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McKinsey on Energy Productivity

by Richard T. Stuebi

The McKinsey Global Institute — the think-tank offshoot of my alma-mater, the management consultancy McKinsey & Company — recently released a study claiming annual global investment of $170 billion between now and 2020 would cut greenhouse gas emissions in half, while producing an internal rate of return on investment of about 17%.

Interestingly, none of this investment is in renewables or other forms of zero-carbon energy. Rather, all of the investment is in energy efficiency.

Actually, McKinsey employs the term”energy productivity”: squeezing more economic output per unit of energy input. Maybe McKinsey is wise to be using the phrase “productivity” rather than “efficiency”, since it conjures up “more good stuff with less input”. As we all know, the concept “energy efficiency” has hardly caught the world by storm, as it seemingly falls prey to the same challenge as the word “conservation”, evoking the unpleasant images of sacrifice, making do with less, and Jimmy Carter wearing the cardigan.

Whatever the semantics, I hope that a study such as this one compels serious economic actors to deploy more capital to reduce energy consumption, and thereby reduce emissions. Per a quote in an article in The Financial Times from Diana Farrell, director of the McKinsey Global Institute, “it shows just how much deadweight loss there is in the economy in energy use.” Sounds to me like a big opportunity for savvy capitalists.

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

Can We Actually Reduce Energy Usage without Hurting GDP?

I was thinking today, in cleantech we often talk a lot about energy efficiency. Californians often cite that this state has grown its economy for the last 20 years without a significant increase in energy usage per capita, compared to the rest of the country, where GDP per capita goes up, and energy usage goes up just as much. But of course, California has lost much of its manufacturing sector over that same 20 year period, too. Perhaps no coincidence?

But if we wanted to actually do it, where could we actually save energy without impacting GDP growth, make a serious difference in our power bill, and do it in a big way – targeting say, 50% of our total power usage on a per capita basis?

  • CFLs & LEDs – We are already moving aggressively towards compact flourescent light bulbs, and the penetration rates are still low. As that trend continues, and LEDs come into the mix for more and more applications, our lighting bills should trend straight downward for the next decade. Now if we can just stop cringing at the thought of a $3 lightbulb!
  • Heating and Air Conditioning – I know whenever my power bill goes higher than I like, I just watch how often I turn the heater on, and adjust the thermoset a bit. The answer here has always been some combination of improved technology, smart metering and more transparency in billing and usage, and energy prices rising high enough for consumers to feel the pinch. Oh, and did I mention insulation, California?
  • Hotwater heaters – Can anybody say, “tankless”?
  • Power generation -If every power plant was upgraded to the latest generation of technology – in the power generation world – newer tends to equal more efficient all else being equal – the impact could be staggering. But bottom line, this means our regulators would have to approve the increase in utility capital expenditures and pass those costs on through to us in the short term. That’s about as likely as George W announcing a plan to tax every SUV Detroit makes and give the money to the poor to buy solar systems.
  • Solar – As for solar – which is typically sold on a “reduce your energy bill” pitch, not a chance. At $0.15 to $1.00/kwh (depending on who’s counting and how they count), if we actually reduced a significant amount of our building load with solar power we’d likely send our GDP plummeting. There are lots of reasons to love solar, but decreasing energy usage per unit of GDP is not one of them. At least, not yet.

These aren’t new ideas. But definitely worth repeating until we learn the lesson.

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

Powering the Planet

by Richard T. Stuebi

“Powering the Planet” is the title of an extraordinary speech that is regularly given by Nate Lewis, Professor of Chemistry at CalTech. It is a bit long and detailed, but very much worth reading, as it elegantly frames the scale of the worldwide energy/environmental challenges to be faced in the coming decades.

The gist of the presentation is that aggressive pursuit of energy efficiency is critical — but we still need to supply the remaining human energy requirement in some carbon-free fashion, which leaves us relatively few viable options:

  • Nuclear power, which concerns Lewis not for safety/security reasons but because of inability to expand nuclear utilization quickly/sufficiently to meet the world’s needs
  • Carbon sequestration of fossil fuel burning, which Lewis says may not be available in time or at the volumes necessary to have significant beneficial impact on climate change
  • Hydro, geothermal, wind and ocean energy, which are all fine in Lewis’ view, but inadequate in scope to supply global energy demands
  • Bio-based energy, which Lewis finds to be highly inefficient and therefore unlikely to be able to provide more than a small fraction of worldwide energy requirements

This leaves solar energy, which Lewis concludes is the best hope for the planet — technologically known to work, scalable with no binding supply limitations, at potentially reasonable economics with continued advancement. Then Lewis closes with the clincher: if we’re going to succeed with solar energy, our priorities need to change:

“In the United States, we spend $28 billion on health, but only about $28 million on basic solar research. Currently, we spend more money buying gas at the pump in one hour than we spend funding basic solar research in our country over an entire year. Yet, in that same hour, more energy from the sun is hitting the Earth than all of the energy consumed on our planet in that year. The same cannot be said of any other energy source.”

‘Nuf sed.

