Cleantech Blog

Thursday, March 13, 2008

Edison International Says Solar is the Great Untapped Resource

Cleantech Blog had a conversation last year with Stuart Hemphill, now the newly appointed Vice President for Renewables and Alternative Energy at Southern California Edison, a subsidiary of Edison International (NYSE:EIX), one of the largest purchasers of renewable power in the US. We caught up with him again today in a lively discussion around his predictions for the renewable sector.

Today they are announcing their sixth competitive solicitation for renewable energy. On peak delivery from the Tehachapi region is preferred, as they are currently building a massive transmission line to tap into the 4,500 MW of wind potential. But wind produces only 35% of the time. This major pipeline needs to be balanced. So they are looking for creative proposals from developers to fill up the rest of that transmission line with on peak power deliveries.

Renewable and alternative energy are still top goals for Edison. Stuart says his promotion is part a reflection of the business’ expanding interest in leadership in renewables in the US.

Prediction Number 1 - The next 10 years are going to be a wild, wild west in the solar industry. Companies around the globe are exploring new solar technologies of every variety. Stuart thinks it’s way too early to tell which ones are going to be successful. But he considers solar to be the great untapped resource in California and elsewhere.

So I asked him if by that he meant solar thermal or photovoltaics. The answer is “Yes”. Stuart responded that in the past couple of years we have seen incredible amounts of venture capital investment going into solar firms, and PV is only part of that equation.

When I pushed Stuart to predict a winner between conventional solar parabolic trough and other types of solar thermal technologies, Stuart refused, suggesting that it is still too early to tell which technologies will be the winners. That’s what makes it exciting to watch, in his opinion. As an example, he stated that we are now seeing renewed interest power tower technologies with pretty high efficiencies. The challenge is to see which ones get done.

When it comes to what’s important to SoCal Edison itself, it is really important that they sign PPA contracts with viable companies and viable technologies. He sees a wide spectrum of proposals in terms of viability, and is always looking for at least some sort of demonstration plant to prove it up and a significant level of backing for the companies before they can get involved.

Prediction Number 2 - I did ask him what his take on run of river hydro is. He responded that he hopes to be wrong, as he likes run of river hydro, but doesn’t see any major increases in the resource coming in California. Hydro in California in general has a very a limited resource potential left to be developed and lots of stakeholder concerns to be addressed in each case, so while he is hopeful, he is not predicting any great increases.

Prediction Number 3 - US Offshore Wind – We will not see much from offshore wind in California, as the limitations both from physical layout of shoreline as well as policy and consumer concerns.

We then switched to what the industry challenges are. Stuart nailed two big ones, transmission and interconnection.

He believes that transmission is getting even more challenging than last time we spoke. What’s interesting to Stuart is that most people agree and are in support of renewables in California, but very few people support the way that the goals need to be attained, ie, significantly increase transmission infrastructure. There tends to be lots of local opposition, or federal agencies that aren’t always in support of particular local goals. This makes sense, as transmission by its nature always touches a lot of different land and communities in its path, meaning lots of different stakeholders need to be involved.

Interconnection queue bottlenecks are the real next challenge in California and in the Midwest according to Stuart. This is a challenge that is addressable and there are proposals into FERC to do so. But currently it is a first come first serve system, and easy to get into the queue. Getting in the queue starts a study process based on FERC rules, including a feasibility study, then a system impact study and a facility study. The bottleneck arises because according to the current rules, if your facility is further back in the queue, your studies assume that the facilities ahead of you are up and running, but if at any point in time someone ahead of you drops out, your studies need to be effectively redone. Because it is relatively easy to get into the queue, nonviable projects that do not end up coming online as planned have been upsetting the applecart, causing all the projects behind them to go back to the drawing board as far as the study process is concerned. Since 2002, we’ve seen a steep ramp up to a level that is just unmanageable given that dynamic. CAL ISO has a proposal in with FERC to change this, so Stuart believes a solution is coming, just not here yet.

As usual, SoCal Edison is pushing forward aggressively on renewables, and we were excited to see the new solicitation and changes they are making. As we have said before, let’s just get it done.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org, and a blogger for CNET's Cleantech blog.

Labels: alternative energy, cleantech, EIX, green tech, greentech, hydroelectric, renewable energy, SoCal Edison, solar, Stuart Hemphill, transmission, wind

Saturday, March 08, 2008

GE: Doing Cleantech The Right Way

I have long had a respect for GE (NYSE:GE), and how it runs its business. In cleantech, I am very, very jealous. They have made themselves into the company to beat. Whether by plan, luck, or simply applying sound business discipline, GE has made itself into a top 3 global cleantech player no matter happens. And they did it for a fraction of the price, and a lot less risk than anyone in Silicon Valley or the energy sector. Venture capitalists beware, in cleantech, the behemoths have beat you to the punch, have done it cheaper, faster, and with more grit than you realize.

