Revolution Now

by Richard T. Stuebi

as posted to Huffington Post

Sandwiched around the election of the first African-American President of the United States, we find the debacles associated with the collapse of the international finance sector and the imminent end of the American automotive industry as we've known it for decades -- accompanied by the scurrying of would-be leaders and experts around the world attempting to patch holes in the badly leaking dikes with hastily-applied band-aids.

It's abundantly clear that the world has changed drastically. In my view, we're now in the midst of truly historical sea changes, although the biggest implications of these dramatic changes are very unclear -- and may not become fully apparent for some time to come.

But, the world spins on, waiting for no-one. Unable to stand still until clarity emerges, how can one make sense of what has happened in the relative blink of an eye? Here's what I've been able to cobble together so far.

The Now-Dubious Ascent

For the past fifty years, the United States has implicitly pursued a social/industrial policy based on consumer largesse powered by low-cost energy. As outlined in a thoughtful December 4 USA Today opinion piece entitled "Blame and the Big 3" by Alan M. Webber, the government decades ago instituted what gradually became a fundamentally unsustainable social compact.

The two prongs of the compact were, first, to Detroit: Make big, powerful, low-cost and disposable vehicles, hire employees at high wages, and customers will flock to your products; we'll ensure there'll be plenty of cheap gas and cheap credit.

The second prong, to Joe & Jane Six-Pack: Work in factories at high wages, keep buying bigger new cars every few years, build big homes in the suburbs; we'll build you roads and ensure cheap credit so you can live a good life.

For a while, it seemed to work pretty well. Sure, we had a tough patch in the 1970s, but with the demise of the Soviet Union and the Eastern Bloc in the late 1980s and early 1990s, we felt secure in our market-oriented supremacy.

At that moment in time, American hegemony looked limitless. It was, we were told, the end of history. The so-called "peace dividend" allowed us to enjoy a decade of almost unparalleled bliss -- unburdened by any intrusions on the national consciousness more existentially serious than sexual peccadilloes in the White House.

Then, 9/11 happened. It was shocking and horrifying, but amazingly it didn't become any wake-up call. Rather than altering the compact, the Bush Administration in effect told Americans not to worry: ignore the war, keep on going as you were -- only more so.

And, boy, did we binge. For most of this still-young century, the United States has been borrowing money from lenders abroad, based on the expectation of ever-increasing housing values, to buy all sorts of stuff from China to fill their too-big and too-remote houses, and to buy oil from the Middle East to fuel their mega-vehicles and driving patterns. (Thanks to Thomas Friedman in a brilliant set of New York Times columns over the past several months for getting at the gist of this logic.)

American automakers went along for the ride, even encouraged it, with the shift to SUV's. As has been long and widely documented, the Big Three focused heavily on SUVs largely because their ongoing and legacy cost structures made them uncompetitive in small cars, and their lingering brand weakness made them uncompetitive in performance and luxury cars. The only niche left for them were the big beasts.

In D.C., our fearless leaders doubled-down on the bet, by simultaneously waging two wars while cutting taxes. How to pay for this strategy? By cutting interest rates, printing money, and mortgaging the future. Dick Cheney said that deficits didn't matter, and Treasury Secretary Paul O'Neill was given the axe for daring to suggest otherwise.

With all of the positive feedback loops in force -- gas less than $1.50/gallon, home values increasing 10% a year, ample supplies of debt at low interest rates -- the social compact held together... at least at a superficial level, at least for a time.

The Rapid Decline

But, for those sufficiently observant, the warning signs were increasingly obvious. By 2005, what was considered a strong year economically, the aggregate savings rate for the U.S. went negative -- which had only happened before in 1932 and 1933, in the midst of the Great Depression. Americans financed their profligacy by increasing their borrowing on what-they-thought-were-appreciating balance sheets.

As long as the asset base increased, and as long as there were lenders, the bubble kept growing. But, clearly, it couldn't last.

Meanwhile, the dollar weakened, and weakened, and weakened. Given the insistence for low interest rates and the persistence of demand for borrowing capital to fund ever-increasing imports of oil and other stuff, the only way that foreign investors would lend to the U.S. is if they could also gain from their currency strengthening in relation to the greenback.

In other words, the world was screaming to the U.S. that the key measure of its relative economic standing on the planet -- the Almighty dollar -- is on the wane. The fundamental forces underlying the U.S. economy may have been invisible to many Americans, but in retrospect, foreigners were the first to pierce the veil.

All of the fundamental precepts underlying U.S. vitality started eroding badly, and in an escalating death-spiral, in the last two years.

First, due to a combination of tightening supplies and a weakening dollar, gasoline prices followed oil prices up to extraordinary levels. According to a March 2008 Petroleum Intelligence Weekly article, it was projected that the U.S. would send $400 billion overseas in 2008 to buy oil, an increase of 300% relative to just 6 years previously. With cheap oil, Americans had been lulled into buying inefficient vehicles and locking into inefficient commuting patterns -- and now with much higher priced oil on the market, we were saddled with our prior decisions.

By May 2008, Gal Luft had seen the future very clearly: "Oil Dependency is America's Financial Ruin". Jeff Rubin of CIBC is similarly on record with the opinion that spiking oil prices were the true trigger for the recession to follow.

High fuel prices pinched consumers, and they had to borrow more money to continue fueling their lives. But, alas, they couldn't take out second (or third, or fourth) mortgages, because housing values were no longer appreciating to enable additional financings. Indeed, housing prices began falling, as speculative demand for real estate began to waver.