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

2007 Roundup

by Richard T. Stuebi

As has become my custom, with the year drawing to a close, I now look in the rear-view mirror and try to distill what I see. In no particular order, here are my top ten reflections on 2007:

1. Popping of the ethanol bubble. Not long ago, it seemed like anyone could get an ethanol plant financed. Now, no-one will touch them. Why? Corn prices have roughly doubled, and producers can’t make money selling ethanol into the fuel markets when having to pay so much for feedstock. Along with the increasing realization that public policies so far to build ethanol markets has largely been for the financial benefit of big agri-businesses such as Arthur Daniels Midland (NYSE: ADM), ethanol has now become a dirty word to many. Progress on cellulosic ethanol technologies may not happen fast enough to redeem seriously diminished public perceptions about ethanol generally.

2. Continuing photovoltaics bubble. For illustration of this phenomenon, let’s take a look at First Solar (NASDAQ: FSLR). Nothing whatsoever against the company; indeed, they make a very fine product. It’s just that their share price has increased by a factor of 10 — from $27 to nearly $280 — in one year. At current levels, the company’s market cap is $20 billion, at a P/E ratio of over 200. I know the solar market is hot, but geez, c’mon. A 10x return in one year on a publicly-traded stock is simply not supposed to happen.

3. Increasing costs for wind energy. For many years, wind energy has become more competitive, as the industry matured and production efficiencies were tained. However, with increasing prices for virtually all commodities (e.g., steel, copper, plastics) and a weakening dollar against the Euro (note that most turbines are made in Europe), the economics of wind are unfortunately moving in the wrong direction right now.

4. Gore as rock star. First, an Oscar for An Inconvenient Truth. Then, the Nobel Peace Prize. To top it off, becoming a partner at top-notch venture capital firm Kleiner Perkins. What next for the what-could-have-been 43rd President? Whatever it is, at least the cleantech sector now has its iconic poster-child.

5. Cheers to Google. Google (NASDAQ: GOOG) has gotten into the cleantech game in a big way by creating an initiative with the mission to develop and launch renewable energy technologies that produce electricity more cheaply than coal. Once that aim is achieved, renewable energy will rapidly become ubiquitous, and we really will start getting on a path of serious carbon emission reductions.

6. Death of the incandescent lightbulb. Early in 2007, Australia led the way to ban incandescents, to force a shift to more energy efficient lighting technologies (fluorescents for now, perhaps eventually LEDs). Amazingly quickly, the U.S. followed suit, passing an energy bill by year-end that effectively phases out incandescents by 2014. This should have a major energy efficiency impact, and yield a big cut in greenhouse gas emissions, in a relatively short amount of time.

7. Tightening CAFE — finally! After decades without change, the U.S. Congress finally acted to impose more stringent corporate average fuel economy (CAFE) standards for auto/truck manufacturers. The main milestone is a 35 mpg combined car/light-truck standard by 2020. For the first time, trucks are now part of the CAFE equation, closing the loophole that helped propel SUVs to prominence. Strengthening CAFE is probably the most important thing that American politicians could do to actually make a meaningful dent in reducing dependence on Middle Eastern oil.

8. Uncertain future for coal. On the one hand, MIT released a major study entitled “The Future of Coal” that compels a radical R&D push to commercialize technologies for carbon capture and sequestration (CCS), underscoring the reality that coal-fired electricity generation is going to be a major factor for a long time. On the other hand, I don’t see any such coal R&D push actually happening, nor even that much progress on CCS. A recent statement by the U.S. Department of Energy concerning its oft-touted FutureGen program for piloting CCS technology indicates a possible retrenchment. Meanwhile, Pacificorp — which is owned by Warren Buffett’s legendary holding company Berkshire Hathaway (NYSE: BRKA and BRKB) — recently cancelled a coal CCS project in Wyoming, with a spokesman quoted as saying that “coal projects are no longer viable.” Ouch.

9. Oil at $100/barrel. Starting the year at about $60/barrel and then promptly falling to near $50, oil prices increased steadily from February to November, reaching the high-90’s. I suspect we’ll see $100/barrel sometime in 2008; I don’t suspect we’ll see oil below $40/barrel very much anymore. Even at prices not long ago considered absolutely stratospheric, it appears that there’s been very little customer/political backlash so far: the world doesn’t seem to be ending for most Americans.

10. Serious dollars betting on energy technology. There’s been a lot written about the big surge in venture capital invested in new energy deals. I find even more intriguing the increasing amount of corporate and public sector investment in new energy R&D. As perhaps the most prominent example, in the U.K., the government has pledged up to $1 billion over the next 10 years in matching support to private investments in the Energy Technologies Institute, which includes the participation of such leading corporate lights as BP (NYSE: BP), Shell (NYSE: RDS.A and RDS.B), Caterpillar (NYSE: CAT), Electricite de France (Euronext: EDF), E.ON (Frankfurt: E.ON), and Rolls-Royce (London: RR.L). That’s a lot of money and corporate weight in the mix. I can’t imagine that such an initiative will produce nothing of use.

Best wishes to you and yours for 2008. Let’s hope it’s a good year, even better than the one wrapping up.

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

Policy Progress in the Midwest

by Richard T. Stuebi

When it comes to clean energy, it’s no secret that the Midwest U.S. far lags beyond the East and West Coasts. This is because, on the coasts, public policy far more aggressively promotes advanced energy. The Regional Greenhouse Gas Initiative (RGGI) in the Northeast and the Western Climate Initiative in the West are regional emission-reduction compacts that will drive significant adoption of renewable energy and energy efficiency. Correspondingly, much of the future advanced energy industry is emerging on the coasts, getting established to serve local markets, while the Midwestern industrial base largely hollows out and stagnates.

