Making Green Mining Less Of An Oxymoron

New breakthrough science and cost reductions from the world of cleantech hold promise for making mining—one of the dirtiest, most inefficient industries in the world—more profitable, safer and cleaner. But which cleantech innovations aimed at reducing toxicity in mining, as well as the need for power and water, are best positioned to succeed? Which companies will win and which will lose? How can existing players manage risk in the face of new innovation?

Big questions. We try to address them in a new research report on green mining technologies, just published this week.

As important as mining is to society, techniques and equipment that were first developed in the early 1900s are still standard in many modern mining facilities today. Mining is one of the last holdouts of dirty, inefficient industry that’s just waiting to be revolutionized by new breakthrough clean technology. Latest innovations and cost reductions in cleantech hold promise for making mining more profitable, safer and better for the planet.

While there are clear benefits to mining companies implementing new technologies, there is risk involved with new technology. New technology—like bioremediation of mine tailings (the often toxic output from mining processes) or electrochemical water treatment—has historically struggled to find footholds in mining because companies generally don’t like taking the risk of adopting new, unproven technology until others have. That attitude is now changing, as companies are increasingly motivated by dramatic new economic benefits promised by new green mining breakthroughs.

Propositions for green mining across the mine life cycle
The permitting process for opening new mines in most areas of the world is long and costly. Some companies are poised to reinvigorate the process with cleantech innovations aimed at making permitting faster and less expensive by reducing toxicity, power and water requirements. Mine closure costs, at the other end of the mine lifecycle, are being minimized by new remediation technologies. Other technologies promise other economic benefits.

In our research, we found important new innovation taking place in the following areas related to both hard rock (e.g. gold, silver) and soft rock (e.g. coal) mining:

  • Power reduction
    • Comminution efficiency (i.e. breaking large rocks into smaller ones)
    • Low power separation (i.e. separating minerals/metals from ore)
    • Hydrometallurgical processes (processes for separating minerals/metals from ore that don’t require large inputs of natural gas or electricity)
    • Other alternative processes
  • Fuel and maintenance reduction
    • Equipment route optimization (i.e. software helping mining companies plan the most efficient routes for their mining vehicles)
    • Fuel additives/filters
    • Natural gas conversion
    • Electric conversion
    • Improved lubricants
    • Polymers and coatings
    • Training simulators (i.e. reducing fuel and maintenance expenses by training operators using immersive flight simulator-like equipment)
    • Other fuel reduction approaches
  • Toxicity reduction
    • Bioleaching
    • Bioremediation/phytoremediation
    • Non-cyanide separation (i.e. not using cyanide, but biology to extract minerals/metals from ore)
  • Emissions reduction
    • Dust management
    • Particulate sequestration
    • Carbon sequestration
  • Water reduction
    • AMD/ARD remediation (i.e. addressing acid mine, or acid rock drainage, the acid created when large amounts of exposed iron-rich rock comes in contact with water… creating an orange slurry that kills vegitation and animal life)
    • Water filtration/reuse
    • Wastewater processing
    • Tailings remediation
    • Desalination

The state of mining innovation today – drivers for cleantech
Continuous advancements have allowed a growing number of cleantech technologies to surpass a tipping point. For the first time, many of these technologies are both environmentally sound and capable of competing against conventional methods in terms of operations, productivity and efficiency.

In our report, we found several drivers have propelled the mining industry’s growing use of clean technologies.

  • Market volatility – The outlook for the future is uncertain as the mining landscape undergoes significant changes. Globalization, industrialization and industry consolidation are some of the contributing factors driving the changes. In addition, conflicting trends are indicating mixed signals about what lies ahead. Countries such as China are showing signs of slowing economic growth, yet forecasts of long-term global demand are bullish. Given the extensive planning required prior to commissioning, miners and investors are hesitant to move forward with projects without a confident outlook for the market. Companies are reacting to the changing industry dynamics by finding ways to bolster operations to become more flexible, cost effective and efficient.
  • Rising operational costs and falling commodity prices – The growing cost of doing business is threatening margins and making it more expensive for companies to bring supply to the market. Records show production costs for commodities such as copper, aluminum and nickel have already reached or exceeded London Metal Exchange (LME) prices for some operations. These escalating costs and waning returns translate to impacts on companies’ bottom lines. In 2012, the Top 40 mining companies measured by market capitalization experienced a decrease in net profit of 49% to 68 billion and the lowest returns on capital employed of a decade at only 8%.
  • Decreasing productivity and efficiency – Issues relating to permitting have become a growing concern among mining companies and potential investors. For example, studies by mining advisory firm Behr Dolbear find that the U.S. permitting process has jumped from an average of 5-7 years to 7-10 years, an increase of 40 percent in just 4 years. The lengthened process is delaying operations, dissuading potential investors and hindering innovation and development across the economy. Some governments are offering economic incentives for cleaner mining companies, reducing permitting times for companies that incorporate clean technologies into operations. Mining technologies have only progressed minimally by comparison. During the last 50 years, the global mining industry lost 30% of its productivity, requiring greater efforts to produce each unit of output.
  • Abrupt policy changes – Expectations are continuously increasing for the mining industry to operate more responsibly after centuries of irresponsible mining processes. As a result of newly imposed policies and stringent regulations, companies are being held more accountable for their actions. Compliance with new standards is necessary in order for companies to retain their licenses to operate.
  • Resource nationalism – Governments are seeking a larger stake from mining operations by extracting more value through taxes, royalties, and levies. Many countries such as South Africa have followed the footsteps of Australia’s recent Minerals Resource Rent Tax and 67% of mining executives in a recent survey are concerned about the potential impacts of the additional tax burdens. These costs are undermining the confidence of mining companies’ abilities to undertake operations in exchange for attractive returns.
  • Societal scrutiny – In the face of growing environmental and social justice awareness, corporate social responsibility is a new and high priority for many mining executives. Delays from community discontent mean unnecessary downtimes, and reduce the productivity of the operations. Companies must uphold expectations and act responsibly in order to retain licenses to continuing operating on the property.

Some mining companies are experimenting with clean technologies. But the majority remain reluctant. In 2012, investment in innovation by the mining industry was a mere 0.2% of revenue. The mining industry’s research and development expenditures pale greatly in comparison to the efforts of 20% to 30% by other industries. Ultimately, mining companies’ bottom lines are at risk, and volatile markets and worsening problems have compelled the industry to embrace new technologies.

Leading companies have recognized the need for innovation and are taking great strides towards clean mining by shifting focus from maximizing short-term production to sustaining operations for the long haul. Here’s a summary of three mining companies’ experiments with new green technology:

Company  Initiative Results Next steps
Barrick Gold Implemented 30 new energy efficiency projects including solar power pilot project in a mine in Argentina in 2012.Innovation in water recycling and zero discharge programs. Currently has over 140 energy efficiency projects across its operations.In 2012, 19.4% of electrical power was sourced with renewables.36% of water used in 2012 was from saline or brackish sources.

70% of its sites operate under zero discharge programs and reuse recycled water.

Continuing efforts to use more renewable energy and improve energy efficiency.
Rio Tinto World-first $7 million pilot in NSW mine testing methane capturing technologies and $6 million project testing carbon dioxide storage in Victoria, Australia. Australian site has since stored over 60,000 tonnes of carbon dioxide since 2008. Trial new technologies in reducing greenhouse gas emissions and testing ways to capture and store fugitive carbon dioxide and methane emissions.
Vale A $140 million partnership with ABB to convert the world’s largest iron ore mine, located in Brazil, to be automated and completely truckless. Eliminating 100 trucks and reducing diesel consumption by 77%.Goal to increase production by 90 million tonnes per year. Seek other opportunities to incorporate autonomous technologies in mining operations.

Selected examples of clean technology adoption by three of the largest mining companies worldwide. Source: Kachan analysis

Our new report profiles 47 companies that have brought, or are bringing, innovative new green mining technologies to market. Out of hundreds of companies in this space, we’ve found ones we believe are best poised for success.

As a result of continuous improvements and innovation, many green mining technologies are now able to effectively compete with conventional products. While the majority of companies have yet to adopt newer processes, leading companies have recognized the need to invest in new technologies as a response to the shifting industry. And with increasing operational costs and environmental expectations, the demand from the mining industry for cleaner technologies is expected to grow at an accelerated pace.

This article was originally published here. It is reproduced here by permission.

Worlds of Differences

I’ve always known that Americans hold a pretty different view about the state of the energy sector than elsewhere in the world, but never really knew how to characterize those variances.

Today, I write in gratitude, thanking the efforts of Sonal Patel, senior writer at Power magazine.  Patel developed this helpful visual framework summarizing the recent issuance of the World Energy Issues Monitor, a a global survey undertaken annually by the World Energy Council posing the question “what keeps energy leaders awake at night?”

For each of three regions — North America, Europe and Asia — Patel has drawn circles for each major issue area of potential concern to the energy sector and placed them on a two-dimensional chart, where higher indicates more impact and right represents more certainty.   The size of the circles is proportional to the urgency of an issue.

Perusing Patel’s graphic is an illuminating exercise.  Of note:

Only in North America is the topic of “unconventionals” — meaning producing oil and gas from unconventional sources such as shale and oil sands — viewed as a particularly big deal.  In Europe, unconventionals are somewhat lower on the radar screen, and in Asia barely on the screen at all.

Conversely, energy prices are a critical topic in Europe and Asia, but deemed only of modest importance in North America.

Similarly, energy efficiency is high on the agenda in Europe and Asia, not so much in North America.  Even more starkly, renewables are seen as only a low-impact issue in North America, and a more significant issue elsewhere.

Perhaps because of the high penetration of renewables there, energy storage is of most interest in Europe, but of less interest in North America, and of hardly any interest in Asia.

Nuclear energy is viewed as a high-impact issue in North America, moderate impact in Europe, and (perhaps surprisingly) low-impact in Asia.  So, for that matter, are electric vehicles.

The so-called “hydrogen economy” — involving the use of fuel cells for power generation and transportation — retains a bit of interest in North America (though with low urgency), but has fallen off the map elsewhere.  Carbon capture and storage (CCS) follows somewhat of the same pattern, although Europe does hold it in higher esteem than hydrogen.