As housing values fell, more and more loans went "underwater", which as they accumulated -- and exacerbated by extreme leverage, through collateralized debt obligations and other repackagings of mortgages in secondary trading -- eventually tipped many of the banks (and hedge funds) into insolvency. And so it was that we started circling the drain in late 2007 and early 2008.

The wipeout of Bear Stearns, acquired for virtually nothing by J.P. Morgan Chase at the end of March, was widely thought to be the turning point, after which we could all go back to normal. During the summer, we became distracted and enthralled by the McCain-Obama campaigns and the Beijing Olympics, but behind the scenes, the economy was in fact gulping its final death gasps.

As profiled in a December 29 Wall Street Journal article entitled "The Weekend That Wall Street Died", the mid-September decision by the Feds to step back and allow the stunningly rapid collapse of Lehman Brothers put the world's financial markets on brutally vivid notice that all bets were off, nothing was safe anymore. This had everyone running for the exits, and in the financial world no one has stopped running since. Securities of virtually all flavors and nations have been routed.

Meanwhile, the so-called "real" economy is now stuck at a standstill. In the U.S., car sales are off about 40% from the previous year, housing values continue to slide because there are few viable buyers, new real estate development has been terminated, manufacturing is at the lowest levels in decades, steel production has fallen by 50% since August, and businesses can't get financing.

Oil prices -- what had been a leading indicator of our troubles -- have crashed back to historical norms, falling by about 75% from $147/barrel on July 11 to the mid-$30s by December, even though demand is off just a few percent from their highs. (For various reasons, it is probably wisest to view this decline as a temporary phenomenon, as the inescapable growth of oil requirements to fuel the slowed but nevertheless major economic growth in China, India and elsewhere in the developing world will quickly chew up the demand-destruction that has occurred in the U.S. and developed economies. But this is a story for another day.)

Taking Stock of the Debris

Before problem-solving on how to stop the panic, it's worth reflecting upon the fundamental priorities that the U.S. had set over the past few decades that has culminated in us spinning and sinking inside this financial black hole.

There's lots of blame to be spread around. It's easy to finger the capitalists on Wall Street for our woes, and certainly they deserve their share of hostility directed toward them. Clearly, plenty of executives in the banking sector were key enablers to our present morass with their often dubious (or worse) ethics and practices, leading to lots of economic activity that is now revealed to have been essentially fictitious.

But, as the preceding text indicates, the list of foundational culprits must truly begin with the U.S. societal devotion to cheap energy, inefficient autos, outsized homes, sprawl, roads in lieu of public transit, and excessive materialism.

In other words, many of the things that make the U.S. economy environmentally unsustainable are what have also made the U.S. economy financially unsustainable.

We have met the enemy, and it is us.

These are not factors that are simple or quick to change, so the way out of our current conundrum will not be an easy one. Barack Obama inherits an incredibly daunting set of challenges. Perhaps this is the rare historical confluence of the right man at the right time, true leadership rising to meet challenges that only historically gigantic leaders can surmount.

Some of you may know that I was academically trained as an economist. Actually, I was almost certainly the least motivated student ever under the tutelage of current Fed Chairman Ben Bernanke (while he was at the Stanford Graduate School of Business, 1984-85), so it would be presumptuous to say that I have found the yellow brick road out of this economic nightmare. And, for sure, I'm not in any particularly influential position to offer advice. ("Hey, Ben! Remember me, your worst pupil? Listen up: I've got the answers!" Yeah, right.)

The few macroeconomic fundamentals I dimly remember suggest, to me at least, that any economic recovery will need to be driven by a boost in aggregate demand. With interest rates offered by the Federal Reserve Bank now essentially at zero, monetary policy tools will have limited power. Thus, fiscal tools will need to carry the load to spur aggregate demand.

As widely reported, the Obama Administration is angling for a major economic stimulus package of nearly a trillion dollars (how fondly I remember the days when a few billion dollars was a lot of money) that will focus on new infrastructure and energy projects.

Given the "Green Team" that the President-elect has picked to lead the nation's energy and environmental agenda, sustainability appears well-positioned to become the essence of an Obama Doctrine. A true test will be if the Administration's economic plan leads the country to pursue only projects that will help us reverse direction from the trajectory we've been headed since World War II.

Even if the Obama plan is large and properly pointed, it's not likely to be enough to restore the American economy and put it on a financially (and environmentally) sustainable path. More will be needed.

Given that the average consumer is far overstretched, there is little scope for increased consumption (and, indeed, lots of evidence to suggest a need for reduced consumption). Thus, any additional demand stimulus needs to come from promoting private-sector savings (which translates to investment), along with the near-certainty of increased government spending.

Bluntly, along with the economic stimulus package that the Obama team is now concocting, we need to cut capital gains taxes and expand R&D to accelerate the turnover to the future, and we need to increase consumption taxes to end the era of living beyond our means.

This is especially the case on the cleantech front.

Investments in new cleaner energy technologies -- both to develop them and to deploy them -- will need to grow dramatically, perhaps even by an order of magnitude. This isn't gonna happen on its own.

Certainly, a cap-and-trade program on carbon dioxide emissions will help, and Obama promises this. However, the magnitude of emission reductions likely to be compelled by any legislation that can get passed through Congress will not cause enough of a tilt in favor of clean energy to drive any rapid shift to a sustainable economy. Additional impetus will be needed.