A few weeks ago, the Midwestern Governors Association (MGA) began to take steps to close the gaps. The Governors of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Ohio, South Dakota and Wisconsin, along with the Premier of the Canadian province of Manitoba, met to discuss shared energy challenges. The result: two pacts that start to lay the groundwork for regional collaboration and commitment to energy/emissions reductions.

The Energy Security and Climate Stewardship Platform sets significant goals in four areas:

  1. Energy efficiency: electricity demand reduced by 2% by 2015, 2% per year thereafter
  2. Biofuels: 1/2 of regional transportation satisfied by biofuels and other low carbon fuels by 2025
  3. Renewable energy: 30% of regional electricity supply from renewables by 2030
  4. Coal with carbon sequestration: all new coal plants with sequestration by 2020, all plants in fleet by 2050

The Energy Security and Climate Stewardship Platform also proposes six areas of regional collaboration:

  1. Carbon management infrastructure: for transporting and storing CO2 in a coordinated fashion
  2. Bioproduct procurement: to establish a common marketing/sales framework for bioproducts
  3. Electricity transmission: to expand transmission to accomodate greater amounts of renewables (especially wind)
  4. Renewable fuels infrastructure: for transporting biofuels and other low carbon fuels
  5. Bioenergy permitting: to avoid duplicating or conflicting efforts in various jurisdictions and arrive at common standards
  6. Low carbon energy integration: to demonstrate the potential to harness multiple forms of advanced energy synergistically

Lastly, some of the Midwestern governors signed the Greenhouse Gas Accord, which commits the signatories to establishing targets and timeframes for greenhouse gas reductions on the order of 60-80% reductions by 2050, along with a cap-and-trade mechanism for reaching these targets.

Note that only some of the Midwestern governors got on board with the Greenhouse Gas Accord. Signatories were Iowa, Illinois, Kansas, Michigan, Minnesota, Wisconsin, and Manitoba. Indiana, Ohio and South Dakota only opted for “observer” status — whatever that really means.

A spokesman for Ohio Governor Strickland was quoted by Gongwer in saying that “the governor supports the Midwest states’ effort to move forward in the way outlined in the agenda, but Ohio is not in a position today to participate actively in [the Greenhouse Gas Accord].” I am compelled to ask: what exactly about Ohio’s current energy situation is materially different than, say, Michigan (which signed the Greenhouse Gas Accord)?

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

In the Dark

by Richard T. Stuebi

As a subsidiary of GE (NYSE: GE), which of course is touting its Ecomagination strategy, NBC Universal declared a Green Week, with the tag-line “Green is Universal”, in which NBC will weave environmental awareness into all its programming this week. All of its programming — including sports.

This made for a very weird half-time show during last night’s Sunday Night Football game (Dallas Cowboys vs. Philadelphia Eagles). Instead of highlights from the games played earlier in the day, the studio hosts (Bob Costas, Keith Olbermann, Cris Collinsworth) spent ten minutes huddled around a few flickering candles barely illuminating their faces amidst an otherwise completely dark set.

With this dramatization, NBC claimed to be doing its part to reduce greenhouse gas emissions by lowering its energy consumption: darkening the set for a few hours otherwise lit would save an amount equal to a typical household’s monthly electricity use.

While laudable in its intent, the dark set instead produced a scene that left me cringing. The hosts giggled like grade-school boys, clearly embarrassed, joking amidst the absurdity of attempting to televise a show in utter darkness. The good intentions of GE/NBC were thereby completely undermined by the snickering of the “talent”.

NBC’s implicit message to the audience was that reducing energy consumption means severely sacrificing commonly-assumed standards of living. Remember Jimmy Carter in his much-ridiculed cardigan sweater, urging all of us in a famous late-1970’s national speech on energy (“Moral Equivalent of War”) to lower our heating thermostats and accept some discomfort so that we didn’t burn so much heating oil? This was worse, much worse. It was as if to say that, to be solid citizens, we need to use fire for lighting. What next, horse-drawn carriages? Through their laughter, the hosts recognized the message they were asked to deliver as ludicrous, completely untenable to a U.S. mass public, and they couldn’t help but distance themselves from NBC’s ill-conceived script.

For U.S. listeners, the conversation regarding energy efficiency needs to be framed in the context of the same (or better) lifestyles with lower energy consumption. A reversion to the Stone Age is simply NOT what the average American will entertain.

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

Utilities Ramping Up Energy Efficiency

by Richard T. Stuebi

In the early 1990’s, before deregulation, the big issue for electric utilities was demand-side management (DSM), often pursued in the context of least-cost integrated resource planning efforts, to help customers reduce energy consumption in ways that were financially beneficial to the utility as well as the customer.

Alas, with the move to competitive markets, energy efficiency largely got lost in the shuffle. Utility expenditures on DSM plummeted.

It appears that utility activism on energy efficiency has returned. Earlier this month, the Edison Electric Institute (EEI), the trade association for the electric utility industry, announced that it was creating a new institute for electricity efficiency. Last year, several utilities (and other energy industry leaders) launched a National Action Plan for Energy Efficiency. Duke Energy (NYSE: DUK) is increasingly vocal about its view of energy efficiency as the “fifth fuel” — after coal, natural gas, nuclear and renewables. PG&E (NYSE: PCG) runs its Pacific Energy Center in San Francisco to educate building professionals on energy efficiency technologies.

