state-regulated utilities.  This is not looking very good and this is a primary concern in Smart Power.  Note that deregulation of either transmission or distribution wires is unrealistic and unwise for the foreseeable future.

Do you see AMI rolling out faster in IOUs or in Municipals?  Domestic vs. overseas?

The amount of AMI investment is greater for IOUs than municipal utilities only due to scale. The actual percentage of customers with AMI is higher among smaller municipal utilities, public utility districts, and electricity cooperatives.  The FERC’s 2008 Assessment of Demand Response and Advanced Metering reported that cooperatives had reached an AMI penetration rate of 16.4 percent in 2008 while IOUs were at 2.7 percent.[2]

Smart meter deployment recently reached a high of 25 percent of U.S. residential accounts.[3] AMI deployment in the U.S. has seen a surge due to ARRA funding, but EU countries may deploy faster by enacting regulations that make smart meters mandatory.  The UK government plans to put smart meters in every household by 2020.  France, Ireland, the Netherlands, Norway, and Spain are projected to have close to 100 percent smart meter installation by 2020 as well.   Generally, the EU is not ahead of the U.S. today and may not be for some time.

For more information on AMI and dynamic pricing potential see:  http://www.brattle.com/_documents/uploadlibrary/upload805.pdf.

What do you think are the top 3 business cases that will make smart grid/AMI fly?

At the moment there aren’t three business cases that have made Smart Grid or AMI “fly”- in every case so far there have been elements in proposed plans that experience pushback from either regulators or customer groups.  The best smart grid business cases incorporate robust pilots and show clear evidence of substantial favorable bill impacts.

Without fundamental changes in the lines, switch gear, transformers, et al that actually make up the grid, how much good can better two way communications with the meter actually do?  What is really needed underneath?

First of all, when utilities implement smart grid systems they typically upgrade more components than just the meters and their communication system.  The transformers, switches, etc., are all being gradually upgraded to be “smarter” incrementally at most utilities — it is a question of how quickly the old gear is turned over.  But more importantly, many of the direct customer benefits of the smart grid do not require substantial change-outs of the distribution system hardware you allude to — not at all.  These benefits come from much more customer and utility control over customer energy use, including dynamic pricing, and this doesn’t rely on the hardware items you mention.

We’ve been talking about wind and DG causing problems on the grid for a long time.  Are they really?  Where in the world can we point to examples and the solutions of that?

The intermittency of large wind and photovoltaic resources continue to provide operational challenges.  One example occurred in Texas where a combination of events caused a disruptive decline in the system frequency.  Wind production dropped from over 1,700 MW to 300 MW over three hours and emergency procedures were activated.  At the time of emergency procedures, non-wind resources were under-producing by about 300 MW.  To further complicate matters, demand was at a high that day and exceeded the day-ahead forecast.  Wind intermittency has also been known to disrupt energy prices (creating negative electricity prices in places like Texas and New York) but this is a far smaller issue than reliability of generation.  Having noted this, the variability of renewable is not a huge, impenetrable road block – – it is steadily being addressed.

Since we already have an effective carbon price embedded in supporting our wind power markets of c. $40-80/ton, what price of carbon do you see being needed to make the difference?

The carbon price needed to make wind comparable to other generation types (gas CC, coal, etc.) after all of the subsidies/incentives for wind generation would depend greatly on the region. There is also quite a bit of range depending on your options on projected gas prices, plant costs, and wind capacity factors.

How big a deal is it /how much does it cost to actually roll out AMI?  It seems as if every project takes forever and gets huge flack.

I don’t agree with the premise of your question.  Many utilities have rolled out AMI systems and they are working extremely well.   There is a lot of press lately about a few smart meter installations that have had problems, but the actual technical problems with these rollouts (as opposed to the PR problems) have actually been extremely small.

Credit Suisse has estimated utilities will need to invest approximately $22 billion in AMI equipment – which is only about 1 percent of total industry revenues. While this sounds like a small investment, the average all-in cost of a smart meter in the U.S. is approximately $200.

If we see more linkage with power and transport fuels through increased natural gas and EVs, what do you think the future and role of OPEC is in this debate?

