Happy Independence Day!

Happy Independence Day, America!

As United States gets ready to celebrate it’s 237th Birthday, a lot of us will travel this weekend to places near and far.  Perhaps Independence Day is also a good time to reflect on the energy independence for America, especially the energy for our transportation needs.

Imported liquid fuels, either in the form of raw crude or refined products, have provided a bulk of our transportation needs for the last nearly hundred years.  There are many changes taking place now that have the potential of changing this scenario in the next 10-15 years.  While increased domestic production of oil and gas has been much talked about and projected to be the key in making US energy independent, I would argue that other developments, that are still being scorned as waste of effort by some, will turn out to be just as important in us becoming energy independent as the increased production of fossil fuels.

Solar and wind power generation are still a drop in the bucket of our electricity generation pool.  But, both these continue to grow rapidly as the costs continue to drop, technology becomes more mature and suitable infra-structure gets built.  Solar panel costs have dropped nearly ten-fold in the last few years and wind power generation costs are now nearly in line with other commercial power generation technologies.  Progress is still being made in bringing the costs down further and new power capacity based on these renewable technologies continues to come on line.  Some independent studies now suggest that solar and wind power could provide high single digit percentage of nation’s electricity in 15-20 years.  It looks more and more plausible solar and wind power will not need the subsidies that fueled their early growth in not too distant future.

Combining the generation of renewable electricity with electrification of vehicular transportation will really put a dent on the liquid fuels demand.  While EV and PHEV sales are still tiny, they continue to grow at a rapid pace.  Last month, nearly 7000 Tesla, Chevy Volt and Nissan Leaf were sold in the US.  At this pace, 100,000 EV and PHEV sales per year in the US seem just around the corner.  Someone could argue that these sales are partially driven by federal tax credits and these vehicles will not be viable on their own.  I remember similar murmurings about Toyota Prius just a few years ago when Prius was being subsidized by tax credits.  Toyota clearly has shown us that they don’t need the federal subsidies anymore and Prius is now as ubiquitous as any other Toyota model.  Tesla is attracting customers to its Model S sedan not because of tax breaks, but because it is a really great car that is also electric.  The build-out of charging infra-structure to alleviate range anxiety continues to grow at a steady pace.  Tesla’s quick battery replacement technology announcement for occasional need will further alleviate the range issue.  As the costs of designing and building these cars continue to come down and automobile manufacturers learn to design and build more appealing EVs and PHEVs, I am confident that they will likely follow growth curves similar to that of Prius.  Thus, the electrification of US automobile fleet will become increasingly important in reducing our dependence of imported liquid fuels.

Overall, I feel great about the prospects our energy independence because of many developments that are happening across the entire energy value chain.  It is time indeed to celebrate our independence.  Happy 4th of July, everyone!

Listening to Bill Ford on Technology

Bill Ford is talking about innovation today at the Ford Trends conference.

He started with two quotes that struck me:

Henry Ford – “If I’d asked my customers originally what they wanted, they would have said a faster horse. ”

Bill Ford – “The car industry back then was the ultimate disruptive industry.”

Ford says when he recruited Alan Mulally as CEO and they talked about the restructuring that was needed at Ford, they agreed two things:

“We wanted to be the fuel economy leader, which was interesting, because the reason customers rejected us was fuel economy, and we wanted to be the leader in technology.  And the first probably depended on the second.”

Part of the issue back then according to Bill was when you wanted to be green, a passion of Bill Ford’s, you had to give up something, for example horsepower, until technology progressed.  Ford envisions that Ford is changing that now.  Among other things by investing in the Ecoboost platform combining direct fuel injection and turbochargers and the Energi platform to supercharge the hybrid and plugin products, and driving these hyper efficient meets high performance technology platforms to be basically standard across all models.  But technology is a lot more than drive train these days, as Ford is heavily into information technology, communications, and networking.

Ford says the rate of innovation in automotive today is something that he hasn’t seen in his working lifetime.  Basically Ford views us undergoing a revolution back to disruptive technology in the auto sector. I love this idea.  And having driven the Ford Energi platform cars, I totally agree.

Ford CEO Admits the C-Max Underperforms EPA Standards in Real World Test

Last night I was at a dinner with Ford CEO Alan Mulally at the Ford Trends conference in Detroit.  After taking a couple of questions on electric cars, emissions, and mileage standards, Mulally touted the C-max platform with the words:  “I want to tell you a funny story”.

The punch line of which is as follows, Mulally had one of their product executives drive a C-Max hybrid in real world conditions to test out the concern that in actual driving experience the cars were not getting the target gas mileage. Mulally stated they found that when driven perfectly, the executive could hit the 47 mpg EPA rating, however the experience was horrible, quote “spent the whole time terrified driving in the right lane.”  When driven with the normal flow of traffic and not adhering strictly to a driving protocol designed to enhance mileage, he underperformed the EPA rating on the same trip by 3-5 mpg.

Mulally seemed highly entertained by this story.  I love the C-Max, great technology, amazingly cool car.  I was not entertained by this story.

Cleantech by any other name

How relevant is the term cleantech today? Has it had its day in the sun?

It’s a heretical question for someone who’s spent much of the last 10 years of his career furthering the cleantech meme globally. A former Managing Director of an organization that gets much of the credit for coining the phrase to begin with, I’ve been a big proponent of the term, to the intentional subordination of others.

But having just returned from a week of meetings with Silicon Valley investors, lawyers and others, I find myself facing the reality that intelligentsia in the sector are distancing themselves from the phrase.

In five days last week, I met face-to-face with two private equity investors, four venture capitalists, two lawyers, an entrepreneur and one of the heads of innovation for a global multinational—all with name-brand firms, all power players associated with some of the biggest deals cleantech has seen. I asked them each about the topic. And while all were quick to affirm their belief in strong future demand for what we think of as clean or green technologies, the term cleantech has undeniably fallen from favor, they said. Why?

  • Cleantech has become built into every sector, with clean/green propositions in many technology verticals, from industry to IT to water to energy to agriculture; “cleantech no longer means anything new anymore,” one said
  • Cleantech is simultaneously “too broad” (i.e. somatic shorthand for too many vertical industries) and “too narrow” (i.e. become too closely associated with renewable energy to those who don’t recognize the intended breadth as defined by Kachan & Co. and others) to be useful any longer, another said
  • But the biggest reason—that we’ve written about for some time herehere and here—is that venture funds’ Limited Partner investors have been underwhelmed (some used the term “burned”) by cleantech too much for too long, and the term is now poisonous for some venture partners; some are distancing themselves from it. Some have let go of their teams. So while there may still be relatively wide general industry momentum for the term cleantech, because lexicons don’t change overnight, those at the very center of the space that we’ve thought of as cleantech are quietly starting to use other phrases. Deloitte, for instance, rebranded its annual invitation-only Napa Valley cleantech event last week as Energy Tech. Is it just a matter of time until others start picking similar monikers?