5 step Cleantech Program by GE

Wind - In 2002, GE bought Enron Wind out of Enron's bankruptcy for about $300 mm, making GE one of the top 5 wind players overnight (it's now well in excess of a billion in revenue). It was their first cleantech steal, right before the wind industry got amazingly tight (and huge).

Power - In 2003, GE acquired one of the leading gas engine manufacturers in Jenbacher, making GE an overnight leader in small, clean power systems, and powering their way into everything from distributed generation to landfill gas markets.

Solar - In 2004, just before the solar boom, GE acquired Astropower, one of the top 5 solar energy companies in the US, for less than $20 million out of bankrupcty, after the company was delisted following accounting irregularities. You cannot even build a single solar manufacturing line for $20 mm. Only the subsequent silicon supply shortages, and a lack of the needed investment in the business and next generation technology kept GE from making a homerun out of it. But despite that, there will never be another steal in solar quite like this.

Water - In 2005, GE acquired one of the largest water technology businesses in the US, Ionics, to complement its previous acqusitions in the water sector. Paying a full price of $1.1 Billion, it virtually guaranteed GE a top 5 position in the reverse osmosis, desalination, and water purification markets going forwrad, right after Ionics was shored up through a merger with Ecolochem.

Ecomagination Brand - Then on the back of these deals, in 2005 GE launched its Ecomagination initiative, and anchored the entire company's image around its new cleantech empire.

That, my friends, is the way you make money in cleantech venture capital. I would venture to guess that GE has made 10x its money, no matter how you spin it. Or put another way, an IPO of the GE cleantech business would be the hottest thing in years.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org, and a blogger for CNET's Cleantech blog.

Labels: alternative energy, cleantech, gas engines, GE, green tech, greentech, solar, venture capital, water, wind

Friday, March 07, 2008

Cleantech Blogroll Review: Sulfur, Flipper, and Cellulose

by Frank Ling

Sulfur Batteries

The EPA has banned sulfur in gasoline but not in batteries. Sulfur, in the form of a sodium salt, has been used as large-scale storage systems. Pioneered in Japan, these batteries are gaining acceptance in the US as a reliable form of energy storage.

Due to the intermittent nature of wind energy, storage systems are needed to make wind power more reliable. The sodium sulfur battery is not only affordable and compatible with these turbines, they are robust and responsive to the output of the generators.

Jim Fraser writes in the Energy Blog:

The 50-kilowatt battery modules, 20 in total, will be roughly the size of two semi trailers and weigh approximately 60 tons. They will be able to store about 6.5 megawatt-hours of electricity, with a charge/discharge capacity of one megawatt. When the wind blows, the batteries are charged. When the wind calms down, the batteries can be used to supply energy to the grid as needed.

Such systems will can power up to 500 homes for over six hours.

Whale Inspired Wind Turbines

The shape of sea creatures have inspired the design of ships. Now, they are also inspiring the design of blades used in wind turbines.

Like the wings of an airplane, the blades can also suffer from drag, reducing it's overall efficiency. Now, a company in Canada has developed a new design that greatly improves the efficiency.

Hank Green writes in EcoGeek:

Using these little "tubercles," a new firm in Toronto has created fan blades that have 32% less drag and are, overall, 20% more efficient at moving air. The new design could lead to similar gains in wind turbines, though the testing and certification process for turbine efficiency takes some time.

For an in-depth analysis of the science behind these modified blades, take a look at the paper recently published in Physical Review Letters.

Cellulosic Ethanol Dead on Arrival?

Clearly, cellulosic ethanol would have much more environmental benefits to corn-based fuel. Scientists believe that cellulosic technology may be viable within five to 10 years but there are many logistical issues that have yet to be solved.

Robert Rapier in R-Squared Energy Blogwrites:

...you still have to haul all of this biomass to the plant, convert the cellulose (and get a low concentration of ethanol for your efforts), and then get rid of a sopping wet mess of waste biomass. Sure, it can be burned - if you spend a lot of energy drying it first. Because of the very nature of the process, I don't believe this challenge will be solved...

Frank Ling is a postdoctoral fellow at the Renewable and Appropriate Energy Laboratory (RAEL) at UC Berkeley. He is also a producer of the Berkeley Groks Science Show.

Labels: alternative energy, Batteries, cellulosic ethanol, cleantech, energy, green tech, wind

Friday, August 03, 2007

Wednesday, August 01, 2007

"Buy Wind Power, It's a Breeze"

by Heather Rae (8/1/07)

The Natural Resource Council of Maine (NRCM) sponsored a tour of the Mars Hill wind farm this past Saturday. I went along to represent Maine Interfaith Power & Light (MeIPL) and to talk about Wind Watts, the renewable energy certificates (RECs) generated by the 28 turbine, 42MW project. MeIPL is the primary reseller of RECs from Mars Hill.