Charles Ebinger, Director of the Brookings Institution Energy Program, who is an OPEC expert, believes that OPEC is very aware of EVs and will respond to them somehow.  However, it may be a long time before EVs put a large enough dent in global oil demand to cause OPEC to worry a lot about them in terms of contemporaneous actions.  The demand for oil from Asia is still rising rapidly, and oil is trading in a range OPEC claims to be very happy with.

Shale gas vs. wind vs. nuclear – where will our key coal power replacement come from?

I think replacement power for any potential coal retirements would mostly come from gas natural gas plants. With the current low expectations for gas prices, wind and nuclear do not have much chance to compete even with new gas plants.

How concerned should we be that low cost dirty coal power in China gives them a fundamental advantage in trade that leaves us playing catch-up?

I would argue that China’s recent clean energy investments pose a greater threat to our global competitiveness going forward.  China is becoming one of the biggest wind markets in the world, with 40 GW of capacity and expected growth of 150-300 GW by 2020.  Chinese companies are seeking to expand abroad and their wind and solar exports to the United States have increased dramatically.  Many argue that this exponential growth has come at the expense of the U.S., whose exports of wind turbine sets and gears fell by 67 percent in 2009.  China’s strength in clean energy surpasses just these wind power examples- China’s total clean energy investments increased 50 percent last year to $35 billion.  This is twice our current level of investment.[4] There has also been a steep decline in U.S. wind and solar technology exports to Europe, illustrating our clean tech competitiveness is at stake on a global scale.[5]

DR. PETER FOX-PENNER is a principal and chairman emeritus of The Brattle Group and author of Smart Power: Climate Change, the Smart Grid and the Future of Electric Utilities (www.smartpowerbook.com).  The views expressed in this article are strictly those of the author.

Interviewer Neal Dikeman is the longtime chief blogger behind Cleantechblog.com and Cleantech.org a partner at cleantech and alternative energy merchant bank Jane Capital Partners, Chairman of ecommerce company Greenhome.com, and previously cofounder of Zenergy Power and founding CEO of Carbonflow.

[1] For more information on transmission investment and planning, see:

http://www.brattle.com/NewsEvents/NewsDetail.asp?RecordID=865

or http://www.brattle.com/_documents/UploadLibrary/Upload888.pdf

[2] 2008 Assessment of Demand Response and Advanced Metering, FERC, 2008. http://www.ferc.gov/legal/staff-reports/12-08-demand-response.pdf

[3] Peter Fox-Penner, “The Smart Meter Backslide,” Harvard Business Review Insight Center, October 4, 2010, http://blogs.hbr.org/cs/2010/10/the_smart_meter_backslide.html

[4] Judith B. Warrick, The Power of an Idea, Morgan Stanley, Energy Insights, October 27, 2010.

[5] Worldwide: USTR Initiates Section 301 Investigation into China’s Subsidies and Restrictive Practices on Green Technology Sector, October 19, 2010. http://www.mondaq.com/unitedstates/article.asp?article_id=113220

Kill Bill Volume 2 and the Cancun COP

Quentin Tarantino’s Kill Bill, Volume 2 is one of my favorite movies.   It penultimate scene – a final confrontation of vengeance  from the wronged Beatrice Kiddo (aka, The Bride, aka, Black Mamba, aka Uma Thurman) and the evil, yet oddly amiable and ambiguous, title character (aka, the great David Carradine) is perhaps the finest in the film.  For those of you unfamiliar, shame on you.  In a nutshell, at the outset of a fight that will certainly require a major furniture allowance, the Bride suddenly executes the most exquisite sequence of strikes on the all of Kung Fu – the Five Point Palm Exploding Heart maneuver.  Bill – to his utmost surprise – finds his greatest disciple has surpassed him (their thousand year old kung fu master played by Hong Kong action master, Gordon Liu, had not deigned to pass this knowledge to him) and bows to her grace and superiority.

Why am I, sitting here on the beaches of Cancun, reminiscing about Tarantino’s oevre?  Well, it’s because of the way the Five Point Palm actually operates, explained via foreshadow earlier one by Bill himself.  It is not instant death – far from it.  The victim feels perfectly normal – except in his fifth step after the strike, his heart explodes and he drops dead.  It creates – literally – a perfect example of the walking dead.  Which is what brings us to the Cancun COP – climate’s first full gathering after the Copenhagen Five Point Palm Exploding Heart debacle.

