The Networked Electric Vehicle

EV Solar  Charging Station Electric Vehicle and Smart Grid Networks

Thousands of electric cars are now communicating with owner’s smart phones, charging stations, and service networks. These EVs are plugging into smart grids that use network communications to charge off-peak, monitor and improve reliablity.

When I use my Blink EVSE to charge my Nissan Leaf, the charger sends a packet of info to the charging network every 15 minutes using Sprint. The charger is communications-ready supporting CDMA, Wi-Fi, and powerline communications (PLC). With the Nissan LEAF app on my Droid I can remotely monitor charging, or pre-heat or pre-cool the car while still plugged-in, saving battery range. My Droid uses Verizon.

While driving, the LEAF’s navigation system uses GPS. If I want to listen to Pandora, my smartphone communicates with the LEAF via Bluetooth. When I park at a ChargePoint for public charging, the Coulomb ChargePoint uses RF to talk with my member smartcard. When charging, the ChargePoint uses various wireless carriers in different countries with protocols such as GPRS and CDMA. The charger even sends me a text when charging is completed or if someone disconnects my car.

Smart Grid Uses Wireless and Mesh Networks

A DOE study identified how we can charge 170 million electric cars in the U.S. before needing to add generation such as renewables, natural gas, nuclear, or coal. Charging needs to be done off-peak. With smart charging communications that is easy to do. I have preset charging my LEAF off peak. When I connect the charger, no electrons flow until the nighttime hour is reached. State utility regulators need to allow utilities A low rate for off-peak charging and higher for on-peak charging and electricity use. No benefits occur until utilities upgrade their old one-way grid communications to two-way smart grid.

As utilities install smart meters, such time of use (TOU) pricing and demand response become realities. Beyond what is visible to their customers, electric utilities are becoming more reliable and efficient with smart grid technology that communicates: advanced meters, smart transformers, sensors, distribution automation, and intelligent energy management.

When I charge and use electricity at home, my PG&E utility smart meter uses RF mesh technology to route the data along with sensor data so that they can manage the grid, collect billing information, and allow me to view home use through an internet browser.

As wireless carriers lower their rates to compete with mesh networks, other utilities take different approaches. Texas utility TNMP is including a CDMA modem in all of the 241,000 smart meters that it is installing.

Transformers and distributed automation are smarter so that sudden changes in load can be better managed and an outage in one location does not take down the neighborhood. SDG&E is charging thousands of electric vehicles with a smart grid.

SDG&E is installing smart transformers and distributed automation that more quickly isolates and handles problems. These devices communicate with centralized GIS and IT applications that keep everything running.

Duke Energy’s David Masters writes, “Duke Energy defines the digital grid as an end-to-end energy Internet powered by two-way digital technology. It is comprised of an Internet Protocol (IP) based, open standards communication network that allows for automation and the exchange of near real-time information as well as enabling the adoption of new technologies as they become available. Duke Energy’s digital grid will have more efficient and reliable transmission and distribution systems; it will leverage energy efficiency programs to reduce wasted energy; it will integrate more distributed energy resources into our grid and decrease carbon emissions.” Duke Energy is co-locating 3G and 4G cellular communication nodes with transformers. These WAN nodes communicate with RF and PLC to smart meters, charging stations, demand response appliances, street light systems, grid sensors and capacitor banks.

EPB, Chattanooga, Tennessee, not only delivers electricity to the home, it delivers broadband fiber optics for fast internet access and streaming video. While most utilities are slowly deploying smart grid, starting with smart meters, EPB installs a broadband router in the home with far more capability than a meter.

Our use of energy will get smarter as utilities fully-deploy smart grids and regulators encourage them share more information. For example, automakers are already demonstrating smart apps so that owners could program preferred charging to occur when high-levels of renewable energy is delivered to the grid, such as wind blowing at night. Smart apps and RE price incentives would encourage the growth of clean and safe energy.

Instead of firing-up dirty peaker plants on hot afternoons when air conditioning is blasting, a smart grid could draw power from utility fleets that are glad to sell power at premium rates. Vehicle-to-grid (V2G) has been successfully tested. V2G is part of our future.

On October 20, utility and automotive executives will attend GTM and Greentech Media’s The Networked EV Conference  to review the details of the convergence of electric vehicles and smart grids. GTM has published a new research report – The Smart Utility Enterprise 2011-2015: IT Systems Architecture, Cyber Security and Market Forecast

The ongoing deployment of smart grid infrastructure (i.e., smart meters and distribution automation) in the U.S. is prompting utility strategists to re-evaluate their organizations’ back-end enterprise architectures in order to enable next-gen utility business and operational services, such as dynamic pricing, grid optimization, self-healing grids and renewables integration. Utilities are just now beginning to understand the implications of outfitting their dated enterprise architectures with current information (IT) and operations (OT) technologies required to offer next-gen smart grid applications.

It will take years for most utilities to deploy smart grids. The cost will be in the billions. The savings will be in the trillions as drivers use less foreign oil and as level demand and energy efficiency replace the need for new coal and nuclear power plants.

Growth is strong for electric vehicles, renewable energy, and smart grid. The growth of one benefits the other. With smart communications, we are enjoying efficient transportation, energy independence, and clean air.

Johnson Controls SAFT Lithium Batteries

By John Addison (10/12/10)

AT&T (T), Xcel Energy (XEL), Johnson Controls (JCI), Southern California Edison (SCE), and New York Power Authority have all ordered Ford Transit Connect Electric. These pure battery-electric vans have an electric charge range of 80 miles and are a great fit for many fleet, small business, and delivery applications. Although Nissan and Chevrolet are the center of EV attention, fleets are the early adapters of new vehicles.

In the United States, fleets control some 14 million vehicles. Some fleets placed initial orders for 10 or 20 Transit Connect Electrics; bigger orders could follow in 2011. JCI has ordered 20 Transit Connect Electrics to be part of its global fleet of 19,000 vehicles.

At the heart of these compact Ford electric vans are 28 kWh lithium battery packs made by a joint venture of SAFT and Johnson Controls, #1 maker of automotive batteries, a tier 1 auto supplier, and leader in building efficiency. The other day, I interviewed Mary Ann Wright, Vice President of Global Technology and Innovation Accelerator for Johnson Controls, to better understand the future of electric vehicles and advanced batteries. Johnson Controls is one of the 100 largest corporations in the U.S., with over 60,000 employees.

Partnerships are critical to success in electric vehicles. As the world’s largest manufacturer of lead-acid batteries, Johnson Controls (JCI) works closely with its material suppliers. To accelerate development of lithium batteries, R&D and manufacturing is a joint venture of Johnson Controls – SAFT (JCS).

For speed to market, Ford has partnered with Azure Dynamics (AZD), who integrates their drive system and the Johnson Controls – SAFT (JCS) lithium batteries into the Transit Connect chassis, which is also available in gasoline and CNG versions. My test drive of the Ford Transit Connect Electric demonstrated that it is practical for many fleet applications. JCI owns over 3% of AZD.

Since 2007, Ford and Johnson Controls have worked with leading electric utilities and EPRI. In 2007, Ford announced a partnership with Southern California Edison, the electric utility with the nation’s largest and most advanced electric vehicle fleet. The partnership is designed to explore ways to make plug-in hybrids more accessible to consumers, reduce petroleum-related emissions and understand issues related to connectivity between vehicles and the electric grid. For the 3-year study, Ford Escape Plug-in Hybrids have been heavily used. It will not be until 2012, that consumers can order plug-in hybrids from Ford.