A group of about 30 made the trek by bus to the Big Rock Ski Area which sits below the project at the Canadian border. (The Boston Globe covered the trip.) We heard from a number of people involved in bringing the project to life. Dave Cowan, VP of Environmental Affairs for UPC Wind Management, the developer of Mars Hill, answered questions including the usual ones about bird kill and noise. Pat DeFillip, Project Manager for Reed & Reed which constructed the project -- with Maine labor -- showed pictures of the construction in all its phases. Ryan Fonbuena, a UPC technical manager originally from California, enlivened the crowd with a broad youthful smile, considerable technical knowledge, and a necklace of white shells (he's been working on a Hawaii project as well).

The Mars Hill 1.5MW GE wind turbines are awesome by its most positive definition: breathtaking, formidable, stunning, wondrous, majestic. Try as I might, I cannot see them in any other way.

We heard from people in the community: a landowner who has multiple turbines on his property and wants to retail products oriented around the wind farm; a real estate agent who sees no decline in property values as a result of the wind farm; proprietors of a hotel; the town manager; the manager of Big Rock Ski Area. All were open and frank about the reasons for the complaints from a few vocal members of the community. Our group repeatedly asked, "is that the noise they don't like?" expressing concern for the community and trying to get their heads around the complaints. One resident said he believes the opposition to the turbines is one of aesthetics and that leads to all the other complaints...which, he believes, are dying down. He also noted that he received his property tax bill; it's $200 lower because of the money put into the town by the project.

At the end of a long day, as a thunderstorm moved in, I spoke about Wind Watts. I'm not fully comfortable with RECs for the many reasons that others like Richard Stuebi have written in this blog. However, Wind Watts I can pitch with equanimity, particularly after talking about how the Interfaith Power & Light organization came into being and why it exists: it's a moral calling to support the planet and people with clean energy. It's a faith-based response to climate change. Here's this wondrous project, I could say with a swoop of the arm across the ridgeline and slowly spinning turbines. You've met the construction company and the developers, I could say, looking right at Ryan Fonbuena of UPC. You've heard what it means to the community, catching the sparkling and proud eye of the Big Rock Ski Area manager. Buy these RECs and you will support this project and encourage others like it.

I stumble in talking about RECs when they become entangled with carbon offsets, as if buying RECs to offset carbon emissions is the only reason to buy them. So I didn't go there. I didn't have to. The first question from the group was, 'isn't buying RECs simply a way for some people to go about their lives without making any changes, so they don't have to feel guilty?' This business of assuaging climate change guilt with RECS (like the business of bird kill and noise) is mass media at work. After a brief group chuckle around guilt, Dylan Voorhees, Energy Project Director for NRCM, explained the whole black electron, green electron, green attribute/REC thinking. I've been hearing this explanation for years and I'll buy into it -- so long as new wind is more expensive to build than the alternatives. Before carbon became all the rage, I could talk about RECs for what they are: financial mechanisms to encourage development of clean energy. To jump on the carbon offset marketing bandwagon for RECs is, I believe, limiting. And darn confusing.

Heather Rae, a contributor to cleantechblog.com, manages a 'whole house' home performance program in Maine and serves on the board of Maine Interfaith Power & Light. In 2006, she built a biobus and drove it from Colorado to Maine. In 2007, she begins renovation of an 1880 farmhouse using building science and green building principles.

Labels: alternative energy, carbon offsets, cleantech, Cleantech Blog, energy, green tech, greentech, renewable energy, wind

Wednesday, March 28, 2007

$2 Bil Wind Acquisition

The cleantech sector received a huge boost this week from the news that Portugal's EDP anounced the acquisition of Texas based Horizon Wind for a price of over $2 Bil. EDP operates globally in Spain, Portugal and Brazil.

One of the intriguing aspects of this deal is the history. Horizon Wind was formerly Zilkha Renewable Energy, before it was purchased by Goldman Sachs in 2005.

According to their websites Selim and Michael Zilkha were the previous owners of Zilkha Energy, which started in the mid 1980s and grew to be one of the largest privately held independent E&P companies in Texas, before selling it to Sonat in 1998 for $1.04 billion plus debt. Zilkha primarily operated in the shallow water Gulf of Mexico, and was one of the early users of 3D seismic on a large scale.

Starting after that 1998 sale they moved into renewables, and built Zilkha Renewable Energy into a sizeable player in the wind market before selling to Goldman Sachs in 2005. The Zilkhas are now involved in a biomass power business. It is interesting to note that both Zilkha Energy and Zilkha Renewables' claim to fame was having gotten in early and built an aggressive leasehold position. In some respects, they grew their wind business in many respects like a traditional oil exploration company, build a large lease portfolio first, prioritize your development resources, apply best available technology, build out your infrastructure.