True, there are some commonalities to acknowledge:  the smart grid and policies to deal with climate change and energy subsidies are seen in approximately the same light globally.

However,  more than anything else, Patel’s framework shows that leaders in the energy industry live in very different worlds, depending upon which part of the world they live and work in.

Fifty Years

Earlier this month, I turned 50 years old.  Such milestones are natural occasions for reflection.

Beyond recalling many of the phases and individual episodes of my life, my reflection included a consideration of how the world had changed in the 50 years in which I had lived.  And, naturally, given my profession, I pondered what it would have been like to have been a “cleantech” practicioner 50 years ago, in 1962.

Frankly, it’s not really possible to imagine “cleantech” back then.  50 years ago, there wasn’t much “clean” and there wasn’t much “tech”.

In the U.S., the Clean Air Act and the Clean Water Act hadn’t been passed, and there wasn’t even an Environmental Protection Agency.  Silicon Valley was still mainly apple orchards, and computers less powerful than your smartphone barely fit into large warehouses.

In the energy sector, the U.S. still dominated the petroleum industry.  Not only did Americans consume more petroleum than anyone else (accounting for about 40% of world demand), U.S. oil production was still a major factor, representing almost 30% of worldwide production.

The oil industry’s operations would still have been very recognizable by John D. Rockefeller:  production was mainly from “conventional” onshore seesaw pumpers dotting the countryside; remote locations such as Alaska hadn’t yet been touched, nor had any material production yet been achieved from offshore wells.

Other than perhaps by watching the recently-released “Lawrence of Arabia”, few Americans paid much attention to the deserts of the Middle East in 1962.

Though unnoticed by most Americans, important forces in the oil industry were already beginning to shift in the early 1960s.  Although Texas oil production had been decisive in fueling the Allied victory in World War II just two decades previously, by 1962, the U.S. had become a net importer of oil.  Yet, only King Hubbert projected a future waning of American supremacy in oil production.

Oil prices in 1962 were a little less than $3/barrel, largely due to the price-setting powers of the Railroad Commission (RRC) of Texas, then still the source of a significant share of world oil production.  When a hitherto little-noticed group formed in the early 1960s called the Organization of the Petroleum Exporting Countries (OPEC) assumed the dominant influence in pricing oil a decade later, the world would change forever, as oil prices would never again be anywhere near below $10/barrel.

It’s almost quaint to summon up memories of the oil sector of the era.  Remember what filling up at a gas station was like in the 1960s?  The attendant would come out, put the nozzle in the tank (always with the filler behind the rear license plate), cheerfully wipe the windshield and ask “may I check your oil?”.  Looking out the window, I remember seeing “29.9” on the gas pumps.  That’s 29.9 cents per gallon — which seems almost surreal to us now, but remember, oil prices were then only a few percent of what they are today.

Of course, given the now-unbelievably appalling gas mileage of those Detroit beasts, usually under 10 miles per gallon, you still had to fill up about as often then as you do now.  Back then, it was all about horsepower — it certainly wasn’t about efficiency, nor about cleanliness.  (Nor, for that matter, reliability.)

Every once in awhile these days, I find myself behind a 1960s-vintage car at a stoplight, most often on a sunny summer afternoon.  When the light turns green, I am left in a thin cloud of light bluish smoke and the fragrance of octane and unburned hydrocarbons.  Odors of my youth.  You don’t see and smell that anymore — and I don’t miss it.

Thank goodness for a plethora of cleantech innovation during the past decades:  unleaded fuels, pollution controls and fuel injection systems.

And, let’s not forget that these advances were pushed by, only happened because of, foresightful proactive policies.

While the financial bonanzas and corporate/family dramas enabled by oil discoveries and production had thoroughly captured the American imagination by the early 1960s — consider everything from “Giant” to “The Beverly Hillbillies” — natural gas in 1962 was an afterthought.  Other than some use for power generation in Texas and Oklahoma (where there was no local coal resource), natural gas was mostly flared at the wellhead.  In many ways because (and many people now forget this) natural gas prices were then regulated at depressed levels, the companies that produced gas as a side-consequence from oil production didn’t see much value in making the investments necessary to collect it and transport it to markets.  In fact, natural gas was widely considered a nuisance in 1962.

Certainly, gas is no longer considered a nuisance.  In fact, it’s now being touted by politicians across the U.S. as the Godsend:  providing lower energy prices, lower emissions, higher domestic employment and reduced dependence on foreign energy sources.

No, the oil/gas industry — and those two fuels are today inextricably intertwined — is now much more aggressive in capturing and processing every Btu that courses through the markets.

In the late 1960s, our family lived in the Philadelphia area, and I remember being awed – almost scared, really – by the immense flames emitted by the refinery near the mouth of the Schuylkill River.  All those now-valuable hydrocarbons…gone, wasted, up in smoke.  You don’t see that anymore at refineries, thankfully.

Oil company practices have massively changed in the past 50 years to capture everything of possible economic value.  Of course, that’s the effect of a 30x increase in oil prices, driven by a worldwide search and race to find and produce new reserves to replace five decades’ worth of depletion of much of the cheap/easy stuff in the face of a tripling of global oil demand (mostly from outside the U.S.), counterbalanced by technological progress on a host of fronts over the span of five decades.

Today, oil is pretty consistently trading between $80-100/barrel, and while U.S. oil production has rebounded a bit to approach early 1960s levels, American production now accounts for less than 10% of world oil production.

But think about how low U.S. oil production would be and how high oil prices might be today if not for offshore oil production, directional drilling, 3-D seismic, and an untold number of other innovations produced by the oil patch in the last half-century to enable production from hitherto undeveloped places.

Of course, beauty is in the eye of the beholder, and not all of these developments are viewed positively by everyone.  The current debates about fracking and development of the Alberta oil sands would have been unimaginable in 1962.  At the time, fracking barely existed as a practice, and the Alberta oil sands were then hopelessly uneconomic as a source of fuels.  Moreover, there was virtually no environmental movement to give voice to the concerns of citizens.

It wasn’t really until Rachel Carson published Silent Spring just a few weeks after I was born that much attention was paid to pollution.  Later in the decade and into the 1970s came the grassroots emergence of the environmental groups, such as Greenpeace and the Natural Resources Defense Council.

If you are about my age or older, you may well remember this 1971 commercial.  The tagline (“People start pollution, people can stop it”) and the image of the Native American shedding a tear remain indelible decades later.

Before this, there was virtually no accountability placed on emitters, and anyone could pretty much dump whatever they wanted, wherever they wanted, whenever they wanted.  And, in the early 1960s, no set of interests benefitted from ongoing inattention to environmental considerations in the U.S. more than the coal sector.  For those with coal interests, the times before environmentalists were truly the glory days — and in 1962, the future for coal in the U.S. at that time was terrifically bright.

Sure, trains had just moved from coal steam to diesel-electric, but over half of all the electricity generated in the U.S. in 1962 was based on burning coal.  With burgeoning demand for electricity (especially to keep pace with the exploding utilization of increasingly-ubiquitous air conditioning), coal was poised for significant growth, as thousands of megawatts of new coal powerplants would be added to the nation’s energy grid each year during the 1960s.

While coal is certainly no poster-child for the cleantech sector today, back in 1962, coal remained a particularly brutish and nasty form of energy.  288 American miners were killed on the job in 1962, and all of the coal burned was subject to minimal pollution control – no electrostatic precipitators or baghouses to capture particulates (i.e., soot), much less scrubbers for sulfur dioxide or selective catalytic reduction for nitrogen oxide emissions.  You pretty much didn’t want to be a coal miner or live anywhere near a coal-burning powerplant, as your health and longevity were seriously at risk.

Indeed, some observers speculate that the uncontrolled emissions from powerplants (not to mention other industrial facilities, such as steel mills) threw up such large amounts of material into the atmosphere that the 1970s became a period of unusually cold temperatures — to the point that many scientists were projecting a future of damaging global cooling.  (Although the then-common theory of global cooling is now mainly forgotten, climate change deniers are quick to employ this prior dead-end of thought as one reason for dismissing the strong likelihood suggested by climate scientists that global warming is probably occurring today.)

Of course, the U.S. still mines coal, lots of it, to fuel lots of coal-fired powerplants.  Production in 2011 was 1.1 billion tons, more than double 1962 levels.  However, employment in the coal industry had fallen by over 40% during the same period.  (And, mercifully, annual fatalities have decreased by a factor of 10.)  The primary factors for these changes:  productivity increases due to new technologies (e.g., longwall mining), lower rates of unionization, and a shift from underground to surface mining (now accounting for nearly 70% of U.S. production).

With respect to the latter factor, Wyoming coal activity has exploded — now representing more than 40% of U.S. production — at the expense of Appalachia, whose coal sector is now but a shell of what it was 50 years ago.  The causes are simple:  the subbituminous Powder River stuff from Wyoming is much more abundant and cheaper to mine, and generally has much lower sulfur content to boot, than what is available from Appalachia.

On a broader level, coal is on the retreat in the U.S.:  while coal still accounts for almost 50% of power generation, this share is dwindling.  It seems as though U.S. coal production levels have plateaued at just over 1 billion tons a year.  While so-called “clean-coal” technologies may at some point provide the basis for a resurgence in the industry, the possibility of future growth certainly seems far from obvious today.

Many legacy coal powerplants – some of which remain in operation from well more than 50 years ago – are fading away.  Tightening emission requirements, particularly on toxic emissions such as mercury, are just one  competitive disadvantage facing coal; coal power is increasingly uncompetitive with cheap and cleaner natural gas powerplants and (in some places) wind and solar energy.

“Wind energy” and “solar energy”:  50 years ago, these would have been oxymorons.  Other than the minute niches of sailboats and waterwell pumping in the Great Plains, a good wind resource had virtually no commercial value in 1962.  At the same time, Bell Labs scientists were wrangling some with solar energy technologies — primarily for satellites – although a lot more attention was being paid to a related device called the semiconductor.

For energy, scientists were mainly working on nuclear power, moving from weapons and Navy submarines to powerplants.  The nuclear era was dawning:  electricity was going to be “too cheap to meter”.