Vice President Wright told me that driving lithium battery packs down in price from industry numbers like today’s $700/kWh to a future of $200/kWh would price electric car on par with cars powered with internal combustion engines. Progress is being made at every level. Manufacturing volume will be a key driver.

The drive for cost reduction will greatly benefit consumers and fleets; cost reduction initiatives will be a mixed blessing for battery suppliers. Last year, Ford had announced that JCS would supply the lithium batteries for its 2012 Plug-in Hybrid which Clean Fleet Report forecasts will be a new Ford Focus PHEV. Now JCS will not be the supplier. Ford has decided to make its own battery packs, and have different manufacturers compete to supply the cells. JCS is the winner for the Transit Connect Electric; LG Chem’s Compact Power is the winner for the Ford Focus Electric; competition has been intense for the PHEV. It appears that Ford has selected the PHEV cell supplier, but has not yet made the announcement.

In this decade, Nancy Gioia, Director Ford Global Electrification, told me that she would like to see Ford reach $250/kWh and have hybrid and electric vehicles represent 10 to 25% of total Ford sales. Ford is making no guarantees for such an ambitious program. Ford lithium cell providers are dealing with a tough customer that could deliver high volumes and continuous improvement.

For $28 billion Johnson Controls, Ford is an important customer, but only one customer. BMW and Mercedes are already using JCS lithium batteries in hybrids. In this decade, JCI sees the biggest opportunity in advanced start-stop, mild, and full hybrid vehicles; with pure battery-electrics being a smaller opportunity. By 2025, Ms. Wright only forecasts 3% of cars being full hybrid and electric.

Look inside a hybrid car and you will see two types of batteries: advanced nickel metal or lithium batteries for the electric motor and a 12V lead-acid battery for the auxiliaries. Lead-acid batteries will continue to be used in hundreds of millions of vehicles including hybrid and those with only an ICE. Johnson Controls continues to advance lead-acid batteries with new VARTA Start-Stop technology. These new batteries are optimal for the micro hybrids now on the road in Europe in over a million cars and coming to the USA. Turning off an engine reduces fuel consumption up to 12% when a vehicle is stationary, such as red lights and rush-hour gridlock. BMW was first to use the micro hybrid approach, now Volkswagen, Audi and others are including start-stop in some models.

When I toured Johnson Controls in Milwaukee, Wisconsin, last year, advancements in both lead-acid and lithium batteries were conspicuous. JCI told me that 98% of the materials in both battery technologies are recycled. As a world leader in energy efficient buildings, Johnson Controls will have the opportunity to repurpose lithium batteries in stationary applications before materials recycling.

Improved battery technology will continue to enable vehicles to use less fuel per mile, show us bluer skies with less air pollution, and reduce our current 97% dependency on petroleum as the only way to fuel a car.

By John Addison, Publisher of the Clean Fleet Report and conference speaker. The author has no position in the stocks mentioned in this article.

Will Google Charge your Electric Cars?

By John Addison – original article at Clean Fleet Report

Google Energy could be a Smart Charging and V2G Provider

Google finally won approval from Federal Energy Regulatory Commission (FERC) to be an electric utility. Now that they are making billions delivering web ads, do they want to make added billions selling electricity? Quite possibly. Google already offers a smart meter app that allows smart grid customers to manage their home electricity use. With their new approval to be a utility, Google could be a smart grid / smart charge service provider.

Auto makers and utilities have already agreed on smart charging standards that allow you to plug-in using a J1772 connection, but not have charging start immediately. A service provider is needed to look at your preferences, take action, and provide information. Your preference might be to not charge until 9 p.m. when rates fall to a fraction of peak electricity demand hours. You might want to receive a text message when your charging is complete. You might want Google Maps to show you the nearest public charging stations that are available and display their cost per kilowatt hour. It looks like a natural for companies like Google. They story gets better in the year’s ahead when cars are V2G enabled.

Electric car sales will get a boost when the utility meter spins backward and customers make money by plugging-in. University of Delaware, AutoPort, and partners are planning to put 100 electric cars on the road in the next 18 months that will plug-in and sell power back to the utility using vehicle-to-grid (v2G) technology. AutoPort plans to secure local fleets that fund conversion of their vehicles. The University of Delaware currently has six Scion eBoxs, converted by AC Propulsion, to be electric cars with V2G.

I just got to hear from the V2G experts while I attend the American Association for Advancing Science (AAAS) Conference. I am posting this report from the conference.

A solar home might have 3 to 5 kW of solar PV. An electric car might have 24 kWh stored in its lithium batteries. Vehicles can be charged at night when excess wind and other forms of electricity are generated. The electricity can be sold back at premium rates during peak hours.
By the end of the decade, some electric cars will be less expensive to purchase than gasoline powered cars; most will be much cheaper to fuel. Monthly electric utility bills will be small for some; others will get paid to plug-in. The concept is not new. Solar power grew rapidly whenever feed-in tariffs created an incentive by having utilities purchase power from homes and businesses.

V2G will initially be promoted by agile businesses that can make things happen much faster than cautious utilities or automakers. When V2G becomes a billion dollar business, look for hundreds of players including auto makers and utilities.

The V2G cars in Delaware will get Big Bucks to sell electricity back to the grid. Electric utilities are becoming desperate for stored energy. Utilities are willing to pay serious money for some contracted delivery of electricity. Dr. Jasna Tomic of CALSTART reports that utilities will pay $15 to 55 MWh for electricity supplied for frequency regulation, but the utility does not want to deal with 100,000 car drivers. The utility wants one aggregator in the middle to provide the power. This could eventually be a billion dollar opportuntity for a Google, GE, IBM, EnerNOC, Better Place, or a new start-up.

Spinning reserves is another major opportunity. If a GW coal or nuclear plant goes down, a utility needs to find a new GW of power online in ten minutes. If you are an energy aggregator who can guarantee that GW 24/7 year-round you can make money every day of the year, even if reserves are rarely needed. A utility might pay $20 MWh for spinning reserves.

Ken Huber, Manager Advanced Technology for PJM, an independent systems operator (ISO) PJM, told me that they had 30 incidents last year that required the use of spinning reserves. On average, the reserves were only needed for about ten minutes. PJM is an energy wholesaler with over 550 member companies that serve 51 million people services in 13 states. On a typical day they are providing 100 GW of electricity. They can handle a 144 GW peak load.

These premium ancillary services can cost-justify early adoption of V2G. A decade from now, less valuable peak and base-load delivery of electricity from electric car batteries may add to the economic value of V2G.

Utilities and their air quality regulators would like to get rid of dirty peaker plants that may only be fired up a few hundred hours per year, when temperatures soar and air conditioning blasts cold air. Dr. Tomic estimates a peak power value of 5 to 80 cents per kWh. For those afternoon peak hours, utilities might offer 2 to10 cents per kWh.

100 V2G cars in Delaware is only a beginning. Fleets will be early adopters of V2G. In the United States, fleets currently have over 20,000 light-electric vehicles in operation. These same fleets will be candidates for new freeway-speed electric vehicles with V2G. Early adopters will include other universities, corporate leaders, and government organizations. The U.S. Post Office, if it secures funding support, may convert part of its 220,000 fleet to electric delivery vehicles with V2G. Utilities with thousands of cars and heavy-duty trucks are perfect candidates for early adoption of V2G.