The capital markets are so broken right now, and savings rates so low, that investment in the U.S. must be more aggressively encouraged. Possible solutions: slash capital gains tax rates, and make R&D expenditures tax-deductible.

And, as politically unpopular as it certainly would be, taxes on fossil-fuel based energy must be raised. We're not going to wean ourselves from our addictions if we don't make it more economically burdensome to maintain the status quo. And, if we raise government expenditures and reduce tax-based disincentives against investment, Uncle Sam is going to need to collect more revenue somehow, some way.

Given the recent freefall in oil prices, many have argued (including a December 8 editorial in the Washington Post called "Start Making Sense") that the time is now to put in place taxes that set a floor on the prices paid by consumers for gasoline. This will not only stimulate more far-sighted decisions and behavior by drivers and vehicle suppliers, but will also provide more certainty for investors in alternative fuel technologies and projects that are so badly needed.

A New Beginning

Some might say that we're poised on the edge of a precipice. For instance, the current environment looks like the early days of what James Howard Kunstler has memorably called The Long Emergency, a dire depiction of a bleak long-term future.

While clearly very urgent, I don't see our situation as hopeless. I prefer an interpretation similar to what I've seen from a number of sources in recent weeks: that innovation and ingenuity are in fact amplified during difficult times, during which many of the most enduring and important enterprises are founded. See, for instance, the recent report on entrepreneurism by the Kauffman Foundation, George Gilder's "The Coming Creativity Boom" in the November 10 issue of Forbes, or the December 15 interview with Harvard's Clayton Christensen in the Wall Street Journal.

Necessity is the mother of invention, and desperate times call for desperate measures. They may be old cliches, but there's a lot of truth in them nevertheless.

Recall that Microsoft was born in 1975, during the last really bleak period of U.S. economic history. In that context, it's interesting to read the perspective of Nathan Myrvhold, formerly Microsoft's Chief Technology Officer, who in "Inventing Our Energy Future" in the November/December issue of EnergyBiz clearly sees the opportunities for reinventing the energy economy.

It's not just the hardware of the energy economy that needs to change, but also the software: how we as Americans think about and operate in the world of the future.

I've written before that we need a whole new story to move us forward in the 21st Century in a truly sustainable manner. I think the story's being rewritten right before our very eyes. The rules of the game are changing, and we don't yet see what they will become yet.

I believe we're in the midst of a revolution. It is uncomfortable, to say the least. But, that's the nature of revolutions.

The Beatles asked if you wanted a revolution, if you wanted to change the world. If so, here's your chance.

But, be assured, this will be a participative sport -- indeed a full-contact sport -- and it won't be a spectator sport.

Advance forward a few years after the Beatles into the music of Gil Scott-Heron, who noted darkly that the revolution will not be televised. No, indeed, it won't. We are living it now. It's reality TV turned inside-out: the fantasy is inside the boob-tube, the reality is on this side of the screen at which you're looking.

The revolution is now. Are you game to take part?

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. In 2009, he will also become a Managing Director at Early Stage Partners.

Cleantech's Solar Conundrum

The solar market is still going strong, despite the financial crisis, and turmoil in some of its key markets. But that doesn't mean all is well on the venture financing end.

As a number of longtime Silicon Valley solar darlings start to demand even more serious money to build plants for commercialization, the financing picture gets clouded. Conventional wisdom has been suggesting it's market issues. Maybe so, and then again, maybe not.

Greentech Media has been reporting on the funding efforts of Solyndra, including a recent discussion of struggles by Goldman Sachs to raise structured finance for the startup, which claims it is shipping some of its very weird looking CIGS product, though little evidence let alone field data exists.

It's not the only one. Recently CPV darling SolFocus was reportedly struggling to raise capital arranged by Advanced Equities. The cash was to fund the buildout of a commercial manufacturing plant, and at least twice the company drastically cut its pre money valuation ask.

The conventional wisdom is that the finance crunch is hurting solar. I have another thought. Perhaps its just the riskiest solar technologies and businesses coming home to roost. Both of these companies have been pitched to investors as late stage, helping to justify massive capital needs and valuations. I'd argue they are actually very, very early stage, with all the risk still in front of them.

Maybe it's not the market? Maybe its the ludicrous suggestion that the first plant should be 420 MW in size. How about two new ideas: 1) Stage gate, or 2) Walk before you run.

Take Solyndra, which has raised hundreds of millions to coat CIGS on a glass cylinder. Perhaps the question shouldn't be is solar getting hurt by the credit crunch, but should be who exactly thinks its a good idea to invest hundreds of millions to build a plant to coat CIGS in a circle, at "pre IPO style prices"? The question everyone I know has been asking is, if they really can coat CIGS with good yields, why didn't they just do it? That's world beating on flat plate glass, if it works as advertised. Why wrap the same amount of solar material around a long glass paper towel roll?

With SolFocus, maybe its just that CPV isn't as good an idea as applying manufacturing process improvement to CdTe and tandem cell thin film?

Who knows, but let's look a bit closer at the particular technologies before we just blame it on the the financial crisis.

Neal Dikeman is a partner at cleantech merchant bank Jane Capital Partners LLC, and Chairman and CEO of Carbonflow, Inc. He edits the Cleantech Blog and chairs Cleantech.org.

