Top 10 Cleantech Subsidies and Policies (and the Biggest Losers) – Ranked By Impact

We all know energy is global, and as much policy driven as technology driven.

We have a quote, in energy, there are no disruptive technologies, just disruptive policies and economic shocks that make some technologies look disruptive after the fact.  In reality, there is disruptive technology in energy, it just takes a long long time.  And a lot of policy help.

We’ve ranked what we consider the seminal programs, policies and subsidies globally in cleantech that did the helping.  The industry makers.  We gave points for anchoring industries and market leading companies, points for catalyzing impact, points for “return on investment”, points for current market share, and causing fundamental shifts in scale, points for anchoring key technology development, points for industries that succeeded, points for industries with the brightest futures.  It ends heavy on solar, heavy on wind, heavy on ethanol.  No surprise, as that’s where the money’s come in.

1.  German PV Feed-in Tariff – More than anything else, allowed the scaling of the solar industry, built a home market and a home manufacturing base, and basically created the technology leader, First Solar.

2. Japanese Solar Rebate Program – The first big thing in solar, created the solar industry in the mid 90s, and anchored both the Japanese market, as well as the first generation of solar manufacturers.

3. California RPS – The anchor and pioneer renewable portfolio standard in the US, major driver of the first large scale, utility grade  wind and solar markets.

4. US Investment Tax Credit for Solar – Combined with the state renewable portfolio standards, created true grid scale solar.

5. Brazilian ethanol program – Do we really need to say why? Decades of concerted long term support created an industry, kept tens of billions in dollars domestic.  One half of the global biofuels industry.  And the cost leader.

6. US Corn ethanol combination of MTBE shift, blender’s, and import tariffs – Anchored the second largest global biofuels market, catalyzed the multi-billion explosion in venture capital into biofuels, and tens of billions into ethanol plants.  Obliterated the need for farm subsidies.  A cheap subsidy on a per unit basis compared to its impact holding down retail prices at the pump, and diverted billions of dollars from OPEC into the American heartland.

7. 11th 5 Year Plan  – Leads to Chinese leadership in global wind power production and solar manufacturing.  All we can say is, wow!  If we viewed these policies as having created more global technology leaders, or if success in solar was not so dominated by exports to markets created by other policies, and if wind was more pioneering and less fast follower, this rank could be an easy #1, so watch this space.

8. US Production Tax Credit – Anchored the US wind sector, the first major wind power market, and still #2.

9. California Solar Rebate Program & New Jersey SREC program – Taken together with the RPS’, two bulwarks of the only real solar markets created in the US yet.

10. EU Emission Trading Scheme and Kyoto Protocol Clean Development Mechanisms – Anchored finance for the Chinese wind sector, and $10s of Billions in investment in clean energy.  If the succeeding COPs had extended it, this would be an easy #1 or 2, as it is, barely makes the cut.

 

Honorable mention

Combination of US gas deregulations 20 years ago and US mineral rights ownership policy – as the only country where the citizens own the mineral rights under their land, there’s a reason fracking/directional drilling technology driving shale gas started here.  And a reason after 100 years the oil & gas industry still comes to the US for technology.  Shale gas in the US pays more in taxes than the US solar industry has in revenues.  But as old policies and with more indirect than direct causal effects, these fall to honorable mention.

Texas Power Deregulation – A huge anchor to wind power growth in the US.  There’s a reason Texas has so much wind power.  But without having catalyzed change in power across the nation, only makes honorable mention.

US DOE Solar Programs – A myriad of programs over decades, some that worked, some that didn’t.  Taken in aggregate, solar PV exists because of US government R&D support.

US CAFE standards – Still the major driver of automotive energy use globally, but most the shifts occurred before the “clean tech area”.

US Clean Air Act – Still the major driver of the environmental sector in industry, but most the shifts occurred before the “clean tech area”.

California product energy efficiency standards – Catalyzed massive shifts in product globally, but most the shifts occurred before the “clean tech area”.

Global lighting standards /regulations – Hard for us to highlight one, but as a group, just barely missed the cut, in part because lighting is a smaller portion of the energy bill than transport fuel or generation.

 

Biggest Flops

US Hydrogen Highway and myriad associated fuel cell R&D programs.  c. $1 Bil/year  in government R&D subsidies for lots of years,  and 10 years later maybe $500 mm / year worth of global product sales, and no profitable companies.

Italian, Greek, and Spanish Feed in Tariffs – Expensive me too copycats, made a lot of German, US, Japanese and Chinese and bankers rich, did not make a lasting impact on anything.

California AB-32 Cap and Trade – Late, slow, small underwhelming, instead of a lighthouse, an outlier.

REGGI – See AB 32

US DOE Loan Guarantee Program – Billion dollar boondoggle.  If it was about focusing investment to creating market leading companies, it didn’t.  If it was about creating jobs, the price per job is, well, it’s horrendous.

US Nuclear Energy Policy/Program – Decades, massive chunks of the DOE budget and no real technology advances so far in my lifetime?  Come on people.  Underperforming since the Berlin Wall fell at the least!

 

Scavenging For “Free” Energy Isn’t Necessarily Cheap

5 watt-seconds. 

That’s the miniscule amount of energy released mid-stride upon the ground when the average person is walking.  At least, so it was reported in a business plan I recently read from a college student group to pursue a new technology concept to harvest the otherwise-wasted energy created by foot traffic in dense pedestrian areas such as airports.