The very first commercial nuclear powerplant, the relatively puny 60 megawatt plant at Shippingport in Western Pennsylvania, had been running for only a few years in 1962, though dozens of nuclear powerplants were just coming onto the drawing boards.  Visionaries were even talking about nuclear-powered automobiles in 1962.  (“Electric vehicles?  Puh-lease.  Batteries are for cheap portable Japanese radios.”)

Perhaps as a psychological defense mechanism to drown out the anxieties associated with potential Armeggedon from a Cold War missile exchange, such was the sense of optimism in the possibilities of the age.

Apparently, no-one could foresee Three Mile Island, Chernobyl or Fukushima at the time.

The future held boundless possibilities.  Back then, who needed to recycle?  To think about efficient utilization of resources?  To care about water quality or air quality?  There was always more and better, somewhere, to be had.  And we Americans would surely obtain it, somehow and someway.  It was Manifest Destiny, ever-onward.

This American philosophy may have confronted its limits early in my lifetime with the ultimate realization, brought home so vividly at the end of the 1960s by the first-ever images of the solitary Earth as provided by the Apollo program, that we’re all utterly dependent upon a finite planet in an infinite sea of otherwise-unpopulable space.  Earth Day followed in April 1970.

To commemorate this first Earth Day, I remember our second-grade class picking up scads of litter along the side of a section of highway.  Upon reflection, I am glad to note how much litter has declined in subsequent years — a case of how values can be reshaped and behaviors can be changed, if people are just a bit more conscious.

That’s a positive take.  However, one can reasonably look back on 50 years of the evolution of the energy sector and say, well, that not that much has really changed in America.

True, the basic structure of American life may not have changed too dramatically.

We still primarily live in single family dwellings, in suburbia, dependent upon cars that look more or less the same, fueled by gasoline available at stations just down the road.  The power grid is still there, powered by central-station powerplants; the light switches and outlets haven’t changed, with refrigerators still in every kitchen and TVs in every living space.

By all measures, Americans are still energy hogs, relative to the rest of the world.

Even so, I would assert that a lot has changed, at both the macro and micro-level, that have consequentially altered the trajectory of resource utilization in America from the path determinedly being travelled 50 years ago.

Admittedly, some of the changes we have experienced are a bummer:  niceties like summer evenings with the windows open are much rarer.  Nevertheless, I claim that most of the changes of the past half-century are positive – and can be attributed to a significant degree to what we now call “cleantech”.

Our energy bounty, improved so significantly by technological innovation, has been achieved while simultaneously improving environmental conditions in almost every respect.  Notwithstanding the substantial increase in carbon dioxide emissions, almost all other manifestations of environmental impact from energy production and use have dramatically improved in the past half-century.  Standards of living enabled by modern energy use, here in America and even more so in the rest of the world, have dramatically improved.

Moreover, the trends for further future improvement on all these fronts are favorable.

With the proliferation of improved technologies such as LED lighting, energy efficiency continues to advance.  Renewable energy continues to gain share:  wind and solar energy represented about a quarter of new U.S. electricity generation additions in 2010.  Citizen understanding of energy and environmental issues continues to become more sophisticated.

Beyond the forces specifically pertaining to the energy sector, a number of broader influences in U.S. society are improving the prospects for accelerating cleantech innovation and adoption.  Entrepreneurship is booming, consumerism is increasingly being called into question, capital markets are more amenable to investment in this sector and more capital is arriving accordingly, and the Internet makes an immense and ever-expanding pool of information freely available to enable better decisions.

Not to mention:  much of the opposition to a transition to the cleantech future emanates from people in generations that are older, that will die out in the next couple of decades, to be replaced by younger generations that are generally more supportive of increased cleantech activity.

So, while it’s easy to get discouraged by the impediments to cleantech progress on a day-to-day basis, over the long-view, it’s pretty apparent that big positive things can happen and in fact are happening.

50 years from now, in 2062, I hope to be alive and well at 100 and still contributing to the cleantech sector.  That may be overoptimistic.  But I don’t think it’s at all overoptimistic that we’ll see more changes, and more changes for the better, in the cleantech realm over the next 50 years than in the previous 50.

Cold Facts About Air Conditioning

There may be people who understand the big picture about air conditioning better than Stan Cox, but the list is surely a short one.

Cox, who wrote Losing Our Cool:  Uncomfortable Truths About Our Air-Conditioned World, has also just written an excellent brief article called “Cooling A Warming Planet:  A Global Air Conditioning Surge”

In this posting, rather than comment on Cox’s article, some of the facts are so succinctly presented that it makes no sense for me to try to improve upon them.  So, I will excerpt some highlights, starting right off the bat with the introductory paragraph:

“The world is warming, incomes are rising, and smaller families are living in larger houses in hotter places.  One result is a booming market for air conditioning — world sales in 2011 were up 13 percent over 2010, and that growth is expected to accelerate in coming decades…If global consumption for cooling grows as projected to 10 trillion kilowatt-hours per year — equal to half of the world’s electricity supply today — the climate forecast will be grim indeed.”

“The United States has long consumed more energy each year for air conditioning than the rest of the world combined.  In fact, we use more electricity for cooling than the entire continent of Africa, home to a billion people, consumes for all purposes.”

“Because it is so deeply dependent on high-energy cooling, the United States is not very well positioned to call on other countries to exercise restraint for the sake of our common atmosphere…With less exposure to heat, our bodies can fail to acclimatize physiologically to summer conditions, while we develop a mental dependence on cooling.  Community cohesion also has been ruptured, as neighborhoods that on warm summer evenings were once filled with people mingling are now silent — save for the whirring of air-conditioning units.  A half-century of construction on the mondel of refrigerated cooling has left us with homes and offices in which natural ventilation often is either impossible or ineffective.  The result is that the same cooling technology that can save lives during brief, intense heat waves is helping undermine our health at most other times.”

But, “China is already sprinting forward and is expected to surpass the United States as the world’s biggest user of electricity for air conditioning by 2020.  Consider this:  the number of U.S. homes equipped with air conditioning rose from 64 to 100 million between 1993 and 2009, whereas 50 million air-conditioning units were sold in 2010 alone.”

“The greatest demand growth in the post-2020 world is expected to occur elsewhere….Already, [in India], about 40 percent of all electricity consumption in the city of Mumbai goes for air conditioning…Within 15 years, Saudi Arabia could actually be consuming more oil than it exports, due largely to air conditioning.”

“In thinking about global demand for cooling, two key questions emerge:  Is it fair to expect people in Mumbai to go without air conditioning when so many in Miami use it freely?  And if not, can the world find ways to adapt to warmer temperatures that are fair to all and do not depend on the unsupportable growth of air conditioning?”

In response to these two daunting questions, Cox suggests some possible technological paths forward:

“Efforts to develop low-energy methods for warm climates are in progress on every continent.  Passive cooling projects…combine traditional technologies — like wind towers and water evaporation — with newly designed ventilation-friendly architectural features.  Solar adsorption air conditioning performs a magician’s trick, using only the heat of the sun to cool the indoor air….Meanwhile, in India and elsewhere, cooling is being achieved solely with air pumped from underground tunnels.”

This implies a wide space of opportunity for cleantech innovators, entrepreneurs and financiers.  In a short piece in its July 28 edition, The Economist profiled Advantix Systems, which is developing a new air conditioning technology that promises 30-50% less energy consumption.  Hopefully, one of many new entrants to address the pressing cooling challenge facing the world.

Clear Signs of Innovation in Glass

Glass has been made for thousands of years, and innovators have always been tinkering to improve the basic product.  Over the years, these improvements have mainly been in terms of color, strength, weight, quality.  The cleantech imperative of the past few decades is now pushing glass innovations on two more dimensions, energy efficiency and power generation.

Regarding energy efficiency, the big issue with windows is energy transfer.  Of course, glass is more thermally conductive than most other building materials, so windows let out more heat in the winter and let in more heat in the summer than the rest of the building.  As such, improving the thermal-insulation of windows has long been pursued, such as through storm windows.

However, another angle on the efficiency topic is via the use of electrochromics, which uses chemistry to change the tint of the glass based on the amount of sunlight.  You’ve no doubt seen these on sunglasses:  the glasses turn darker in bright sunlight, and lighten up inside.  Well, these are now increasingly being applied to windows, so as to reduce the amount of energy (heat) transmitted through the glass.  SAGE Electrochromics of Minnesota, recently bought by the French giant Saint-Gobain (Paris: SGO), is arguably the leader in this field. 

With respect to power generation, a number of inventors have been dabbling with photovoltaics integrated into glass.  Most of this work has been to incorporate solar collecting material into the entire pane, but this recent article discusses some efforts at TU Delft in the Netherlands to use the glass as a lens to focus the light onto solar cells at the periphery of the window.

The moral of this story is:  even something invisible like glass is subject to advancement as part of the cleantech movement.


Top 10 Cleantech Subsidies and Policies (and the Biggest Losers) – Ranked By Impact

We all know energy is global, and as much policy driven as technology driven.

We have a quote, in energy, there are no disruptive technologies, just disruptive policies and economic shocks that make some technologies look disruptive after the fact.  In reality, there is disruptive technology in energy, it just takes a long long time.  And a lot of policy help.

We’ve ranked what we consider the seminal programs, policies and subsidies globally in cleantech that did the helping.  The industry makers.  We gave points for anchoring industries and market leading companies, points for catalyzing impact, points for “return on investment”, points for current market share, and causing fundamental shifts in scale, points for anchoring key technology development, points for industries that succeeded, points for industries with the brightest futures.  It ends heavy on solar, heavy on wind, heavy on ethanol.  No surprise, as that’s where the money’s come in.

1.  German PV Feed-in Tariff – More than anything else, allowed the scaling of the solar industry, built a home market and a home manufacturing base, and basically created the technology leader, First Solar.

2. Japanese Solar Rebate Program – The first big thing in solar, created the solar industry in the mid 90s, and anchored both the Japanese market, as well as the first generation of solar manufacturers.

3. California RPS – The anchor and pioneer renewable portfolio standard in the US, major driver of the first large scale, utility grade  wind and solar markets.

4. US Investment Tax Credit for Solar – Combined with the state renewable portfolio standards, created true grid scale solar.