Virtually all I met with agreed that what we’ve thought of as cleantech to date is still an investable thesis: There’s still resource scarcity. Governments are still seeking energy independence. Climate change is accelerating, not abating. Large corporations continue to have an appetite for clean technologies for cost savings, differentiation vs. competitors and as high margin product offerings. So the markets for clean and green technologies are expected to be sustaining and long-term. But will there continue to be a unified name for the sector? Will the term cleantech rebound in popularity? Cleantech, at the time of this writing, appears to be in what IT analyst company Gartner calls the “trough of disillusionment” in its widely-referenced “hype cycle” model:

Cleantech & the Gartner hype cycle

Cleantech is arguably suffering a correction from hyperbole that also characterized the early PC, Internet, networking and other technology sectors—all of which recovered in some form as expectations mapped more realistically to execution. Will cleantech as a term do the same? Source: Gartner.

So the question appears to be: Will cleantech as a meme emerge on the other side of this trough, regaining market momentum and credibility much like PCs, the Internet, networking and Internet applications did when they went through the trough themselves? As another datapoint, if cleantech is indeed in a trough, it’s been slipping into it for a while, now. A historical look at Google search data for the term cleantech, current up to the time of this writing:

Cleantech term Google search history

Google search history of term “cleantech” over time. Interest in the term peaked in late 2009 and has been declining since. What does this mean for companies positioning around the term? Will it recover or not? What would YOU bet? Source: Google.

Will cleantech re-emerge, regain in popularity and follow the Gartner curve back up? Or has its usefulness as a distinction ended? If the term is no longer fashionable, what should this space be called? What would you advise entrepreneurs in this sector to position around? We’re very interested in your thoughts here at Kachan & Co., where we work exclusively with cleantech companies… or what we used to call cleantech companies! Leave a comment on the original version of this article on our website.

This article is reprinted by permission and was originally published here.

Ta-Ta (For Now)

I am pleased to announce that, as of last week, I have assumed the position of President and Chief Executive Officer of MAR Systems.

MAR addresses some of the most challenging wastewater treatment needs, cost-effectively removing highly toxic contaminants (e.g., mercury, selenium, hexavalent chrome, arsenic, antimony, etc.) from discharges into the world’s water bodies that are generated by commercial activities such as refineries, powerplants, mining operations, and other industrial facilities.  Compared to competing approaches, MAR’s technology is more economical and achieves greater degree of contaminant capture down to lower concentration levels.  Because MAR’s proprietary Sorbster media permanently captures these contaminants from water streams, the resulting spent material holding the captured contaminants does not need to be treated as a hazardous waste.

Of course, if you are aware of any client situations where MAR’s solutions could be of help, I would welcome your contact.

By taking the helm at MAR, I am no longer in a good position to serve as your intrepid reporter.  Rather than writing provocative missives here each Monday, I will need to spend all my time and attention on leading the company.  Indeed, while provocation is usually a good thing for a blogger aiming to build a following, it’s not necessarily a good thing for a business leader trying to sell wares to customers in the marketplace.  Moreover, my professional focus of attention will narrow dramatically to solely those topics of relevance to MAR, and consequently I will be less exposed to good blogging fodder, which I had been culling from a broader spectrum of cleantech-related issues that I had been casually monitoring.

So, with this note, I’m signing off from CleanTechBlog.

In closing, I would like to thank Neal Dikeman and the team at Jane Capital for providing me this forum.  I’ve enjoyed posting weekly for the past eight years, and hopefully have been able to inject something positive into the cleantech discourse from doing so.

I suspect that, someday, as U.S. Army General Douglas MacArthur once proclaimed, “I shall return.”  Until then, I bid you all adieu, and thank you for your readership.

Worlds of Differences

I’ve always known that Americans hold a pretty different view about the state of the energy sector than elsewhere in the world, but never really knew how to characterize those variances.

Today, I write in gratitude, thanking the efforts of Sonal Patel, senior writer at Power magazine.  Patel developed this helpful visual framework summarizing the recent issuance of the World Energy Issues Monitor, a a global survey undertaken annually by the World Energy Council posing the question “what keeps energy leaders awake at night?”

For each of three regions — North America, Europe and Asia — Patel has drawn circles for each major issue area of potential concern to the energy sector and placed them on a two-dimensional chart, where higher indicates more impact and right represents more certainty.   The size of the circles is proportional to the urgency of an issue.

Perusing Patel’s graphic is an illuminating exercise.  Of note:

Only in North America is the topic of “unconventionals” — meaning producing oil and gas from unconventional sources such as shale and oil sands — viewed as a particularly big deal.  In Europe, unconventionals are somewhat lower on the radar screen, and in Asia barely on the screen at all.

Conversely, energy prices are a critical topic in Europe and Asia, but deemed only of modest importance in North America.

Similarly, energy efficiency is high on the agenda in Europe and Asia, not so much in North America.  Even more starkly, renewables are seen as only a low-impact issue in North America, and a more significant issue elsewhere.

Perhaps because of the high penetration of renewables there, energy storage is of most interest in Europe, but of less interest in North America, and of hardly any interest in Asia.

Nuclear energy is viewed as a high-impact issue in North America, moderate impact in Europe, and (perhaps surprisingly) low-impact in Asia.  So, for that matter, are electric vehicles.

The so-called “hydrogen economy” — involving the use of fuel cells for power generation and transportation — retains a bit of interest in North America (though with low urgency), but has fallen off the map elsewhere.  Carbon capture and storage (CCS) follows somewhat of the same pattern, although Europe does hold it in higher esteem than hydrogen.

True, there are some commonalities to acknowledge:  the smart grid and policies to deal with climate change and energy subsidies are seen in approximately the same light globally.

However,  more than anything else, Patel’s framework shows that leaders in the energy industry live in very different worlds, depending upon which part of the world they live and work in.

Tesla, First Solar, Better Place and Comments on a Weird Quarter in Cleantech

Wow.  This has been a really interesting few months in cleantech.

First Solar announced a $0.99 cent/Wp target within 4 years for installed with trackers utility scale in its investor deck.  That equates to around $4-5 henry hub gas price in a new combined cycle gas plant.