It seems like a reasonable number, so let’s work with it.  5 watt-seconds, when continuously applied, translates to 300 watt-minutes, or 18,000 watt-hours, or 18 kilowatt-hours.  At 10 cents per kilowatt-hour, a representative value for electricity from a typical utility, it would be worth $1.80 if someone was to constantly tread upon a gadget that could perfectly capture the kinetic effort being exerted and supply it into the grid.

Over the space of a year, $1.80 per hour could theoretically work up to nearly $16,000.  This sounds like an impressive sum, and could lead someone like a group of hopeful students to think about developing a technology, about a square foot in size, which could underlie tiles, carpeting or a thin-veneer of pavement in busy pedestrian corridors.

Well, there are several simplifying assumptions in the above analysis that are easy to gloss over, but which will likely prove economically fatal to this seemingly-appealing concept.  Where to begin?

First, 100% efficiency capture is impossible.  Indeed, I’d be surprised if 20% capture was realistic, but for the sake of argument, let’s modify our analysis to use 20% as an assumption.  That knocks $16,000 per year down to $3,200 per year.

Second, what square foot of real estate is going to experience constant pressure from landing feet?  The answer: none.  I don’t know of any study of pedestrian traffic patterns, but I’d be surprised if any one spot on a floor receives more than one footfall every five seconds even in the busiest of times.  Using that probably optimistic assumption cuts the economics by another factor of 5, down to $640 per year.

Starting to sound a little sketchy already, but it gets worse:  what fraction of the time is any busy area really busy?  It’s certainly not 24 hours a day, 7 days a week.  It’s easy to overlook how many non-busy hours there are in a year:  fully one-third of hours are between 11 pm and 7 am, and 28% of hours are on Saturdays and Sundays.  In contrast, peak activity times only represent maybe 10% of the hours of the year.

All of this means that the prior assumption of one footfall every 5 seconds, reflective of peak periods, is inappropriate for an annual average.  Although I have absolutely no data to back it up, I’d guess that one footfall every minute is a reasonable annual average (8760 hours in a year) for the very busiest spots on the planet.  That worsens the last estimate of value by another factor of 12, down to $53.33 per year.

Over an entire space upon which this technology would be deployed, this degree of utilization — reflective of the busiest spots — is still far too high.  I would guess that the average traffic location in a venue like an airport would be no more than a quarter of the highest traffic location, which reduces the average value estimate down to little more than $13 per year per square foot.

I still think this is way too high, but I’ll stop here and assume it’s about correct:  5 watt-seconds per footfall is maybe worth about $10-15 per year per square foot of floorspace in a busy venue.

Now, let’s look at the cost side of the equation.

How much will a tiny but robust generating device implanted in a floor covering cost to manufacture in volume?  Let’s assume that the gizmo is made in China, where high-volume electronic equipment can be produced for very low cost.  Based on Chinese wares of similar size/complexity I’ve seen at prior exhibitions of the Consumer Electronics Show every January in Las Vegas, I would estimate that a Chinese manufacturer would be willing to sell such a device for $10 a unit.

But, that’s shipped out the factory door.  Then, there’s transportation to the U.S., which is at least another couple of dollars.  And this doesn’t include the costs of wiring.  And, maybe even more importantly, some energy storage device and power conversion/quality equipment to “smooth out” all of the lumpy jolts and surges of energy production into something the grid can absorb.

All told, the cost of goods, delivered to the site, will be at least $25 per square foot.

Alas, the product cost is just the tip of the iceberg.  More importantly, there’s installation.  In a retrofit situation, the existing floor covering will need to be ripped out, the generation device will need to be installed — and crucially, wired in series and connected somehow to the building’s electrical system — and the floor made usable again.

I’m not a flooring expert, but the labor involved in such an endeavor has to be considerable.  If it’s going to be in a civic context (which it pretty much must be, to get that degree of pedestrian traffic), then the labor is likely to be unionized, at probably $30/hour — maybe more for the electrical work.

With all these considerations, it’s hard to figure how the total cost per square foot of this energy harvesting device, installed, will be less than $100.  I would guess it would be far more than that.  But, even at this cost, it’s about a 10-year payback on deployment cost — assuming no maintenance costs (another optimistic assumption) — relative to the value calculated above.  My gut tells me that the actual payback in a real-world situation would be much longer, maybe 20 or even 30 years — which is probably longer than the expected life of the generator unit itself.

This is not the economic foundation of a successful product concept.

Going through this long example indicates the fundamental commercial challenges associated with energy harvesting — a class of technological concepts to capture energy from incipient sources.  I’m seeing an increasing number of energy harvesting ideas coming across my desk, usually from younger people who wonder why we can’t make use of something that already is occurring and being wasted to gather some “free energy”.  Well, “free energy” isn’t exactly free:  while many of these energy harvesting ideas may be technologically possible, most are uneconomic, some ridiculously so.

Just because something can be done doesn’t mean it should be done.

To the extent that energy harvesting ideas are being pursued — whether it’s capturing the motion of a hiking person for battery recharging (as is being pursued by Tremont Electric with their nPowerPEG device), or cultivating a virus to biologically produce electricity (potentially for micro-devices such as implanted pacemakers) such as recently discovered by researchers at Lawrence Berkeley National Laboratory — the common element underlying potential success is that the value associated with energy being harvested is very high. 