Low Carbon Footprint Four-Door Sedans

By John Addison. The four-door sedan continues to be a popular vehicle for fleets and for individuals. These sedans often deliver the right amount of space for 4 or 5 passengers and enough cargo space for a taxi. The following 10 four-door sedans have the lowest greenhouse gas emissions per mile of any vehicles available for volume commercial sale in 2009. In many cases, they also have the best fuel economy. Most are already selling in quantity. In a few cases, we are betting that the manufacturer will sell 1,000 to fleets by the end of 2009. Buying these clean cars often gives fleets tax breaks and special funding opportunities.

Reduced greenhouse gas emissions are becoming a priority with fleet managers and millions of conscientious consumers. These Top 10 Low Carbon Footprint Four-Doors are listed from lowest to highest in carbon footprint.

1. Toyota Prius
2. Honda Insight
3. Honda Civic Hybrid
4. Toyota Camry CNG Hybrid
5. Ford Fusion Hybrid
6. Nissan Altima Hybrid
7. Honda Civic CNG
8. Toyota Camry Hybrid
9. Toyota Yaris
10. Chevrolet Aveo

Fleets are also early adopters of vehicles with even less emissions including electric vehicles, hydrogen fuel cell, plug-in hybrid conversions, and diesel hybrid concept cars. Because these are not offered for commercial volume sale, they are not part of this Top 10 Four-Door Sedan list. Electric and alt-fuel vehicles are also covered in detail at Clean Fleet Report.

The Toyota Prius continues to lead the four-door sedan field in fuel economy and lowest lifecycle greenhouse gas emissions. This perennial favorite midsize is lowest on the list with 4 tons of carbon dioxide equivalent for the EPA annual driving cycle; combined fuel economy is 46 mpg. Yes, 4 tons of CO₂e is a lot; by comparison the 2009 Lamborghini Murcielago rates at 18.3 tons and only gets 10 mpg. Sorry fleet managers, you’ll need to take that Lamborghini out of the budget. Watch for new announcements from Toyota at the Detroit and Chicago Auto Shows, including a solar roof option to power accessories and thereby boost mileage. Prius

The new Honda Insight four-door sedan with an Ecological Drive Assist System is expected to be priced for thousands less than the Prius. Honda will start selling the Insight in North America in spring 2009. Honda is setting expectations that mileage will be similar to the Honda Civic Hybrid. Honda Insight

The Honda Civic Hybrid compact rates at 4.4 tons of CO₂e for the EPA annual driving cycle and a combined 42 mpg. Civic Hybrid

The Toyota Camry CNG Hybrid was presented to me as a concept car at the LA Auto Show. Should gas prices start climbing as summer approaches, then Clean Fleet Report is betting that Toyota will make this available to fleets. A similar move happened 10 years ago in 1999 when Toyota marketed a CNG Camry to fleet customers in California. Clean Fleet Report makes an unofficial estimate that emissions will be 4.6 tons of CO₂e for the EPA annual driving cycle, based on achieving 32 mpg combined. Camry CNG Hybrid

The Ford Fusion Hybrid will be the most fuel-efficient midsize car on sale in the US by next spring, with an EPA certified 41 mpg rating in the city and 36 mpg on the highway. Clean Fleet Report makes an unofficial estimate that emissions will be 4.8 tons of CO₂e for the EPA annual driving cycle. The Fusion Hybrid and Mercury Milan Hybrid may travel up to 47 miles per hour in pure electric mode. The Advanced Intake Variable Cam Timing allows the Fusion and Milan hybrids to more seamlessly transition between gas and electric modes. Green Car Congress

Cleanfleet Report with discussion of other Low Carbon Vehicles

If you are planning to buy any four-door sedans, this list may be a good starting point. The focus is on low CO₂e emissions and likely commercial availability. Some will need larger sedans, while others will need affordable small cars, including small station wagons and two-doors which are not part of the list. Executives and sales managers that once required luxury sedans may now insist on one of the green alternatives in the Clean Fleet Report Top 10 Low Carbon Footprint Four-Door Sedans for 2009.

John Addison publishes the Clean Fleet Report. His new book, Save Gas, Save the Planet, will be published March 25, 2009.

Smart Grid Primer

by Richard T. Stuebi

If you want to quickly gain a good overview of the smart grid, check out "The Smart Grid: An Introduction". A slick 48-page wire-ring bound primer developed for the U.S. Department of Energy, one can find several juicy data tidbits, such as:

1. The U.S. power grid consists of 9200 electric generating units connected by 300,000 miles of transmission lines -- of which only 668 miles were added since 2000.

2. Between 1988-98, U.S. electricity demand increased by nearly 30%, while transmission capacity grew by only 15%. (What about since then?)

3. In the U.S., there were 41% more outages affecting more than 50,000 customers in the second half of the 1990's than in the first half of the 1990's. (Again, what about since then?)

4. The average age of a substation transformer on the U.S. power grid is 42 years -- two years more than their expected life span.

5. 10% of all generation assets, and 25% of distribution infrastructure, are required for less than 5% of the hours of the year.

All of this, plus a great picture of Dr. Zachary Smith (the inimitable Jonathan Harris) and the robot from "Lost in Space". What more could you want?

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

UPS Delivers with New Hydraulic Hybrid Vehicles

By John Addison. Millions of last minute shoppers used UPS to get their gifts delivered on time. The snow storms did not stop UPS. On December 22, I skipped the hour line at the post office, which was open on Sunday, instead shipping via UPS. I got my gifts to my brother by December 24.