A New Breed of Energy Service Providers

Electric cars, smart grids, and needed grid available storage will attract a agile innovators, many with deep pockets. Ken Huber of PJM identified a number of potential aggregators that include energy storage providers such as CAES which currently provides PJM with one MW of lithium-ion battery storage; smart grid providers such as IBM, Microsoft, Google, and Cisco; vehicle service providers such as GM OnStar, Grid Point, and Better Place; and demand-response providers such as Comverge and EnerNOC.

Some energy providers will fight to be first to market with smart charging and V2G services. Others will be fast followers. Most utilities will leave the investments of capital and creating new business models to others. Some innovative utilities may directly offer their own V2G services – Duke, Edison, Sempra, Austin Energy, and Xcel come to mind. Electric car customers will benefit from the convenience, smart charging cost savings, and ability to make money with V2G.
The Grid is Ready for Millions of Electric Cars

“Electricity is the new vehicle fuel,” explains Dr. Will Kempton, Director, Center for Carbon-free Power Integration, University of Delaware. He is confident that the U.S. electric grid can support millions of electric cars that are likely to be added in the next decades. He observes that the U.S. total grid load is about 417 GW. If all U.S. cars will converted to V2G plug-ins with an average of 15 kWh per vehicle, they would provide 2,865 GW. A U.S. fleet of electric vehicles could provide 7X entire electricity needed in U.S.

The average U.S. car is parked 23 hours per day. If most charge off-peak and only 20 percent are available for V2G at any given time, V2G will be a major contributor in energy security and more affordable electricity. A brighter future will be created by early adopters of electric vehicles, utilities with renewable energy portfolios, and a new breed of smart grid and V2G service providers.

John Addison publishes the Clean Fleet Report and speaks at conferences. He is the author of the new book – Save Gas, Save the Planet – now selling at Amazon and other booksellers.

PG&E to Smart Charge 219,000 Electric Vehicles

By John Addison (originally published in the Clean Fleet Report)

By 2020, 219,000 customers of PG&E (NYSE: PCG) may say goodbye to those trips to the gas station. No more spinning dials at the pump – $20.00, $40.00, $80.00, etc. Instead drivers will conveniently plug-in their electric cars at home or work. The fill-up will be electrons, not gasoline.

Across the country, electric utilities are preparing to offer smart charging boxes for the garage and charging stations for work and downtown locations. For a fraction of gasoline cost, you will be able to charge plug-in vehicles.

Pacific Gas and Electric (PG&E), for example, is a utility that is planning to service between 219,000 and 845,000 battery electric cars and plug-in hybrids by 2020, under three different planning scenarios presented at Greentech’s The Networked Grid Conference. PG&E currently provides electricity to 5 million customers, including a few thousand that currently drive electric cars. Currently, most of these electric cars are 25-mile per hour neighborhood vehicles that are popular in college and university towns. A few hundred can zoom past you on a freeway, such as the Tesla Roadster.

This year, Newsweek ranked PG&E as the greenest utility in the country due to its strong commitment to customer energy efficiency programs and renewable energy (RE) programs. PG&E serves 15 million people in northern and central California with 123,054 miles electric distribution lines needed to cover 70,000 square miles of its service area. Natural gas is 46 percent of PG&E’s source for electricity, nuclear 20 percent, hydro 16 percent, and out-of-state coal only 2 percent.

Renewable Energy > Coal + Natural Gas by 2020

Renewable energy is 14 percent of PG&E’s total delivered electricity today. It will miss its legal requirement to be at 20 percent by the end of 2010 due to NIMBY roadblocks to large solar thermal plants in the desert. PG&E needs approvals to install the high-voltage lines necessary to bring utility-scale RE to PG&E customers, thereby adding to its current 18,610 circuit miles of interconnected transmission lines.

Hal LaFlash, PG&E Director of Emerging Clean Technologies, outlined how the utility will have 34.8 TWh of RE in 2010 and 77.6TWh of RE in 2020, the year when California utilities must generate 33 percent of their electricity from RE. By 2020, renewable energy may be the utility’s #1 source of energy. The RE mix will be (1) solar thermal, (2) photovoltaics, (3) wind, (4) geothermal, with bioenergy and ocean adding to the total.

With terawatts of nighttime wind power, PG&E may have more electricity at night than it needs. One million electric vehicles could easily be supported provided that they charge off-peak, preferably at night. Smart charging allows customers to plug-in; yet not have charging begin until a preferred time, such as when excess electricity is available to the grid. PG&E hopes to secure regulatory approval for time-of-use pricing so that customers have an incentive to charge at night.

Utility executives worry that people will charge whenever they feel like it. Since charging an electric car is like powering an entire home, the concern is valid. People are still buying gas guzzlers as pump prices rise, so they many may ignore price incentives to charge at night. So far, early customers of plug-in vehicles have been environmentally concerned, and have shown a preference for charging with renewables including their own solar rooftops. Automakers, utilities, and regulators are working to make it easy for new electric car customers to select night time and even renewable energy charging through web browsers, smart phones, and even vehicle dash displays.

Smart Charging and Renewable Energy

Between the electric cars and renewable energy will be a smart grid. Every vehicle charging device will include a smart meter. PG&E is leading the nation with 1.6 million smart meters now installed. It is installing an average of 13,000 per day, and will have 10 million smart meters installed by 2012.

Andrew Tang, PG&E Senior Director of the Smart Energy Web, expects 35 different models of plug-in vehicles to be available within the next two years. PG&E actively meets with auto makers to make sure that smart charging networking is compatible and in place. Only some homes and communities are now ready with dedicated 240V/30A circuits for the 4-hour charging that electric car leaders, such as Nissan recommend.

Although smart charging provides for two-way communication, electricity will only be delivered one-way from the grid to the vehicle. Mr. Tang expressed skepticism about vehicle-to-grid (V2G) being cost-effective and acceptable to customers and automakers, even though PG&E has done V2G demonstrations within its own fleet, with Tesla, with Google, and elsewhere. PG&E is looking at MW grid storage alternatives such as pumped hydro and compressed air, such as the 300MW compressed air storage in Kern Country that PG&E has applied for a federal grant. Sulfur Sodium batteries that could scale to hundreds of MW were also presented at the conference.

Infrastructure issues may be greatest in communities that are now adopting hybrid cars at fast rates. For example, in Berkeley, 18 percent of new car sales are hybrids. As electric cars sell briskly in some communities, PG&E will likely need to upgrade substations to handle the increased distribution of electricity.

With the advanced planning outlined in PG&E’s presentations and with regulatory support for time-of-use pricing, renewable energy, and high-voltage lines, PG&E will be ready to power a new generation of vehicles for a fraction of the cost of gasoline. Increasingly, these electric cars will be powered by solar, wind, and other renewables.

By John Addison who publishes the Clean Fleet Report and speaks at conferences. He is the author of the new book – Save Gas, Save the Planet – now selling at Amazon and other booksellers.