Cancun is Bill getting up from the couch and taking that first proud step to his inevitable demise.  Everything here looks normal, feels normal – the mass ant colony of climate has done is annual migration to another odd corner of the world and set up shop. It’s lower energy than Copenhagen, Bali, the Hague or Kyoto, but that’s to be expected – off year COPs always go through these cycles

But make no mistake, COP/MOP process in its original form is most certainly the walking dead.  The fundamental political dynamics around past and future carbon responsibility in a world transitioning to new global multipolar balance (a dizzy prospect in its own right) have not been remotely resolved.  The chasm we saw in Copenhagen is not close to being bridged and there appears no way it ever will be bridged in this particular UN process.

To quickly review the dynamics of this particular Mexican standoff, developing countries continue to insist on an extension of Kyoto emission caps on industrial countries as the fundamental policy to engage mitigation.  Simultaneously, more and more industrial countries refuse to continue down that path.  While there are many other issues – macro and micro – this alone is a pretty binary choice and neither side is ever remotely likely to move.  Since the UN process is intrinsically based on 100% consensus, well – it ain’t gonna happen folks.  This  is my ninth COP/MOP total, my fifth in a row and these tensions are not getting better, they are getting worse.

Therefore – for all intents and purposes – the CMP process dead in its current configuration and the question is how many steps we will take before we too collapse in a heap.  For the record, cinema buffs debate  whether Bill died on his fifth or sixth step off the couch.  If each COP were a step, Tarantino’s model means we have another five years to go before we final collapse. Somewhat sickeningly, that feels about right.  Unlike David Carradine – who had total awareness of his fate – my guess is that substantial parts of the COP ant colony continue to delude themselves that this process represents the only relevant forum for climate management.

The COP process has become is own raison de etre and its existence seems increasingly  isolated  from the real innovation that countries, companies and other aggregations are attempting to address small fragments of the problem.  Basically, what goes on for two weeks inside these halls of official dialogue is a shadow game with little relevance to actual decision making around carbon policy, innovation and investment in the world that 6.5 billion people inhabit.  And vice versa.  And when when institutions exist simply for the reason that they exist under their own life force, a serious rethink is in order.

If we solely focus another half decade to supporting this particular paradigm, we may indeed be accused by our grandchildren of fiddling while Rome (and many other places) burned.  The efforts that thousands of negotiators and tens of thousands of other participants undertake to address the climate challenge through the COP process are undoubtedly real and important.  They are, however, driving toward an inevitable dead end.

The UN process as a intermediary of economic and environmental value between countries no longer holders up to scrutiny.  Being honest, we must recognize that the UN and CMP texts of the last decade do represent some agreement to abrogate  sovereignty – and for countries who are finding their way in a new global political  dynamic, this is likely a bridge too far.   Given the other forces at work, that simply is not a realistic assumption to make during such a fundamental power transition such as we find ourselves

This is not to say the UN does not have a role going forward – far from it.  My very good friend Christiana Figueres is now the ringmaster of the circus and if there is a human being on the planet who can recast the intergovernmental role positively for  our species and our fellow  earthlings, she’s the one I’d put my money on.  In my next installment in the next couple days, I’ll lay out some ideas for reinvigorating this UN processes relevance, making it so real climate mitigation work and UN support can walk hand in hand, as opposed to in parallel paths around the climate policy maze.

The Seminal List of Authoritative Cleantech Definitions

It dawned on me after I MC’ed the Cleantech Open Gala Awards Ceremony two weeks ago (congrats again the to winners!), that there were now some 5.6 mm listings on google for the term cleantech, and while virtually every data provider or leading market analysis firm in the sector had tried to define cleantech, no one had ever tried to reconcile the different definitions.  And since after Cleantech.com and Wikipedia, the next two websites are mine, I ought to be the one to kick it off.  Especially since I wrote the first mini-history essay on cleantech in 2007.

So in conjunction with our new Cleantechblog.com facebook fan page, here is the first seminal list of definitions of cleantech.  Send us new ones in the comments.