5. Brazilian ethanol program – Do we really need to say why? Decades of concerted long term support created an industry, kept tens of billions in dollars domestic.  One half of the global biofuels industry.  And the cost leader.

6. US Corn ethanol combination of MTBE shift, blender’s, and import tariffs – Anchored the second largest global biofuels market, catalyzed the multi-billion explosion in venture capital into biofuels, and tens of billions into ethanol plants.  Obliterated the need for farm subsidies.  A cheap subsidy on a per unit basis compared to its impact holding down retail prices at the pump, and diverted billions of dollars from OPEC into the American heartland.

7. 11th 5 Year Plan  – Leads to Chinese leadership in global wind power production and solar manufacturing.  All we can say is, wow!  If we viewed these policies as having created more global technology leaders, or if success in solar was not so dominated by exports to markets created by other policies, and if wind was more pioneering and less fast follower, this rank could be an easy #1, so watch this space.

8. US Production Tax Credit – Anchored the US wind sector, the first major wind power market, and still #2.

9. California Solar Rebate Program & New Jersey SREC program – Taken together with the RPS’, two bulwarks of the only real solar markets created in the US yet.

10. EU Emission Trading Scheme and Kyoto Protocol Clean Development Mechanisms – Anchored finance for the Chinese wind sector, and $10s of Billions in investment in clean energy.  If the succeeding COPs had extended it, this would be an easy #1 or 2, as it is, barely makes the cut.


Honorable mention

Combination of US gas deregulations 20 years ago and US mineral rights ownership policy – as the only country where the citizens own the mineral rights under their land, there’s a reason fracking/directional drilling technology driving shale gas started here.  And a reason after 100 years the oil & gas industry still comes to the US for technology.  Shale gas in the US pays more in taxes than the US solar industry has in revenues.  But as old policies and with more indirect than direct causal effects, these fall to honorable mention.

Texas Power Deregulation – A huge anchor to wind power growth in the US.  There’s a reason Texas has so much wind power.  But without having catalyzed change in power across the nation, only makes honorable mention.

US DOE Solar Programs – A myriad of programs over decades, some that worked, some that didn’t.  Taken in aggregate, solar PV exists because of US government R&D support.

US CAFE standards – Still the major driver of automotive energy use globally, but most the shifts occurred before the “clean tech area”.

US Clean Air Act – Still the major driver of the environmental sector in industry, but most the shifts occurred before the “clean tech area”.

California product energy efficiency standards – Catalyzed massive shifts in product globally, but most the shifts occurred before the “clean tech area”.

Global lighting standards /regulations – Hard for us to highlight one, but as a group, just barely missed the cut, in part because lighting is a smaller portion of the energy bill than transport fuel or generation.


Biggest Flops

US Hydrogen Highway and myriad associated fuel cell R&D programs.  c. $1 Bil/year  in government R&D subsidies for lots of years,  and 10 years later maybe $500 mm / year worth of global product sales, and no profitable companies.

Italian, Greek, and Spanish Feed in Tariffs – Expensive me too copycats, made a lot of German, US, Japanese and Chinese and bankers rich, did not make a lasting impact on anything.

California AB-32 Cap and Trade – Late, slow, small underwhelming, instead of a lighthouse, an outlier.

REGGI – See AB 32

US DOE Loan Guarantee Program – Billion dollar boondoggle.  If it was about focusing investment to creating market leading companies, it didn’t.  If it was about creating jobs, the price per job is, well, it’s horrendous.

US Nuclear Energy Policy/Program – Decades, massive chunks of the DOE budget and no real technology advances so far in my lifetime?  Come on people.  Underperforming since the Berlin Wall fell at the least!


An Illuminating Article

As most of you readers know, the lighting industry is undergoing a revolution, stemming from the phase-out of inefficient incandescent bulbs as directed by the Energy Independence and Security Act (EISA) of 2007.

A recent article in Distributed Energy by David Engle entitled “Quest for Light” provides a succinct overview of the domino effect on technological advancement to develop good substitutes for the old incandescents.

It’s well-known that compact fluorescent lighting (CFL) for household use has been somewhat of a bust, between the perceived inferiority of the light quality and disposal concerns due to mercury in the devices.

It’s also generally believed that LED lighting technologies will be the big wave to unroll in the lighting sector in the coming decade:  super-efficient, with tailorable light quality.  The big issue is cost:  current LED bulbs for residential application are generally over $20, but according to this presentation by Fred Welsh of Radcliffe Advisors at a 2011 U.S. Department of Energy symposium, the costs of LED lighting is projected to fall by an order of magnitude in the next decade.

A big issue for LED lighting advancement is heat management:  current LEDs produce a lot of heat, so many innovators are working on novel ways to either reduce the heat output associated with LEDs, or to dissipate the heat produced by LEDs more effectively/cheaply.

What’s less well-known is that, as Engle reports, “practical elimination of incandescents was envisioned [by EISA], but it is not happening.”  Why?  At least one reason is that a class of more efficient incandescent bulbs called “2x” – meaning twice as efficient as old incandescents – has been released, and these comply with the requirements of EISA. 

All these factors suggest a fatal blow for the CFL:  a technology whose time apparently never came.  (I’ve got several in my drawer at home – I hate ‘em.)  However, notwithstanding the failure of CFLs for household use, fluorescent lights probably still have a viable market in commercial applications, given their combination of low costs and high efficiencies. 

As Engle also points out, it’s not just illumination technology that’s advancing:   lighting controls is also a hotbed of innovation.  In some ways, improved lighting control is to compensate for consumer indifference, ambivalence, or unawareness of modulating illumination to meet frequently-varying lighting needs.  Perhaps 20% energy savings or more can be achieved with better lighting controls.  Since lighting represents about 13% of U.S. electricity demand, that’s a lot of kwh – and associated dollars and emissions – that can be saved with more advanced lighting controls.

If he could see us now, Thomas Edison would probably be discouraged to observe that most homes still use basically the same technology he invented in 1879, over 130 years ago.  At least he might feel a little better knowing that we’re finally getting around to making his creation obsolete.

CleanWeb: The Intersection of IT and CleanTech

For many observers, the bloom is off cleantech venture investing.  The challenges are numerous and increasingly well-known:  capital requirements are too large, the non-market (i.e., regulatory/political) forces are too influential, the incumbents are too strong, the sales cycles among risk-averse customers are too long, the technological issues are too profound. 

As reported in this posting, this negative view of cleantech venture capital is held especially strongly by Peter Thiel, one of the early principals of PayPal and a highly-influential voice within the capital markets and financial community — especially in Silicon Valley.

Oh, for the glory days of venture investing!  Where in cleantech is the next Google, Yahoo, Facebook, Microsoft, LinkedIn, Amazon?  Anyone, anyone?  Bueller?  Bueller?

A nascent movement is growing in response to this queasy inquiry.  At the center of this movement is “CleanWeb”, which focuses on the ability to harness the ever-expanding powers of intelligence for greater efficiency in physical resource management.  At the center of the CleanWeb phenomenon is Sunil Paul, the founder of Spring Ventures and a co-founder of the IT company Brightmail, which was eventually acquired by Symantec for the tidy sum of $370 million.

As Sunil and his Spring Ventures partner Nick Allen argue in this article from a recent issue of Technology Review, many of the enabling physical sciences discoveries to significantly change for the better our energy production and consumption have already been achieved.  “What hampers [them] now is poor sales channels, complex financing and incentives, and a failure to communicate with customers.  That makes them ripe for disruption by the application of IT, which will drive the next phase of cost reduction and implementation.”

More good news:  as Stanford Professor Jonathan Koomey argues in another article in the same issue of Technology Review, there’s a lot of remaining untapped upside potential in the CleanWeb.  Koomey writes that, according to some calculations by the crazy-genius physicist Richard Feynman, the energy efficiency of computing theoretically could improve by at least four more orders of magnitude from today’s levels, and it appears that the trajectory of improvement is a factor of 100 every decade.  So, we’ve got a long way to go. 

Or, put another way, as Koomey does:  today, the world’s most powerful computer (the 10.5 petaflop Fujitsu K) consumes a whopping 12.7 megawatts — an entire town’s worth of power — but a similarly capable machine two decades from now would consume as much electricity as a standard household toaster.  If you doubt that this degree of improvement can be achieved in 20 years, Koomey notes that today’s MacBook Air — if operated at the efficiency of 1991 computers — would fully discharge its battery in merely 2.5 seconds.

Sunil, Nick and their confederates have been organizing a series of regional CleanWeb Hackathons, bringing together information technology professionals to develop new code for “optimizing resource use and accelerating cleantech development.”  The first hackathon in (you guessed it) San Francisco last September was said in this article by GigaOM to have drawn 100 participants and resulted in 14 cleanweb applications.

The space of CleanWeb is pretty broad.  In our venture capital firm, Early Stage Partners, we’re seeing an increasing number of software-based business plans that – whether directly or tangentially – result in lower consumption of energy, and correspondingly lower emissions.  You could call any of these “CleanWeb”. 

One of ESP’s portfolio companies — Cleveland-based LineStream Technologies, spun-out from Cleveland State University by licensing the control systems innovations developed by Professor Zhiqiang Gao — clearly fits the CleanWeb category, as its proprietary algorithms enable much better management of both industrial and consumer applications.  This improved management usually results in lower energy consumption, and the reduction in energy consumption translates to lower costs, which is virtually always a good thing for prospective users.  The environmental benefits of lower energy consumption are nice, but incidental.

These CleanWeb business models often aren’t subject to the litany of challenges listed at the outset of this posting:  capital-intensity, regulatory impediments, incumbent opposition, long sales-cycles, or challenging physical innovations.  Accordingly, they may be relatively well-suited to venture capital investment approaches – more so than pushing for the next breakthrough in batteries, solar energy, fuel cells, wind, biofuels, nuclear or other cleantech sector involving a physical discipline.

A complaint leveled by some observers — such as in the closing paragraphs of this report by one of my favorite cleantech writers, Eric Wesoff of GreenTechMedia, on Thiel’s diatribe against cleantech venture capital — implies that CleanWeb investors are too wimpy.  The thinking seems to go that venture capital practices developed from investing in software start-ups just can’t handle the big/tough but necessary challenges of cleantech.  The CleanWeb innovations on which such investors are focusing, while nice, may be just “cherry-picking”, and not truly transformative.