Energy harvesting is unlikely to make economic sense in displacing any electricity generated by powerplants, which is available on the grid for on the order of 10 cents/kwh.  On the other hand, the cost of electricity from batteries typically exceeds $1.00/kwh, so energy harvesting technologies might have a niche where the scavenged energy can replace battery-supplied energy.

To those students who had the idea of emplanting generation devices in the floor to capture the energy of walkers:  I appreciate your creativity, but I would turn your attention elsewhere.  It’s OK; one usually has to walk through several truly wacky ideas before landing on a really good one.

Bettering Batteries

I recently got an email entitled “Trojan Tips”.  Hmmmm, wonder what that could be about?  Alas, upon scrolling down from the subject line, I found the message provided advice from the battery manufacturer Trojan about proper battery management practices.

The more you get into cleantech, the more you realize how central a role is played by battery technology

Really, more broadly, energy storage technology is the central player in the cleantech drama.  Energy storage is not technically synonymous with batteries:  there are other non-battery storage technologies such as flywheels that exist.  Sandia National Laboratories has recently developed a modeling tool, called ES-Select, to help in determining which energy storage technology is most well-suited to a particular application need.

However, most of the major technology and commercial issues associated with energy storage are battery-related.  In other words, for the most part, talking about energy storage means talking about batteries, and vice versa.

Of course, everyone has used batteries for decades in portable electronics — beginning with transistor radios (remember them?) and flashlights, and now to smartphones and computers. 

Less obviously, batteries are making an increased push for stationary applications.  

Though generally invisible, banks of batteries have been in use for decades in telecommunications systems — ever notice how you get a dial tone on your landline when there’s a power outage? — and also in large computer and data centers in uninterruptible power supply (UPS) systems, such as those from the APC division of Schneider Electric (Euronext:  SU).  Since computers have become a consumer item in the past twenty years, UPS systems have gotten substantially smaller, to the point where many households now have them to prevent brief disruptions in power from the grid from affecting sensitive electronics. 

Imagine a UPS system so large it can power a whole neighborhood, situated at the local utility substation.  This would not only improve power quality for all the customers in the area, but it would also enable more utilization of intermittent renewable energy resources like wind and solar energy.  As this article discusses, the independent power producer AES (NASDAQ: AES) has established a new business unit to implement battery-based grid storage facilities at grid-scale.

As important as batteries may be in the future for the electricity grid, the really big future opportunity for batteries is in transportation.  For performance and economic reasons, this is also the most challenging application for batteries.

Improvements in batteries are the key enabler for wider market penetration of electric vehicles (EVs) to reduce petroleum consumption and associated emissions.  As noted by David Bello in “What Do We Need From the Battery of the Future?”, “the battery the future requires is cheap, more energy dense and less fragile”, while Joe Fargione of The Nature Conservancy is quoted as saying that EVs “need batteries that last longer, charge quickly and are inexpensive.”

Lower cost, more reliable, higher energy density, faster recharge times, longer lifetimes – all at the same time?  That’s a tall order, indeed.

Well, you can probably build a battery that simultaneously improves all of the above criteria…except the first one.  Alas, a high-performance small and lightweight battery that costs a fortune is of interest only for space and military applications.  Hardly anyone will buy a car where the batteries will cost more than a few thousand dollars.  A recent article by Vince Biancomano in Energy Efficiency & Technology says it all in the title:  “Industry Grapples with EV Battery Economics”.

One of the ways that EV players are “grappling” with battery economics is by considering leasing models, involving “hot-swapping” of discharged batteries with fully-charged batteries at service stations, as Better Place is aiming to offer (about which I’ve blogged in the past).  Alas, it will be difficult for the industry to come up with standards as uniform and widespread as the fueling infrastructure of gasoline pumps, nozzles and tanks that is ubiquitous in today’s developed economies.

Ultimately, however, an expensive battery being leased is insufficient to largely debottleneck the EV marketplace; the cost of higher-performing batteries must also come down significantly. 

According to McKinsey in its recent article entitled “Battery Technology Charges Ahead”, batteries must cost less than $250/kWh to be competitive with automobiles running on $3.50/gallon gasoline.  Alas, batteries currently cost about $500-600/kWh today, but the McKinsey analysis suggest a 60+% cost decline in the next decade, to $200/kWh by 2020.  This is hoped to be achieved by attaining greater manufacturing scale economies, reducing component prices via competitive pressures, and advancing technologies to increase the performance of batteries.

Our venture capital firm, Early Stage Partners, continues to see a robust deal flow of investment opportunities in early-stage companies that are working to develop innovative battery-related technologies – mainly for EVs, but also for other applications. 

Though discovered over 200 years ago by Alessandro Volta (hence, “volt” as the key unit of measurement), batteries remain an active field of invention, though the capital-intensity associated with maturing a physical technology through proof of concept all the way to achieving scale economies of mass production can be daunting.

Thoughts from Intersolar 2012

By Guest Blogger Charles Waitman

I spent a day at Intersolar North America in San Francisco, considered by some to be North America’s premier exhibition and conference for the solar industry.  My career, to date has been in the oil industry.  This was my second Intersolar conference.  These are my observations.

PV dominated the conference.