Here’s our official Cleantech.org definition of cleantech, slightly revised from 2007:  Cleantech (noun) KLEEN TEK  is the generally accepted umbrella term referring to a variety of products and services, investment asset classes, technologies, government policies, and business sectors which encompass some combination of clean energy, environmentally friendly, and sustainable or green attributes; Synonyms/AKAs: clean tech, clean technology, greentech, green tech, energy & environmental technology


“What is Cleantech?” the first mini history of cleantech I wrote in 2007, published on Google’s Knol and Cleantech Blog and CNET, at the time tried to lay out in brief of how the term cleantech or clean tech came to be defined, and why some firms still used greentech to refer to their investing strategy.

“Cleantech, also referred to as clean technology, and often used interchangeably with the term greentech, has emerged as an umbrella term encompassing the investment asset class, technology, and business sectors which include clean energy, environmental, and sustainable or green, products and services. . . .

The term has historically been differentiated from various definitions of green business, sustainability, or triple bottom line industries by its origins in the venture capital investment community, and has grown to define a business sector that includes significant and high growth industries such as solar, wind, water purification, and biofuels.”

No definition of cleantech should start without first reading the Cleantech.com current definition, as they really get credit for popularizing the term, or more accurately, the Cleantech Group cofounders, Keith Raab and Nick Parker do.

“Clean technology, or “cleantech,” should not be confused with the terms environmental technology or “green tech” popularized in the 1970s and 80s. Cleantech is new technology and related business models that offer competitive returns for investors and customers while providing solutions to global challenges.

While greentech, or envirotech, has represented “end-of-pipe” technology of the past (for instance, smokestack scrubbers) with limited opportunity for attractive returns, cleantech addresses the roots of ecological problems with new science, emphasizing natural approaches such as biomimicry and biology. Greentech has traditionally only represented small, regulatory-driven markets. Cleantech is driven by productivity-based purchasing, and therefore enjoys broader market economics, with greater financial upside and sustainability.

Cleantech represents a diverse range of products, services, and processes, all intended to:

  • Provide superior performance at lower costs, while
  • Greatly reducing or eliminating negative ecological impact, at the same time as
  • Improving the productive and responsible use of natural resources”

They’ve also long maintained a taxonomy of cleantech, currently with 11 categories:

“Energy Generation
* Wind
* Solar
* Hydro/Marine
* Biofuels
* Geothermal
* Other

Energy Storage
* Fuel Cells
* Advanced Batteries
* Hybrid Systems

Energy Infrastructure
* Management
* Transmission

Energy Efficiency
* Lighting
* Buildings
* Glass
* Other

Transportation
* Vehicles
* Logistics
* Structures
* Fuels

Water & Wastewater
* Water Treatment
* Water Conservation
* Wastewater Treatment

Air & Environment
* Cleanup/Safety
* Emissions Control
* Monitoring/Compliance
* Trading & Offsets

Materials
* Nano
* Bio
* Chemical
* Other

Manufacturing/Industrial
* Advanced Packaging
* Monitoring & Control
* Smart Production

Agriculture
* Natural Pesticides
* Land Management
* Aquaculture

Recycling & Waste
* Recycling
* Waste Treatment”

CleanEdge Original 2001 Definition of Clean Tech

However, while the Cleantech Group does not lay credit to coining the term (nobody really does), the first original report on Clean Tech was by CleanEdge in 2001.

With Ron Pernick, Clint Wilder, and Joel Makower behind it, Clean Tech: Profits and Potential laid out a four leaf clover of clean technology was around Clean Transportation, Clean Energy, Clean Materials, and Clean Water.  And the reports original forecasts, while a bit understated looking back, were quite prescient.  Except perhaps for the bits about fuel cells and microturbines, but we won’t hold that against them!

But then no definition list would be complete without Wikipedia’s cleantech article (not the we trust it!)

Cleantech is a term used to describe products or services that improve operational performance, productivity, or efficiency while reducing costs, inputs, energy consumption, waste, or pollution. Its origin is the increased consumer, regulatory and industry interest in clean forms of energy generation—specifically, perhaps, the rise in awareness of global warming, climate change and the impact on the natural environment from the burning of fossil fuels. The term cleantech is often associated with venture capital funds.”


