Sober Words from DOE

by Richard T. Stuebi

At the recent Western Energy Summit, Dr. Steven Koonin (Undersecretary of Science at the U.S. Department of Energy) made a speech with some eye-opening tid-bits. In this review on GreenTechMedia, Koonin is quoted as saying about the daunting challenges in moving away from fossil fuels:

“We have limited time and limited resources….We cannot let 1,000 flowers bloom indiscriminately.”

“The deployment of inefficient feel-good resources is doubly-bad” because they give the illusion of progress and divert scarce resources.

Coal “is not going to disappear anytime soon,” so much more effort needs to be put into carbon capture and storage technologies.

“If the world wants to seriously address emissions, nuclear will almost certainly have to be part of the future.”

Most interestingly, as reported by the August 3rd issue of the Peak Oil Review, Koonin is said to have opined in his speech that “resource constraints soon will force the Department of Energy to narrow its focus onto the most promising technologies.” If true, this is worrisome because (1) it possibly implies that the DOE isn’t necessarily expecting any major increases in R&D funding — and our national energy R&D budgets are considered by many to be pretty darn low in light of the challenges we face (see, for instance, this report by the Government Accounting Office), and (2) it suggests that DOE will increasingly start picking “winners and losers” — and the public sector is not known for being good at making such judgments.

If anyone can find Koonin’s speech text in full, I’d appreciate getting a copy.

Richard T. Stuebi is the Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Effective September 1, he will also become Managing Director of Early Stage Partners.

My Year as NREL’s Entrepreneur in Residence

by Joel Serface

I just spent an amazing year at the National Renewable Energy Laboratory (NREL), but have no start-ups to show for it (yet).

A year ago, I was asked by
Kleiner Perkins to be the first Entrepreneur in Residence (EIR) at NREL. As a person who has been into energy and environmental technologies since gradeschool and as an early cleantech investor, it was an opportunity of a lifetime to become the first NREL EIR. It was a fantastic time spent with some of the best cleantech researchers in the world. I felt like a kid in a candy store. I tremendously added to my depth and breadth of cleantech history and knowledge.

The program itself was a grand experiment that I commend the Department of Energy for attempting. DOE’s calculus was that if they inserted a serial entrepreneur/investor backed by a brand-named VC firm into a lab that magic would happen and that an innovation would turn immediately into a company. At worst, DOE would learn a lot about what it and its labs need to do better to in order to accelerate ideas to market.

In the 11 months that I had the privilege to work inside NREL, I met with more than 300 researchers, identified around 30 promising technologies that I thought could reach commercial potential over the next several years, and honed in on 3 technologies that showed imminent promise. Unfortunately, the EIR program was timed too short to reach its full potential and to get the first one of these ideas set up as a company.

When building a new program into a research institution, timing is critically important. Based on my experience running the
Austin Clean Energy Incubator at The University of Texas, it took almost 11 months to start my first company. In 18 months, I had helped start 5 companies. In total, these companies raised more than $200 million, but none surpassed KP’s investment hurdle.

When I agreed to become NREL’s EIR, I set the expectation with DOE, NREL, and KP that starting a company that KP would back within one year should not be expected. While there are a tremendous number of opportunities for commercialization at NREL, they need to temporally match a VC firm’s thesis, meet its perceived portfolio needs, or surpass its hurdle for innovation. Given enough time, many of the 30 technologies described above could be built into companies, but not necessarily into ones KP would fund over the period of the EIR Program.

A more reasonable expectation for all was to use this program to begin developing long-term relationships with VCs and start-ups that helped the lab and DOE develop better tools and processes. If successful, this could help NREL deliver more companies or successful collaborations for the entire industry. With this approach in mind, there were many things learned by all parties that could benefit the entire venture capital and start-up industry. Here is what I learned…

First, NREL truly is “The National Renewable Energy Lab”. There is more breadth and depth of renewable energy and energy efficiency knowledge at NREL than any other institution on the planet. This alone is worth the price of admission. Unfortunately, the admission price has never been posted and there have only been secret alley entrances with secured doors to gain access to the lab. The lesson here is that new interfaces need to be developed by the lab to better expose its collective knowledge and translate it to the marketplace more effectively (thus EIR and other programs).