Mark Pinto of Applied Materials gave an excellent presentation.  He forecasts that innovation will support continued growth in the rate of PV installation.  Dr. Pinto forecasts a 20 to 20% growth rate in annual solar installations, with annual installations reaching 250 GW/yr  and installed capacity reaching perhaps 800 to 900 GW by 2020.  He described total installed cost approaching $4/w today.  As an interesting perspective the installed cost of 250 GW, at $4/w, is about one third of worldwide expenditures for oil.  Other interesting perspectives, at the level of 800 to 900 GW, PV solar would represent 15% of worldwide generating capacity, 5 or 6% of annual generation, and a little less than 1% of energy use.   The US Energy Information Administration’s 2011 forecast (International Energy Outlook 2011) differs sharply from Dr. Pinto’s.  EIA forecasts a 16% annual growth rate for solar capacity (16% first derivative vs 20 to 30% second derivative for those of you who love calculus) from 2008 to 2020 with a 2020 capacity of 86 GW.  Pinto sees panel costs dropping below $1/watt.  Balance of system costs are coming down as well, but the progress here is slow.

I talked briefly with a representative of the EV Group about their non-reflective coatings.  The marketing strategy has been increased efficiency.  From my perspective the most significant benefit of these coatings might be expedited permitting since glare is a common concern.

I listened to several presentations at the PV Energy World Stage.  California Assembly member Skinner and Arthur O’Donnell of the CPUC reported on the California a legislative mandate to introduce storage with as yet unspecified physical requirements in 2015 and 2020.  The remaining presentations caused my head to spin thinking about load and generation profiles, distributed vs central generation, smart grid requirement – or perhaps things will just balance out.  However, the point that registered clearly in my mind is that $4/w for the installation isn’t the cost of PV in a very large scale and mature setting.  Storage, transmission, resources for load balancing, etc. will be big cost centers when we reach the point that PV power from the roof top impacts more than the firing rate of a peaking turbine.

What I didn’t see was discussion of end of life issues for panels and batteries.  While these issues are later (as in sooner or later), nickel, cadmium, lithium, magnesium, cobalt, tellurium, indium, selenium shouldn’t accumulate in stockpiles and permiate into the ground and water.  Everything has an end of life.  Disposal (or hopefully recycle) isn’t exciting, it is often expensive, it is hard to enforce.  PV isn’t the first promise of an almost infinite supply of clean energy.   Real thinking and robust policy regarding end of life issues should accompany the technological development that is proceeding at such a furious pace.

I am almost in the PV camp (a big deal for an oil industry guy).  PV is bigger than I thought, growth is faster than I thought (EIA is also a few years behind), and it will be a major part (as in Coal or Oil or Gas not domestic hot water) of the energy balance.  Balancing cost (including changes to the grid, and storage) and environmental impact (end of life) of PV against shale gas (abundant and likely cheap but faces groundwater issues) and combined cycle generation (pretty cheap and pretty clean but still a large source of greenhouse gas) will be no small challenge.

 

Chuck Waitman has extensive experience, within the oil industry, with synthetic fuels, refining, hydrogen production, cogeneration, energy procurement, energy contracts, and energy conservation.  For the last 5 years he has worked on implementation of California AB-32, the California Global Warming Solutions Act.  He presently consults on issues related to energy and greenhouse gas management.

 

Hot Enough For You?

So far, the summer of 2012 has been a scorcher for most of the U.S., following hot on the heels of a much warmer than usual winter. 

Last week, as reported by the Washington Post, the National Climatic Data Center released its State of the Climate report for June, in which NCDC noted that not only were the last 12 months of U.S. temperatures the hottest in recorded history, the last 13 months in a row were all well above average.  The NCDC then calculated the chances of this series of above-average temperature outcomes happening randomly to be on the order of 1 out of 1.6 million.  (Subsequent analysis suggests that the true odds may be somewhat lower, but still extraordinarily slim.)

It’s thus very tempting to claim that the recent heat must be due to anthropogenic climate change, what some people term “man-made global warming”…and it may be so.  This article hints that the recent heat wave “is what climate change looks like.”

Of course, responsible journalists know that any small sample of weather results, even a whole year’s worth of data over an entire continent, can not possibly be conclusive.  This recent oped in the Los Angeles Times makes all the right caveats. 

The one data trend that’s most troubling to me is the ratio of record high temperatures to record low temperatures.  Logic dictates that this ratio, in a stable climate, should be approximately 1:1.  However, as reported here (by Fox News, no less!), the website Climate Central has been tracking the ratio at approximately 2:1 for the past several years, with about 7:1 for 2012 to date.

In the most extreme example I know, as reported here, the record high temperature for International Falls MN on March 19 was eclipsed this spring by that day’s low temperature.  (The prior day’s high temperature obliterated the previous record high by a ridiculous 22 degrees F.)

What are ya gonna do?  Well, adapt. 

It’s not a new thought:  I recall Bill Nitze making this case to me about eight years ago, recognizing that whatever response humans might make to reduce greenhouse gas emissions was going to be insufficient to completely prevent significant climate changes from occurring.  Thus, we’d better prepare.

Nitze’s credentials as a thought-leader for the cleantech sector are unimpeachable, but the concept of focusing on adaptation rather than prevention was (and remains) to me somewhat of a surrenderist perspective. 

Now, as reported here by the Associated Press, we’re hearing some of the same things from Rex Tillerson, CEO of ExxonMobil (NYSE: XOM)

Basically, Tillerson’s message is:  climate change is happening, human activity is probably causing it, but it’s not that big of a deal, fear-mongers are overblowing the issue, and humans can adapt sufficiently.  “It’s an engineering problem and there will be an engineering solution.”