And more recently, Dallas Kachan, cleantech analyst and former editor of Cleantech.com, and before that Inside Greentech, published a new cleantech taxonomy on our Cleantech Blog. Arguing that the old taxonomy’s had gotten long in the tooth, Kachan & Co highlight a 3 level taxonomy with 8 top level categories:

  • Renewable Energy Generation
  • Energy Storage
  • Energy Efficiency
  • Green Building
  • Transportation
  • Air & Environment
  • Clean Industry
  • Water
  • Agriculture

A few other definitions are worth noting:

Matt Marshall in Venture Beat commented a couple of years back on Dow Jones Venture One’s definition of cleantech, which defined as:

“Because of the significant level of attention being focused on cleantech, VentureOne’s research department adopted a strict methodology for categorizing potential companies in this new industry. They were defined as companies that directly enable the efficient use of natural resources and reduce the ecological impact of production. Areas of focus include energy, water, agriculture, transportation, and manufacturing where the technology creates less waste or toxicity. The impact of cleantech can be either to provide superior performance at lower costs or to limit the amount of resources needed while maintaining comparable productivity levels.”

And of course that means that Thompson Reuters and the National Venture Capital Association jumped into the game in 2008:

“To enable more precise reporting on clean technology companies, Thomson Reuters has newly implemented a specific “clean technology” flag for the portfolio company database. Using the definition that clean technology investment focuses on innovations which conserve energy and resources, protect the environment, or eliminate harmful waste, transactions are coded by the data team and reviewed by the QA team for whether they meet the clean tech criteria. VentureXpert is the official database of the NVCA.”

And NRDC with E2 published their version in 2004 when arguing for a California Cleantech Cluster

“Cleantech as a distinct industry is still in its formative years. The industry encompasses a broad range of products and services, from alternative energy generation to wastewater treatment to environmentally friendly consumer products. Although some of these industries are very different, all share a common thread: They use new, innovative technology to create products and services that compete favorably on price and performance, while reducing mankind’s impact on the environment.”

In conclusion, aka, Let me explain. No, there is too much. Let me sum up

  • Damn, there are a lot of lists.  Why doesn’t someone do an analysis on them?
  • We are still waiting for Greentech Media and Michael Kanellos, and the Gartner Group to weigh in, not to mention Rob Day, the original Cleantech Investing blogger.
  • We have green washing in the green sector, but cleantech is a very inclusive sector, which means so far there’s still no sign of cleantech washing hawks, or even a first definition of cleantech washing (maybe I’ll write that next).
  • It is worth noting with some humor how many of these definitions try to shoe-horn in the notion of “and it’s cheaper, too!”.  I figure that  falls into the category of if you have to say it is, then it probably isn’t, but since half of these definitions include input from venture capitalists trying to justify why they’re investing in policy driven investments, a historic no-no in VC-land.
  • Note how the last three definitions build on concepts from the earlier ones.

But the real question is, just because you think you’re cleantech, are you actually cleantech – across EVERY definition?

Will your Utility be ready for your Networked EV?

Yes, your electric utility will be ready to charge your new electric car if you live in the right city.  Your odds improve if you live in one of 18 cities, own a house that uses air conditioning, has a garage, and have new underground power lines. If you live in an apartment with no garage, especially in a non-priority city, then get ready to be a brave pioneer.

I recently invested a day listening, interviewing, and networking with forward thinking utility executives and some of the smartest people in the smart grid business at GTM Research and Greentech Media’s Networked EV conference.

Nissan has started shipping the LEAF. Chevrolet has handed car keys to early Volt customers. Forty thousand new electric vehicles will be on the U.S. highways by the end of 2011. Charging these vehicles could be the equivalent of powering another 40,000 houses. Since the sub-prime mortgage crisis has left that many houses empty, you would think that charging 40,000 cars should raise no concerns. Charging one million by 2015, however, is both a challenge and an opportunity.

Utility executives are raising concerns and conducting PR campaigns. They want to make sure that they are ready, that no neighborhood blackouts happen, and that they make money charging these electric cars. Early Prius sales were concentrated to certain communities; it will be the same story with electric cars. For example, universities and tech centers will have a concentration of EVs that will lead utilities to install smart meters, add smart grid software, and add $9,000 transformers. In many cases, public utility commissions must support these upgrades so that utilities make money charging EVs.

Even morning charging at work or public spots is fine with most utilities. Peak demand is often in the afternoon and early evening. It greatly helps that all electric cars, from LEAFs to Volts, use smart charging. Charging does not start when you plug-in. It starts based on your preferences, such as charging at lower night rates. With a couple of clicks on your smartphone app, night preferences can be overridden with your request to immediately charge.