The scary thing is that best utility scale PV solar is already approaching the $1.50/Wp range in the LAST quarter, equating to $7-8 Henry Hub.

The Top 5 PV manufacturers announced module costs all south of $0.65/Wp.  First Solar says <$0.40/Wp in 4 years. Greentech Media says the best Chinese C-Si plants will do $0.42 within 3 years.  Screw the EU and US dumping  trade wars.  That my friends, is grid parity for a massive swath of the electricity market wholesale AND retail.

These companies are learning to work on GP margins of sub 10%.  They are getting lean, and mean and good.

 

Better Place finally went bust with a whimper.  $850 mm in venture money gone.  As we predicted, battery changing for electric cars is a really bad idea.  But this time, unlike the billion that Solyndra took down, nobody noticed.  Maybe because EVs are being rolled out right and left.

Why was it a bad idea? Well, 1) they would make car companies have to change their fleets, and effectively COMPETES not leverages what the rest of EV and battery world was doing, 2) it implicitly assumes fast charging and better cheaper batteries were not coming, so we needed a work around – meaning if the industry succeeds, Better Place has no advantage, if the industry fails, Better Place has no leverage, a really bad bet for an EV lover, 3) it assumes the costs of the swappable battery car and changing stations were not high, and could come down as fast or faster than conventional EVs and battery technology, 4) it means basically all fillups are full service, which I consider a really dumb idea.  We stopped that in the US in 1980s?

 

Tesla got profitable, sort of.  Announced a positive EBITDA.  Well, ok, but a big loss if you excluded emissions credits that are expected to be a 2013 only event –  about 12% of revenue.  Exclude those and the car manufacturing business had <6% gross profit margins and still loses a lot of money.  But a huge step forward.  Especially as the Model S is now the best selling EV.  Oh, and seriously, even GETTING GPs to positive this fast is a big deal as well as EBITDA positive under ANY circumstances this fast.  Kudos!

This is huge, because as we reported last year, Tesla by itself holds up the venture returns in the cleantech sector.

An analysis of Stifel’s monthly report on EVs and Hybrids shows the Leaf, Volt and Model S making progress, still young and small and choppy sales, but EVs as a group outpacing sales of the HEVs at the same point in their lifecycle.  EVs + HEVs is now consistently at 4% of new US sales. Not half the market, but definitely real.

 

But somehow, nobody’s making much profits.  This industry is looking like profits will always be elusive and come either in the bubbles, or only to the #1 or 2 player.  2013-2014 are looking like set up years for cleantech.  Our prediction? By 2015 NO ONE will question whether cleantech sectors are viable.  It will be about how fast they erode other people’s profits.

Contrarian Wisdom Isn’t Necessarily Better Than Conventional Wisdom

For years, many observers (including myself) have argued that — from an environmental perspective — it is preferable for energy prices to be higher, so as to (1) discourage consumption of energy, mostly from fossil fuels which generates significant environmental impact, and (2) make various forms of energy efficiency and cleaner (if not zero-emission) alternative sources of energy more economically attractive to customers, which in turn will produce a virtuous cycle of further improvement in energy efficiency and alternative energy to penetrate markets in an ever-increasing fashion.

Recently, Carl Pope (formerly CEO and Chairman of the Sierra Club) penned an article that aims to turn this wisdom on its head.  In “The Road To Climate Heaven Is Paved With Ever Cheaper Oil”, Pope makes the point that the most environmentally-damaging forms of oil — such as the oil sands in Alberta — are intrinsically the most expensive to produce.  As a consequence, if oil prices were consistently at $70/barrel or less, production from these resources would be unprofitable and would relatively quickly cease, which in turn would (paraphrasing here) save the planet from future horrible devastation.

Pope notes that — of world oil demand at levels around 85 million barrels per day — about 80 million barrels per day can be sourced from relatively-clean conventional oil resources that are economically recoverable at much lower prices, rather than the dirty stuff which are economically viable only at higher prices.  In other words, the world supply curve for oil is pretty flat and low up to about 80 million barrels per day, and then goes vertical beyond that.

Assuming that his analysis of global oil supply is approximately accurate, Pope asserts that we just need the largest consumers of the world to somehow reduce demand levels by about 5 million barrels per day — permanently — and then the dangerous sources of marginal supply will be shut out of business.

It’s an interesting argument.  But I am not persuaded.

First of all, let’s consider how we got here:  World oil prices have consistently been hovering in the $80-120/barrel range since mid-2007 (except for a brief period in 2009 during the absolute trough of the global economic meltdown).  Why is this?  Except during the economic standstill, global oil demand has been robust at (as Pope says) around 85 million barrels per day — even in the face of high (and generally increasing) prices.  Note that U.S. demand has essentially been declining, so the rest of the world (especially China) has been picking up the slack.  (Imagine for a moment how much more demand there would have been had prices not increased so substantially!)

Put aside for a moment the question of how to achieve a demand reduction of 5 million barrels a day from the developed economies.  (Pope himself fudges on this point by stating that the developed economies could “encourage transportation efficiency and fuel diversity” in some unstated way.)  What would happen if Pope’s dream were somehow to be achieved?

At first, as Pope would hope, world oil prices would no doubt fall.  I don’t know if they’d fall by tens of dollars of barrel, but it’s possible.  If that were to happen, it almost certainly would cause a significant increase in demand within not-too-much time, which in turn would spur prices upward again.  Eventually, this force of increased demand would push prices back into the range that again makes viable production from the dreaded dirty marginal resources.

This is the notion of an equilibrium, central to free-market economic thought:  that any exogenous shock to the system will produce a response from the market that will tend to bring the system back into balance.

For Pope’s fantasy to play out, there would have to be not only an immediate reduction in developed-world demand for oil on the order of 5 million barrels per day (thus dropping oil prices to a significantly lower level), but an ongoing reduction from the developed-world to offset the faster growth in oil demand that would be generated by much lower oil prices that would somehow need to be maintained by ever-shrinking demands from the developed world.

I simply don’t see this happening.  Efficiency won’t be enough; it requires a massive shift off of oil for transportation — the “fuel diversity” for which Pope argues.  Low-cost natural gas (largely due to fracking, another environmental bete noire) for compressed natural gas vehicles and better (higher performance and lower cost) batteries for electric vehicles will help, but daunting investments in fueling/recharging infrastructure would be required for either (or especially both) to achieve mass-penetration — and I don’t see the money for these laying around.