Gee, thanks, that’s reassuring:  coming from the same company that brought you the Exxon Valdez, the accident that couldn’t happen.

As an aside, adaptation-enabling or -related technologies will be difficult for the investor community to finance, simply because it’s unclear who the customers would be, and what pricing mechanisms would support them.

So, are we going to have to wait until climate change becomes unmanageable before we start managing it?  Because, if we do wait that long, we’ll be behind the curve by several decades. 

Tillerson’s comments became somewhat of a news item because ExxonMobil has historically tended to deny climate change as an issue, and the fingerprints (i.e., funding) of ExxonMobil have been found on many of the works by climate change skeptics.

In response to ExxonMobil’s kinda-sorta admission of climate change, the Financial Times ran its own oped:  adaptation is necessary, but it shouldn’t be sufficient, as the response to the situation we collectively face. 

Echoing the sort of calculus that was first and most famously pursued in the Stern report of 2006, FT argues that “the warmer the world gets, the more likely it is that [the costs of climate change] will outweigh the price tag for curbing emissions…The sooner the world gets to grips with it, the lower the eventual costs will be.”

In other words, FT (and the Stern report) suggest that simply relying on adaptation ex post will be more expensive than taking some ameliorating actions in advance.

Alas, there simply is not the political will to do anything in the near-term.  I recall a candid off-the-record conversation about a year ago with a recently-retired C-level executive from a major oil company who previewed Tillerson’s comments from last month, but with a harsher reality.  I don’t remember his exact words, but they were something like:  “Anthropogenic climate change is almost certainly happening, but there are too many vested interests at stake that want society NOT to do anything about it.  So, we’ll have to adapt.”

Maybe at some point there will be enough decision-makers and thought-leaders who will eventually feel that there’s enough evidence to do something proactive to mitigate man-made climate change.  However, aided by the fact that the playbook of climate deniers is ingenious at obfuscating public and political opinion, there is likely to always be a significant enough body of power for whom climate science is not sufficiently “settled”.  For these people, there will never be definitive proof of human-induced climate change, and thus never adequate justification for action.  They are likely to be blockers for a long time to come.

Without political action to limit greenhouse gas emissions, and without a situation conducive to investment in adaptation, our society will likely be faced with increasing climatic pummeling by a world going madder. 

If it’s not hot enough for you now, just wait till next decade.

Absent an at-scale program with the potential for meaningful impact, my best idea for individual adaptation:  a cold beer in the shade, anyone?

7 Cent Solar Power for my House

by Neal Dikeman

The other night I answered an ad on Craigslist.  Not surprising, since  buying and selling things on craigslist is kind of my hobby.  But this one was for solar panels.  180 Wp panels from a wholesaler.  Offering for $190 ea if I bought one, or $180 if I bought 20 or more, and $170 if I bought 100.

Not name brand, but 17% efficient monocrystalline 180 Wp 25 year warranty product.

Holy smokes, residential panels for $1/Wp?  So, add 3.5 kW inverter for $2300 (list price off the web of a name brand inverter), and a bit of steel and mountings and labor, and I can put 3.5 kW of PV on my roof for <$9k UNSUBSIDIZED?  Without getting fancy on the math, that’s an amortized cost of 7 cents a kwh at the warrantied life, cheaper than my 11 cent Texas power now.  Payback’s weak, c 13-15 years, again thanks to my cheap Texas power.  But knock a third off in tax credits, add some back for inverter replacement and contingencies, and damn, this is really, really close. Payback maybe down into the 8-10 year range with a little luck and good design.

Kwh/kW/Yr                  1,500
kW 3.5
Kwh/Yr                  5,250 3.5 KW Panels  $          3,500
3.5 KW inverter  $          2,300
$/Wp Installed Cost Installed Other materials  $          1,000
 $                 2.50  $           8,750  $          6,800
Labor  $          1,950
Avg Degradation Factor over Life
                   0.90
Yrs Life  Total Kwh Life
25             18,125
Amortized Cost / Kwh
 $             0.07

I think I may need to get a couple of bids for my house.

And if you think this is just because I’m looking at wholesale numbers, GreentechMedia did a review of module costing estimates for 2013, WAY down, below 70 cents a Wp, which would certainly support this case.

So let me put it this way:

When it comes to solar photovoltaics, we may not be quite there yet on costs.  But we’re awfully close.  This is real.  Not just for top tier time of use pricing in California.  But for the Texas Gulf Coast.

And it’s here now, not aspirational.  And it really is a gamechanger.

Right now the solar industry is in the throes of overcapacity and price wars, and struggling to make margin.  But those capacity wars are wringing the weak players and the high cost ninnies out of the market.  Making everyone get lean and mean.

By 2015 at latest we’ll likely hit our cost real tipping point for the mainstream end user.  Even with cheap natural gas.  And when we do, manufacturing and install capacity will not be able to keep up.  We’ll have another war on our hands.  The war for the home power bill.

 

David Anthony’s Last Question – Can We Power the US Solely off of Solar?

By Tao Zheng, with David Anthony, an active cleantech venture capitalist, who passed away in April 2012.