Temporary TOU tiered pricing will be tested in cities such as San Diego to see if people are encouraged to charge off-peak. Some lucky test households will pay super off-peak rates that are only 1/6 of peak rates when charging their new plug-ins in San Diego. Money incentives and the simplicity of smart charging should lead to most charging being done off-peak.

Eighteen cities from San Diego to Seattle, from New York to Raleigh, have been preparing for the deliver of thousands of electric cars by installing 15,000 public charging stations as part of a DOE Ecotality project. Independently, thousands of home charging stations are being installed by EV drivers.

Greg Haddow with SDG&E in San Diego described how they have evaluated best locations for public charging considering geographies of early buyer interested as reported by their customers and automakers, employment centers, and strategic areas of public use. Starting this December, ten stations per week will be installed, with quantities increasing until 2,500 are installed.

Electric vehicle interest has been strong in areas of urban density, so SDG&E has engaged with many apartment and condo complexes. No two multi-unit dwellings have been the same in parking structures, renter/owner allocation of spaces, meters, panels, and power currently available to the complex. Some EV enthusiasts have been surprised to learn that their rental agreements prohibit EVs or use of parking power. Condo CCRs vary.

Electric utilities have already successfully handled bigger challenges than charging EVs.  They have added underground lines, new transformers, and distribution to handle new real estate development including hundreds of McMansions, each demanding more juice than even a Tesla. Utilities are upgrading grids and infrastructure to support megawatts of distributed solar. Electric utilities take on new industrial parks with hours of surges in demand for electricity.

PG&E with 5.1 million electricity customers was ranked the greenest utility in U.S. by Newsweek 2009 and 2010. It has developed three scenarios to support 220,000 to 850,000 plug-in vehicles by 2020 in its service area. Kevin Dasso, Senior Director of  for PG&E, contrasted two neighborhoods where there is a concentration of those ordering Nissan LEAFs and Chevrolet Volts – Silicon Valley and Berkeley. New developments in Silicon Valley will be easier. The distribution infrastructure is already there to support larger air conditioned homes, newer underground wiring, and newer transformers.  A plug-in hybrid will not equal the demand of one large home. Berkeley homes are supported with older infrastructure, less likely to have air conditioning. One battery-electric car could create more demand than one home.

Yes, your electric utility will be ready for your new EV. If you live in an older neighborhood with energy-efficient homes, some planning and upgrading will be needed. The impact will be less than adding new developments, new industrial parks, and even high-growth of solar power. Most charging will be done off-peak, allowing utilities to run their most efficient power plants 24/7 and make better use of nighttime wind-power. The key to off-peak charging will be the incentives of TOU pricing and the fact that your networked EV is smart enough to charge when rates are lowest.

For a nation that is 95 percent dependent on petroleum for transportation, the chance to use home grown energy should be a blessing, especially in 70 percent efficient electric drive systems, instead of 15 percent efficient gasoline engine drive systems. Done right, your electric utility will make money. Most utility generation assets are underutilized at night when home charging is ideal; generation is underutilized in the morning when workplace charging ideally occurs.

EV Economics are getting interesting

EVs are getting interesting.  With the Nissan Leaf this year, Ford planning to release its Focus EV in 2011, and the Honda Fit EV scheduled for 2012, the 100 mile range EV class will provide consumers with several choices within a couple of years.

So it’s time to take a look at whether EVs are a good deal for consumers.   It took a bit work to analyze but the results were worth it.  The initial step is to review the key drivers affecting consumer economics.

First is upfront cost for the EV, the charging station, and the incentives being offered.  The EV costs more, even after vehicle and charging station incentives.  I estimate the additional cost at $7,334 for a Nissan Leaf versus a basic Toyota Camry.

Second is annual cost.  A Camry gets 24.5 EPA miles per gallon.  A Nissan Leaf, by my estimate, will get about 3 miles per kWh.  So what matters is how much a driver drives and the cost of electricity.  The average driver drives 15,000 miles per year, or 41 miles per day, which should be reasonably feasible in an EV.