Delivery giant UPS helps people drive less. UPS delivers over 16 million packages per day to over 200 countries. 70 percent of its volume is commercial; 30 percent residential. UPS operates nearly 100,000 ground vehicles, 600 airplanes, 3,000 facilities, and employs over 400,000 people.

UPS first put a hybrid-electric delivery van into operation in 1998. Although UPS has experienced over a 40% improvement in fuel economy with 50 hybrid-electric delivery vehicles, a new type of hybrid may be even better.

UPS will deploy two new hydraulic hybrid vehicles (HHV) in Minneapolis during the first quarter of 2009. The additional five HHV’s will be deployed later in 2009 and early 2010. The Navistar delivery truck uses an Eaton hydraulic hybrid drive system with the diesel engine in series. The vehicle uses hydraulic pumps and hydraulic storage tanks to capture and store energy, similar to what is done with electric motors and batteries in a hybrid electric vehicle. The engine periodically recharges pressure in the hydraulic propulsion system. Fuel economy is increased in three ways: vehicle braking energy is recovered; the engine is operated more efficiently, and the engine can be shut off when stopped or decelerating. Eaton Hybrid Systems

Delivery fleets are excellent early adopters of clean vehicles. UPS, FedEx, the United States Postal Service, and others are finding that hybrid technology is excellent at capturing braking energy from the frequent stops made by delivery vehicles. Plug-in hybrid Sprinter vans are achieving over 100 miles per gallon. These major carriers all have pilot programs using electric delivery vans and trucks can be parked.

UPS emitted 7.47 million metric tons of CO2 in 2007; other GHG emissions not reported (jets are responsible for emission of other GHG in addition to CO2). Over 87 percent of CO2 gas emissions were from its transportation use, rather than stationary power. Jet fuel represents 46% of U.S. Package Operations energy use; diesel 37%. Airplanes demand tremendous amounts of petroleum processed fuel and are probably responsible for most greenhouse gas emissions for the delivery giant.

When we read about energy independence and reducing transportation greenhouse gas emissions, passenger vehicles get most of the press. In fact, it is fleets that lead in testing and improving vehicle technology. UPS has been a leader since the 1930s.

More...Clean Fleet Report with more about UPS hydrids and GHG reduction tactics.

John Addison publishes the Clean Fleet Report. His new book, Save Gas, Save the Planet, will be published March 25, 2009.

Carbon Trading, The Game

At our company Christmas party this year we played Carbon Trading, The Game. Bascially, I devised a simple cap and trade game in a power sector, and then we played out four rounds to see what happened. The results were an interesting summary of how small rules can have big impacts in the outcome. And perhaps a good Christmas lesson to everyone involved in carbon market design. The good news, the market in our game came in well under its caps even in the early round.

Basic rules were as follows:

Players start with a certain amount of cash, and then each round bid for different types of power plants, fuel, and carbon credits each round (there were shortages of each), then run their plants (assuming they were able to acquire power plants, adequate fuel, and adequate carbon credits to operate). In our simple cap and trade model, the cap was based initially off of a coal plant's emission factor, and declined on a per plant basis each year. Power was priced at a flat $100/MWH (makes the math simple). The winner was the one with the most cash after converting carbon to cash at the market clearing price in the last round.

The idea was that the declining cap and fuel shortage would lead to players bidding high for low emissions hydro and wind farms to get under their cap, and lead to reductions.

A few interesting outcomes. Wind and hydro plants did command premium prices, but not all the way to pricing carbon in (probably since no one was sure what then final carbon price would be - proving uncertainty wins again). And since we did not let power prices float, nor require a must run component, fuel prices went on a wild swing but eventually fell as at least two players opted for a strategy to essentially mothball plants and instead just bank the carbon credits, and buy a few more. As a result, carbon prices also stayed low in the early rounds, since fewer operating plants were hitting their caps - however, the players who has stockpiled carbon then bid up the price of the final credit of the final round to $70 instead of the $10-$20 in previous rounds (it only stopped there because they ran out of money).

The final result, that high price of carbon in round 4 meant the winning strategy ended up being buy cheap coal plants throughout the game, run them only when fuel and carbon were very cheap, and make your money off the carbon.

I am planning on revising the rules for better play, then releasing an actual carbon trading game in the near future.

Besides operating CleantechBlog.com, Neal Dikeman is a partner at cleantech merchant bank Jane Capital Partners LLC, CEO of Carbonflow, Inc., and Chariman of Cleantech.org.

Baby Nukes

by Richard T. Stuebi

Although not popular to many in the environmental community, one low/zero-carbon energy supply alternative that has to be at least put on the table for serious consideration is nuclear energy.

Yes, yes, we know the litany of concerns about nuclear energy: runaway fission leading to explosive catastrophes like the one that occurred in 1986 at Chernobyl, long-lived and extremely toxic waste products, and the use of fuels that make for scary weapons-grade materials for terrorists to exploit.

The U.S. nuclear industry hasn't completed a new nuclear power generating unit in many years -- though it's generally not for the reasons listed above. Rather, the main damper on the U.S. nuclear industry has been high cost: to achieve economies of scale, the optimal nuclear unit size has long been thought to be greater than 1000 megawatts, which given the capital intensity of nuclear technologies (a November 2007 article in Nuclear Engineering suggests construction costs of at least $4000/kilowatt), implies minimum investments of several billion dollars. Given the massive market and regulatory uncertainties facing electric utilities, few have been willing to step up to the nuclear plate and lay down such a huge bet.