 The sun is the champion of all energy sources, in terms of capacity and environmental impact. The sun provides earth with 120,000 terawatt (TW) energy, compared to technical potential energy capacity of single digit TWs from other renewable sources, such as wind, geothermal, biomass and hydroelectric. More energy from the sun hits the earth in one hour than all of the energy consumed on our planet in entire year. In the last blog, we estimated that the technical potential of electricity generation from rooftop photovoltaics (PV) can take over 1/3 of U.S. electricity consumption demand. The next question is: can we power the U.S. solely by solar energy, technically? The answer will rely on development of utility-scale solar farms and energy storage solutions.

Assuming the rest 2/3 of U.S. electricity demand can be fulfilled by utility-scale PV solar farms, we can estimate how much land required to install such solar farm systems. The total U.S. electricity demand in 2009 was 3,953 TWh with 1% annual growth projection in next 25 years. Two third of U.S. electricity demand is about 2,635 TWh. The PV power density is calculated with a weight-averaged module efficiency using market share for the three most prevalent PV technologies today: crystalline silicon, cadmium telluride, and CIGS. The resulting PV power density is 13.7 MW/million ft2, assuming an average module efficiency of 18.5% in 2015. If we assume 10 hours/day and 200 days/year with sunshine, the annual available sunshine time is 2,000 hours. The total land required for solar farms to generate 2,635 TWh, can be calculated as:

Total Land Required = Total Energy Generated / PV power density / Annual available sunshine time

                                 = 2,635,000/13.7/2000 = 96.2 ×109 ft2 = 8,937 km2 @ 100 × 100 km

Therefore, to generate energy equivalent to 2/3 of U.S. electricity demand, we need to install solar panels in a tract of land with size of 100 by 100 km, the area about 0.1% of U.S. land. Technically, to provide electricity for entire U.S. demand, we only need to cover PV-accessible residential and commercial rooftop with solar panels and install solar farms in desert area equivalent to 0.1% U.S land. In addition to rooftop and desert, there are many opportunities for installing PV on underused real estate, such as parking structure, airports, and freeway margins. PV can virtually eliminate carbon emissions from the electric power sector.

In comparison, Nathan Lewis, professor at Caltech, predicted a solar farm with land size of 400 by 400 km to generate 3 TW energy to power entire America. The represented area is about 1.7% of U.S. land size, comparable to the land devoted to the nation’s numbered highways. As shown in Figure 1, the red square represents the amount of land need for a solar farm to match the 3 TW of power demand in the U.S. Of the 3 TW energy, only 10% represents electricity demand, and the rest represents other energy needs, such as heating and automobile. Thus, Lewis’ calculation is consistent with our estimation: 10,000 km2 solar farms can generate enough electricity to fulfill 2/3 U.S. demand.

Figure 1. Solar Land Area Requirement for 3 TW Solar Energy Capacity to Power Entire U.S. Energy Demand. (Source: Prof. Nathan Lewis group at Caltech).

One of big challenges using solar to power U.S. grid is intermittency of sunlight. Solar energy is not available at night, and the variable output of solar generation causes voltage and frequency fluctuations on power network. Energy storage technology can smooth the output to meet electricity demand pattern. There are many grid energy storage technologies, from stationary battery to mechanical storage methods. Pumped hydro technology is clearly a better choice for solar energy storage, due to its high energy capacity, low cost, and public safety assurance.

For solar to have a dominant role in the electric power generation mix, in addition to power storage infrastructure, upgrading America’s transmission grid is required. In contrast to traditional electricity generation, solar power collections are distributed across numerous rooftops or centralized in utility-scale farms. Distributed solar requires grid operators to install smart grid technology to monitor power supply and demand and balance thousands of individual generators with central power plants. The current century-old transmission grid needs to be upgraded with high-voltage lines to carry electricity from remote solar farms to consumers. The American Recovery and Reinvestment Act (ARRA), signed into law by President Obama in 2009, has directed $40 billion to accelerate the grid infrastructure transformation.

The U.S. photovoltaic market has been growing quickly in recent years. In 2010, the U.S. installed 887 megawatts (MW) of grid-connected PV, representing 104% growth over the 435 MW installed in 2009. Current trends indicate that a large number of utility-scale PV power plants are in the south and southwest areas, such as in the sunny deserts of California, Nevada and Arizona. For example, the Copper Mountain Solar Facility in Boulder City, Nevada, is one of the U.S. largest solar PV plants with 48 MW capacity, as shown in Figure 2.

Figure 2. One of the U.S. Largest Solar Plants, the Copper Mountain Solar Project with 48 MW photovoltaic in Boulder City, Nevada.

Historically, solar PV deployment has been limited by economic factors, since solar energy is too expensive to compete with traditional fossil fuels, due to lack of economies of scale. However, the cheapest solar cells are now being produced for as little as 70¢ per watt. They are selling for about $1.26 per watt, with prices expected to drop to $1.17 next year. Most anticipate the price of solar module, such as thin film, will hit 50¢ per watt within four or five years. First Solar, the world’s largest maker of thin-film solar panels, has told investors that production costs will range between 52¢ and 63¢ per watt by 2014. When companies can produce solar photovoltaic modules for less than 50¢ per watt, solar energy will reach grid parity. Grid parity refers to the point at which the cost of solar electricity rivals that of traditional energy sources, such as coal, oil, or nuclear. The solar module price drop is driven by cheaper manufacturing costs, lower costs for such crucial raw materials as silicon, and rapidly improving technology. A recent study even claims solar grid parity is already here today, based on a legitimate levelized cost of energy (LCOE), calculated the cost in $/kwh. The value of LCOE is determined by the choice of discount rate, average system price, financing method, average system lifetime and degradation of energy generation over the lifetime. Figure 3 illustrates the effect of initial installed cost and energy output on the LCOE value. For a PV system with production cost at $0.5/W, the initial installed system cost will be $1.5-$2/W, after considering labor cost and module margin. If we assume energy output is 1500 kWh/kW/yr, which is reasonable in south west area in the U.S., the LCOE value in Figure 3 will fall in the range between $0.06/kWh and $0.08/kWh, the lower side of grid parity value for the U.S. residential electricity rates range.