Perhaps.  However, I would argue that the primary role of private capital is to make good returns, period.  Most investors don’t place their money in the hands of others (i.e., venture capital firms) to effectuate social change, no matter how desirable such change might be.  Venture capitalists can’t afford to break their picks fighting fights that they can’t win, or would have to spend inordinate amounts of capital in order to win.

Those battles need to be fought not by investors but rather by participants in the arenas of politics and laws.  Those battles set the rules of the game, within which investors and competitive market actors subsequently play.  

In my view, the rules of the game are in many ways stacked against those of us active in cleantech, and it is entirely appropriate to seek — in a fair and just manner — to change those rules.  But, it is unreasonable to expect professional investors to deploy capital imprudently, flying in the face of unfavorable rules. 

And, it is unreasonable to expect professional investors to be able to dedicate more than a modest portion of their time or effort in the public debates.  Their investments, and their investors, properly demand the majority of their attention.

In contrast to many investment opportunities in energy supply or storage technologies, CleanWeb faces minimal headwinds.  It may well be lamentable that renewable energy faces stiff headwinds, some of which may stem from outdated or inequitable rules, but that sentiment doesn’t change the harsh realities.

Virtuality does have its virtues.

Conducting Home Performance

“Home Performance” used to sound like something musically-inclined parents forced their children to do in living rooms.
It’s catching on, slowly, for what it really is, and that is tightening up houses – with an ear for proper ventilation, humidity controls and other riffs on indoor air quality, and fuel-efficient climate controls. (There are geographic oddities; in Westchester, New York a common refrain of homeowners is to call all heating appliances furnaces, even if they are, in fact, boilers, and builders here have grooved on locating air conditioner handlers in attics.. That’s hot … and not in a good way.)
A long-time friend invited me to a fundraiser Sunday night for Canticorum Virtuosi at the old JP Morgan estate in South Salem which is now home to Le Chateau, a French restaurant. Harold Rosenbaum is the founder and creative director for Canticorum and he conducted two choirs’ performances during dinner.
Two flutes of champagne into the evening, somewhere between Harold’s amateur and youth choirs, a handsome, lighthearted man to my left asked me the difference between closed cell and open cell foam, and did one need to apply a fire retardant to both? His attractive wife sitting between us said nothing, and later, I asked how it was that her husband knew so much about foam. (Of all things? Really?) She said she was as surprised as I was. He said he’d been doing a lot of reading online about making his house more energy efficient, and that he was about to call an insulator to give him an estimate.
I’ve read that musical conductors have different styles, some use ‘point of the stick’ and others a more fluid arm gesture that creates a time lag between conductor and choir or orchestra.
Sitting at Le Chateau in black lace and pumps, it felt, not strangely, that the invisible home performance conductor was using the latter method — that this concept was slowly catching on, with fluid gestures and yes, time lags.
I gave the man to my left my business card, urged him not to call an insulator but to look at the Energize NY website (, where he could fill out an application for an energy assessment by a trained home performance contractor. Energize has just the right contractors to conduct his home energy improvements.

Great Day

One upside to the economic downturn is the influx of finance and technology professional entering the sustainability sector. They are ubiquitous. (“And they are everywhere, too,” as an old friend used to say.) These professionals bring to programmatic endeavors around slow food, climate change, recycling and the myriad elements of sustainability not only valuable expertise, but alacrity, defined purpose and accountability. It’s refreshing.
Energize New York – a government-funded program that markets residential energy efficiency improvements — is overseen by a local development corporation, Energy Improvement Corporation (EIC). The founder of EIC is Mark Thielking; Mark came out of the finance world (UBS, specifically). He has a focused, data-driven mission to transform the residential and commercial energy improvement market through financing loans to building owners. He draws from a pool of talented corporate, legal, finance and grassroots folk, including the non-profit Bedford2020 which helped write the grant that established Energize for the Town of Bedford in New York’s Westchester County.
EnergizeNY is under the reporting gun to deliver results (as measured in the number of homes that make energy improvements). The program is dependent on infrastructures that have less va-va-voom than corporate finance. There is, for example, the issue of extracting data from government bureaucracies … data that is pivotal to effecting market transformation … data that resides within the orbit of a government contractor.
When things that may take mere weeks to effect in the corporate world, take months to bring about (like data access), it can feel a bit like Andy Samberg’s SNL skit, ‘Great Day’ (drugs aside):
“Any problem is solvable, we can feed the hungry and cure disease
But all of that would be a huge waste of time because we live in the
You may remember … a business-suited Samberg dances and sings on a cocaine-induced high, and then backbends into a slow-mo Matrix move.
Energize has made, and continues to make, great strides in modernizing the IT systems needed for targeted marketing, with the essential support of a handful of forward-thinking contract managers at the New York State Energy Research and Development Authority (NYSERDA), as we aim to get at the data that resides within the Authority’s orbit. NYSERDA is currently reviewing bids for an RFP to implement its home performance program, including the technology piece.
In effecting market transformation around energy improvements, it can feel like our hearts race along barupa papapam pam! And then we go into the Matrix. And then we’re off to the races again.

Afternoon, Deloitte

The consulting firm Deloitte recently released a report entitled “Every Company Is An Energy Company (And If It Isn’t, It Will Be Soon)”.

The main message is that, with increasing energy prices, it will be imperative for every company to consider how to reduce energy consumption in its buildings and its shipping/fleet, as well as what kind of self-production of electricity and/or heat.

The secondary message is that a long-term shift to “values-based capitalism” is afoot.  Companies need to minimize their environmental footprint – in large part, through their energy strategy – because customers, shareholders and employees alike are increasingly demanding that companies do so.

The authors, Nick Main (Deloitte’s Global Managing Partner of Climate Change and Sustainability) and Joseph Stanislaw (independent senior advisor to Deloitte), make the case that the clean energy game is just beginning:  Clean Energy 1.0 will evolve to Clean Energy 2.0 and 3.0 and so on over the generations to come.  And, it will take generations, because the energy asset base is long-lived and human behaviors of those making decisions are hard to change.

More bluntly, good ideas often become widely adopted only when those opposing the good ideas die off.

It is notable that Deloitte’s white paper appears to be aiming for, and solely references (with one exception:  National Grid (NYSE: NGG)), companies that are currently only consumers of energy — and major consumer brands to boot:  Unilever (NYSE: UN), IBM (NYSE: IBM), United Parcel System (NYSE: UPS), Dell (NASDAQ: DELL), PepsiCo (NYSE: PEP).  The text is essentially silent in its (potential) messages to companies that are energy suppliers themselves or that supply to the energy industry. 

Is it because Deloitte has already told this message in another format to companies that are already generating revenues (as opposed to incurring costs) from energy?  Or, is it because such companies just don’t like the message and don’t want to hear it again?

Will it take generational turnover in the energy sector itself before Deloitte’s story is more widely endorsed?

Paving Path to Realistic Energy Modeling

Once upon a time, in a land called Maine, a girl (of a certain age) couldn’t help but wonder, “if you want to reward homeowners for saving energy in their homes, doesn’t it make sense to look at actual energy usage, something that accounts for behavior, as well as structures?” Soon, there were others, too, in lands far to the west and south who shared this wonder, antagonized by a protocol of projecting energy savings based on structural details. Perhaps modeling needs to be in line with actual utility bills and oil deliveries, and those actuals would better reflect energy savings, and more realistic carbon savings. Perhaps there needs to be a “before and after improvement” verification of savings, and a way for everyone to keep track.
The girl (of a certain age) checked out of the world for a couple years, to Southeast Asia where she found her bliss in colorful silk, and when she returned to the world of energy, she met a man who had a vision, in a land called New York. And he was called Tom. And he introduced her to people paving a path of realistic energy projections. And they were called Snugg Home.

The World According to BP

On January 18, BP (NYSE: BP) released Energy Outlook 2030, its official corporate view of the future of energy.  Every year, BP releases its Statistical Review of World Energy that serves as an excellent compendium of historical and current data on a host of energy-related issues, but rarely does BP present its projections of trends and the associated implications on the energy markets.

At the release event in London, BP’s CEO Bob Dudley made a brief speech covering the highlights of the Outlook.  It’s an easy and good read, which I will summarize here.

Dudley began by reciting what he termed “five realities”.  In reality, these so-called “realities” are nevertheless anticipations of events to come.  However, they do seem like pretty safe bets as playing out as described:

  1. Global energy demand will increase by 40% by 2030.  As Dudley notes, “that’s like adding one more China and one more U.S. to the world’s energy demand by 2030.  Nearly all that growth – 96% in fact – is expected to come from the emerging economies with more than half coming from China and India alone.”
  2. Fossil fuels will supply roughly 80% of global energy demand in 2030.  Dudley continues, “renewables will grow rapidly, but from a very low base.”  In other words, while renewables will be a great growth industry for the next few decades, the enormous head-start in market share that fossil fuels enjoys from more than 100 years of development, along with continued demand growth, means that energy markets and the energy industry will be dominated by fossil fuels for the lifetime of anyone who reads this blog post.
  3. Oil will continue to be essential for transportation, with 87% of mobility based on petroleum.  While increased fuel efficiency, hybrid vehicles, and expansion of biofuels will reduce needs for petroleum, the explosive growth of the developing economies and their voracious desire for vehicles means that oil demand will continue to grow.  Dudley notes that oil demand growth will be less than 1% annually, which “doesn’t sound like much, but it adds up to an additional 16 million barrels per day by 2030.”
  4. To supply this increasing demand, new frontiers will continue to be tapped.  This will be oil from deep water – what should be a sticky subject for BP, given the Deepwater Horizon debacle from less than two years ago – heavy oil such as the oil sands in Alberta (which Dudley noted needed to be “produced carefully and responsibly”), and unconventional gas plays such as shale gas and tight gas.
  5. Global CO2 emissions will rise by almost 30% by 2030.  Dudley emphasized that “this is a projection, not a proposal.  BP supports action to limit emissions including a carbon price and transitional incentives that encourage renewable energy to become competitive at scale.”  The last two words – “at scale” – are critical, not just for cleantech advocates and for the planet, but also supermajors like BP, who by their sheer size can only be bothered with energy phenomena that represent more than niches.