Smart Grids and Electric Vehicles

By John Addison (1/28/08). In the future, utilities will pay you to plug-in your vehicle. Millions will plug-in their electric vehicles (EV), plug-in hybrids (PHEV) and fuel cell vehicles (FCV) at night when electricity is cheap, then plug-in during the day when energy is expensive and sell those extra electrons at a profit. Vehicle to Grid (V2G) technology is a bi-directional electric grid interface that allows a plug-in to take energy from the grid or put it back on the grid. V2G helps solve the major problem that demand for electricity is high during the day when everything from industrial plants to air conditioning is running full blast and then excess electricity is wasted at night.

Several early models of passenger vehicles have enough energy stored in advanced batteries to power several homes for hours. Hybrid electric buses and heavy trucks could power many homes or a school or a hospital in an emergency. Recent announcements demonstrate that electric utilities and some auto makers want to make V2G a reality.

The Smart Grid Consortium, established in December 2007 by Xcel Energy, will select a community of approximately 100,000 residents to become a Smart Grid City using V2G. Potential benefits include lower utility bills for residents, smarter energy management, better grid reliability, improved energy efficiency, and support for EVs and PHEVs.

Current consortium members include Accenture, Current Group, Schweitzer Engineering Laboratories and Ventyx. Smart Grid City will use a realtime high-speed two-way communication throughout the distribution grid. Smart meters and substations will be integral. Installation will be made of thousands of in-home control devices and the necessary systems to fully automate home energy use.

The current electrical grid is poorly designed for distributed generation of power. Individuals and businesses lose months and connect fees when they add solar and other forms of renewable energy to the grid. Smart Grid City will easily support up to 1,000 easily dispatched distributed generation technologies including PHEVs, distributed batteries, solar and wind.

In addition to Smart Grid City, another major EV/V2G initiative is unfolding.

The Renault-Nissan Alliance and Project Better Place have signed a Memorandum of Understanding to create a mass-market for electric vehicles in Israel which is an excellent target market: it has a sales tax exceeding 60% for gasoline vehicles, gasoline costs over $6 per gallon, most driving fits the range of electric vehicles, and the government strongly supports energy independence.

Project Better Place plans to deploy a massive network of battery charging spots. Driving range will no longer be an obstacle, because customers will be able to plug their cars into charging units in any of the 500,000 charging spots in Israel. An on-board computer system will indicate to the driver the remaining power supply and the nearest charging spot. Nissan, through its joint venture with NEC, has created a battery pack that meets the requirements of the electric vehicle and will produce it in mass volume. The entire framework will go through a series of tests starting this year.

The Israeli model is different than the rapid battery swap model that Better Place has promoted as better than “dangerous” fast charging. For the future, Renault is working on development of exchangeable batteries for continuous mobility.

As part of the solution framework, the Israeli government will provide tax incentives to customers, Renault will supply the electric vehicles, and Project Better Place will construct and operate an Electric Recharge Grid across the entire country. Electric vehicles will be available for customers in 2011.

Just as wireless service providers offer smartphones at discounted prices, Project Better Place will offer discounted electric vehicles with usage pricing plans. Pre-paid 600 kilometer cards are one approach that is suggested. A free car on a four-year plan in France is another idea mentioned by Shai Agassi, CEO of Project Better Place. Annual use of an EV should be less than the average cost of $8,000 per year for using a gasoline in many countries including the USA.

Shai Agassi predicts that Israel will have over 100,000 electric vehicles in use by 2010. This will be five percent of the nation’s vehicle population. The number represents a significant step towards energy independence.

Project Better Place has already received over $200 million of venture capital investment. Shai Agassi presented their new business model at Davos. Mr. Agassi was an executive at SAP that lead the software company to being the enterprise software leader ahead of Oracle, IBM, and all others. Agassi’s Davos Insights

Success with V2G would be a double win for electric utilities. Millions of EVs and PHEVs would expand the sale of electricity as an alternative to oil. Utilities could avoid building more dirty peaking power plants. Instead they could buy back electricity at peak hours from vehicle drivers. Clean Fleet Article It would be a financial win-win for all.

John Addison publishes the Clean Fleet Report with archives of over 60 articles and reports about electric vehicles, V2G, biofuels, fleet success and more.

What I Read on My Summer Vacation

by Richard T. Stuebi

In the spirit (though not the length) of a back-to-school book report, I dedicate this column to reviewing three energy-related books that I read in the last few weeks as the dog-days of summer wound to a conclusion.

Cape Wind

I first read Cape Wind by Wendy Williams and Robert Whitcomb, which profiles the eponymous offshore windfarm in Cape Cod, and provides a behind-the-scenes look at the mischief that has so far thoroughly stymied its progress.

The story makes just about everyone involved in the local, state and federal political arena look awful – petty, elitist, short-sighted, unprincipled. The list of bad guys is headed prominently by Senator Ted Kennedy (of course) and Governor Mitt Romney of Massachusetts, but less obviously also includes players such as Senator John Warner of Virginia and Congressman Don Young of Alaska. (Alaska! You are absolutely right to ask: “Why Alaska?”) The only person emerging from the story smelling like a rose is Cape Wind’s lead developer, Jim Gordon, who is portrayed as truly heroic.

The book reads quickly and well, and is getting good reviews, even from usually not-so-wind-friendly places like the Wall Street Journal. However, I am concerned that the book comes off a little too much like an in-house PR piece for the developer of the windfarm: I put the book down sincerely questioning the authors’ objectivity. The tale seems so one-sided, it’s hard to believe that it could be really accurate. If it is, our political system is in dire shape, and our prospects for good energy/environmental policy are dim.

The Grid

I most recently finished The Grid by Phillip F. Schewe, a very readable history of the electricity industry. This was the first text I have found that, in less than 300 pages, spans the mad-scientist inventors Edison and Westinghouse and Tesla, through less-known but equally pivotal industry giants such as holding company progenitor Samuel Insull and TVA legend David Lilienthal, into the turbulent days of Enron and deregulation.

The book does a particularly good job reconstructing the 1965 Northeast blackout (not much different from the 2003 version), touring the reader through massive nuclear (Indian Point) and fossil steam (Ravenswood) powerplants, and accompanying a distribution crew on a routine but not-to-be-taken-lightly line repair job in Idaho. Most interestingly, Schewe weaves in contemporary commentary and observations from social critic Lewis Mumford, whose writing excerpts offer an insightful countering perspective questioning the contribution of energy technology to the fundamental advancement of humanity.

The author’s writing style was not to my taste (for reasons that alas I can’t pinpoint), and I think the electricity industry still deserves a more gripping seminal treatment comparable to the gift Daniel Yergin gave us of the oil industry in The Prize, but until then, this will suffice pretty well.

The Long Emergency

In between, I read a thought-provoking but highly disturbing tome entitled The Long Emergency by James Howard Kunstler. Its premise is not unique: peak oil + climate change = end of the industrial era = return to pre-industrialism. Indeed, one of my recent posts covered this very topic.

However, Kunstler’s writing is incredibly powerful, with pithy snippets about every other line, and some of the directions he explores are truly distinctive. For instance, he argues that mankind’s one-shot exploitation of the non-renewable fossil energy inheritance is but a reflection of the entropy mechanism inherent to our universe (as described in the Second Law of Thermodynamics), and that escalating energy extraction/use only accelerates the rate at which our world winds down.

Kunstler is somewhat hopeful about the ability of the human species to adapt and survive, though not in its current social structures and industries/economies, and not at anywhere near current population levels. And, he is clearly pessimistic about the transition: basically, Kunstler doesn’t think there’s enough time or enough remaining energy to avoid cataclysmic change characterized by mass famine, economic depression, drought, migration, war, etc.