With his recent article, Pope reaches for a similar conclusion, but coming from a different angle, as those who are seeking to forestall the construction of the Keystone XL pipeline to thwart access to markets for oil sands from Alberta and thereby prevent their development as a means of protecting the planet.  They share a supply-oriented mindset:  curtail supply by whatever means necessary (in Pope’s case, taking actions to depress market prices; for pipeline opponents, fighting legal/regulatory battles) to prevent consumption of a particular source of oil.

In my mind, this is not the way the modern economic world works.  In the market-oriented economy that generally prevails around the world, it is demand — not supply — that drives all the mechanisms.  World oil markets are fungible:  pushing down in one place will cause counterbalancing forces elsewhere, mostly negating the initial restriction.  Trying to control markets by somehow altering supply is futile, as the forces of demand will insidiously work around any inhibitions.

To see an example of this, look at the ineffectiveness of the so-called war on drugs:  demand may be lowered from unfettered levels but nevertheless remains abundant, against all social wishes.  The market is not destroyed; be assured, the market remains — it’s just been driven underground to all sorts of illegal and nefarious suppliers.

Similarly, the lack of a Keystone XL pipeline will not prevent the tapping of the Alberta oil sands (as long as oil prices are high enough).  Participants in the market are too nimble and inventive.  Oil sands output is already being shipped to the U.S. not only over existing pipelines, but as they approach capacity, by an increasing number of rail cars.  In addition, the Canadians may build their own pipelines to the Atlantic or the Pacific Coasts, allowing oil sands to reach world markets even with constrained access to the U.S. if Keystone XL is never built.  So the opposition to the pipeline will mainly have ended up being for naught — other than to drive up oil prices a little bit, due to the extra costs introduced into the market by denying an economically-attractive project from being built.

I respect Pope for all he has done in his career for the environment, building awareness of the critical issues our planet faces and generating urgency for action.  But, at least in his most recent writing, his unconventional economic wisdom does not ring true to me.  I’m often a contrarian myself, but in this case, I believe that Pope’s out-of-the-box thinking should probably be put back in the box.

TVA Privatization: An Idea Whose Time Has Not Come, And Is Not Approaching

For those who are irate about the U.S. government intervening in the energy markets, you’ll have to go back a long time to find when that was not the case.

To illustrate, rewind 80 years:  in the 1930’s, the Administration of Franklin D. Roosevelt looked at the physical and economic backwaters of southern Appalachia and determined that what this part of the country needed to arrive into the 20th Century was the availability of electric power.  With Federal intervention, rivers were dammed, hydro powerplants were installed, and lines were strung.  Voila!  The Tennessee Valley Authority (TVA) was born.

For eight decades, the residents and businesses of this area of the country — not just Tennessee, but large parts of Kentucky and Alabama, and slivers of Virginia, North Carolina, Georgia and Mississippi — have benefited from electricity well before the market would have brought it, and at prices well below what the market would have brought it.

No doubt, it would gall many folks from the area served by TVA — immortalized by the movie “Deliverance” — to realize how much their lives and economic successes owe to the largesse of the Federal government.

As I discovered from reading this article in the Economist, the Federal budget released on April 10 by the Obama Administration mentioned “the possible divestiture of TVA, in part or as a whole.”  Such a privatization is consistent with what I’ve long argued:  that assets in industry segments subject to sufficient competition, such as power generation assets in wholesale power markets, are more properly owned by private parties than by the public sector.

Bluntly, the folks in TVA-land have been getting a huge handout from U.S. taxpayers for decades, with below-market debt financing an enormous infrastructure build-out that would have cost much more with private capital.

I’ve never seen a good reckoning of the aggregate amount of the subsidies that TVA has received since its inception nearly 80 years ago, but it’s certainly in the billions of dollars.  Perhaps even tens of billions of dollars.  According to this 2008 analysis by the Energy Information Administration, the TVA benefited from low-interest capital underwritten by the U.S. government by between $65 and $189 million in 2006 alone.  During periods of high interest rates, such as the late 1970s, the benefit may have been much higher.  (Oh, and by the way, TVA was undertaking a massive nuclear powerplant construction program at that time, so the effect of interest rate subsidies would have been especially pronounced then.)

Is it time for the subsidy to end?  The proceeds from a sale would help address the ever-growing fiscal crisis the U.S. faces, while injecting much-needed competitive discipline to wholesale energy markets in the South.  However, I strongly suspect that the political forces to maintain the status quo will be too strong.

As the Economist noted in their concluding remarks, “elected officials in the TVA area are either frosty or outright hostile to Mr. Obama’s proposal [for privatization].  Most are Republicans, who might be expected to applaud a plan to shrink government.  But power does strange things to politicians.”

Indeed.  In other words, don’t bet on the TVA being privatized anytime soon.  The lack of discernible public debate on this eminently worthy topic should tell you everything you need to know about the likelihood of TVA privatization in the foreseeable future.

Survey of Advanced Energy Business Executives

In April, the Advanced Energy Economy Institute (AEEI) released the synthesis of a survey of executives in the advanced energy sector conducted by PA Consulting to suggest priorities for U.S. energy policy.

The report, Accelerating Advanced Energy in America, outlined business challenges and policy challenges thwarting the growth of the advanced energy sector, in order to identify policy improvements that could overcome these challenges.

The most significant business challenges identified were:  financing of emerging technologies, scaling technologies from development to commercialization, declining electricity prices (primarily owing to the natural gas boom), and recruiting a qualified and skilled workforce.

The most significant policy challenges identified were:  regulatory/policy uncertainty, “static definitions” of technologies qualifying for support, inadequate R&D support, and politicization of advanced energy.

From these challenges, AEEI summarized the respondents’ observations to make the following suggestions on sound energy policy:

  • Business leaders want stability and predictability in market structures.
  • They want a level playing field with their competitors – with traditional energy, and with each other.
  • They want government to support research across a wide range of technologies.
  • They want subsidies that make new technologies more competitive to be limited in duration, and phased out in a gradual, predictable manner, not maintained forever or cut off after arbitrary deadlines.
  • They want government policies crafted around broad problems, rather than pre-ordained solutions so that the market can identify the best ways forward.

It’s a reasonable wish list to ask of policymakers.  But, then again, when did “reasonable” last prevail in Washington DC?

Speed in the Oil Patch – Automation at the Wellhead looks like Cleantech

I had a chance to wander around the Offshore Technology Conference this week and chat about some of the technologies on display.

OTC is still heavily a mechanical engineer’s conference.  Despite the high tech nature of the industry, in large part vendors are not yet leading customers, and steel still rules the day in technology.