It’s a daunting picture.  As Dudley states, “this is not an outlook for the world as we wish to see it,” but nevertheless “it should be important input for policy-makers.”  And, it should be added, for participants and advocates in the cleantech space.

From this sober perspective, Dudley outlines “five opportunities” surfaced in the Outlook:

  1. Energy efficiency gains will be critical to the world of the future, as they simultaneously reduce consumer costs, improve energy security and cut emissions.  Frankly, this is “motherhood and apple pie” that just about all observers of the energy sector point out – nothing new here.
  2. Technology advancement will be crucial.  Dudley notes that BP thinks “the efficiency of the internal combustion engine is likely to double over the next 20 years” – an extraordinary possibility for a technology that’s over a century old and ought to be quite mature.  Innovation is not only imperative for efficiency gains but also for supply expansion to meet worldwide demand growth even netting out improvements in efficiency.  New energy supply technologies are not just in the realm of renewables but also in the realm of hydrocarbon production as well, increasing the economic access to fossil fuels on the frontiers described above.
  3. Competitive forces are an essential stimulant of capturing efficiencies and pursuing innovation.  Although Dudley doesn’t exactly say so, I think this is code for “expect increasing energy prices”, thus driving efficiency and new technology.  (Also unsaid:  “Don’t blame us or accuse us of gouging when energy prices are high.”)  I think these comments are also a soft unobtrusive plea for more access by private sector companies, and correspondingly fewer obstacles thrown up by governments, to developing new energy resources.
  4. Natural gas will be a very big thing.  Dudley calls natural gas a “sustainable option being deployed at scale”.  The latter claim of scale is inarguable, though the former claim of sustainability is semantically dubious.  Even so, it is true when Dudley says “gas typically generates fewer than half the emissions of coal” – notably, the one and only time that the word “coal” is uttered by Dudley in his entire talk.  (Admittedly, BP doesn’t have any coal business, but coal remains a sizable piece of the global energy economy, and to mention the role of coal just once is telling.)
  5. Biofuels show great potential.  According to Dudley, BP has “an optimistic view on the future of biofuels,” but “the world needs to focus on biofuels that do not compete with the food chain and are produced in a sustainable way.”  Thereafter follows some touting of second-generation biofuels (e.g., cellulosic ethanol), which still remain tantalizing but commercially-unavailable.  To me, this fifth “opportunity” is the most speculative of the bunch.

Dudley closes his comments by discussing BP’s obviously very substantial place in the world of energy. 

He acknowledges the Deepwater Horizon tragedy, and BP’s activities in expanding production of the controversial oil sands in Alberta.  No doubt, he had to, in order to avoid allegations of “greenwashing” BP’s record.

However, he tries to counterbalance this by extolling $7 billion of investments in renewables since 2005, “focused on creating large-scale commercial businesses that are not dependent on subsidies,” and BP’s emphasis on improving energy efficiency – in part because BP requires “all new projects to calculate the impact of future carbon pricing on their operations”, planning for “a future where carbon does have a price.”

Perhaps this is the most optimistic item in Dudley’s synopsis of BP’s future view of the energy sector over the next 20 years.  Hopefully, not unrealistic.

Banking on a Low-Carbon Energy Future

One of the world’s largest banks, London-based HSBC (NYSE: HBC) issued last September a very interesting research report entitled “Sizing the Climate Economy”.

At less than 60 pages, it’s an excellent read for those interested in the future growth of the advanced energy economy.  There are really too many highlights to capture all of them in this blog post, but here are a few snippets.

HSBC pegs the global low-carbon energy market — comprising low-carbon energy supply (renewables, nuclear, and carbon capture/sequestration) and energy efficiency (vehicles, buildings, industrial, energy storage, and “smart-grid”) — at $740 billion in 2009.

The HSBC authors characterize four potential scenarios between now and 2020:  ranging from a “Backlash” scenario where most world economies retrench from commitments to reduce or limit carbon emissions, to a “Green Growth” scenario in which many nations commit (and actually follow through on those commitments) to clamp down on emissions to an even greater degree than in earlier headier days of 2009. 

Even in the most-pessimistic (in my view, most realistic) scenario, the global low-carbon energy market is projected by HSBC to more than double by 2020, to about $1.5 trillion, representing an annual growth of over 6%.  By any account, and even under this uninspiring scenario, the low-carbon energy market is a solid growth market of the next decade.  If the dominoes fall right and we get a result similar to HSBC’s most optimistic scenario, then the low-carbon energy market would nearly quadruple to $2.7 trillion by 2020, for a 12.5% compounded annual growth rate.

The numbers in the HSBC report need to be taken with a grain of salt.  Any system or market as complex and multi-faceted as the global energy sector cannot be modeled with any great degree of precision.  If HSBC’s forecasts for 2020 end up within +/- 50%, I’d say they would be doing well.  What’s more valuable, in my opinion, about studies of this type are the qualitative conclusions that can be drawn.

In general, the energy efficiency side of the ledger fares better in HSBC’s analysis than low-carbon energy supply.  No doubt, this is because many effiicency options are lower cost (certainly, lower cost per ton of emissions reduced) than new low-carbon supply options — and because the demand for new energy supply options will inevitably be depressed as more efficiency is implemented.  HSBC is particularly bullish on electric vehicles, especially in the second half of the decade — an optimism that I’d like to share, but can’t at present based on the decidedly mixed results of 2011 for electric vehicles (as discussed in my last post here).

For most of the report, HSBC uses their “Conviction” scenario as “the most likely pathway to 2020″, in which Europe meets their renewable energy targets but not their energy efficiency targets, China more than meets their clean energy targets and becomes the largest market for low-carbon energy in the world, and the U.S. (disappointingly, but predictably) experiences relatively limited clean energy growth.  So, for those of you in the clean energy marketplace, the place to be is….NOT the U.S.

This report was written by a team of HSBC analysts based in Europe — and it shows in many places. 

The text refers several times to human-driven climate change as a phenomenon that’s commonly-known and understood to be a real issue, and the need for public sector intervention to address the issue — if not cap-and-trade or carbon taxes (which seems unlikely for the foreseeable future), then command-and-control regulation.   Alas, much of corporate America and most of one of the two major political parties in the U.S. (lots of overlap here) contends that climate change is unproven at best or a hoax at worst — and therefore undeserving of any policy initiatives.   

This study could never have been issued by a U.S. bank, or even a U.S. based team of a global bank, or else they would be disavowed.  It certainly won’t help HSBC grow market share for U.S. corporate banking services.

Notwithstanding the lack of political will and leadership (especially in the U.S.), HSBC is more hopeful about progress in lowering carbon intensity, because other co-aligned forces will be powerful in the coming years.  In particular, austerity will squeeze out inefficiencies.  Furthermore, the authors note that many countries are pursuing low-carbon strategies because such an emphasis fosters industrial innovation or offers the prospect of creating many “green jobs”.

As HSBC notes, “a low-carbon economy will be a capital-intensive economy”.  This makes intuitive sense, as the use of carbon-based fuels implies an ongoing set of economic activities to continually extract and consume the resource.  Put another way, low-carbon energy will be more about capital expenditures and less about operating expenditures.  And, a LOT of capital will be required:  HSBC estimates about $10 trillion of capital cumulatively through 2020, tripling from 2009 levels to reach an annualized rate of $1.5 trillion per year — “a large but manageable sum in our view”. 

Where will this investment capital come from?  “It will be private capital from corporations and consumers that will finance the climate economy — with governments setting the framework and providing capital at the margin.”  In typical understatement, HSBC notes that “the challenge for investors, however, is the lack of certainty over both policy intentions and actual implementation.”

That’s a polite way of saying the world will likely muddle through, somehow.

A World of Hurt

Seemingly generating nary a ripple here in the U.S., the International Energy Agency (IEA) just issued its 2011 World Energy Outlook — its annual synopsis on the future of the global energy sector. 

If ignorance is bliss, then we’re certainly blessed by generally not bothering to confront the pretty-alarming conclusions of the report. 

A pastiche of the highlighted snippets in the Executive Summary, when stitched together, provide a glimpse of the world we’re now choosing to invent for ourselves and future generations:

“There are few signs that the urgently needed change in direction in global energy trends is underway.”

“Global investment in energy supply infrastructure of $38 trillion (in year-2010 dollars) is required over the period 2011 to 2035.”

“The age of fossil fuels is far from over, but their dominance declines.”

“The cost of bringing oil to market rises as oil companies are forced to turn to more difficult and costly sources to replace lost capacity and meet rising demand.”

“Factors both on the supply and demand sides point to a bright future, even a golden age, for natural gas.”

“Coal has met almost half of the increase in global energy demand over the last decade.  Whether this trend alters and how quickly is among the most important questions for the future of the global energy economy.”

“The dynamics of energy markets are increasingly determined by countries outside the OECD.”

“All of the net increase in oil demand comes from the transport sector in emerging economies, as economic growth pushes up demand for personal mobility and freight.”

“China’s consumption of coal is almost half of global demand and its Five-Year Plan for 2011 to 2015, which aims to reduce the energy and carbon intensity of the economy, will be a determining factor for world coal markets.”

“Russia’s large energy resources underpin its continuing role as a cornerstone of the global energy economy of the coming decades.  Russia aims to create a more efficient economy, less dependent on oil and gas, but needs to pick up the pace of change.”

“International concern about the issue of energy access is growing.  Around $9 billion was invested globally to provide first access to modern energy, but more than five-times this amount, $48 billion, needs to be invested each year if universal access is to be achieved by 2030.”

“We cannot afford to delay further action to combat climate change.”

“New energy efficiency measures make a difference, but much more is required.”

“Widespread deployment of more efficient coal-fired power plants and carbon capture and storage (CCS) technology could boost the long-term prospects for coal, but there are still considerable hurdles.”

“Events at Fukushima Daiichi have raised questions about the future of nuclear power.”

“The wide difference in outcomes between [the scenarios analyzed in this report] underlies the critical role of governments to define the objectives and implement the policies necessary to shape our future.”