Electric costs are a big factor.  Retail rates nationwide are something like 11 cents/kWh.  In high cost states like California, without time-of-use metering, costs are 15 cents/kWh and higher.  I’m a SMUD customer with an old meter.  I’m into Tier 2 consumption and if I charged up tonight it would cost me 17.55 cent per kWh.   But wholesale, nighttime rates are dramatically lower.   One wholesale electric price forecasting company that serves electric traders shared their outlook for the next 12 months with me:

Quarterly forecast prepared 12/3/2010, Off-peak prices

period        NP15 (Northern California)
2010-4      3.3 cents/kWh
2011-1      2.7 cents/kWh
2011-2      2.2 cents/kWh
2011-3      3.3 cents/kWh

These prices may seem amazingly low but they are, in fact, realistic.  Thanks to the shale boom natural gas is being delivered to  power plants for $4.40 per mmBtu.  And the power plants setting prices throughout the western US are modern combined cycle units with heatrates around 7,200 Btu/kWh. (4.40 * 7200 / 1000 = 3.2 cent/kWh).  In Northern California alone on Dec 3 there are over 4,000 unload MW of these plants.  That’s enough to charge 1.3 million EVs consuming 3 kW each.

Tying the analysis together I computed the IRR of owning an EV under three scenarios.

  • In scenario 1 my utility is serious about promoting EVs and they flow cheap nighttime power to me at a 5 cent/kWh rate.  They can do this with their new smart meters; at night they have plenty of distribution capacity; and they would make some money.
  • In Scenario 2 I pay roughly the national average for power, say 11 cents/kWh.
  • In Scenario 3 my utility does nothing and I have to pay Tier 2 rates — 17.55 cents/kWh.

I computed when I break-even, or when my fuel savings equal the extra cost of the EV, and my IRR, or the return on my initial investment after I’ve driven 105,000 miles (this is 7 years at 15,000 miles per year).  The results are presented below:

Scenario                 Break-even years      IRR at 105,000 miles
1  (5 cent/kWh)                 3.9                                17 %
2  (11 cent/kWh)              4.8                                 11%
3  (17.6 cent/kWh)          6.2                                 3%

At a 17% return the EV option is pretty compelling and my local utility can make it happen, if they really want clean energy technology.

At the national average rate 11% isn’t bad, and early adopters may find EVs attactive.

And under my current personal rate schedule, EVs aren’t interesting.

That said, with a bit of creative utility rates, and leveraging the big smart meter investments being made, EV can be a hit.  And if they are a hit car companies with early products, like Nissan, GM, and Ford can pick up market share.

At the national level this makes great sense.  Every EV driven will displace over 600 gallons of gasoline per year, virtually all of which is produced from imported oil.  This reduces our balance of payments and trade deficits and improves our security situation.  Maybe a higher federal incentive would be cost effective and should be pursued?

Disclosures: none
Credits:  Price forecast and electric data courtesy of Plexos Solutions LLC and its weccterm forcast.

Report from the Berkeley-Stanford Cleantech Conference

The Berkeley-Stanford Cleantech Conference, a biannual conference organized by Berkeley and Stanford students, successfully brings some of the best and brightest minds together to discuss cleantech-related topics. Past themes have included Electric Vehicles, Big Solar, Energy Storage, and Smart Grid; this year the conference was organized around Distributed Generation. This year’s event took place at the PG&E General Office Conference Center in San Francisco.

The first panel of the afternoon, “Customers Turned Producers: The State of Distributed Generation,” provided a comprehensive introduction to distributed generation (DG) and the various issues and problems that may come with increasing adoption. The panelists covered a wide variety of backgrounds: Helen Priest from PG&E, Eric Dresselhuys from Silver Spring Networks, Sky Stanfield from the law firm Keyes & Fox, Chris Marnay from Lawrence Berkeley National Labs, Peter Asmus, a Senior Analyst at Pike Research, and Eric Wesoff from Greentech Media.

The first topic of consideration was the definition of distributed generation, for which there was considerable ambiguity. Sky Stanfield proposed a standard definition of 20 MW for SG, but participants were quick to point out there are varied definitions, depending on location and application (as Eric Dresselhuys commented, “the one consistent rule is that there is no consistent rule for DG”). Peter Asmus reminded the audience that DG is not necessarily just renewable energy, pointing out that diesel-based power (considered one of the dirtiest energy options) is a common DG source. Regardless of the energy source, distributed generation must align peak generation as close to peak load as possible.