Figure 3. LCOE contours in $/kWh for solar PV systems for energy output versus initial cost of the system for a zero interest loan, discount rate of 4.5%, degradation rate of 0.5%/yr and 30 year lifetime (Courtesy of Prof. Joshua Pearce at Queen’s University)

Based on the analysis above, it is reasonable to believe we can power the U.S. electric grid solely by solar PV, technically and economically. Thomas Edison had a great quote on solar energy: “We are like tenant farmers chopping down the fence around our house for fuel when we should be using Natures inexhaustible sources of energy — sun, wind and tide. … I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.”

 

David Anthony was the Managing Director of 21Ventures, LLC, a VC management firm that has provided seed, growth, and bridge capital to over 40 technology ventures across the globe, mainly in the cleantech arena. David received his MBA from the Tuck School of Business at Dartmouth College in 1989 and a BA in economics from George Washington University in 1982. David passed away in April 2012. 

Tao Zheng is a material scientist in advanced materials and cleantech industry. He held 20+ patents and patent applications, and published many peer-reviewed papers in scientific journals. Tao Zheng received his B.S. degree in polymer materials sciences from Tsinghua University in China, and a Ph.D. degree in chemical engineering from University of Cincinnati. He obtained his MBA degree with distinction in finance and strategy from New York University, Stern School of Business, where he was designated as “Stern Scholar” and received “Harold Price Entrepreneurship Award”. 

Depoliticizing CleanTech

It really wasn’t that long ago that the environment was an issue with about equal bipartisan support in the United States.

Americans under the age of 30 might not even realize that the Republican party used to actually have very solid environmental credentials.  Theodore Roosevelt launched the National Park System, Richard Nixon spearheaded the creation of the U.S. Environmental Protection Agency in 1970 amid a flurry of environmentally protective action, and George H.W. Bush (a.k.a. Bush I) signed the Clean Air Act Amendments of 1990 which included (horrors!) cap-and-trade provisions for sulfur dioxide emissions.

The pro-environmental positions of these Republican Presidents mirrored the fact that Republican voters as recently as only one generation ago pressed strongly for environmental improvement.

Just 20 years ago, surveys by the Pew Research Center found that 86% of self-identified Republicans  and 93% of acknowledged Democrats supported the statement that “there needs to be stricter laws and regulations to protect the environment.” 

In this year’s American Values Survey, 93% of Democrats continue to back that same statement, but Republican concurrence has fallen by almost half, to 47%. 

In Pew’s parlance, the partisanship gap on the environment has widened from 7% to 46% in two decades. 

Interestingly, most of the widening of this gap has occurred in the past 10 years, as Republican response to the same question in 2002 was still around 80%.

Formerly an area of general agreement, the environment has become a litmus test political issue.  What has happened in the past decade so that so many Republicans have jumped off the bandwagon for environmental protection? 

It’s an interesting question, worthy of someone’s doctoral dissertation.  I speculate that the declining concern among Republicans about the environment is somehow correlated to the recent finding by Gordon Gaulet, a postdoc researcher at the University of North Carolina, that conservatives are significantly less trusting of science and scientists than they used to be

Whatever the root causes for declining Republican support for environmentalism in recent years, it’s probably really important for the cleantech sector to better understand them, as it would no doubt shed insights to help answer an even more interesting and important question:

What can be done to make environmental protection – and by extension, stronger commitment to a transition to a cleantech-based economy – more bipartisan again?

As we’ve heard time and again, it’s difficult for the private sector to make decisions and deploy capital under uncertain circumstances.  As long as cleantech is politically polarized, then cleantech is subject to wide swings in activity depending upon the political winds and whims of the day. 

Any cleantech-related policies that are passed based on the support of one party, against the opposition of another party, are very likely to be overturned when political power switches hands (which it usually does with some regularity).  For cleantech, this means that the entire business and investing environment turns positive when the Democrats hold power, and turns negative when the Republicans hold power.

We, the members of the cleantech community, can’t have this.  It doesn’t make for a bright future for any of us professionally, and all of us planetarily, being subject to start-stop cycles as the political pendulum swings.  

Whether it was earned or obtained by default, it’s simply not a good thing for the cleantech sector to be seen as an issue owned by the Democrats. 

Accordingly, the cleantech community must figure out what can be done to increase bipartisanship on environmental concerns, and make a big and ongoing outreach to the R side of the aisle.  This won’t occur overnight, and I’m not naive to think it will be easy, but we need to be playing the long-game here.

It may also mean that the cleantech community needs to create more distance from the hard-line elements of the D caucus.  Being more willing to stand as truly politically independent, not merely being seen as a tool for the Democratic party, may better serve the long-term interests of the cleantech community.