Renewables might be sexier, and in the long-run extremely important, but there’s little that offers greater impact to address our energy and environmental challenges in the near-term than energy efficiency. Thankfully, we now seem to be getting the utility industry back on-message.

Want to learn more? A good one-stop shop on energy efficiency is the aptly named American Council on an Energy-Efficient Economy (ACEEE).

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

Is Microsoft Vista Global Warming Friendly?

Is Microsoft Vista global warming friendly? Could Vista be the best selling cleantech product in the world? I was thinking about this question the other day, and started emailing the Microsoft (Nasdaq:MSFT) press relations folks looking for an answer.

The Microsoft answer – yes it is. They have a recent release entitled “Windows Vista Power Management Features Can Help UK Companies Reduce Their Carbon Footprint” on some independent research they had done by PC Pro Labs in the UK.

Here’s their quote:

“Windows Vista is Microsoft’s most energy efficient operating system to date with its power management system, functionality, reliability and default settings focused on helping to reduce overall PC energy consumption. The key areas where the Sleep mode in Windows Vista has been improved compared to the equivalent Standby mode in Windows XP include:

• Enter Sleep mode after being inactive for 60 minutes
• In Windows Vista, it is much easier for users to change the power management settings themselves
• The Sleep mode is more reliable than Windows XP’s Standby mode, both in terms of entering the mode and safely resuming back into Windows
• Windows Vista is much quicker at resuming from Sleep, now taking two to three seconds compared to five seconds for Windows XP”

They also published a whitepaper entitled “Windows Vista Energy Conservation“. Reading through it all, Vista does seem to be an energy efficiency masterpiece.

But I wonder – the description of these tests seemed to quite fairly compare the XP and Vista operating systems running through a series of different scenarios – but it’s not a survey of real world conditions.

So I’m probably convinced that if you run the same computer post-Vista the exact same way you ran it on XP, that you’d use less power. Vista itself may actually BE the best selling cleantech product in the world. But in the real world, we don’t work that way. Each year we add a whole lot of new features and programs that suck down power, and buy more powerful PCs to run them on with every upgrade. And part of the promise of Vista is to enable even more such goodies – possibly offsetting the energy savings.

So are Windows users who have upgraded to Vista running the same programs in the same way, and the same (or more energy efficient PCs) and therefore using less power? Or are they actually using more or different features, or on a more powerful energy hog PC, and despite Microsoft’s energy efficiency efforts, using more power on a daily basis anyway after the upgrade? That might not be something Microsoft could control – but I’m sure curious as to the answer from a carbon standpoint.

As a matter of full disclosure, I run XP at the office, Vista at home, own a small amount of Microsoft stock (and am a very big fan) and have a very bad habit of leaving my computer and monitor on – but I’m working on that.

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

Market demand for green buildings – no less than 5 star

by Nick Bruse

Currently I’m doing quite a bit of work in the Green Building Industry and we are currently seeing a very rapid transformation in the thinking of leading developers around green building development.

In today’s ‘The Age’ one of Australia’s major newspapers we have Daniel Grollo, one of the high profile developers in Australia, admitting to the market that 2 years ago he was wrong in only shooting for a 4 star Green Building Rating (6 currently the highest) on a number of developments. The demand from tenants has sky rocketed recently, and luckily design consultants advised him to go for one star higher. While this cost the company more, had they not done so they would have delivered an obsolete building.

Next week I will be heading down to Tasmania to moderate a panel session of the ADPIA (Australian Direct Property Investment Association) dealing with sustainability and green building development. Through my work with my current client who advises property developers and project manages construction projects, the biggest issue clients are stating is “How do I achieve sustainability in my property portfolio or asset effectively?”

Whilst the technologies to achieve significant reductions in energy use, water consumption and waste production, and the tenant market in Australia is demanding green star rated buildings, there is still a lot of uncertainty in developers of how to actually transition their portfolios. Quantifying the returns, choosing between alternative solutions, even choosing a service provider is challenging in this space.

That said, the expectation is that there is unlikely to be any new major developments in Australia now with a green star rating of less than 5. Water pressures is one thing driving this issue, but for the most part, major tenants are willing to pay more for a green star rated office in Australia, because it offers them better productivity, better employee attraction and retention and lowers their overall costs.

For more information on the Australian Green Star Building Rating you can go to www.gbcaus.org you can find the background articles on Daniel Grollo’s comments here ( 1 and 2 )


Nick Bruse runs Strike Consulting, a growth venture consultancy specialising in the cleantech sector and hosts the cleantech show, a weekly podcast of interviews with leaders involved in clean technology research, entrepreneurship, commentary and investment.

De-Reg Do-Over

by Richard T. Stuebi

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The love and hate relationship with platform technologies

by Nick Bruse

One of the terms that is used to describe companies every so often is the word “platform technology”. Companies who have been labelled as “platform technology” companies invariably fall into two camps. Those which all the investment community easily understand the technology and it has applications that they all can visualise – and hence they want to throw money at. Secondly those that they don’t really get the potentially for the applications and brand as “complicated” or “no clear business model” or “Not focused”

Recently I interviewed David Forder from TAG Technology, which is a platform technology company. Their product, or their additive ( an often even scarier term for investors) has applications in over 25markets that they have identified so far. Now its been several years to get their product to the stage at which it is now, and David tells me has taken some committed Investors who have stuck with them for the long run. But it hasn’t been a case of money being thrown at them… but now they are getting some attention.