In recent weeks, I've seen not one but two articles -- "Neighborhood Nukes" in Forbes and "Mini Nuclear Plants to Power 20,000 Homes" in The Guardian -- covering the investigation of small-scale nuclear power generating units. Both articles prominently feature the New Mexico company Hyperion Power Generation, which claims to be developing a hot-tub sized unit of 25 megawatts capacity.

Spun out from Los Alamos National Laboratory, the Hyperion design is intended to overcome many of the obstacles associated to date with nuclear energy.

As The Guardian article summarizes, "the miniature reactors will be factory-sealed, contain no weapons-grade material, have no moving parts and will be nearly impossible to steal because they will be encased in concrete and buried underground."

From Forbes: "Hyperion's design uses uranium hydride instead of traditional uranium with control rods. The reactor gets rid of heat using thermal conductivity, which eliminates the big water-cooling systems and their containment bulwarks."

Stunningly, Hyperion promises an installed cost of $1000/kw, and claims a sales backlog of $2.5 billion, with 100 firm orders.

So, maybe there's a renaissance of nuclear energy in the offing. Steve Martin may have had it right, after all: "Let's get small."

But, before you get too excited, remember that the nuclear industry has been down this path before: in 1954, Lewis Strauss, then-Chairman of the U.S. Atomic Energy Commission, hinted that nuclear energy would in the not-too-distant-future make electricity "too cheap to meter." We're still waiting.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. In 2009, he will also become a Managing Director at Early Stage Partners.

Car Sharing Competition: Hertz and Enterprise Chase Zipcar

By John Addison. New car sharing programs allow two or more people to need only one car. Each shared vehicle results in 6 to 23 cars not being owned. Once someone joins a car share program, they cut their vehicle miles traveled up to 80 percent. Introduced first in Europe, car sharing is now growing in the United States with over 200 car share programs operating in over 600 cities.

Zipcar is the leader in car sharing with over 260,000 members. Car sharing is popular with individuals who live car free in a city, with couples who share one car, with university students and staff, and with corporate fleet and travel managers.

Zipcar makes car sharing easy. After a simple enrollment a member is issued a Zipcard. Members reserve a car online or on the phone. At the appropriate hour, they go to their designated car, parked in one of many lots in the city. A Zipcard is used to enter the vehicle and drive until returned to the reserved parking space. A variety of vehicles are available in their program from hybrids to SUVs.

Hertz, as the largest international rental car company, has entered the car sharing market by launching the Connect by Hertz car sharing club, with neighborhood parking in London, New York City and Paris. Hertz plans to expand into additional cities, as well as universities, in 2009. As Hertz expands, it can leverage its established presence in 8,100 locations in 144 countries worldwide

Membership in Connect by Hertz includes insurance, fuel, roadside assistance, maintenance and cleaning. Connect by Hertz members enjoy a paperless program where they can reserve, drive and return vehicles all on their own, via the internet or phone. “Connect by Hertz supports Hertz’s diversified business model by providing best-in-class transportation solutions across the spectrum of customer needs,” commented Mark P. Frissora, Chairman and CEO of The Hertz Corporation. “In addition to being environmentally friendly, Connect by Hertz cars can save members thousands of dollars a year in vehicle ownership costs and, by leveraging Hertz’s established infrastructure, we’re the first major car rental company to be able to offer members the first global car sharing program.”

The showcase car of the Connect by Hertz fleet in the United States is the Toyota Prius. The fuel emissions of the London and Paris cars are significantly less than the voluntary target of a maximum 140 g/km CO2 output set by the EU.

To unlock and engage the Hertz vehicle, members simply swipe their membership card, the Connect card, over the car’s radio-frequency identification (RFID) reader. In car, a hands-free audio kit connects members to a Member Care Center representative should they have questions, need assistance or need to extend their rental. The in-car technology also enables Connect by Hertz to ‘communicate’ with the vehicle enabling representatives to unlock, engage and locate vehicles. The technologically savvy cars are also equipped with iPod connectivity and, in the US, NeverLost® in-car navigation systems and EZ Pass transponders.

Complete Article includes Enterprise and Corporate Programs

Car sharing is destined to grow and attract growing competition.

Copyright © John Addison. Excerpts of this article will appear in his upcoming book – Save Gas, Save the Planet. John Addison publishes the Clean Fleet Report.

Ich Bin Ein Freiburger

by Richard T. Stuebi

Earlier this month, I had the privilege of joining a delegation led by Cleveland Mayor Frank G. Jackson to visit Baden-Wurttemberg, the southwestern-most state in Germany. The aim of the trip was to begin building stronger commercial bridges between the Cleveland area and Baden-Wurttemberg – two heavy industrial economies of similar size. I was there to represent our region’s interests and activities in advanced energy, in an aim to identify and explore potential collaborations in the academic, civic and private sectors.

As part of our tour, we spent a day in Freiburg, a delightful university city nestled in the corner where Switzerland and France abut Germany. And, in their lovely city hall, we had the privilege of meeting with Freiburg’s dynamic Mayor Dr. Dieter Salomon and the city's environmental minister, Dr. Dieter Worner.