While I appreciate Kunstler’s wisdom and expansive disparate set of knowledge and insight, I’m not totally sold on some of his conclusions. As an example, as long as the amount of solar radiation provides more than enough energy to the Earth’s surface to supply all of mankind’s energy needs (with a few orders of magnitude to spare), I believe there ought to logically be a way to maintain a standard of living similar to what we have now – it will just cost more. I don’t think Kunstler has some of his facts straight, which always causes me to be a little shy about buying everything a writer tries to sell. For certain, Kunstler makes a lot of assertions that are not backed up solidly by facts, therefore exposing his arguments to question.

Unlike Kunstler, I’m somewhat optimistic that the combination of technological innovation and market forces (under a big assumption: that policy allows market forces to work, prices energy appropriately highly, and doesn’t provide incumbents huge protective barriers against the impact of innovation) can allow us to colonize a very attractive future. Kunstler doesn’t seem to incorporate an economic view in his thinking, whereas I believe energy prices with increasing scarcity and the resulting downward force in demand will ameliorate (though not eliminate) the pain of transition. However, I admit that it would require a huge allocation of global economic capacity towards the rapid implementation of a new energy paradigm to completely smooth the transition, and present markets with their pricing signals and investment incentives aren’t making that happen as urgently as it probably should.

Therefore, ultimately, I agree with Kunstler that the ending of the conventional energy age will be extremely painful for many constituencies, who are blindly accelerating into the wall with voracious consumption. I agree that exurbia lifestyles spreading across the U.S., especially across the southern half of our country, will someday be viewed as a cul-de-sac of history, burdening us with enormous social costs due to the massive infrastructure investments that will become untenable. I agree that life will tend to become more localized, less materialistic, simpler.

In summary, I tend to agree with Kunstler on the general direction and trajectory of our collective situation, but he and I do differ in degree regarding the likely pace and magnitude of the impending discontinuities.

All three of the above books get my “thumb’s up”, but if I had to recommend just one, it would be The Last Emergency. Read it and see. Or, actually, read it and think.

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.

De-Reg Do-Over

by Richard T. Stuebi

In the 1990’s, electricity deregulation was the next big thing. By separating generation and retailing from the natural monopoly wires businesses (transmission and distribution), competition could be spawned in wholesale and retail electricity markets, thereby unleashing long-repressed efficiencies and innovation in the production and sale of electricity products and services. Deregulation had previously produced major benefits in a number of other economic sectors, such as natural gas, telecommunications and airlines — why not electricity?

Seizing on such optimism, a number of states — including California, Texas, New York, Pennsylvania, Maryland, Illinois, Ohio — took significant steps to “deregulate” their electricity sectors. I use quotes because, in many of these cases, important regulatory constraints remained in place.

In theory, deregulation ought to have aided the emergence of clean technologies in the electricity sector. Alas, as a general statement, such promising hopes have not come to pass.

Of all the states that implemented deregulation, only Texas, arguably, has achieved some degree of success with their electricity deregulation initiative. For the other states, the results of deregulation have been generally disappointing: a lack of true competition, the potential for collusion, few new entrants, little innovation, and (most visibly) increasing energy prices.

Now, not all of the ails experienced in these states can be traced to bad deregulation. For instance, increasing natural gas prices caused by secular shifts in its supply-demand balance would have inevitably led to higher electricity prices in many states, deregulation or not.

Nevertheless, hindsight is always 20-20, and in the case of electricity deregulation, the failure of deregulation has become pretty clear: many of the approaches that were pursued to create competitive marketplaces were fundamentally flawed.

In the past several years, regulators in many states around the country have been busily working to clean up the messes produced by wayward deregulation efforts. California was the first to attempt electricity deregulation in 1998 — and was the first to try to “stuff the genie back into the bottle” in 2002.

Just a few weeks ago, Illinois has been the latest to reverse course, with a broad electricity reform legislation that combines an aggressive renewable portfolio standard, a significant commitment to energy efficiency, and the creation of a state-run energy procurement authority to obtain competitive generation prices and enable low-cost financing of new generation capacity.

Now the road show (some would say “circus”) associated with deregulation clean-up moves to Ohio.

Ohio passed its deregulation bill in 1999, and for various reasons, it failed to produce any meaningful competition among generation suppliers or among retailers. When natural gas prices soared in 2004, wholesale electricity prices in Ohio also went skyward — even though the costs of Ohio generation didn’t rise materially, given that virtually all generation in Ohio is coal (87%) or nuclear (12%) based — because the neighboring power markets in Pennsylvania and New Jersey are generally set by natural gas generation. In short, Ohio customers faced far-higher electricity prices, but no competitive options. Other than Ohio’s utilities, who now operated unregulated monopolies, everyone was highly dissatisfied with deregulation.

Band-aids in the form of “rate stabilization plans” were quickly applied a few years ago, but these plans expire at the end of 2008. Thus, Ohio needs to take another bite at the apple, now, in order to set its post-2008 electricity market rules and structures.

The Strickland Administration is due to release its comprehensive plan for electricity by the end of August. Although under tight wraps, this plan is said to include (among other things) an advanced energy portfolio standard that will create a market for new renewable energy projects in Ohio. Hopefully, the portfolio standard will include a section for increasing energy efficiency requirements as well. In the likelihood of a carbon-constrained world — and given Ohio’s (1) inefficient consumption infrastructure and (2) undiversified generation mix — a portfolio standard seems more than just prudent, but essential.

In the meanwhile, many other parties are offering their proposals for how to move forward. FirstEnergy (NYSE: FE) recently filed a proposal with the Public Utilities Commission of Ohio in which it proposes a rolling set of auctions to acquire a variety of tranches of generation, including renewable energy, to supply its retail customers.

In Ohio, it’s bound to be a busy autumn for electricity regulation. Stay tuned. And, in support of cleantech, keep your fingers crossed that Ohio finally gets a portfolio standard, which 25 other states already have. If Ohio moves promptly, it still has a chance of being 3rd quartile!

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.

Blogroll Review: Grid, Bubbles, and Lead

by Frank Ling

Going off the grid
180,000 American household must be onto something if they can live without the grid. Despite the costs of setting up your own distributed generation, Richard Perez, publisher of Home Power magazine, says that this number increases by one-third each year.

On this this week’s Energy Blog, Jim Fraser says:

“180,000 homes is a very small number when compared to the total population of the U.S., but by increasing by a third each year this could turn into a more significant number. Although expensive there are millions of people who could afford it. The significance to me is that we have the technology to do it and prices are going down. The trend should really accelerate after 2010 when solar power prices start to drop significantly.”

With cleantech hot right now, there is bound to be some irrational exuberance. Some analysts now believe that there will be not one, but two clean tech bubbles.

Martin LaMonica at says:

“The surge in clean technology investment has two areas–solar photovoltaics and biofuels–where there is over-investment on the part of venture capitalists, what many people would consider a bubble.”

In addition, Maurice Gunderson, co-founder of energy investment firm Nth Power, suggests that the best bets are on transformational technologies, most of which involve new materials. He is looking at more efficient photovoltaics for solar and technologies that will make ethanol plants obsolete for biofuels.