The interesting thing about Thermally Active Granules (TAG) technology is that when applied to buildings in the form of a paint additive can reduce the heat flow by 15% which results in up to 7 degrees warmer/cooler. You can apply it on the outside of the building to keep it cool, or paint it on the inside to keep it warm. Oh and it can be added to windows also to reduce heat flow.

It can be impregnated into candy bar wrappers or food packaging and reduce refrigeration costs, and can even be added into fast food packaging to keep your fries hotter and your soda cooler.

The other neat thing is when applied to power lines in the form a clear coating it can reduce the line temperature by 25% or from 100C down 75degree. This in turn reduces the resistance, in turn reducing the power losses form the line by 10% or more.

It really starts to sound interesting doesn’t it? We’ll I heartily commend David and his Team on this platform technology – and for sticking with it. This is one platform technology we should be thankful for someone having the innovation to produce. If you would like to hear more from David about the technology you can tune into the interview on The Cleantech Show here.

If anyone has any other Cleantech Platform Technologies they would like to commend – please shoot us some comments.


Nick Bruse runs Strike Consulting, a growth venture consultancy specialising in the cleantech sector and hosts the cleantech show, a weekly podcast of interviews with leaders involved in clean technology research, entrepreneurship, commentary and investment.

Westport – The Greening of Big Trucks

One of the companies I have followed for some time is Westport Innovations, Inc., (TSX:WPT) out of Vancouver. The technology and product suite allows large diesel trucks to run standard diesels on a 95% natural gas mix, enabling fuel switching as well as significantly improved NOx and PM, as well as CO2 emissions. The company’s rapid expansions date from a late 1990s joint venture with Cummins (NYSE:CMI), and Westport has led this market sector since then.

I had the opportunity at the recent Greenvest 2007 Conference I chaired in San Francisco to hear the talk of my friend Dr. Mike Gallagher, President & COO of Westport, and asked him to share a few thoughts for Cleantech Blog based on his conference presentation.

A few quick quotes from their website on the technology (you’ll see why I like it so much):

“Westport™ HPDI (High Pressure Direct Injection) natural gas engines on the road are producing approximately 50% less nitrogen oxides (NOx), 80% less particulate matter (PM), and 20-25% less carbon dioxide (CO2) emissions than equivalent diesel engines.” – These are the regular diesels running on 95% natural gas.

Westport has also been developing a Compressed Natural Gas Direct Ignition technology that basically similarly enables a straight natural gas engine to run direct injection like a diesel. The benefits include:

“- near-zero emissions of particulate matter
– 20% less greenhouse gas emissions (mainly carbon dioxide) than equivalent diesel engines
– 25% increased fuel efficiency over current spark-ignited natural gas engines”

Mike, before we go into your thoughts on Westport, let me lay out some of your background in energy engineering. Mike was previously Senior Vice-President, Americas, for Fluor Corp, and held executive officer positions with the Bechtel Group in San Francisco and London-based Kvaerner Group. He also has PhD from Stanford in Mechanical-Nuclear Engineering. So Mike, thanks for the time today.

Mike, I know Westport makes products to run diesel engines on natural gas – how exactly does this work?

Westport’s LNG System for Heavy-Duty trucks uses a small amount of diesel pilot fuel for robust ignition and then allows the truck engine – we’ve based our technology on the Cummins ISX diesel engine platform – to operate using approximately 95% natural gas for high duty cycle applications. The combustion approach uses a high pressure direction injection of natural gas into the diesel combustion chamber.

Can you tell us about the greenhouse gas impact of your products? That’s such a hot topic these days.

Emissions regulations are the norm now, particularly in California where we are actively pursuing opportunities for the use of our heavy-duty product. The Westport LNG system truck produces 15-20% less greenhouse gas emissions, compared to an equivalent diesel engine.

Our joint venture company, Cummins Westport Inc., offers mid-range products for medium-duty truck and bus applications. CWI’s advanced ISL G engine produces 7-13% less greenhouse gas than the equivalent diesel.

As you just alluded to, and for those who haven’t followed the company, Westport has a major joint venture with engine company Cummins. How does this arrangement work and what’s in it for Westport?

Cummins Westport Inc., or CWI as we call it, is a 50:50 joint venture between Westport and Cummins Inc. The JV company is headquartered right here in Vancouver with us, it has a dedicated management team and a dedicated Board of directors.

Profits (and losses) are shared equally by the two parent companies. CWI Cummins Westport Inc., a joint venture of Cummins Inc. (NYSE:CMI) and Westport Innovations Inc. (TSX:WPT), manufactures and sells the world’s widest range of low-emissions alternative fuel engines for commercial transportation applications such as trucks and buses. Cummins is a global power leader in engines, electrical power generation systems and related technologies. Westport Innovations is the leading developer of technologies that allow engines to operate on clean-burning fuels such as natural gas, hydrogen, and hydrogen-enriched natural gas (HCNG).

Revenues grew approximately 40% from 2006 to 2007, to $60 million Canadian, what were the major drivers – and is that growth expected to continue? Where should investors expect the growth from?