One of the areas that interests me is speed.  Speed to find, speed to drill, speed to produce.  In every industry, speed kills.  (In the good way). Speed with more data and more controllability? That changes the way we do business.  Efficiency, speed, better, safer, cleaner.  That’s where the oil & gas industry is headed.

Superior Energy Services (NYSE:SPN) one of the largest drilling and wellhead services companies, picked up one of the technology awards with CATS, the Complete Automated Technology System.  Neat stuff.  Basically, take a small workover rig that needs half a dozen or so people and a lot of manual labor, modularize components into a truly mobile ready to use package, add more robotic material handling, soup up the control system, cut down to half the people, and automate completions.

  • Cuts labor.  They’ve got 3 people where they had 6.
  • Improves safety, now on 3 rigs running for 8 months, zero loss time incidents.  I asked how many he’d have expected in that time – 6.
  • Controllability and knowledge management.  Once automated, we can turn to a statistical management, not a black art.
  • Speed.  The units themselves are small units, so a bit slower in use if I follow correctly.  But more controllability means more predictability.  And a ready- to-use design means faster up, faster down, higher percentage of time on.

Quote: we won’t be building any more conventional ones.  These are expensive day rates, but all fully utilized.

 

Baker Hughes (NYSE:BHI) picked up another one of the awards with a steerable drilling liner technology called SureTrak.  Basically, same directional steering and drilling system, within liner in place, packed with logging-while-drilling and measurement-while-drilling sensors, once done, unhook the liner, and just leave it there.  Brand new, done it 8 times now, with Shell and Statoil according to one of the sales managers.  Same as before, automate and integrate a process, allow you to solve different and more technical problems, and deliver speed, less time up and down.

 

Eventually, we will automate our industry and move it all the way to the information age.  REALLY automate it.  Until then, one step at a time.  That sounds odd from an industry that uses seismic and ROVs and supercomputers.  But one of the guys at the Weatherford booth said it best when asked about the digital oilfield – is anyone yet using all of your digital oilfield software the way you think it should be used?  Answer, no, it’s all still very silo’d.

Reporting from Omaha

Over the weekend, I attended the annual shareholder’s meeting of Berkshire Hathaway (NYSE:  BRK.A, BRK.B) in Omaha to hear the wit and wisdom of CEO Warren Buffett and Vice Chairman Charlie Munger.  For five hours on Saturday, Buffett and Munger fielded questions from panelists and investors on a wide range of topics.  A good synopsis of the often amusing banter was provided by an ongoing blog operated by the New York Times.

During the marathon Q&A session — quite impressive for a pair of octogenarians to endure — Buffett and Munger thrice touched upon topics of relevance to the cleantech sector.

First, Buffett commented on the excellent performance of Berkshire’s railroad, BNSF, which experienced a very strong first quarter of 2013, with much higher growth in volumes than other U.S. railroads.  Buffett noted that it was very fortunate for Berkshire to have “lots of oil discovered next to BNSF’s tracks”:  BNSF is able to take advantage of the oil boom in western North Dakota associated with the Bakken shale, due to its extensive route network in the area.   A side implication is that BNSF is well-positioned to ship oil imported from Canada, whether or not the Keystone XL pipeline gets built.

Of course, BNSF also has a large exposure to coal hauling.  However, it’s important to recognize that BNSF’s coal business is mainly centered on production from the Powder River Basin, which is both incredibly cheap and low-sulfur.  As such, it remains competitive with low-cost natural gas, and is not being displaced as much from the power generation sector as is coal from Appalachia, so BNSF is unlikely to be as hard-hit by the shale bonanza as other railroads.

Second, an investor asked about the potential effects of the increasing competitiveness of solar energy on the future financial performance of Berkshire’s utility business unit, MidAmerican Energy.  The question was likely prompted by a recent report issued by the Edison Electric Institute raising the concern that solar and other forms of distributed generation may lead to reduced revenues and profitability of grid-based electric utilities as customers source a greater share of their electricity needs from on-site sources.

Buffett and Munger noted that Berkshire was aware of the declining cost of solar energy and correspondingly saw good investment opportunities in the sector, as evidenced by three very large projects acquired by MidAmerican with over $5 billion in capital requirement.  However, they noted that these plants were central-station generation, as opposed to on-site distributed generation.  Moreover, they are located in the deserts of the southwestern U.S., not in MidAmerican’s utility territories.

Extrapolating from Berkshire’s entry into solar — central powerplants in deserts — Munger was particularly skeptical that rooftop solar would pose much of a cannibalization threat anytime soon in MidAmerican’s not-so-sunny locales in the Pacific Northwest, Iowa and the United Kingdom.

Buffett asked MidAmerican’s CEO Bill Fehrman to stand in the audience and comment further.  Fehrman opined that MidAmerican’s relationships with their regulators were sufficiently positive that tariffs would be restructured if/as rooftop solar penetrates their customer base and leads to reduced revenues/profitability associated with the grid services that MidAmerican provides to its regions.

Personally, I agree with these assessments — insofar as MidAmerican’s current portfolio of territories is concerned.  For electric utilities in far sunnier locales, and with regulatory regimes that are generally more populist in their leanings, rooftop solar may sooner pose more of a downside.

Third, another investor asked about the potential impacts of climate change and of climate change policy on Berkshire’s businesses.

Buffett began his response sarcastically by noting the unseasonably warm weather that Omaha was enjoying (which it most definitely wasn’t, as attendees had to prevail against a cold windy rain to enter the auditorium).  After this Fox-worthy cheap-shot, Buffett cautiously offered that — though he certainly wasn’t an expert — he believed that there was a real chance that man-made climate change was occurring, because most of those who really understood the issue and were worried were quite compelling in their logic.

However, he was less concerned that climate change would represent a major negative force against Berkshire — especially their insurance businesses.  At several points during the day, Buffett extolled the excellence of the pricing discipline and risk assessment of Berkshire’s insurance businesses, and Buffett indicated that he didn’t think that the risk profiles of the insurance businesses had changed materially due to climate change, at least so far.

Munger then chipped in with some commentary on climate policy.  He was pessimistic that any global policy on carbon would be effective, due to the massive coordination problems between all of the various countries that would need to be signatories.  However, Munger was supportive of higher taxes on carbon fuels, which “Europe stumbled into” for reasons other than climate change.  This suggestion prompted some applause from the audience, which surprised Munger.  Buffett then noted to Munger that far from everyone applauded, which drew laughter and a much louder burst of applause from the crowd — indicating that the Berkshire shareholder base on average is probably not as concerned with this issue as is your intrepid reporter.