Though I had previously heard of Freiburg, the two Dieters opened my eyes to what Freiburg had been able to accomplish – and, alas, what also remained to be accomplished – in the realm of sustainability, with their Freiburg Green City plan.

Freiburg frequently hosts public sector leaders from around the world to learn how to put a city on a low-carbon trajectory, as it is widely recognized to be the foremost green city in Germany, which in turn is widely recognized to be the country farthest down the sustainability path in Europe, which in turn is widely recognized to be far ahead of other continents in dealing substantively with the climate change threat.

We were humbled by what we learned. Way back in 1996, before climate change was much of a concern in the U.S., Freiburg officials decreed that it would aim to reduce CO2 emissions by 25% by the year 2010. To achieve this, Freiburg pursued two priorities.

First, it established very ambitious building energy efficiency standards – 20% below already-stringent German national levels. Yes, building professionals (architects, engineers, contractors) initially objected to this stance as being too hard or too costly. However, over time, the building community learned how to meet these tough standards at a minimal 1% cost premium over conventional buildings not meeting the standard. Now, the Freiburg-based businesses have a substantial competitive advantage in the German building marketplace. This goes to show that good policy can drive private sector innovation and subsequently economic health of a key sector of the economy.

Second, Freiburg seized upon its natural advantage – it is the sunniest place in all of Germany – to become the leading player in the soon-to-be-booming German solar market. With a major investment to establish the Fraunhofer Institute of Solar Energy, affiliated with the University of Freiburg, the city became Ground Zero for R&D on new solar technologies. This, in turn, spawned many businesses – either spun-out from Fraunhofer or founded by people who worked or studied in Freiburg – that were able to catch the wave as the solar market in Germany took off.

The net result: Freiburg now lays claim to an environmental business cluster of 1500 companies, employing 15,000, generating over 500 million euros of annual revenues. For a city of roughly 200,000 population, this is green economic development writ large.

We were also surprised by what we learned: namely, that Freiburg was really struggling to achieve significant emission reductions. Despite strong mechanisms to drive reduced emissions in the economy, Freiburg had only been able to achieve a 7% reduction in CO2 emissions since 1996. Freiburg readily admits that it won’t be able to attain the 25% reduction target it had set for itself by 2010.

So, Freiburg is finding out it’s not so easy to be as green as it wanted to be, as we all need to be.

That being said, I did take heart in noting that Freiburg wasn’t giving up in the face of adversity, as it is ratcheting its goal for 2030 to reduce CO2 emissions by 40%.

I also noted that a key reason for Freiburg failing to achieve its emission reductions was economic/population growth. Although aggregate CO2 emissions had only fallen by 7%, on a per capita basis, CO2 emissions had declined by about 30%. In other words, Freiburg’s population had grown substantially – one of the few places in Germany to experience population growth.

It’s hard to escape the conclusion that Freiburg’s environmental posture and ambitions are key attractors for this growth. The best and the brightest of Germany seem to be flocking to Freiburg to be part of the vanguard in moving to a low-carbon economy.

Lastly, I am inspired by Freiburg’s civic motto. By my transcription (and excuse my lack of knowledge of German), Freiburg’s credo is “Gut leben stadt viel haben”, which translates approximately to “A good life is more important than lots of possessions.”

A lovely city, Freiburg is living proof that one can live a good life and be at the forefront of sustainability.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President at NextWave Energy, Inc. In 2009, he will also become a Managing Director of Early Stage Partners.

A Better Strategy for Detroit: Electric Drive not Flexfuel

In 2006, Detroit held high hopes of being profitable by selling millions of flexfuel vehicles. The vehicles are named flexfuel because they can be fueled with either E85 ethanol or with gasoline. It cost little extra to make these flexfuel vehicles. The flexfuel modifications were not made to all engines. They were made in bigger engines for SUVs, trucks, and big cars with better profit margins, but subpar fuel economy. Millions of flexfuel vehicles were sold.

Thousands of E85 stations appeared, primarily in corn growing states. A federal law was passed requiring production of 36 billion gallons of biofuel to be produced by 2022. Executive orders gave preference to buying flexfuel vehicles for the fleet of 4 million federal, state, and local vehicles. As food prices soared, one billion people struggled to afford food. The law was modified to requiring 16 billion of the 36 billion gallons to be from cellulosic sources. Biofuel 2.0

Recently at the Los Angeles Auto Show, I saw flexfuel vehicles extensively displayed in GM and Ford booths. They are also pilling-up in at auto dealers throughout the nation. These flexfuel vehicles fail to delivery the fuel economy that people are now demanding.

Although Detroit automakers sell flexfuel vehicles with good mileage in Brazil, in the United States, the best EPA mileage rating for a vehicle using E85 is 19 miles per gallon.

As we approach 2009, transportation is beginning a major shift away from the internal combustion engine to electric drive systems. Just as downloadable music disrupted CD sales, just as mainframe computing gave way to distributed computing, transportation is shifting to a new electric-drive paradigm.

At the Auto Show crowds were excited by new electric vehicles, including plug-in hybrids and fuel cell vehicles. Crowds surrounded BMW’s Mini E, the freeway-speed battery electric version of the Mini Cooper with a 150 mile range. Nissan was showing off its Cube and talking about making 100 mile range battery electric vehicles in volume, with fleet quantities in 2010. Mitsubishi’s iMiEV was shown as is being put into trail at the electric utility SCE.