The 39% increase in annual revenues was driven by increased CWI engine shipments (up 50%) and the delivery of our first Westport LNG systems for heavy-duty trucks. Product sales growth which we measure in Canadian dollars was actually offset by a 5% decrease in the US dollar exchange rate. In US dollar terms, revenue growth was 44%. Growth for the next couple of years is expected both from CWI global sales growth around the launch of its new ISL G, and from sales of Westport’s new LNG systems for heavy duty trucks.

And the company turned a profit for, I believe, the first quarter ever in this last quarter. Does this mean Westport has turned the corner? The company has a fairly large retained deficit – and I know investors have been looking for profits to begin erasing it.

We are pleased about this last quarter’s results for sure. We have a solid history with CWI and a new HD product now and the markets are responding. The profitability for this recent quarter was driven by a number of fortuitous events that occurred during the quarter on a one time basis. So we will continue to push for improved profitability on a recurring basis.

Perseus, one of your major shareholders (who has had two seats on the board) recently sold a large amount ($50 million worth) of shares. What was the story there? Didn’t Perseus loan money to the company just last year? Should existing or prospective investors be worried?

No, certainly no cause for worry, quite the reverse actually. In fact, the sale erased planned interest payments by Westport to Perseus which is a positive for us, and Perseus elected to capitalize on a a very attractive financial opportunity available to them based on our significant share price increase in recent months.

The stock price has tripled in the last year – what were the drivers and are you worried the run up was too steep?

It’s always hard to know exactly what is going on out there in the marketplace, but we think the market has responded primarily to two things: our CWI business is demonstrating strong and growing profitability, and our heavy duty LNG truck business has launched with some early sales and big opportunities at the Port of LA and others.

We think we are now being valued more broadly for our expertise, we are meeting expectations, and the regulatory system is catching up with our technologies, opening the door for more sales. CWI has an engine offering available now that is certified to 2010 emissions standards – that’s 3 years ahead of schedule! And Westport is positioned to provide LNG systems in trucks in California now, where they have approved a five year Clean Air Action Plan at the Ports of Los Angeles and Long Beach to replace up to 5,300 older diesel trucks with LNG trucks in five years.

Do you have any plans to list on Nasdaq in the future to make it easier for US investors to buy in?

We are always looking at listing alternatives and have expanded our communications with US institutions and investors. But we don’t have any immediate plans to do a US listing.

You personally came to Westport from big corporate engineering – what had attracted you to the company?

That’s true, I had spent 25 years and grew into senior executive positions with the pre-eminent engineering and project management companies in the world- well known names like the Bechtel Group and the Fluor Corporation. Within those companies though I had dedicated a fair piece of my career to development of alternative energy technologies- particularly alternatives to oil- and to environmental cleanup technologies. And to the entrepreneurial creation and growth of new businesses. And of course I had my Stanford and MIT engineering and technology roots to draw from. So when the Westport opportunity came along almost five years ago, I felt it was a great way to take everything I had learned and apply it to a fast-growing technology company. A place where I could work with some of the brightest young talent around to transform Westport from an R&D company to a full commercial company, making a serious contribution to solving some of the world’s oil, energy, and environmental challenges.

If you had to give an investor three reasons to like Westport – what would you pick?

Real and growing sales, short term commercialization opportunities, and a technology right in the wheelhouse of current world needs around oil, energy, environment, and climate change.

For more information, you can visit the Westport website.

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

Reflections on Illumination

by Richard T. Stuebi

While grocery shopping yesterday, I found that our local store has finally started stocking GE (NYSE: GE) compact flourescent lightbulbs (CFLs).

Candidly, my experience to date with CFLs has not been positive. Last year, I went to Home Depot (NYSE: HD), where I tend to buy household gadgets, thinking they would have the best selection of CFLs. At least back then, Home Depot didn’t carry GE CFLs (some say this was because of ex-CEO Bob Nardelli’s lingering resentment of having been passed over for Jeff Immelt when Jack Welch stepped down as CEO of GE), so I bought what Home Depot had in stock: a carton of private-label CFLs, for about $10 for a 5-pack.

I wish I could say that I was blown away by the CFLs, but regrettably, I wasn’t. In my assessment, the light quality provided by the CFLs was too pale, and it took far too long (10-20 seconds) to reach even a minimally acceptable “warm” color. Furthermore, the CFLs were not usable in many of the applications in my home: they don’t fit into lamps with tight covers/shades, and when installed to a fixture with dimmers, they emit an annoying loud buzzing sound — and an awful Snap-Crackle-Pop (and I don’t mean Rice Krispies) when the dimmer is turned down.

My initial foray into CFLs thus resulted in considerable disappointment. Although I don’t feel good about it at all, so far I’ve generally stuck with the old horribly inefficient incandescents — they at least produce a quality of light that I’ve come to expect.

I’ve been told that CFL quality varies, and that GE’s CFL products are quite a bit better — albeit more expensive — than the generic brands of the kind I had bought. I didn’t search all over town for GE CFLs, but I never saw them anywhere I happened to be shopping. Until this weekend.

Now, here in front of me finally were individually-packaged GE CFLs, the 15 watt (60 watt incandescent equivalent) priced at $4.49. Two shelves below were the standard GE incandescent 60 watt soft white lightbulbs, priced at $1.59 for a 4-pack, or about $0.40 per bulb. The CFL is thus 11 times more expensive, on a first-cost basis, than the incandescent. For the average customer, who is typically very conscious of the initial cost and pretty clueless about life-cycle economics, this is a really big spread.