When observing the dysfunctional nature of the current political ecosystems in the U.S., in Europe, and in world affairs (e.g., the United Nations), and the increasing imperative for economic austerity to resolve the shortfalls in public coffers, it is hard to believe that governments (other than autocratic places like China and Russia) will be able to take any meaningful action to nudge the energy sector from its trajectory of “muddle-along.”  The chaos that IEA describes in the world energy scene will thus likely only intensify.

Lots of challenges in this world.  But, then again, lots of opportunities too.

“Off the Grid and Into People’s Homes”

In the November/December issue of EnergyBiz, you will find an unusual contributor to a magazine about the utility sector:  Bob McDonald, CEO of Proctor & Gamble (NYSE: PG).

Being one of the largest, most successful and savviest consumer marketing companies, P&G is often considered by utility companies as a model for how to develop and market new products or services. 

As more and more so-called “smart-grid” technologies go to market, enabling more active customer intelligence and management of energy consumption, the skill of rolling out innovative — and potentially lucrative — new offerings to households will be important both from a financial and an environmental standpoint.

For the utility industry, learning this skill is very challenging.  The utility sector grew through the 20th Century under a regulated monopoly structure, where customers didn’t have choices about providers, and often didn’t have choices about service levels either.  This codified innumerable business practices across all aspects of the utility business and shaped generations of utility employees to not know anything about individual customers — and frankly, to not much care about customers, other than the overarching mandate to provide reliable service levels.   To this day, many utilities still refer to customers as “meters” or “accounts” — hardly customer-centric terminology.

But it’s not just the fault of utilities.  As McDonald’s opinion piece “From Soap to Energy” notes accurately, “consumers are fairly passive about their energy needs — the only times they get involved are when costs go up or service goes out.”  With such customer indifference, it’s hard to break through the clutter and compel changes in behavior. 

And, this change in behavior is at the root of so many energy efficiency opportunities that — as a widely-cited McKinsey study points out — represent much of the “low-hanging fruit” in untapped emissions reductions.  Thus, unless utilities get stronger at marketing, much of the promise of energy efficiency will remain uncaptured.

McDonald’s brief essay is pithy — and not only highly relevant for utilities, but any cleantech innovator seeking to offer a new product/service. 

“We all occasionally fall into the trap of knowing more about the technologies we invent than about the people who use them.  This is usually a prescription for marketplace failure.  Successful innovation requires a deep understanding of consumers’ lives, dreams, frustrations and aspirations.  This level of understanding breeds insights that, in turn inspire innovation that improves lives.  It’s hard, time-consuming, hands-on work.”

Continuing:  “My advice to the electric utility industry is to get off the grid and into people’s homes.  Understand the role that energy plays in day-to-day lives.” 

For McDonald, this entails a degree of immersion into household behavior and sentiment that probably no utility has today.  For that matter, it’s a degree of immersion that few entrepreneurs developing energy-saving products/services have. 

Ultimately, the future of cleantech is not just, or even mainly, about the technology, or even its economics.  If smart-grid technologies, and cleantech in general, are going to transcend the entrenched customer indifference about energy, the future winners will have to somehow figure out a way to tap deeply buried dissatisfactions or unleash undiscovered sources of happiness regarding energy usage.

As the old adage says, “Nothing happens in business until someone sells something.”  And, as virtually anyone involved in cleantech ventures will tell you, there’s no more important validator of a technology or enabler of financial success than revenues.  This all starts with the essence of McDonald’s simple advice:  Know Thy Customer.  

Indeed, given the daunting challenges that utilities face in restructuring their century-old operations and grooming a new cohort of human capital to be more customer-centered, a whole segment of cleantech entrepreneurship may emerge to help bridge this utility-customer gap.

Get Yer Motors Running

Last week, I spoke with a few representatives from GE Motors and Services, one of the groupings under Industrial Solutions within the massive GE Energy business unit of General Electric (NYSE: GE).  In the course of the conversation, I received a brief tutorial on the state of affairs in the motor marketplace.

Although easy to overlook, motors add up to a very big deal:  according to the Department of Energy, motor-driven equipment accounts for an estimated 64% of U.S. industrial electricity demand, because motors are embedded in so many fans, pumps and processes — all of which are ubiquitous in the industrial sector, and particularly in the three largest end-user segments of power generation, oil/gas and mining. 

Because motors represent such a significant share of the nation’s electricity consumption and such a signficant outlay for U.S. manufacturers, the DOE has made motors a key area of its Industrial Technologies Program to improve the competitiveness of American industry.  There’s also a group of interested parties that has formed Motor Decisions Matter, a group that is hosting a website with information on motors to facilitate better decision-making on the subject.

Energy efficiency is arguably the primary factor in the motor market, because expenditures on energy consumption represent the vast majority of a motor’s total life-cycle costs.  For instance, a low-voltage motor might cost $4000, whereas its associated annual energy cost might be on the order of $40,o00 if it runs a large percentage of the time (not uncommon in industrial settings). 

Thus, each fractional gain of energy efficiency is huge, and paybacks on making an investment in a new motor might be as short as one year. For larger motors, it can be very economic to tear down and rebuild the windings to eke out a little more efficiency from the motor — that’s the Services part of GE Motors and Services.

As you might expect from such an industrial giant — one that was built upon electric energy — GE offers the full spectrum of electric motors from 1 to 100,000 horsepower.  Main targets for GE’s research agenda in motors centers on applications for electric vehicles, and also permanent-magnet motors to reduce the need for rare earth metals (as discussed in a prior posting of mine). 

Other desired improvements in motor technology center on relability — particularly since industrial users have reduced inventories of spare motors as capital budgets have been squeezed.  Two particular challenges stand in the way of improved reliability.  First, heat:  as a rule of thumb, each 10 degree increase in internal temperature reduces motor life by 50%, so considerable attention is being paid to materials and heat dissipation approaches.  Second, vibration:  bearing failures account for 52% of all motor failures, and vibration is at the source of most of this issue.

I didn’t hear anything from the GE Motors representatives suggesting that a major revolution is on the way in the motor sector — although GE is more known for continuous incremental improvements than in profound breakthroughs — but it’s clear that motors continue to be a fertile ground for innovation, so many decades after they became commonplace. 

It’s yet another a good reminder that all facets of the modern economy, even the most basic ones, are the subject of attention for innovation relevant to the cleantech sector.

The Man On The Street: Less Time On The Street, More Time In The House

I came across two data tidbits recently about U.S. energy consumption — each of which was interesting independently, but collectively seemed to indicate diverging trends.

First, gasoline consumption is down dramatically, by about 30% from 2007 — a good sign that we’re getting more energy efficient.

Second, residential electricity sales in 2010 were the highest on record, up 6.3% from 2009.  Uh, wait, I thought we were getting more energy efficient?

How to reconcile this seeming dilemma?  Here’s my theory.

Gasoline consumption is the product of two factors:  fuel economy of the vehicle fleet and vehicle-miles-driven.  While the fuel economy of the U.S. vehicle fleet has definitely improved in recent years (remember “cash-for-clunkers“?), total vehicle-miles-driven has fallen as well — by almost 2% since 2007, despite an increase in the driving population.  In other words, the average person is driving at least 2% less.

This is for two primary reasons, both of which are pretty obvious.  One, gasoline prices are near all-time highs.  Two, the economy sucks; unemployment rates are near all-time highs, and those who are employed aren’t driving around for fun as much anymore because they need/want to save more money.

It used to be the case that, when the economy tanked, gasoline prices collapsed.  Witness how much gasoline prices fell just in the six month period between July 2008 and January 2009, when the economy fell off the cliff.  Not anymore:  the U.S. economy is still wheezing, and gasoline prices have rebounded and remain firm because the developing world (especially China) continues to boom and suck up just about any/all oil production/refining capacity around the world.  All the spare capacity that existed (albeit briefly) as 2008 moved into 2009 and the world’s populace stared into the economic abyss has been absorbed by the global marketplace.

With gasoline prices high, the economy weak and Americans driving less, they aren’t spending as many discretionary dollars at the shopping mall or for recreation and entertainment.  So, they must be staying at home more.  They are cooking at home more.  They are watching more TV — on the big screen LCD units they bought during the past several years.  They are surfing the Internet, tweeting and chatting on Facebook.   

All of these shifts chew up more electricity.  So, what we’re seeing is a subtle shift in overall energy consumption patterns, away from transportation energy to stationary energy, and correspondingly from oil to electricity.  

The “man on the street” is more and more becoming the “man in the house”.

The Great State of Uticana

Last week, at the stunning student union of The Ohio State University, Battelle convened a meeting entitled 21st Century Energy & Economic Summit on behalf of Ohio Governor John Kasich, who both opened and closed the conference with some observations.   The agenda covered a wide spectrum of energy issues facing Ohio, and didn’t lack for interesting moments.

One of the hot issues in Ohio energy policy is whether the renewable portfolio standard and energy efficiency provisions of the last major energy act, SB 221 from 2008, are vulnerable.  Indeed, some of Kasich’s fellow Republicans in the Ohio Senate recently released SB 216, a bill to completely eliminate the renewable and efficiency requirements of SB 221 — although it is widely viewed that the bill has no chance of passage.  Acknowledging this, as reported by The Columbus Dispatch, Kasich said in his introductory remarks that several parties are “trying to get me to say we don’t need renewables here.”  But, he continued, “of course we need renewables.  Of course we need solar and of course we need wind.”  In his concluding remarks at the end of the two-day event, he reiterated that “I believe in renewables.  My kids believe in renewables.”

Kasich also had a kind comment for his predecessor, noting that the Strickland Administration had done “a number of good things on energy efficiency for the state” that needed to be built upon.

Nevertheless, expect some retrenchment that will not fully please renewable and efficiency advocates:  in his closing remarks, Kasich circled back and noted that he thought SB 221 would probably benefit from some tweaking, using as an example his exasperation that cogeneration hadn’t been given appropriate eligibility.  All signs point to hearings in the Ohio Assembly later this year to re-evaluate SB 221, although the Governor’s stated position providing some cover to renewables and efficiency seems to indicate that SB 221 at least won’t get entirely discarded or thoroughly trashed.  Stay tuned.