Green Processing
Not ony is Intel committed to lower the power requirements for their processing, they are now planning to remove all lead from their chips. Nevertheless, some observers believe there is a ways to go in making the PC manufacturing process environmentally friendly.

On this week’s EcoGeek website, Philip Proefrock says:

“Unfortunately, lead is not the most egregious of these chemicals, and the CPU chip is not the greatest source of contamination inside a PC case. Brominated fire retardants among other chemicals inside the case are more worrying to us than lead is.”

Unleaded chips are cool. Now how about high octane?

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.

Big Utilities vs. Big Oil

By John Addison (4/17/07) Question: What could be more American than healthy competition? Answer: Healthy competition that reduces our dependency on foreign oil. By 2010 you may be filling your “tank” by plugging-in to your electric and natural gas utility. Today fleets turn to utilities to power everything from light electric vehicles to heavy natural gas and hydrogen vehicles.

At the recent Alternative Fuels and Vehicles Institute (AVFi) National Conference, major utilities were there with exciting presentations and demonstrations. Major California utilities included Sempra Energy (SRE), Southern California Edison (EIX), and PG&E (PCG). Major automotive and truck manufacturers showed their latest alt-fuel vehicles. Globally there are over 30 million electric vehicles and over 5 million natural gas vehicles.

Vehicles give utilities added markets for electricity and natural gas, the opportunity to use excess off-peak electricity that is now wasted, and long-term opportunities to capture electricity from vehicles (V2G) when electricity is in peak demand.

Southern California Edison provides electricity to over 13 million customers. Edison’s Gordon Smith presented the ability for 70% of U.S. vehicles to be powered with off-peak electricity. Edison provides electricity to customers with thousands of electric vehicles, forklifts, sweepers, scrubbers, airport equipment, truck stop electrification, ship port electrification, and plug-in hybrids. Over 300 of Edison’s own fleet are electric vehicles. Some of its 240 Toyota RAV-4 EVs have achieved a life of up to 150,000 miles. Edison Programs

Running a utility requires large fleets including vans and trucks. Edison is aggressively testing hybrids and plug-in hybrids. SCE now is testing a DaimlerChrysler (DCX) plug-in hybrid-electric Sprinter vans with a 20 to 30-mile all-electric range through a partnership with the Electric Power Research Institute (EPRI), the South Coast Air Quality Management District and DaimlerChrysler.

SCE is partnering with EPRI, other utilities and Eaton Corporation (ETN) to establish a program for Class 5 plug-in hybrid troubleman trucks using the Ford (F) F550. They will offer the ability to drive in an all-electric mode, and to operate in a stationary mode (without idling). The electric mode is perfect for the hours that these trucks are used at work sites and when running hydraulic lifts. The electric mode eliminates emissions, fuel cost and noise.

SCE is also working with other fleet operators through the Hybrid Truck Users Forum to place prototype heavy-duty hybrid trucks in operation, with a goal of leading to production commitments and expanded purchases. Based on initial testing of the trucks at an independent facility, these vehicles are projected to cut air emissions by up to 50%, and use 40% to 60% less fuel, compared to similar diesel-powered trucks. These trucks are likely to become a standard Class 6 offering by International, using an Eaton hybrid drive system.

AVFi presented the “Industry Pioneer” award to the Southern California Gas Company, a Sempra utility. Sempra is the nation’s largest natural gas utility, serving 29 million customers. The Gas Company owns and operates a fleet of 1,100 natural gas vehicles. It operates 26 natural gas stations. It helped LAMTA create the world’s largest fleet of natural gas buses (over 2,200). LAMTA is also expanding into buses running on hydrogen blended with CNG and battery-electric buses.

PG&E provides electricity and natural gas to over 5 million customers in California. With revenues exceeding $12 billion, PG&E has an opportunity to increase revenues one billion dollars if there is a shift from vehicles with gasoline engines to vehicles using electric propulsion.

As part of its larger environmental leadership strategy, PG&E owns and operates a clean fuel fleet of electric and fuel cell vehicles, and more than 1,100 natural gas vehicles. PG&E’s clean fuel fleet consists of service and crew trucks, meter reader vehicles and pool cars that run either entirely on compressed natural gas or have bi-fuel capabilities. Over the last 15 years, PG&E’s clean fuel fleet has displaced over 2.7 million gallons of gasoline and diesel, and helped to avoid 5,000 tons of carbon dioxide from entering the atmosphere.

PG&E is actively field testing both battery electric vehicles (BEV) and plug-in hybrid vehicles (PHEV).

PG&E has ordered four Phoenix Motorcars ( all-electric sport utility trucks (SUTs) for June delivery. PG&E has given Phoenix a conditional order to buy 200. The Phoenix trucks have an impressive 130 mile range using Altair Nano (OTCBB: ALTI) batteries with their unique lithium titanate spinel oxide (LTO) electrode materials. Both Phoenix and Altair were on display at the AFVi Conference. Altair has claimed a breakthrough in several areas: specific power, battery life of over 10,000 charge cycles, “zero explosions and safety issues” test results, and fast charge capability. Altair Nano Batteries:

“PG&E is firmly committed to reducing our carbon foot print by using innovative alternative-fuel technologies,” said Bob Howard, PG&E vice president of gas transmission and distribution. “By adding the Phoenix Motorcars SUTs to our leading clean fuel fleet, we are taking an important step in developing a proven and necessary electric vehicle market. Electric vehicles provide a practical solution to help us reduce our dependency on petroleum-based fuels, keep California’s air clean, and meet the challenges associated with climate change.” PG&E News

Along with Edison, PG&E’s fleet was one of 14 in the country chosen to test the plug-in hybrid pilot project for a Ford F550 Super Duty Field Response Truck. PG&E currently has 350 Field Response Trucks on the road. PG&E, partnering with the Bay Area Air Quality Management District, also recently placed into service a prototype Plug-in Toyota Prius to demonstrate the benefits of light-duty plug-in hybrid vehicles.

PG&E owns and operates 34 compressed natural gas (CNG) fueling stations, through which they supply natural gas to more than 200 commercial and private fleets throughout the PG&E system. This includes transit districts, private refuse haulers, school districts, municipalities, air/seaports, and other miscellaneous operators including taxi, package delivery, military, and private fleets.

Construction of a hydrogen fueling station in San Carlos, California is also scheduled to begin this summer. Pacific Gas and Electric Company (PG&E) was awarded a California Air Resources Board (CARB) grant for the project. GTI will serve as a partner on the project, providing a mobile hydrogen unit (MHU) that uses GTI’s patented reformer technology. This self-contained unit will produce hydrogen from natural gas and condition it to serve the on-site dispenser during the development of a hydrogen fueling network in California. The hydrogen fueling station will be co-located with a publicly accessible compressed natural gas station to allow for 24/7 availability. Once sufficient demand is established, the MHU can be replaced with permanent facilities, and the unit can then be relocated.

The relationship between big oil and big utilities are complex. Oil refineries are among the world’s largest users of electricity. Oil companies are transforming into integrated energy providers that sell large quantities of natural gas to major utilities, making the utility a distribution channel for the natural gas producer. Some energy giants are expanding into wind, solar and other renewable energy.

Edison and BP have a joint venture to build a large scale electric plant that will not run on coal, not on nuclear, not on natural gas. The Carson plant will run on hydrogen and output 500 MW of electricity. By products will include enough hydrogen to inexpensively fuel thousands of vehicles in Southern California. Another byproduct will be CO2 that will be sequestered as part of increasing oil production. Hydrogen power plant details:

Edison also has an existing hydrogen fueling station in partnership with Chevron.