ABB’s New Solar Star

Over the weekend, ABB (NYSE: ABB) announced the $1 billion acquisition of Power-One (NASDAQ: PWER), which makes a wide spectrum of power conversion electronics equipment.

Notably, Power-One is a major player in the market for inverters, which convert DC power into AC power.  In turn, inverters are important for synchronizing DC-based technologies such as batteries, fuel cells and photovoltaics (PV) with the AC electricity grid.

While there may be other reasons underlying the acquisition, ABB singled out Power-One’s inverter lines for the PV market.  At first blush, this might seem surprising, because as most observers of the cleantech sector know too well, the PV sector has been brutalized in recent years.

Surely, the PV industry has been beset by intense competition among module suppliers, stemming from global excess manufacturing capacity that has accumulated over the past few years.  This is bad news for module manufacturers, who have struggled to attain or maintain profitability.  However, it’s very good news for customers, as PV system prices have plummeted in recent years.  In turn, this has dramatically expanded the market for which PV installations are now economically competitive to grid-based power, and PV market growth rates are on a hockey-stick upward trend.

Accordingly, the demand for ancillary equipment required for grid-connected PV systems — most prominently, inverters — has also grown dramatically.  As a result, the inverter manufacturers such as Power-One have been able to take advantage of the rising tide.  ABB clearly wants to jump on it.

So, ABB is playing the Levi Strauss strategy:  in the 1850’s, Strauss decided he wanted to participate in the California gold rush boom — but rather than becoming a miner himself, he decided to supply the miners with their required supplies.  In 1873, Strauss invented blue-jeans for the miners to wear as they flocked to the hills and — lo — Levi’s was born.  Thereafter, Levi Strauss made the fortune that the miners were actually seeking themselves, and for the most part never attained.

ABB thus seems to see that it can make good money from the booming PV market without buying into the challenge of being a supplier of PV modules.  It’s strong validation of the long-term fundamental appeal of PV as a major force in the energy sector for decades to come.

Simple Thoughts on Aggie Muster

Simple Thoughts on Aggie Muster

Written on Muster’s Eve April 20th 2013 the year of the birth of my daughter

Softly call the Muster, gently call the Roll.
Another year is passing, time will take her toll.
My family is remembered, as I’ll be remembered too.
Remember me my brethren; I am remembering you.

Softly call the Muster, gently call the Roll, a century of thoughts and prayers, lifted once a year.
I know them not, I’ve never met, we are connected still.
Each year on Aggie Muster, my mind with thoughts will fill.
I never go, they do not know, they never see I do.
But decades hence when I have passed, they shall remember too.
It leaves me feeling sad and bright, emotions flowing free.
Remembrance celebrated, tears and hope I see.
Softly Call the Muster, Gently Call the Roll, tomorrow comes the rising sun, and memories held dear.

Muster always chokes me up, to the very verge of tears. Reminds that time goes marching on and lessens mortal fears.

When asked by those who do not know what Muster is I’ve said, “it is the day that every year We Call the Roll of Absent Friends and Celebrate our Dead”.

That does not hardly even touch its awesome thrilling hold for me. Does not show the chills I feel. Or show the peace that makes it real. To know on us when once we die, on far flung future minds we’ll lie.

This much this year I know and when, tomorrow, as all years before, just whisper of these words alone will choke me up again:

“Softly call the Muster, gently call the Roll.
Another year is passing, time will take her toll.
My family is remembered, as I’ll be remembered too.
Remember me my brethren; I am remembering you.”

by
Neal M. Dikeman, Class of ‘98

for
Gwendolyn Piper Dikeman, Class of ‘2035
Dr. Rebecca Dikeman Turney, Class of ‘01
Dr. Matthew M. Dikeman, Jr. Class of ‘68
In remembrance of
Matthew M. Dikeman, Sr., Class of ’36 (Aggie Muster April 21st 1986)
All those I do not know who Muster this year, and those for 130 years before.

A Tale of Two EVs

Albert Einstein once said:  “Make everything as simple as possible, but no simpler.”  Pundits always pursue the former, but often fail to uphold the latter.

Such has been the case recently in regards to the prospects for electric vehicles.  Will electric vehicles be commercially successful or won’t they?  As often happens, there is superficial evidence supporting both sides of the argument.

On one hand, you have Tesla Motors (NASDAQ:  TSLA).  Tesla recently announced that it had achieved its first quarterly profit, on the back of better-than-forecasted sales of its new Model S sedan.

On the other hand, you have Fisker Automotive.  At the same time that Tesla was releasing good news, Fisker was making waves with its drastic downsizing, laying off 75% of its workforce.  Fisker’s main model, the Karma, is probably unfortunately named, as the company is certainly beset with misfortune these days.

Fisker’s bad news made more headlines than Tesla’s good news, in part because Fisker has received financial support from the U.S. government, and was thus being lambasted by some as the “next Solyndra”.  (In part, also, because bad news seems to get more attention than good news.)

So, why is Tesla doing fairly well while Fisker is definitely not?  This comparison between the two makes a strong case that Tesla simply has a better all-around product at a more attractive price than Fisker.

Moreover, it is said by many observers that Tesla has pursued a different fundamental approach to business than Fisker.  Fisker started by designing a wholly-new electric vehicle that looks cool — and the Karma is by all accounts beautiful — but only much later turned to considering how to actually manufacture it.  As a result, the costs and complexity of the car ballooned.  It’s a big challenge to source and manage thousands of parts from many vendors.  (It didn’t help Fisker when their main battery supplier, A123 Systems, had performance issues with their products and then went belly-up.)

In contrast, Tesla focused solely on developing an electric vehicle drivetrain, including the battery packs, and then outsourcing design as much as possible to other companies expert in the car business, and then focusing on making the integration/assembly of all the relevant systems as low-cost as possible.  (However, it’s an been documented to be an oversimplification to say, as some have, that Tesla’s initial model, the Roadster, is simply a Lotus Elise with an electric drivetrain.)

Time will tell if Tesla will be a long-term survivor.  No question:  succeeding as a start-up car company is very difficult.  However, Tesla may have turned the corner.

Clearly, though, there’s a long way to go and plenty of opportunities for critics to pile on.  In the wake of some bad press in February, when a New York Times reporter wrote a famously negative review of the Model S, Tesla still must fight the headwinds of skepticism about electric vehicles as a major automotive force.