I would hope that most sane and informed people realize that neither party has a monopoly on good ideas, and that both parties (including their own, heaven forbid!) have some bad ideas.  (Of course, there is little agreement upon which ideas are the good and the bad ones.) 

In my humble opinion, the Democratic party tends to hold views on a number of issues that are economically misguided.  To the extent that cleantech leaders can become less visibly aligned with Democrats on certain issues, it may open more doors of possibility for rapprochement with Republicans.

At the risk of oversimplification, I will state as a general truism that, over the years, the Republican party has generally been the party of business.  I would further assert that the party has shifted in recent years to become the party of big business.  (Perhaps that’s mostly because that’s where the big money is.) 

There are a number of titanic American corporations that have large cleantech-related business interests or strong commitments to sustainability:  General Electric (NYSE: GE), WalMart (NYSE: WMT), Ford (NYSE: F), Dow (NYSE: DOW), DuPont (NYSE: DD).  This kind of brand-name corporate leadership helps give cleantech at least some credibility among today’s Republican base.

Alas, there are probably an even greater number of big businesses in the U.S. that are lukewarm at best about cleantech, or don’t have much direct participation in the sector.  And, there are many corporations that are downright hostile to cleantech, seeing any movement for increased environmental  protection as a competitive threat. 

Moreover, many of the CEOs of these companies are part of the inner circle of major donors and backers of the current Republican party and their like-minded trade groups and SuperPACs.  (The Koch brothers are the current bête noire, although Tom Donohue of the U.S. Chamber of Commerce also has become quite visible.)   

This set of players, representing big business interests at the expense of the environment, seems to be dominating the storytelling around the Republican campfires in recent years. 

By contrast, most cleantech businesses are not corporate concerns:  either early-stage companies that have yet to blossom into something huge, or small businesses whose voices don’t seem to carry much weight (at least currently) in the political cacophony.  They certainly aren’t in the inner circle of Republican leadership (as maybe they used to be).

Recognizing this, it seems imperative that somehow the cleantech sector needs to make more positive inroads with the large corporate interests that are now not helping us.  It would be good to learn their list of policy priorities outside the environmental realm, and perhaps offer cleantech support on some of those issues in exchange for more corporate support on some of cleantech’s issues.  Maybe some of the big guys already pretty firmly on the side of cleantech, such as those listed above, can help in this cause.

To me, the large corporates are key to greater bipartisan support of cleantech, which in turn is critical to the long-term health of our sector.  This has got to become a priority for the cleantech community.

I suspect that some of the above commentary may be controversial to many members of the cleantech community.  But I would argue that things aren’t working to our best advantage due to the hyperpartisanship of environmental concerns, which in turn means we cleantech advocates need to change our approach to depoliticize our issues.

Einstein once defined insanity as “doing the same thing over and over again and expecting different results.”  The cleantech community should be savvy enough to recognize the current American political trends, understand the dangers of these trends continuing, and be willing to do something different so as to produce a better future outcome.

An Illuminating Article

As most of you readers know, the lighting industry is undergoing a revolution, stemming from the phase-out of inefficient incandescent bulbs as directed by the Energy Independence and Security Act (EISA) of 2007.

A recent article in Distributed Energy by David Engle entitled “Quest for Light” provides a succinct overview of the domino effect on technological advancement to develop good substitutes for the old incandescents.

It’s well-known that compact fluorescent lighting (CFL) for household use has been somewhat of a bust, between the perceived inferiority of the light quality and disposal concerns due to mercury in the devices.

It’s also generally believed that LED lighting technologies will be the big wave to unroll in the lighting sector in the coming decade:  super-efficient, with tailorable light quality.  The big issue is cost:  current LED bulbs for residential application are generally over $20, but according to this presentation by Fred Welsh of Radcliffe Advisors at a 2011 U.S. Department of Energy symposium, the costs of LED lighting is projected to fall by an order of magnitude in the next decade.

A big issue for LED lighting advancement is heat management:  current LEDs produce a lot of heat, so many innovators are working on novel ways to either reduce the heat output associated with LEDs, or to dissipate the heat produced by LEDs more effectively/cheaply.

What’s less well-known is that, as Engle reports, “practical elimination of incandescents was envisioned [by EISA], but it is not happening.”  Why?  At least one reason is that a class of more efficient incandescent bulbs called “2x” – meaning twice as efficient as old incandescents – has been released, and these comply with the requirements of EISA. 

All these factors suggest a fatal blow for the CFL:  a technology whose time apparently never came.  (I’ve got several in my drawer at home – I hate ‘em.)  However, notwithstanding the failure of CFLs for household use, fluorescent lights probably still have a viable market in commercial applications, given their combination of low costs and high efficiencies. 

As Engle also points out, it’s not just illumination technology that’s advancing:   lighting controls is also a hotbed of innovation.  In some ways, improved lighting control is to compensate for consumer indifference, ambivalence, or unawareness of modulating illumination to meet frequently-varying lighting needs.  Perhaps 20% energy savings or more can be achieved with better lighting controls.  Since lighting represents about 13% of U.S. electricity demand, that’s a lot of kwh – and associated dollars and emissions – that can be saved with more advanced lighting controls.

If he could see us now, Thomas Edison would probably be discouraged to observe that most homes still use basically the same technology he invented in 1879, over 130 years ago.  At least he might feel a little better knowing that we’re finally getting around to making his creation obsolete.