Currently, fleets are taking the lead with electric vehicles and plug-in hybrids that are developed by system integrators and specialty companies. DaimlerChrysler was at the AVFI conference with its 25 mph GEM. 40,000 have been sold. Rumors are flying that in 2008 Toyota (NYSE:TM) will begin fleet tests of its new plug-in hybrid using lithium batteries. Consumer sales may start in 2009. By 2010, Mitsubishi (MSBHY) will start selling an EV to consumers in Japan. Drivers will increasingly use electric power.

Today, utilities are powering vehicles with electricity, natural gas and hydrogen. In a few years, electric vehicles will also power homes with vehicle-to-home (V2H). Large batteries and fuel cells provide many times the electricity demand of a home. In a few more years, smart grids and intelligent power management will allow peak electricity demands to be met by utilities buying power from vehicles with vehicle-to-grid (V2G). U.C. Davis and PG&E have demonstrated V2H and V2G already.

Healthy competition is leading America to cleaner electricity and cleaner vehicles. Innovative utilities are taking an important role in the transition.

John Addison is the author of the upcoming book Save Gas, Save the Planet and publishes the Clean Fleet Report http:// This article is copyright John Addison with permission to publish or excerpt with attribution. John owns stock in ALTI.

$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.

Fuel Tech – Driving Profits by Cleaning up Coal

Fuel Tech (Nasdaq: FTEK) is one of the fast growing public greentech / cleantech companies focused on cleaning up dirty coal.

I have known John Norris, the CEO of Fuel Tech, and his family for years, and have had the pleasure of following his career for some time. He’s one of the many former nuclear engineers that grew up in the electric utility industry. He has held utility executive positions including CEO of Duke Engineering & Services, SVP and CEO of Duke Energy Global Asset Development, and Senior Vice President, Operations and Technical Services, at American Electric Power (AEP).

He took the reins at Fuel Tech early last (the stock promptly started climbing), and when I ran into him at a recent conference, filled me in on the goings on at this cleantech company that I not previously followed. I had a chance to chat with John for the record on Cleantech Blog about Fuel Tech in specific, and his thoughts on emissions technologies, carbon and greenhouse gases, and cleaning up electric utilities. I hope you enjoy.

You are relatively new to Fuel Tech, what compelled you to join the company?

I started with Fuel Tech as an Executive Consultant in April of 2005 to try to open doors with utility execs. When the Board approached me late that year about becoming the CEO, I thought about what I had seen over that last 8 months and really liked the prospects for growth. I have had the opportunity in the past to build high growth, highly profitable enterprises including one the most fun periods in my life in leading Duke Engineering & Services. This reminded me a lot of that experience, although I think Fuel Tech has even better prospects than DE&S had when I first got there.

What are the key drivers an investor should understand for the recent and continuing growth of the business?

There are several. On the Air Pollution Control (capital projects) side, investors should watch for market penetration of Ultra systems in the China/Pacific Rim market as well as a broader acceptance our all our NOx reduction technologies in the US market. They will be able to track this by watching for our announcements regarding contract wins. On the Fuel Chem (specialty chemical) side, the key driver is market acceptance by utility coal units. Again they can track this through our announcements.

And in short – what did cause the recent revenue growth?

I tend to credit the good looks of the CEO, but others do not necessarily support that conclusion. [Note to readers: John’s picture is on their website, so you can judge his conclusions for yourself!] — I think the real reason is that we have better defined our products and services and have recognized a much broader market for those services. We have a more focused R&D effort to bring solutions to client problems quickly. And it doesn’t hurt that customers are looking more earnestly for ways to reduce pollution and increase efficiency. All of these have come together for us in sort of a “perfect storm”. Still, we have to deliver results for our customers and for our investors.

Do you view Fuel Tech as part of the emerging cleantech investment theme?

Very much so, but also maybe with an important difference. Too often the greentech sector has, in my opinion, over-promised and under-delivered for clients and for investors. We aim to be a different breed in those regards.

If I understand correctly, Fuel Tech has long been a leader in post combustion pollutant reduction systems, and pre-combustion technologies are a newer business for you. Is this correct? What does the future hold? Where is the industry going?

Fuel Tech has long been a leader in post-combustion NOx control as you mention. Our Fuel Chem product line is really a combustion/post-combustion technology that helps reduce slag problems, dramatically reduce SO3 emissions (both in the boiler and across an SCR), and improve plant efficiency thus reducing CO2 emissions in the process. These latter two items have only recently (in the last few years) become important to customers. I think in the future clients will much more strongly focus on all these and other environmental and operational issues, both domestically and internationally.

Can you give us some color on the overall direction and key issues in the regulatory environment for these pollutants?

For all air pollutants the direction is towards dramatic reduction. You can sense that the whole world is looking to clean up the environment and they are not so much focused on CO2 but rather all the more serious pollutants (SOx, NOx and Hg especially).

You reported all time high international sales for 2006. How much of the business do you expect to be from overseas in the next 2 to 3 years? What has happened on that front? Has the growth been because it is a newer area of focus for the company, or because the overseas markets are growing? And how does China play into the company plan?

Our dramatic international revenue growth in 2006 really came from our projects in China. I expect China and the Pacific Rim to become a much larger part of our business going forward. China consumes more coal today than we do in the US and within a decade they will be using about 3 times the coal we use. The Chinese have now recognized the pollution issues of smog and acid-rain (from NOx and SOx emissions) and are working hard to do something about that. The upcoming Olympic games has heightened the sense of urgency to clean up the air and water. We have worked hard for a number of years to establish our credibility there and to demonstrate our technologies. In 2005 we won two major contracts to demonstrate our NOxOut SNCR and eventually our NOXOUT Cascade technologies and then earlier this year we won two major contracts to install our NOxOUT ULTRA urea to ammonia system on new plants who have the catalyst NOx control technology installed (SCR). Those wins position us well to really make this a major and growing part of our business going forward.

What about C02? In a Kyoto world, is Fuel Tech looking at C02 reduction, sequestration, or capture technologies? If so, what can you share about that?

Our Fuel Chem targeted injections can typically reduce CO2 emissions by 1 to 1.5% for coal utility plants, while dramatically reducing slag and SO3 operational issues and emissions. That may not sound like much but it very hard to make any significant CO2 reductions in plants and our reductions can be achieved while actually REDUCING plant costs. A 1.5% CO2 reduction for a 500 MW plant would be a reduction of about 8 tons/hr or about 65,000 tons per year of CO2 emissions. That is not insignificant and there is much interest in this in China and India especially where we can sell the emission reduction credits on the European Kyoto market (if done thru our Italian subsidiary).

A large portion of your business has been focused on cleaning up NOx or other pollutants at coal fired power plants. With low-carbon power likely to be a larger and larger portion of the global generation mix, what does this mean for the coal-fired pollution control sector?

While I strongly support the push for more renewable energy sources and a renewed push for nuclear power (I am a nuclear engineer as you know), the reality is that for our lifetimes and beyond fossil fuels will supply most of our energy needs. I think our company has a long and exciting future in making those energy sources cleaner and more efficient and thus making this planet a better place.

