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.

Acquisitions

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.

MIT Energy Summit 2013

At this year’s MIT Energy Summit, the centered on how to mainstream new energy technologies. This will depend on one of two economic changes: 1. Lowering the prices of new technologies or 2. Raising the price of current technologies by adding a price on the pollution associated it them. While the first option will take years of investment for economies of scale to take place, different policy mechanisms have been discussed for the second. These include the carbon tax and the cap-and-trade program to put a price on the greenhouse gas pollution from the the use of fossil fuels. Due to the complexity of the mechanism and competition between developed and developing countries, there is broad sentiment that at the international level, a price of carbon will not be established for the foreseeable future.

Rather than relying on an international framework to drive the development and deployment of low carbon, efficient energy technologies, the key to success lies in local implementation.

The key message coming out of the MIT summit was whether if low natural gas prices will have an impact on investing in alternative energy technologies. While the wind market in the US has added significant capacity in the last few years, the availability of cheap natural gas has made them less competitive.

The impacts will not only be felt in producing power but also across all sectors. Electric vehicles, which have received tremendous resources for investment, may no longer have long term support if natural gas prices stay low. In addition, cheap natural gas will disincentive heavy and chemical industries from improving the efficiencies of their plants.

While big energy companies have traditionally based their strategy on fossil fuels and have been resistant to new energy technologies, some companies have a more progressive outlook and are actively working with both early technology companies and policymakers to help facilitate their implementation.

In his keynote, David Crane, the chair of NRG Energy came to talk about his company’s efforts to develop clean power and provide choices for consumers to switch. He emphasizes the need for public-private partnerships (PPPs), which will be crucial in integrating new technologies into the existing energy infrastructure.

Cleantech Venture Fertility

I try hard to stay on top of a wide range of developments in the cleantech world.  Maybe I spread myself too thin, sacrificing depth for breadth, as I scan through a lot of journals and attend a lot of events to see what’s new and interesting.

Even so, I’m continually surprised by the number of emerging cleantech companies that I’d never encountered before.

It’s pretty uncommon when they come in bunches when reading print media, but leafing quickly through just one recent magazine, the January/February 2013 issue of EnergyBiz, I came across not one but two articles from CEOs of cleantech ventures that were completely new names to me.

The first was “A Revolutionary Approach to Clean Coal” by Bill Brown, who is CEO of a venture called NET Power that is commercializing a new power generation technology on an innovative concept called the Allam cycle.  NET claims that they offer “a new oxyfuel power cycle that combusts coal, natural gas, and biomass [to generate] electricity that is cost-competitive with the best fossil fuels plants while producing zero air emissions.”  The key innovation:  using supercritical carbon dioxide (rather than steam) as the transfer fluid from heat to power, thus avoiding the energy losses associated with liquid-to-gas phase change intrinsic to steam cycles.  Emissions are minimized by using pure oxygen (rather than air) for the combustion environment, and where there are nearby oil/gas wells, by injecting the resulting carbon dioxide produced from combustion underground to enhance recovery.

The second was “Growing the Microgrid Market” by Terry Mohn, who is CEO of General MicroGrids.   They offer a suite of services to better enable the integration of small-scale distributed generation resources (including intermittent solar energy), energy storage devices, and power quality enhancement equipment with the needs of the electricity-using customers on locally-confined power grids with minimal size and limited diversity.  Historically, microgrids have largely been relegated to tiny island economies or other remote communities or industrial sites.  However, microgrids have increasing applicability to military bases, hospitals, government centers and institutional campuses in a future world where improved grid security (i.e., the need to sever from the wider power grid in an emergency) becomes a greater concern to maintain operability of sophisticated digital intelligence and communications functions.

NET Power and General MicroGrids are just the tip of the iceberg.  Surfing the Internet, formerly undiscovered cleantech ventures are all over the place.

I especially appreciate the work of bloggers like Katie Fehrenbacher of GigaOM, who recently posted a series of “13 to Watch in 2013″ lists for different segments of the cleantech sector.  To illustrate, here’s her take on “13 Energy Data Startups to Watch in 2013″.  With one fell-swoop, Ms. Fehrenbacher put a number of new companies on my radar screen.

My continuing discovery of new cleantech ventures is a refreshing change from not-that-many-years-ago, when it seemed like I mainly kept seeing the same deals over and over and over again.  I can only conclude that this apparent fertility is a very healthy sign for the cleantech sector.