It is also highly instructive to see traditional energy capital plowed into a wind company, only to sell it to a major Wall Street firm, which after additional investment subsequently flipped the business in less than 2 years to a major European utility. Texas oil money makes good in renewables? No wonder Texas has passed California in wind energy generation. Perhaps we are finally entering a new era of maturity in renewables.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.

Labels: alternative energy, cleantech, Cleantech Blog, climate change, electric utilities, energy, green tech, greentech, renewable energy, wind, wind energy

Wednesday, January 24, 2007

What has Changed in the Alternative Energy Investment Landscape

Is the time right to invest in alternative energy? We’ve seen a lot of this before in the 1970s and 1980s. Solar and biomass hot, big regulatory pushes, and then companies and investors lost a lot of money when things changed. We’re still a bit skeptical. We’re also all about not getting pulled in to each and every overpriced hype (read, the ethanol race) – but fundamentals are fundamentals. And they’re hard to ignore and pretty darn impressive. We think the real question today is not “are alternatives a good investment?”, but “which ones have legs and make a good investment bet?”

In four words – broad-based critical mass – Unlike alternative energy of yesteryear, this alternative energy explosion has been slowly building for 10 to 15 years, and is reaching critical mass in multiple markets. Take a couple of examples – the solar market is on pace for a $20 Billion per year number globally within 3 years (SolarBuzz.com), across several major jurisdictions (in the 1980s we were talking less than 5% of that). World ethanol production is on the order of $12 Billion/year. In the US wind capacity production has growing at 25%+ per year for the last 2 years wind generation capacity additions have been second only to gas-fired generation adds in the US mix.

“It’s the global economy, stupid” - Don’t forget, this is global now, and it wasn’t really like that 25 years ago. The US pioneered solar photovoltaics, but Japan and Germany (with China catching up) are the biggest markets today. The US pioneered large scale wind power (remember Altamont Pass?), but 3 of the top 4 wind turbine companies today are European. The US engineered cap and trade in carbon, but Kyoto is a European driven engine. Lots of examples of why it’s not just us anymore. For an investor worried about the legs of the industry, that’s a really big point.

In two words – cost structure – alternative energy is still more expensive than conventional energy - that’s why we call it “alternative”. But the cost curves for each and every alternative energy source have fundamentally changed for the better over the last 10 years (NREL), are moving into striking distance, and continue to improve. This trend is not going to reverse, so it’s just a matter of time.

In three words – carbon, carbon, carbon - The carbon credit trading market, driven by Kyoto protocol was $21.5 Billion in the first 3 quarters of last year (World Bank and IETA) - that’s up from virtually zero three years ago. Now we’re talking real numbers. The US has been left out of this so far, but not for long. California is committed, the Democrats are in control of Congress, and we will likely be seeing a strengthening of some sort of cap and trade system before long.

The bottom line – alternative energy is cool and the consumer cares. Of all this activity, it’s really high gas and electricity prices and climate change that have put alternative energy on the map in the consumers minds. And they care. And they vote. And they blog. And they are buying hybrids, uneconomic hybrids, lots of them. And as the battery technology continues to advance (think lithium ion overtaking nickel metal hydride), they’ll start buying HEVs and Plug-in HEVs in massive quantities. And they are buying green power. And little pieces of paper certifying their green power. In enough quantities for Toyota and Walmart and GE and Google to brand green as part of their core strategies. How’s all that for impact?

And finally, the regulations are here. Don’t kid yourself, alternative energy has ALWAYS been a regulatory driven market. But now the regulations are pretty widespread. Take electric power, for example – it’s not just the federal production tax credit anymore, or just the solar tax credit, or the state solar subsidy programs - 23 US states now have Renewable Portfolio Standards for electricity production (Pew Center) , including Texas, California, Pennsylvania, Arizona, Illinois, etc. That’s up from 1 in 1991. Put another way, if you could swing the electoral votes from just the RPS states, you’d have a landslide presidential victory.

Yes, it’s still possible that if oil and gas prices prices fall back to 1990s levels (we expect them to pull back somewhat, but are scared to make a precise prediction) and we have 5 or 6 normal, cool winters that make the climate change debate disintegrate, then a new political wave will come in (in 30 different western countries), and each and every major alternative energy regulatory program along with all the consumer demand will collapse – in a dozen major nations worldwide. But as the saying goes, that ain’t the way to bet it.

Author Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is the founding contributor of Cleantech Blog, and a Contributing Editor to AltEnergyStocks.com.

Labels: alternative energy, carbon, cleantech, Cleantech Blog, energy, ethanol, green tech, greentech, renewable energy, solar, wind