Indeed, one of the central themes of Kasich’s comments was that all players in the energy sector need to get along, that there’s a place for everyone, albeit maybe not to the degree that any one segment would ideally like.  As the Dispatch termed Kasich’s comments, “company executives in gas, solar, coal and other energy sectors needed to agreed to give up some turf as his administration crafts its policy.”  In kicking off the event, Kasich asked for “natural gas to work with coal, and coal to work with natural gas, and renewables to work alongside fossil fuels, and for the utilities to get along — well, that might be too much to ask,”  a perfect segue into the electric utility panel.

Attendees got to see some pretty feisty verbal jousting between Tony Alexander, CEO of First Energy (NYSE:  FE), and Mike Morris, CEO of American Electric Power (NYSE:  AEP), who differed strongly on whether competitive markets or regulated rate-base recovery mechanisms led to the best outcomes for electricity prices to consumers.  Not surprisingly, First Energy favors competitive markets — as they’ve spun off all their generation into an unregulated subsidiary and can earn attractive margins on their deeply-amortized powerplants — and is therefore unenthusiastic (to put it mildly) about renewable energy and energy efficiency requirements.  On the other hand, AEP believes that only regulation can provide enough price certainty and stability to ensure investments in new generation capacity that are both prudent for investors and customers alike. 

Keith Trent of Duke Energy (NYSE:  DUK) tried to split the difference, arguing for competitive energy markets to induce operational efficiencies and regulated capacity markets to foster capacity investment decisions that avoid boom-and-bust cycles of tightness-and-glut.  Perhaps even more striking was the different stance of American Municipal Power (AMP), the generation and transmission cooperative serving several municipal utilities in the Midwest.  To be sure, they do have a significant reason to have a different perspective:  as a non-profit corporation, they are exempt from regulatory oversight by the Public Utilities Commission of Ohio and not subject to any of the requirements of SB 221.  AMP’s CEO, Marc Gerken, indicated that his customers — the municipal utilities — were driving AMP to invest more in renewables such as hydro and wind, in large part to insulate themselves against the likely prospect that wholesale power prices will only increase due to rising fuel prices, more stringent environmental requirements and tightening capacity markets.  

Regarding coal, which the Dispatch article referred to as “long a driver of the state’s energy economy that is still subsidized with state taxpayer dollars,” Kasich noted that “we’re not going to walk away from coal.”  I remember Kasich also saying that “we’ll be using coal for the rest of my lifetime.”  However, Kasich said that we also “have to be mindful of the downside of it.  And we’ve got to think about cleaning it.”  In a subsequent interview with ClimateWire, as reported in The New York Times, Kasich acknowledged climate change as a legitimate concern, not taking the skeptical or denial positions so common to the beliefs of many of his fellow Republicans:  “there isn’t any question that the activities of humans have an impact.  As to what the extent of it is, I don’t know.”  

So, while he’s keeping the door open for coal, and supports its continued use, he’s also not blindly defending it to the death either.   I wonder if Kasich was amused or embarrassed by the impassioned rant of Robert Murray, President and CEO of Murray Energy Corporation (a privately-held Ohio-based coal mining company), in which he loudly called for the defeat of “Barack Hussein Obama”. 

All of this was preamble to the clear centerpiece of the event:  the discussion of opportunities afforded by the Utica Shale resource underneath much of Ohio.  And, the star of the show was Aubrey McClendon, CEO of Chesapeake Energy (NYSE:  CHK), by far the most visible cheerleader for shale gas exploration and production in the U.S.

As reported by BusinessWire, McClendon stated that their early test drilling results indicate that the Utica shale opportunity was likely to be very large — as large or larger as the most productive shale plays in the U.S., such as the Bakken, Barnett, Eagle Ford and (closer to home) Marcellus.  Also, it appears that it offers the potential for a three-prong play:  natural gas, gas liquids and oil.  When pressed to give a sense of magnitude of the Utica prize in Ohio, McClendon offered that he thought it could be worth $500 billion — “I prefer to say half a trillion dollars, it sounds bigger”.

McClendon restated what he had claimed in an early August appearance on Jim Cramer’s “Mad Money” CNBC show:  that he can foresee $20 billion of investment per year in Ohio for the next 20 years to pursue Utica opportunities.  Coinciding with the event, the Ohio Oil & Gas Energy Education Program (OOGEEP) released initial results of an economic analysis that estimated about 203,000 jobs in Ohio to be created by 2015 — just three years from now! — associated with pursuit of Utica shale gas.

Of course, these kinds of incredible (non-credible?) numbers being thrown around cause officials in economically-challenged Ohio to salivate.  According to the New York Times, Kasich said that “we’re sort of experiencing a gold rush.”   

The only pushback to unfettered pursuit of Utica is the rising chorus of concern from a wide range of environmental advocates about the use of hydraulic fracturing, more commonly-known as fracking, to produce gas from shale.  Among other places, New York, New Jersey and Maryland have issued moratoriums on fracking, primarily due to worries that the process will lead to water contamination, and secondarily due to fears that the activity may lead to ancillary emissions of methane (a potent greenhouse gas) and may increase prospects for earthquakes.

In the New York Times account, Kasich was adamant:  “There’s no problem with fracking.  I dismiss that.”  One of the reasons Kasich feels so confident:  under the prior Strickland Administration, the state of Ohio passed SB 165, a set of laws concerning oil/gas production that are claimed to be among the most stringent in the nation, including strong requirements for triple-casing all drilled holes to mitigate the potential for contamination or leakage to seep into other strata or release to the surface.

It appears that the Kasich Administration is bending over backwards to clear the path for Utica shale development, recently reassigning David Mustine from being the head of the Ohio Department of Natural Resources to a position that Kasich called “Shale Czar” in the newly-created privatized economic development agency JobsOhio.  From being invisible a year ago, Chesapeake has become a high-profile sponsor of Ohio State football — probably the most-scrutinized activity in Ohio — and McClendon has been known to meet frequently with top officials from Ohio.

Personally, I worry that the Utica shale is being viewed by the Kasich Administration and by certain segments of the government and private sector as the answer to all of Ohio’s issues.  Based on what I’m seeing, the state may soon be renamed “Uticana”.

I have no problem with environmentally-responsible fracking, which I believe is in fact doable, and endorse the pursuit of shale gas as long as it is truly “done right” (a phrase used often during the two-day event).  However, I fear that the Utica shale opportunity will be less spectacular than claimed — and if so, then putting all of Ohio’s eggs in that basket will have been a mistake.  McClendon and others on the shale panel noted frequently, as a disclaimer, that the drilling test results were still preliminary.  And, as the experience in other shale basins indicates, decline rates from shale production have been very steep — much more so than from conventional gas wells.

For the U.S. has long been insufficiently diversified:  we have an energy system that depends way-too-much on oil for transportation and coal for power generation.  As a result of that long over-reliance, we’re now painted into a challenging corner on a variety of environmental, geopolitical and economic fronts.  I don’t believe that any one energy solution — even those I have advocated for in Ohio, such as the offshore wind efforts being undertaken by the Lake Erie Energy Development Corporation (LEEDCo) and its partners — is the cure-all for our current challenges, or the road to future successes. 

Betting the farm on any one thing, even something as seemingly-compelling as Utica shale, will just paint us into another corner a few years from now.  To avoid this outcome, we need a more resilient and robust energy system — one that only diversification can provide.  In turn, this will require regulatory innovation, technological innovation and capital.

If I have a criticism of the two-day summit, it is that the last two input factors — technological innovation and capital — were mainly excluded from the proceedings.  There was literally no discussion of financing of the energy sector in the coming deacdes.

As for technology, the master of ceremonies, Joe Stanislaw, helped frame the conference at its outset with some big-picture remarks, including his provocative observation that “energy represents the new Great Game for the 21st Century”:  there is an intense global competition not only for the energy resources of the world, but the technologies to enable continued access to affordable energy to fuel economic growth.  Alas, the discussion panels never picked up on Stanislaw’s point.

If Ohio is to be something more than Uticana, not only does it need to pursue other energy options with some degree of vigor, it must also commit to creating an environment conducive to cleantech innovation and entrepreneurship — the font of much job-creation and wealth-creation in the 21st Century.  Surely, this is something that should be well-appreciated by Mark Kvamme (Kasich confidante, head of Jobs Ohio, and long-time venture capitalist at Sequoia Capital) and Wilber James (Kasich confidante, long-time venture capitalist at RockPort Capital, and planner of the agenda for this two-day event).

Notwithstanding the potential riches associated with the Utica shale, we cannot allow Ohio to become primarily a resource-extraction economy.  While some degree of resource-extraction is inevitable in modern society, examples near (West Virginia) and far (Nigeria) suggest that overreliance on this segment of economic activity is a path towards massive inequities and injustices, environmental degradation, low standards of living, and a wide variety of social ills.

Building Energy Performance: The Johnson Controls White Paper Library

Without much fanfare, Johnson Controls (NYSE:  JCI) has developed a number of very good white papers relating to building energy performance:  energy efficiency and renewable energy implementation for buildings.

The list of white papers includes coverage of topics such as:

  • Lighting retrofits for industrial facilities – including an illustrative example of the economics associated with a retrofit indicating a payback on investment of 1.24 years (presumably, one of the more favorable examples that JCI has encountered themselves).
  • Solar energy systems on building rooftops — summarizing the issues associated with implementing a solar project, backed by anecdotes from several case studies.
  • Combining on-site renewables with energy efficiency – reflecting the important concept that it’s typically cost-inefficient to supply electricity to a building with (usually higher-cost) renewable energy without first capturing many of the (usually lower-cost) energy reduction opportunities available from a variety of efficiency measures.
  • “Net zero” buildings – articulating a vision of building performance that requires extreme co-alignment and collaboration among all parties involved in the execution of a building:  the owner, the occupant (not always the same), the developer, the architect, the engineer, the general contractors and their subcontractors.
  • Financing of energy efficiency and renewable energy projects for buildings – providing an overview of the various lease and debt options that can be found in the marketplace.

Of course, it goes without saying that these are marketing pieces designed to promote JCI’s capabilities and offerings.  Even recognizing this bias, they are well-written, clear and concise on the germane issues facing building professionals in considering energy efficiency and renewable energy possibilities.  JCI’s library is a good addition to the resources available in the cleantech space.