Fisker’s woes don’t help.  For the too-populous segment of oversimplifiers out there, it’s easy to extrapolate Fisker’s plight to other electric vehicle companies, particularly if they have a reason to want to make the sector look bad.  To illustrate, Sarah Palin piled on by lumping Tesla with Fisker and calling them both as “losers”.

Tesla will do well to distance itself from Fisker as much and as quickly as possible, as they really do have a different tale to tell.

Who’s Got Nest?

Like most other tech sectors, the cleantech world is subject to fads that are overhyped — meteoric rises, sometimes followed by spectacular flameouts. It seems like we humans like to create heroes and then tear them down.

There’s a particular tendency to sing the praises of the latest “hot company”:  the one that has the best investors, is on the fastest growth path, offers the coolest product.

In cleantech, that company today may well be Nest.  The investor roster represents the top-drawer of venture capitalists, including Google (NASDAQ: GOOG), Kleiner Perkins, Venrock, and Lightspeed.

What are they betting on?  In the words of Technology Review, who recently profiled the company, Nest “injected new technology into the humble thermostat”. Imagine a thermostat developed and marketed by Apple (NASDAQ:  AAPL).

The Apple link is not coincidental:  the co-founders are Tony Fadell (who created the iPod) and Matt Rogers (who led the development of the iPhone).  One look at the Nest and the Apple lineage becomes crystal clear.  Surely, Nest would have called their product the iStat if they could get away with it.

As with Apple, arguably the key advancement offered by Nest is the human interface.  Programmable thermostats have been around for years, but most users have found them bothersome.  Nest aims to make the functionality as intuitive as Apple has with their devices, therein revolutionizing the way that households manage their heating and cooling requirements — and, by extension, their energy consumption.

Early reviews, such as this one by Katherine Boehret of the Wall Street Journal, are gushing.  I haven’t played around with one yet, but am looking forward to doing so.  I’d welcome any feedback from those who have.

 

Failing The Course: Energy Economics and Subsidies

When I was a young lad in college, at the Massachusetts Institute of Technology (MIT) in the early 1980s, I took a course in energy economics taught by Prof. Morris Adelman.  I was an anomaly:  there were probably no more than a handful of courses then being taught in energy economics in the colleges and universities around the world, and Adelman was one of the very few people around who could have plausibly been called an “energy economist”.

Thirty years on, and the relative dearth of economic understanding in the energy sector persists.

Certainly, there is much more attention now being paid to the intersection of energy and economics at centers of higher education, but these professors are teaching students who will be leaders 20-40 years from now.

Most of today’s leaders involved in energy policy, who went to school decades ago (as I did), do not seem to have been exposed to (or if so, to have grasped) the importance of economic principles when setting energy policies.

Perhaps this economic ignorance in the energy policy realm is most apparent by the prevalence of energy subsidies.

As I’ve posted before, energy subsidies are powerful and dangerous things:  powerful because they are effective, dangerous because their effects can be bad.

And how prevalent are they?  The International Monetary Fund just issued a new study, entitled “Energy Policy Reform: Lessons and Implications”, that brings a fresh analysis of this difficult-to-measure topic.

By IMF’s estimates, on a worldwide basis, energy subsidies of all types summed to nearly $2.5 trillion in 2011, equating to over 3% of global economic output (GDP).

Certainly, some of the less-developed kleptocratic oil producing countries of the world are among the worst performers.  For instance, under the despotic rule of Hugo Chavez, Venezuela directed nearly 17% of its economic output into energy subsidies.

However, the U.S. performed no better than the world average, with fully 2.4% of its GDP subsidizing American petroleum markets.

This is not a good thing at all.  As the IMF notes right at the top of the executive summary of the report:

“Energy subsidies have wide-ranging economic consequences.  While aimed at protecting consumers, subsidies aggravate fiscal imbalances, crowd-out priority public spending, and depress private investment, including in the energy sector.  Subsidies also distort resource allocation by encouraging excessive energy consumption, artificially promoting capital-intensive industries, reducing incentives for investment in renewable energy, and accelerating the depletion of natural resources.  Most subsidy benefits are captured by higher-income households, reinforcing inequality.”

In all, it’s a long litany of ails that are amplified by energy subsidies.  And yet, they persist.  Why?

Do I really need to answer that question?

Whether future leaders have the strength to prevail over political forces that aim to preserve and enhance energy subsidies remains to be seen.  However, it is cause for some hope that a greater number of future leaders are being better taught about energy economics and better informed by estimates such as those produced by the IMF.

Let’s hope these future leaders pass their energy economics courses — not only when they attend school, but more importantly, when they’re out in the real world and make decisions and recommendations and actions that have consequence to us all.

Fracking: Where Do You Stand?

In the energy sector, there are few topics that generate more debate today than the relative merits/demerits of fracking.  To see just how strongly-held yet evenly-divided opinion is, check out this online debate moderated by The Economist and sponsored by Statoil (NYSE: STO).

The question is framed simply:  “Do the benefits derived from shale gas outweigh the drawbacks of fracking?”  Writing in defense of the “pro” position was Amy Myers Jaffe, the Executive Director for Energy and Sustainability at the Graduate School of Management at the University of California Davis.  Writing in opposition was Michael Brune, the Executive Director of the Sierra Club.

The final tally of the debate:  51% voted “No”, while 49% voted “Yes”.

Honestly, I lean more towards the “Yes” side of the ledger.  While fracking raises significant concerns, I believe that they can be managed — though it’s up to us as engaged citizens to ensure that the powers-that-be fully hold accountable those who participate in fracking activities to the highest standards.

My hunch is that the beliefs and the numbers of the “No” side have been strongly influenced by films such as “Gasland” and the more-recent “Promised Land”.  I confess that I haven’t seen either of them, and while I suspect that they have oversimplified complex issues and stretched the facts/truth to fit a convenient dramatic storyline (as so many movies do), it really is unfair for me to criticize them.  Even so, it’s clear that — other than the ever-dependable defender of all-things fossil fuels, Fox News — there are few “pro”-fracking vehicles in mass-culture appealing to the middle-ground to provide a counterbalancing force from the seemingly-dominant message that fracking is dangerous and bad.

As a friend of mine likes to say about thorny political dilemmas:  “I have friends on both sides of this issue, and on this issue, I’m with my friends.”  With respect to fracking, this applies.

Strategic Drivers for Acquisitions in the Water Sectors

I recently read an article by Chris Gasson of Global Water Intelligence which was thought-provoking and insightful. The article addressed a number of issues surrounding water technology company acquisitions and raised a question regarding what problems companies are looking to solve through these acquisitions.