Guest blog by Andrew Lonecker

The potential safety and legal issues of distributed generation were also discussed. For instance, although utility-scale and grid-connected systems can easily close all downstream components in case of accidents (e.g., inclement weather situations), for DG, with multiple input and output points, this is not possible. Panel participants mentioned situations in which live and dead connections of DG systems were confused, causing significant safety issues.

Finally, the panel began a discussion of microgrids, which are autonomous “island” grids that can be connected and disconnected to the larger grid. Peter Asmus estimated that there were 140 microgrids in existence, comprising over 1.8 GW, primarily at college campuses and in military applications. Helen Priest acknowledged that the prevalence of microgrids would currently be a “nightmare” for some parts of PG&E, although she was optimistic that PG&E innovation would be able to solve these issues. Billing was viewed as a consistent problem, particularly with the growth of intermittent solar and wind and electric vehicles.

The second panel, “Scaling down to size: the technology landscape,” provided an overview of the technological opportunities and challenges in distributed generation. Panelists included Matt Lecar from GE Smart Grid, Carrie McLaughlin from Nordic WindPower (which provides 1 MW utility-scale turbines), Kevin Passalacqua from Bloom Energy, Liang Downey from Nextek Power Systems (which integrates native intermittent DC sources to provide uninterrupted DC power for load), and Ed Sappin from BP Solar.
The first topic regarded early adopters and potential customers segments for each company. Bloom Energy, whose first customers were Google, eBay, Adobe, and others, have searched for early adopters who are not risk averse and are very cost focused. Further, Bloom Energy has searched for large corporate partners that have an existing customer base, allowing for future expansion. Nordic WindPower’s end customers are usually schools or small business looking to “green” their business (in fact, ROI is often less important than the marketing opportunity). Nextek Power Systems’s first customers were building and facility owners in California, focusing on lighting (and move to LED), data centers, HVAC, and in emerging markets.

As a result, the technologies created by each of the companies are tailored to these customer segments. Bloom boxes, for instance, are modular 300 kW systems that can be combined for larger uses. Further, Bloom Energy designed their boxes to be extremely quiet, to minimize the NIMBY (“Not In My Backyard”) concerns. Also, Nordic WindPower must design their products and services to align with complicated safety issues (e.g., noise and safety guidelines). For each of the panelists, project financing and lack of certainty in US policy are their largest barriers to success.

The last panel of the afternoon, “Stories from off the grid: DG & Microgrids in operation,” provided an perspective on the operations side of distributed generation. Panelists included Olaf Groth from Monitor 360, Sheldon Kimber from Recurrent Energy (a solar provider), Ryan Levinson from Wells Fargo (involved in renewable energy investment), Matt Heling from PG&E, and Matt Singleton from Prologis (an industrial real estate developer involved in rooftop solar installations).

The primary topic of discussion involved the various operational challenges inherent in distributed generation. For instance, the primary challenge for PG&E is to devise system that supports DG but without raising costs for everyone else. As part of this topic, the panelists struggled with the tradeoff between being a business person, and rational developer of DG, and an advocate. Matt Singleton commented that Prologis has recently struggled with bank willingness to finance their larger, and multi-building, projects (for reference, approximately 200 square feet of rooftop space equates to 1 MW). Commenting on the involvement of Wells Fargo to finance these projects, Ryan Levinson explained the other side of the pendulum, in that small-scale projects (on the order of 100 kW) are also difficult to fund due to their lack of scale. To solve this, Wells Fargo works with developers to aggregate multiple projects together to standardize and save costs.

To end the conference, Scott Jacobs, the Head of McKinsey & Company’s cleantech practice, discussed the state of cleantech and McKinsey’s involvement in the industry. According to Jacobs, McKinsey is probably one of the top 10 largest cleantech companies in the world, by revenue. They have had over 1000 cleantech projects over the past two years and over 2000 consultants working in the industry. According to McKinsey estimates, the opportunity in cleantech is massive, comprising over $1 trillion in market potential by 2020. Renewable energy is becoming cheaper (while conventional energy is getting more expensive), governments are moving aggressively, and there is a huge need for human capital. In fact, according to Jacobs, McKinsey’s cleantech work can be seen as a signal that corporations of all sizes are prioritizing this in their strategy.

Guest blog by Andrew Longenecker.  Email him at alongene@stanford.edu