ARPA-E Energy Summit 2013

ARPA-E Energy Innovation Summit 2013

arpa-e picOne of the bright spots in US policy has been the Department of Energy’s (DOE) Advanced Research Projects Agency – Energy (ARPA-E) program, which has bipartisan support. Both Republicans and Democrats have come out speaking favorably about the potential of ARPA-E’s contribution to wean the country from its dependence on fossil fuels, and also address the greenhouse gas emissions that is at the heart of the climate change problem. Inspired by the Defense Advanced Research Projects Agency (DARPA) under the Department of Defense, ARPA-E is intended to spur game changing technologies, in the same way that DARPA played a pivotal role in innovations that led to the creation of the Internet.

It was gratifying to know that ARPA-E supported “non-sexy” technologies. The electricity grid can be roughly divided into three components, power generation, transmission and distribution (T&D), and end use. Of these three, T&D has received the least attention and therefore the least investment.  While the public is more aware of the high profile renewable energy technologies and policies needed to lower our dependence on fossil fuels, less is talked about when it comes to the mundane innovations like the grid. Under ARPA-E, the GENI program specifically address how the grid can become “greener” and how to improve the uptake renewable generation.

To date, ARPA-E has disbursed nearly $300 million per year since 2009 and funded nearly 300 projects to universities, large companies, utilities, and start ups. At this year’s ARPA-E Energy Innovation Summit, almost all of the fundees participated in the exhibition.  Among the exhibitors, a couple particularly stood out.

Cree, Inc.

Using Silicon Carbide (SiC), Cree has developed power electronics that will have a major impact on the utility industry. SiC offers advantages over your typical silicon components, by increasing power efficiency from the 80%-tile to over 93%. Instead of bulky transformers that often weigh up to 10,000 pounds, they can be reduced to 100 pounds. This will not only make installations easier but also improve maintenance and enabled the grid to handle multiple types of power sources, including renewable energy generation that are intermittent in nature. Ultimately, these systems can used to support microgrid development in communities. Cree has already received over $5 million from ARPA-E and commercialized their technologies, including LED lamps that are currently available in hardware stores around the country.

General Compression

The uptake of renewable energy into the world’s power grids will require investment in energy storage in order to mitigate the variability of energy produced from solar and wind. Batteries continue to be expensive and are limited to specific applications due to their smaller capacities.

Compress air energy storage (CAES) has been under development for many years to address the needs of grid storage. Another ARPA-E fundee, General Compress has developed a 2 MW system that can be ramped up in as little as 6 seconds, much faster than similar systems under development. In addition, the operation can be reversed from expansion to expansion in as little as one second.

Moving Forward

ARPA-E sows the seeds of future success by providing funding at early stage development. At this years summit, one of the key questions is what is needed to take technologies to the next stage of private investment. Indeed, a policy environment, for example, that promises funding from DOE or other sources beyond ARPA-E is critically needed so that innovators will get into the process in the first place.

Elon Musk of Tesla Motors and recipient of a separate DOE loan program, has pointed out the enormous value of government programs like ARPA-E. Although not all projects will succeed like, for example the case of Solyndra, successes like Tesla can be game changing. He has pointed out that not only is the company able to turn a profit, but that it will be able to repay its loan ahead of time.

Another issue is the lack of energy expertise in the investment community. Attendees that I’ve talked to generally come from the IT field and are only stepping their toes into the energy field. There needs to be strong awareness that investing in energy is very different from IT and requires much more capital.

Better management to bring together different stakeholders is needed. ARPA-E was modeled on DARPA and in fact had intended to bring in DARPA to help build its capacity. At this year’s summit, DARPA officials had also come to discuss their future collaboration with ARPA-E and to bring capacity to the current management.

 

 

Crowdfunding Coming Of Age In Cleantech

With early stage capital for cleantech innovation becoming increasingly scarce, crowdfunding sites like KickstarterIndiegogo and a new crop of clean/green ones are beginning to emerge as significant sources of funding for selected next-gen clean technologies.

Hurdles remain, particularly for investors seeking returns, but I’m more optimistic about these sites’ usefulness to cleantech entrepreneurs than I used to be.

Asked a year ago by a publication about how significant crowdfunding was likely to become in fostering disruptive cleantech innovation, I wasn’t exactly effusive. As GE’s Ecomagination Magazine wrote, “’When it comes to the tens and hundreds of millions of dollars needed for new breakthrough science, that still best comes from institutional investors,’ says Kachan. Kachan says big investors like to get seats on a company’s board and hope to get a sizable chunk of profits. Clearly, someone who plunks down a small pledge on Kickstarter has different motivations.”