You announced not to long ago a series of company firsts, among others:

– Installation of a NOx Out Cascade System on a Coal fired boiler

– Commercial SNCR/RRI project

– SNCR lignite fired application

What does this actually mean for company?

We are looking with great haste and much effort for ways we can provide a much broader array of solutions for clients in pollution control, efficiency gains, and operations and maintenance cost reductions. We have a dedicated R&D team of our best and brightest folks focused on this effort and their work has paid off. One technology that you did not mention is our Targeted Corrosion Inhibition Program was introduced in 2006 and which is aimed at helping municipal solid waste plants dramatically reduce the corrosion rates in their boilers. Our patent in this area was but one of 7 patents applied for or granted here in the US and another 12 internationally. We are on the leading edge of technologies in these areas and we intend to stay on that leading edge.

Revenues are obviously up, and you’ve said you expect revenues to increase 20-27% in 2007, with growth from both technology segments. What about 2008, 2009 and beyond, what markets and which products do you expect to deliver the longer term growth?

We do intend to grow but have provided no guidance beyond 2007.

In 2006 compared to 2005, the gross margins were down in the NOx Reduction business, but up in the Fuel Treatment business. Net income for the 4th quarter was down year over year, even though 2006 vs 2005 was up significantly. Can you talk a little about this, as well as tell us what the long term margin objectives are for the company?

First, our revenue for 2006 was up 42% over 2005 and our pre-tax income in 2006 was up 64% vs 2005. (These results were above our guidance.) The net income (after tax) blip you mentioned is that in 2005 we recorded $4.3 million in non-cash tax benefits related to the anticipated utilization of new operating loss and tax credit carryforwards. So we believe our performance in 2006 was considerably better than 2005 and has positioned us to do even better in 2007.

You keep a healthy amount of cash and no debt on your balance sheet. What is your view on the company’s capital structure?

I love our capital structure—lots of cash, no debt, unsecured borrowing ability and a business model that is delivering rapid growth in revenues, profits and cash.

And I know you’ve had to discuss this a lot lately, but the stock price has doubled in the last year, and P/E and valuation metrics are looking rich. What is your view on how the capital markets should look at the stock and valuation?

Personally I think this is a great buying opportunity (and I just recently did so in my personal accounts). If you believe that we can and will execute our business plan and grow this company rapidly and profitably then today’s stock price is not over-valued at all. If you don’t believe that we can and will execute and achieve the results, then the stock price is already too high. It all depends on what you believe about the Fuel Tech team.

And if I was an investor interested in the company, what should I be looking for over the next 6 to 12 months?

You should be watching for contract announcements to see if we are winning in the market-place. The first quarter will be the hardest for us from a results point of view but the orders need to come over the next 6 months if we are going to deliver this year’s revenue and profit results. We are working hard to make that happen, but until the contracts are in hand it is just talk.

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.

Cleantech: The Problem and Solution

Two interesting cleantech reports came out in the last couple of days. One talking about the problem, the other the solution.

On the problem side, as reported in USA Today, a team of researchers working at Texas A&M found that increased pollution in Asia, primarily from the rise of industrialism in China over the last 10 years, is affecting weather patterns over the Pacific and even into the US West Coast.

I guess the last 10 years of environmentalists harping over the growth in “dirty Chinese coal plants” had some real merit.

On the solution side, the 2007 Clean Energy Trends report authored by Clean Edge, came out this week.

The highlights from my review of their document:

$2.4 Billion in clean energy (as distinct from cleantech) venture capital investment in 2006, up 2.4x from 2005.

They project $220 Billion in market for Clean Energy by 2016.

Their 5 Trends to Watch:

  • Carbon Finally Has a Price…and a Market – They note the major advances including California’s GHG law push. We agree. But like wind and solar, we pioneered it, but Europe is leading it today.
  • Biorefineries Begin to Close the Loop – They are big on the advances of cellulosic ethanol. We remain cautious here.
  • Advanced Battery Makers Take Charge – They note the coming rise of lithium ion in the automotive sector. We agree.
  • Wal-Mart Becomes a Clean Energy Market Maker – They note major moves by Wal-Mart to go green. Long a shareholder of Wal-Mart myself, I definitely agree. We have been saying for a while that when it comes to cleantech, startups talk the talk, the big boys walk the walk.
  • Utilities Get Enlightened – They note that utilities are getting on the climate change band wagon. We would add that corporate venture is back, in a new and possibly smarter form.

You can download their report from the Clean Edge website. We have written on each of these topics before. Onwards and upwards in cleantech.

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.

What to Make of the TXU Deal?

by Richard T. Stuebi

Last weekend, TXU Corporation (NYSE: TXU) made the stunning announcement that it would be acquired by two private equity giants — Kohlberg Kravis Roberts (KKR) and Texas Pacific Group (TPG) — in a transaction valued at $45 billion.

Press release

Two things leap out at me from the announced deal.

First, the investors are willing to pay a 25% premium over the recent share price, while at the same time committing to a 10% rate reduction for TXU’s residential electricity customers in Texas. KKR and TPG are no dummies: it must mean that they truly think they can run TXU much more efficiently than it has been run — even though TXU has been widely viewed as a glowing success story since the meltdown of the merchant power markets in 2002. If a “good” utility TXU can be taken over by a private equity group at a premium price and earn the required rates of return on invested capital while cutting prices to customers, pretty much any electric utility should be in the same boat. Conclusion: there must be a lot of fat in the utility industry that can be cut with more aggressive management. If I were a large institutional investor in an underperforming utility, I’d be pressing the executives to dress the company up for sale. If I were a senior manager in the utility sector, I’d be expecting to be pushed to a much higher degree of performance for shareholders. If I were a mid-manager or lower level employee at a utility, I’d become increasingly worried about my job.

Second, the investors are the prime movers in axing 8 of 11 announced coal fired powerplants from TXU’s growth ambitions, in lieu of increasing expenditures on customer efficiency by $400 million. This will be a major reversal for John Wilder, TXU’s CEO, who has been loudly touting a vision for massive coal expansion. I’m certain that Wilder’s rich payday from this lucrative deal will help soften the blow to his ego, but it will be interesting to see how Wilder copes under his new owners. These are smart investors, and they seem to be saying that energy efficiency (along with renewables) is a much better investment than new coal fired powerplants — especially in a world with likely future carbon restrictions. This deal no doubt sends a signal that the capital markets are increasingly unwilling to make big bets on continued status quo in the utility industry. Wall Street is saying that the utility industry must change, and that it isn’t just going to keep dumping money into utilities that want to perpetuate the 20th Century.

Based on initial reports, it appears that there are few hurdles to the deal being closed, but I remain curious as to how KKR and TPG expect to monetize their $45 billion investment. It seems like there are three possibilities: simply holding the company and recouping returns via dividends from improved operations, flipping the company to another owner (or re-taking the company public) at a higher price, or breaking the company apart and selling the pieces to more natural owners. I’m sure they have thought through these possibilities in great detail, though it’s not obvious to me.

The examples of private equity attempting to earn attractive returns through investments in the U.S. electric utility sector have, to date, been not very successful. Let’s hope this deal works out for the investors. I’d love to see many more utilities bought by private equity firms and shaken up. I bet that many utility CEO’s and management teams wouldn’t last long under the reins of more aggressive owners. And, I’d bet we’d see better environmental performance from these historically lethargic companies. I hope the TXU deal is the beginning of a trend.

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.