Big automakers were also displaying fuel cell vehicles that extend the range and speed the fueling time for electric vehicles. Chevrolet, Daimler, Honda, and Toyota are each putting over 100 of their hydrogen vehicles into daily fleet and personal use. Toyota also has big plans for plug-in hybrids. Look for new announcements in Chicago this coming February.

GM continued to generate excitement with its Chevy Volt, a beautiful sporty sedan with a range of 40 miles in electric mode and hundreds of added miles using a small gasoline engine to extend range.

Chrysler was demonstrating four different electric vehicles at the L.A. Auto Show. The popular low-cost battery electric Chrysler GEM has now passed 38,000 in use in the United States, with sales continuing to do well. Although it is limited to 25 mph and a 40 mile max range, the bigger new Chyrsler ENVI electric vehicles get from 0 to 60 in as little as 5 seconds with EVs and plug-in hybrids that include Jeeps, mini-vans, and sports cars. Chrysler Details

The full transition to electric transportation may take 40 years, but it is unstoppable. The fuel of choice is shifting from foreign oil to our own renewable energy resources. Over 40,000 people now drive electric vehicles in the United States. Most are the 25 mph types, not the $100,000 Teslas, but in 2010 several affordable freeway speed choices will be offered by Nissan, Chrysler, GM, Toyota, and dozens of exciting smaller companies.

Although millions of electric vehicles will displace cars with gasoline engines, the internal combustion engine will be with us for decades in hybrids, plug-in hybrids, and heavy-duty trucks. Using new biofuel blends in these engines will help us achieve energy security. Biofuels from cellulosic sources will help moderate damaging greenhouse gas emissions. Biofuels are not a panacea; rather, they are an important transitional solution for the next decades.

Currently, 142 billion gallons of gasoline are consumed annually in the United States. In ten years, consumption could moderate to 120 billion gallons annually, even with population growth, due to these factors: CAFÉ fuel efficiency standards, replacement of some gasoline engines with more efficient turbo diesel, growth of electric vehicles, growing use of commute programs, growing use of trains and transit, and reduced vehicle miles traveled.

Fuel refiners and engine manufacturers could agree on standards so that 20 percent of gasoline could be from ethanol and other approved next generation biofuel. This 20 percent would be 24 billion gallons annually of fuel from biomass, not from petroleum. Flexfuel vehicles that deliver under 30 mpg are not needed. A new E85 infrastructure is not needed.

The United States can regain its world leadership in transportation by investing in future solutions, not the failed strategies of the past. Millions of jobs can be created in public transportation, high-speed rail, electric cars, hybrid electric heavy vehicles, renewable energy, and next generation biofuels that can be blended with existing gasoline and diesel.

John Addison publishes the Clean Fleet Report and speaks at conferences. His new book, Save Gas, Save the Planet, goes on sale March 25.

Another Way to Skin the Carbon Cat

by Richard T. Stuebi

The challenges associated with climate change are so daunting -- so much emission reductions to achieve, so much money to invest in energy efficiency and low/zero-carbon energy technologies and infrastructure, and so little time to do it -- that we're going to have to be awfully creative.

In the past, I've blogged about geoengineering the planet, putting stuff up in the atmosphere to block incoming solar radiation, thereby reducing the energetic input to the planet from the sun. This week, I take note of an article entitled "Eating Carbon" in the November 15 issue of The Economist.

It appears that the Earth is endowed with massive reserves of a particular type of rock called peridotite, which seems to be able to react quickly with carbon dioxide to produce carbonates. One thought is to grind up the peridotite and expose it to exhaust streams, but a new approach profiled in a paper (see abstract) in Proceedings of the National Academy of Sciences by Peter Kelemen and Juerg Matter of Columbia University involves injecting carbon dioxide in mass quantities (e.g., from powerplants) into the peridotite strata, leaving inert byproducts in-situ underground.

The big challenge appears to be depth: the peridotite is 20 km down. But, the upside appears to be substantial, with seemingly much more carbon dioxide sequestration capacity than the caverns and reservoirs mainly being considered in the carbon capture/sequestration (CCS) community -- and with no potential for leakage.

Apparently, peridotite is not the only rock that "eats" carbon, as researchers are now investigating volcanic basalt as well. With luck, perhaps geologists can find a good rock type that is both quickly reactive, highly plentiful and dispersed on the planet, and relatively cheap/easy to access.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

EarthLED releases a new consumer LED light bulb

by Cristina Foung

My favorite green product of the week: the EarthLED ZetaLux 7 Watt LED

What is it?
The EarthLED ZetaLux is a 7 watt LED light bulb. With a standard medium base, the bulb is a replacement for any incandescent light bulb. EarthLED estimates that it will cost as little as $2.00 to run the bulb for 8 hours every day for a year.

Why is it better?
The ZetaLux uses 1/10th the amount of energy and produces roughly the same amount of light as a 50-60 watt light bulb. It has a direct light path (which in some ways takes a little getting used to) but according to EarthLED, that means the bulb has a 95% luminary efficiency (the bulb does not direct any light toward the light fixture).

I've been using the ZetaLux for a week now, and it provides quite a bit of bright light in a table lamp. It's completely quiet (which was a complaint some folks had with the EarthLED EvoLux) and although the "warm white" bulb produces light that is not as warm as an incandescent, the quality of the light is quite nice.

Where can you find it?
You can order the ZetaLux directly from EarthLED for $49.99 in either warm or cool white.

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