In my experience advising large water companies’ strategic acquisitions activity, I have identified three key reasons why they seek to acquire water technologies companies:

1.   To future-proof their technology portfolios

Companies always want to ensure they have tomorrow’s solution in their portfolio, especially if there is reason to believe that tomorrow’s solution will not look like today’s product. Two of the major trends in the water industry that will lead to growth and which may require new solutions are water re-use and energy and resource recovery from wastewater. Wastewater currently consumes energy and does not recover resources. Therefore, if the market is to move towards energy neutral, with a focus on resource recovery, this will require new solutions.

Because innovation within large corporations can be challenging, one way to future-proof the portfolio is through acquisitions. The 2013 BlueTech Forum in Amsterdam on May 14th addresses this exact issue in the “Intrapreneurship and In-House Innovation” panel and the BlueTech Showcase will feature the kinds of companies with highly disruptive technologies (i.e., UV LED companies Aquionics and Crystal IS) that large corporations seek to acquire.

2.   To access new market opportunities and drive growth

All companies are looking for growth. Three key areas where growth opportunities exist are:

  • Where an infrastructure gap exists (e.g., in the developing world economies)
  • Where a new market is opening that did not previously exist (e.g., shale gas-produced water management, Oil Sands Alberta)
  • Where the existing market is changing (e.g., the move within wastewater treatment towards water re-use and energy and resource recovery).

One way to access these new market opportunities is through acquisition. In the emerging economies, this can be through local acquisitions of EPC contractors and private operators. In new market areas, such as shale gas, this can be through acquisition of service providers and of solutions specifically suited to these applications. For changes in an existing market, an acquisition can future-proof the technology portfolio (e.g., adding in advanced oxidation or nanofiltration membranes to capitalize on the trend towards water re-use market).

This year at the BlueTech Forum, we are featuring a number technologies aimed at the oil & gas industry and water re-use, and food & beverage (e.g, MIOX, which produces on-site disinfectants and mixed oxidants for municipal and industrial applications and Magpie Polymers, which recovers and enables recycling of rare and precious metals, and reduces metal content in industrial waste-water).

3.   To enable new entrants to enter the water technology market

Many new entrants are entering the water market, including companies like LG Electronics, Bilfinger, BASF, Mann + Hummel, Mahle, Clariant, Fuji, Novozymes, PWN Technologies and Outotec. At BlueTech Forum, we will explore this very topic in our “New Entrants to the Water Game” panel and will hear from these companies on what is driving their move into the sector and their strategy for growth.

When executives decide to create a new water business unit within a company, management is typically tasked to achieve certain growth targets in a short span of time, as opposed to decades. In general, it is faster, less expensive, and poses a lower risk for a large corporation to enter the water technology market through acquisition than through internal growth. To start from zero and build a water technology section within a company takes decades, while acquisition would immediately add significant revenue and a footprint in a new market area.

Many previous major acquisition strategies employed the ‘general store’ approach and created what appeared as a ‘water business,’ but was more like a Frankenstein of various assorted bits and pieces that did not constitute a cohesive, functional entity. We are now seeing a more focused and targeted acquisition strategy, where companies first establish their ‘right to play’ in the water sector, recognize their core strengths and adjacencies in the market, and then acquire companies and technologies in market areas of interest. They acquire entities with technologies that supplement their areas of expertise and add to their core strengths.

For example, Mahle, the German car parts manufacturing company, has expertise in filtration in the automotive industry. Thus, their acquisition of an ultrafiltration company, InnoWa Membrane GmbH, makes sense because it correlates to their area of expertise in filtration.

Identifying and Assessing Acquisition Targets in Key Market Areas

The BlueTech Forum showcases a list of twelve specially selected companies at various development stages to present in three key themes: Oil & Gas, Food & Beverage and Smart Infrastructure. These companies are active in the key growth areas we have identified: water re-use and alternative water, unconventional fossil fuels, and energy and resource recovery.

  • The Norwegian company, Zeropex, recovers energy from water distribution networks and generates distributed power, which can reduce operational costs for water utilities.
  • MIOX produces on-site disinfectants and mixed oxidants for municipal and industrial applications.
  • Magpie Polymers recovers and enables recycling of rare and precious metals, and reduces metal content in industrial waste-water to stay in-line with increasing regulation.
  • QUA uses advanced membrane products for the water, wastewater, and water reuse markets.
  • Aquionics and Crystal IS will present on one of the potentially most disruptive technologies in the water technology market: UV LEDs.
  • ANDalyze uses catalytic DNA technologies to enable rapid detection and monitoring of contaminants such as trace metals.

(For the complete up to date list of companies presenting visit www.bluetechforum.com )

In summary, three key reasons for a company to make acquisitions include:

  • To future-proof water technology portfolios and address the changing landscape
  • To enable access to new market growth opportunities
  • To enable new entrants to enter the water technology market and fast-track growth 

The next article in this series will focus on three key water technology market growth areas and will provide details on key new market areas and opportunities.

Chinese Food For Thought

As I posted a few years ago, so many of the best opportunities for cleantech to have immediate benefit can be found in China.

Every day, evidence accumulates supporting this thesis.  Of course, this winter’s air pollution crises in Beijing and other cities made global news.  More gruesome was last week’s discovery of nearly 7,000 dead pigs floating in a river outside Shanghai.

The true extent of environmental abominations in China is unknown.  As this article indicates, the Chinese government guards a substantial body of data about environmental quality — and the Chinese citizens are getting increasingly angry about what they know they don’t know.

To the extent that there is good news to report, it is that China has clearly become a prime destination market for clean technologies to penetrate.

The Pew Charitable Trusts commissioned a recently-released study by Bloomberg New Energy Finance indicating that the balance of trade between the U.S. and China on three key segments of cleantech — wind, solar and smart grid — actually tilts more to China than from China.  This finding conflicts with conventional wisdom, which holds that cleantech exports from China to the U.S. must be dominating the balance of trade, as illustrated by the widespread evidence of Chinese companies dumping low-cost solar panels onto U.S. markets.

For years, knowing how vast the opportunity is, I’ve been trying to figure out how to better facilitate promising clean technologies in entering China to make a big environmental impact (and, of course, do well commercially and financially in doing so).   Of course, I’m not alone, and others have acted while I pondered:  organizations such as JUCCCE and the US-China Clean Tech Center have arisen in the past few years to offer their services.  I guess they’ve been able figure out what I couldn’t:  a clear strategy and compelling business model for serving as a conduit for cleantech dissemination into China from outside China.