In small print on the CFL packaging, GE claims that the 15 watt CFL bulb will save over its 3000-hour lifetime $13 worth of electricity (at $0.10/kwh) relative to 60 watt incandescents offering the same lumination.

$13 worth of electricity savings for an extra $4 up-front sounds like a pretty good deal. However, of course, it all depends on how many years it will take the user to generate the $13 of electricity savings — which in turn depends on how much the user uses the lightbulb.

A year is comprised of 8760 hours, so if the CFL operates 24/7, it will only take a few months to generate $13 in savings. Perhaps more importantly, it will only take a few weeks to pay back the extra $4 for the CFL instead of the incandescent. But, few of us use any lights anywhere near that much.

For a lamp used an hour a day, or about 300 hours a year, it will take 10 years to achieve the $13 in savings — or about 3 years to recover the $4 extra premium for buying the CFL instead of incandescents. A 3-year payback represents a good internal rate of return, on the order of 20%, which is far better than the long-term returns historically offered by the stock market.

So why don’t I pursue a 20% financial return? On further consideration, I am put off for two reasons.

First, I can see for sure the $4 extra leaving my hands today to buy the CFL — but I don’t have anywhere near the same degree of confidence that I’ll actually generate the economic savings at the desired pace. Will I really use the CFL about an hour a day? It might be more like 15 minutes a day, leading instead to a 12 year payback period — an outright unattractive financial return.

Second, I am strongly influenced my past negative experience with CFLs. If I buy this expensive lightbulb today, will I like its light? Will I be annoyed every time I turn it on and wait for it to have a color I can barely tolerate? Will I swap it out for a regular incandescent after a few weeks?

When I reflect upon it further, it’s the second set of considerations that put me off from buying that GE CFL. I bought CFLs in the past that I disliked, and don’t use. They were a bad investment. Even though it’s relatively small dollars involved, I don’t like making mistakes — and I really hate making the same mistake twice.

I speculate that I might not be alone in having a poor first impression of CFLs. Such a bias will probably need to be overcome by a no-cost favorable experience with a good CFL. If they really want to build the market, players like GE might consider an investment in a mass-scale public free trial — a mailbox stuffer? — of CFLs. I know that if I got a GE CFL for free, I’d give it a go — and assuming I liked the product, maybe then I’d consider buying some at $4.49 per.

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

Blogroll Review: Vegan Power, Lasers, & 18 Seconds

Going Green? Go Vegan.

Who says grocery shopping can save greenhouse gas emissions? Perhaps those who just buy vegan.

That’s right. Choosing the right products at your supermarket can impact your carbon footprint. Jessica Marmor at the Wall Street Journal provides an in-depth analysis of different strategies at home, on the road and in the grocery store.

Mark Gongloff, staff writer at WSJ, says that “the most-difficult at-the-grocery store tactic is to go vegan, which could save 3,000 pounds of CO2 a year, or about 8% of the average American’s annual production of 40,000 pounds of CO2. The easy way? Eat whatever you want, but only as long as it’s locally made (thus cutting down on transportation). Such a tactic might keep 60 to 242 pounds of CO2 out of the atmosphere a year.”

Beam Me In

Lasers have come a long way since Charles Townes’ discovery. They are used for everything from supermarket checkout scanners to removing fat in liposuction, but a Silicon Valley startup PowerBeam has found another use: energy transmission.

Matt Marshall at Venture Beat says that “Using a laser to beam light, the energy of which would be used to power your laptop or other device without having to plug it in.”

Although the idea has been around for a while, beaming lasers raises concerns of safety, which the company claims to have addressed. Matt adds that “if the laser power itself were to come from solar panels, the entire energy transmission system would be solar. With venture capitalists so passionate about the clean energy area, Powerbeam may just find some backing.”

18 Seconds

18 seconds may be enough time to eat an entire hotdog, but according to Yahoo, that’s also enough time to reduce 450 pounds of carbon dioxide emissions.

Many of us already know that by simply changing a bulb from the conventional incandescent lamp to the newer compact fluorescent lightbulb (CFL), we can reduce electricity use and emissions by two-thirds or more. But on this week’s Switched, Phillip Crandall also showed us other earth friendly tips.

Frank Ling is a postdoctoral fellow at the Renewable and Appropriate Energy Laboratory (RAEL) at UC Berkeley.

Nigerian Scams Move into Solar?

I received this brief missive in my email box last night. Fascinating, but true, Nigerian scams appear to be moving into solar. Does that mean solar has grown up?

The email read:

“Dear sir/Madam,

This is to introduce our co. to you that we are in Uganda (East Africa) andwe kindly request you to give us prices of the 75watts and 80watts of solarmodules Please, we kindly request you to make all pricesin USD that are cif Entebbe airport.We shall be very happy for the quckest response.

rgds Lutaya Macon the behalf of

MM. GENERAL MERNDISE PLOT NO.4 BOMBO RD P.O BOX 5435 KAMPALA UGANDA EAST AFRICATEL: +256-772-579326″

It looks like a classic Nigerian scam, where after making contact, one eventually receives the opportunity to pay or front some money, in order to unlock illgotten gains that they will pay into your account later – but of course never do.