Second, the value in NREL is not just in its innovation, but more importantly in the value it can deliver across the life cycle of a technology…

  • Innovation – Yes, NREL has a great pool of researchers and ideas. They also have a network of other labs and universities they collaborate with (MIT, Stanford, University of Colorado, etc.). They will also soon be the hub of all DOE renewable energy intellectual property by managing DOE’s IP Portal.
  • Acceleration – NREL’s experience allows them to solve critical issues for external technologies and companies. Success stories abound from NREL helping First Solar, Uni-Solar, Clipper Wind, and many others. Identifying new ways to open up NREL to solve critical issues in start-ups is critical to the VC industry.
  • Analysis – NREL has a large division that does market, techno-economic, scaling, integration, policy, and plant design analysis. This primarily is developed for DOE and Congress (which really does not take advantage of this tremendous asset), but needs to be exposed to the financial services and venture capital sectors. I would encourage any thesis-driven VC firm or investment bank to review the work that has already been delivered by NREL.
  • Testing / Validation – NREL provides the service of testing all flavors or renewable energy, storage, transportation, building, and energy efficiency technologies. They even integrate multiple technologies as systems and perform accelerated testing. NREL’s validation not only helps get products designed into projects, it also provides critical feedback for future development.
  • Deployment – NREL has a cities and states program that helps advise on local policies, design parameters, and integrated solutions. NREL will increasingly be involved in regional test and implementation centers that will help scale technologies into cities and integrated pilot facilities.

Finally, NREL will only get better; now is the time to begin forging long-term relationships with them. With additional funding, increased DOE support, stronger linkage to national priorities, and new management focused on commercialization and market needs, NREL will deliver increasing value to the cleantech community. By becoming more intertwined with our imminent national priorities and community needs, the lab will increase its “NRELevance” in our nation’s day-to-day existence.

So, what next’s next for the NREL EIR? Over the short run, I will help deliver a national energy efficiency initiative focused on schools with the help of NREL. I will also continue supporting NREL as an entrepreneur/investor and as an advocate of the lab’s potential. I will also continue nurturing the many wonderful relationships I began forging through this program. And, yes, there will be start-ups forthcoming, unfortunately not within the short period of the EIR Program.

Thanks again to DOE, NREL, and KP for inviting me into this unique and invaluable experience. I hope that my time at NREL has made a difference there. If NREL is successful with its new management team and tools, then the entire cleantech community and nation will benefit.

Joel Serface served as NREL’s first Entrepreneur in Residence with Kleiner Perkins Caufield & Byers. As an investor and entrepreneur, Joel has planted cleantech seeds in Massachusetts, California, Texas, and now Colorado. Since 2000, Joel has started or invested into more than 20 cleantech companies with 5 liquidity events so far and has catalyzed the formation of numerous supporting cleantech institutions and regional and national policy initiatives.

FutureGen Stalled?

FutureGen is the major US Department of Energy backed effort to pilot a technological solution to prove that carbon capture and sequestration from coal fired power plants is possible. At a slated price tag of $1.5 Billion ($1 Bil estimated originally, now estimated at $1.8 Billion), it is one heck of a science project – but one that sorely needs to be done.

Now that project appears to have hit a snag. While the site the consortium picked to build the project was selected in December as Mattoon, Illinois, after a short delay in responding, the DOE is now hesitating to give formal approval – their Record of Decision.

The CEO of the FutureGen Alliance, Michael Mudd, seems confused as to why, though cost overruns, disagreements about the scope and technological objectives, and objections to moving to fast for good practice have been suggested.

After thinking about it this morning, I had a few initial reflections:

  1. We are a nation of massive coal reserves and 50% of our power comes from coal generation. Investing in clean coal technology should definitely be a prime DOE objective. let’s keep our comparative advantage in energy.
  2. While CCS is likely to be an expensive way to abate greenhouse gases, if we are going to solve the global warming problem, we are going to need help from everything and the kitchen sink. Pilots exactly like this need to be tried.
  3. At the kind of price tag and scale up risk we are talking about with CCS, government research support and funding is vital.
  4. On a practical level, the Department of Energy is 74% of this project. I really do not understand why there should be any miscommunication. He who writes the checks makes the call. If they have real concerns over cost overruns, technology, or management, make the changes and get going.

There, I said it. Now let’s just get it done, people.

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, Chairs, and a blogger for the CNET Cleantech Blog.