Today, a year later, a lot has changed. Cleantech venture investment worldwide in 2012 was two thirds of what it was the year previous, with early stage funding particularly hard hit. And now with good, relevant success stories like Adapteva and BioLite, at least some startups are starting to find today’s crowdfunding options emerging as a source for the equivalent of friends & family seed capital. While it’s unlikely to ever produce the millions that institutional or corporate deep pockets will continue to provide, it may—just may—serve entrepreneurs seeking early stage money in a time when early stage money has become harder to come by than ever.

And then there’s new, fledgling policy support. In America, today is coincidentally the one-year anniversary of House passage of a bill known as the JOBS Act, which is intended to make it easier for companies to raise money through crowdfunding. Charities have used crowdfunding for years to raise money. The new bill is to streamline the process of companies raising up to $1 million a year in equity, not the simple donations as in today’s crowdfunding, but U.S. Securities and Exchange Commission (SEC) regulations to govern the process are still forthcoming as of this writing. Today, small businesses wanting to raise money from more than 500 investors have to go through a long and often expensive process of registering documents with the SEC.

Barriers to equity investors aside, it’s clear that crowdfunding activity has been ramping up in cleantech. A random smattering of latest developments:

  • This week, a startup called Velkess launched a Kickstarter campaign looking for $54,000 to build a large prototype of a new type of less expensive flywheel for energy storage. The company seeks to build a large 750-pound prototype of its fiberglass flywheel. The company’s founder has bootstrapped the company to date, but says he needs more money to buy larger magnets needed by the new prototype.
  • Lucid Energy, which produces power from gravity-fed water pipelines, received undetermined financing this week from Israeli venture platform OurCrowd. The Portland, Oregon-based company has commercial traction in Israel, and plans to use the capital to launch a wider roll-out of its technology. OurCrowd is a combined venture capital firm and crowdfunding platform. Lucid was formed in 2007 and has invented an in-pipe turbine that captures energy from fast-moving liquid inside water pipelines without affecting operations.
  • It only has a few weeks to go and is far short of its target, but Potential Difference of Las Vegas is seeking $50,000 through an Indiegogo campaign to produce a first run of fast chargers for consumer electronics devices such as cell phones and tablets. The company’s patented power management algorithms, licensed from Georgia Tech and with applicability to EVs and plug-in hybrids, it says, aim to reduce the charge time of lithium ion battery packs from 30 minutes to 12 minutes.

Entrepreneurs and project developers of all walks are being increasingly drawn to crowdfunding sites. Especially those without a university education, who don’t have government backing, or, for whatever reason, choose not to go traditional venture or debt routes.

And, for clean technology startups, there are now no shortage of sites to cater to them. In addition to Kickstarter, Indiegogo and their general ilk like RocketHub, Seedmatch and Crowdfunder, Greenfunder is a crowdfunding platform for green, sustainable and related projects. Germany-based SunnyCrowd launched late in 2012 to support (mostly) local German renewable energy projects. On its heels, Mosaic has launched its solar crowdfunding site, and within 24 hours, its first four projects sold out. More than 400 investors put up amounts ranging from $25 to $30,000 (the average was nearly $700), for a total investment of more than $313,000. Similarly, SunFunder has introduced a “crowdfunding platform to connect individual investors with quality, vetted, high impact solar businesses working on the ground in Africa, Asia, Latin America and the Caribbean.” Next week at the South by Southwest (SxSW) conference in Austin, social enterprise CarbonStory, based in Singapore, is to formally introduce its crowdfunding platform, where participants are to contribute as little as a few dollars a month to sponsor green projects that have been selected by CarbonStory.

The final remaining barrier, however, is reconciling returns on investment and crowdfunding. There’s more of a provision for, and expectation of, returns for investors in the more-established microlending mechanisms pioneered by Kiva and others than there is in crowdfunding as it’s known today.

Because crowdfunding today is essentially a metaphor for “donation,” establishing a mechanism for investor returns as is being attempted via the JOBS Act, and blurring the lines with what we currently know and think of separately as microfinance, will be critical to unlock the vast amounts of private capital waiting to be applied to innovative cleantech innovation and products by you, me, our rich uncles and other private investors seeking returns on our hard-earned money. Only then will crowdfunding really get its day in the clean/green tech sun.

This was originally published here and is republished by permission. Agree? Disagree? Weigh in on our original article.

 

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

Pollution Solutions

In the January issue of Pollution Engineering, Roy Bigham and Josh Foster have compiled their list of “10 Top Technologies for 2013″.

Summarizing their summary of the new-and-nifty that the environmental industry should monitor:

  1. Self-healing plastics that rush in to repair cracks and voids.  Obviously, this would have significant implications in a wide variety of spill containment applications.
  2. Artificial stomachs, basically pre-packaged anaerobic digesters, to convert organic wastes into biogas.  The products of SEaB Energy are noted as examples.
  3. Zero-fuel cargo ships, employing solar and wind power for propulsion in lieu of dirty diesel.  Greenheart is a non-profit organization pursuing this seemingly-fanciful concept.
  4. Algae in lieu of crude oil.  As the article notes, economics remains the gating factor, but apparently the authors are bullish based on the number of efforts underway.  We’ll see.
  5. “Living building” that produces more water and electricity than is consumed.  A 6-story edifice of this type, the Bullitt Center, is being developed as we speak in Seattle.
  6. 3-D printing.  It’s not here yet, but it’s coming:  the ability to use a printer to manufacture an object.  Enormous theoretical time and energy savings associated with avoided shipping.
  7. Soybean-based materials for transportation, replacing the need for petroleum.  Goodyear (NASDAQ: GT) is singled out for its work to make a synthetic rubber out of soy.
  8. Airborne bacteria destroying technology.  Of particular note, Healthy Environment Innovations is offering novel air sterilization products to improve indoor air quality.
  9. Safer bombs.  Really.  A material called G2ZT being developed in Germany is not only more powerful than TNT, but also are more stable and produce fewer toxic emissions.  Who knew?
  10. User-friendly carbon footprint monitors.  This seems like a natural extension of many products being developed to monitor energy consumption.

Thanks to Mssrs. Bigham and Foster for compiling this list.  Hopefully, you’ll find a tidbit or two to be of interest or utility.

 

 

Japan Sets its Sight on Water

Japan has the 3rd largest economy in the world and is the 4th largest exporter.
They produced prominent technological advancements, from reliable and fuel efficient cars to flat screen televisions. Now, Japan is taking interest in water technology markets and innovative water companies.

Napoleon said, “Let China sleep, for when she wakes, she will shake the world.” How prophetic this proved to be.

In this instance, Napoleon could easily be referring to Japanese firms who, in light of recent activity in the water industry, are opening up to the world of water and may indeed “shake the world.” There is increased activity from Japanese firms looking to apply technology to address water challenges in a range of markets, including non-conventional fossil fuels.

In an article entitled “Japanese Firms Grow Thirsty”, published by The Wall Street Journal in February, author Kana Inagaki commented on the potential of Japanese companies and their desire to join an ever-expanding, profitable market. Inagaki commented, “They are a bit late to the game … But they are armed with strong balance sheets and technology that could improve service in emerging markets, and they have the support of the Japanese government.”

Even if Japanese companies are “late to the game” or possess limited experience operating water utilities, their strong existing water technology portfolios and financial ability to execute may lead to an increasingly strong Japanese presence in the global water industry. In fact, with the announcement of the sale of the Siemens Water Technology business, Reuters reports rumors that several interested buyers include Japanese players Kurita, Hyflux, Hitachi, and Marubeni.

Japanese New Entrants

In addition to existing water companies with access to the global water market, we see companies such as Fuji enter the mix. With advances in digital photography, Fuji sought to utilize existing film production lines and manufacturing capabilities in different capacities, which led to involvement with manufacturing water filtration membranes. Fuji will present in the “New Entrants in the Water Game” panel at BlueTech Forum 2013.

Japan leading the way in ceramic membranes

At Singapore International Water Week 2012, a key take-away was the emergence of ceramic membranes for water treatment. Japan has long been a leader in membrane filtration with companies such as Kubota and Toray possessing strong global market positions. Now Japan possesses potentially disruptive technology in the area of ceramic membranes.

Essentially, Japanese firms are not new to water industry

Invention and break-through tend to occur almost simultaneously across the globe. Japanese firms have long been originators of innovative water technologies; however, historically these technologies often remained in the home market.

Some examples include SBR technology and phosphorus removal processes. The Sequencing Batch Reactor (SBR) was originally licensed into North America from Australia by ABJ. When ABJ needed reference data for operational plants, they consulted firms in Japan, where the technology had already been in operation for a number of years.

The BlueTech Innovation Tracker includes a number of impressive Japanese technologies, including the Fibax Filter by Organo Company, and the Bioleader process by Kurita. Even Ostara, a Canadian leader in phosphorous recovery has a lesser known Japanese cousin, Unitika’s PHOSNIX process.

This is an excerpt from the BlueTech Research Monthly Intelligence Briefing for March 2013.
Click here for details.