I get one of these every day, and as usual:

– it came from a hotmail or free account but purported to represent a legit business or a scam opportunity,
– came from an African country addressed to Dear Sir/Madam,
– very polite if unsophisticated writing style (complete with abbrev.),
– had a very long generic sounding PO Box address
– had nothing to do with my business, but acted like it did (I don’t actually sell solar cells, I just write about them).

They’ve been getting more sophisticated over the years – and now rarely ask for money up front, instead trying to lure you into some sort of a business relationship first. But it’s still a Nigerian scam.

Here’s the rub – never in the 10 + years I’ve been getting these things, have I seen one using solar cells as the bait!

Obviously the solar industry’s sex appeal is transcending boundaries and attracting the “wrong” kind of attention. But that’s good right? Does it mean the industry has “made it”? Your guess is as good as mine.

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

Fuel Tech – Driving Profits by Cleaning up Coal

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

– Commercial SNCR/RRI project

– SNCR lignite fired application

What does this actually mean for company?

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

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

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

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

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

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

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

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

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

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

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

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

Light Bulbs Replace Coal Power Plants

By John Addison (2/23/07). California media, business and government leaders gathered at the CFL Summit in San Jose on February 22 to discuss an important subject – changing a light bulb. Yes, it was an all-day meeting about a light bulb – the compact fluorescent lamp (CFL).

A summit meeting about a light bulb? I had to attend. I thought it would be like the light bulb joke that asks “How many Californians does it take to change a light bulb?” Correct answer: Eleven. It takes four to create a space for it to happen, one to change the bulb, four to share in the experience, one to write a book about the experience, and one to negotiate the movie rights to the book.

It turns out that the right light bulb is no laughing mater. CFLs are an important part of saving billions, achieving energy independence and averting a climate crisis. If each American replaced only one conventional 60W bulb with a 13W ENERGY STAR-labeled CFL, it would prevent the burning of 30 billion pounds of coal, and save $8 billion in energy costs.

This enormous potential for change brought 200 to the meeting including a Hollywood producer, Washington officials, environmental leaders, and corporate executives from around the country.

Producer of an Inconvenient Truth, Lawrence Bender introduced the significance of 18seconds.org, named for the 18 seconds it takes to change a bulb. “This movement is about empowering the individual — to say to every person in America that with one easy step, they can become part of a movement that will literally change the world,” said Bender. An Inconvenient Truth is nominated for two Academy Awards including best documentary. Mr. Bender’s past films Good Will Hunting and Pulp Fiction won multiple Oscars.

Co-founder of Yahoo, David Filo, talked about the unexpected rewards for doing the right things. He knows a lot about empowering people to make a difference. When he co-founded Yahoo in 1994, 99% of us were unable to navigate and communicate using the Internet. From the early years, Yahoo has supported a wide-range of non-profit causes, bringing together those that want to help with those in need. Yahoo for Good (http://brand.yahoo.com/forgood/) provides details about programs including Earth Day, Breast Cancer, and Disaster Relief. Amy Lorio, Yahoo News GM, shared how environmental news is reaching many of Yahoo’s 500 million users.

Yahoo manages 18seconds.org and helps sponsor summits like this one. Yahoo also goes to lengths to empower employees to enjoy sustainable living and avoid gridlock traffic. (Cool Commutes) http://www.cleanfleetreport.com/vault/cool_commutes.htm

Environmental Defense offers details about a wide range of compact fluorescent lamp for different lighting and decorative requirements at their website.

One of the CFL Summit sponsors is public utility PG&E which actively promotes fuel efficiency and is investing billions in renewable energy. Not all utilities are promoting efficiency. Making daily headlines is TXU’s controversial proposal to build 11 to 19 inefficient coal power plants that threaten all of us with the planned emission of 78 million tons of annual greenhouse gas emissions. In the past month, Americans have installed enough CFLs to more than offset the power that would be produced by these plants.

18seconds.org provides good information and tracks success. For example, since the start of 2007, over 14 million CFLs were purchased in the U.S. During the life of these lamps, $400 million will be saved; 1.4 billion pounds of coal will not required for fueling unnecessary power plants. Over 6 billion pounds of greenhouse gas emissions will be prevented.

“A journey of a thousand miles begins with a single step, observed Confucius. Ending global warming begins by installing one CFL. It only takes 18 seconds.

John Addison is the author of the upcoming book Save Gas, Save the Planet. This article is copyright John Addison with permission to publish. For years, he and his wife Marci have lighted their home with CFLs. This article appears in full at the Clean Fleet Report. http://www.cleanfleetreport.com

Climate Stabilization Wedges

by Richard T. Stuebi

The most useful framework for considering solutions to the climate change problem was developed by Professor Robert Socolow of Princeton University.

In a pathbreaking August 2004 Science paper, Socolow (with fellow Princeton co-author Stephen Pacala) coined the concept of “stabilization wedges” to illustrate the types and magnitude of actions that would be required by society to stabilize the climate. Each “wedge” corresponds to one gigaton per year of worldwide carbon reductions by 2050; seven wedges are estimated to be required to cap CO2 concentrations to less than 500 ppm and thereby achieve climate stabilization. (Incidentally, this translates to a global emission reduction of about 1/3 relative to projected business-as-usual levels.)

It is then fairly straightforward mathematics to postulate actions that can achieve one wedge. For instance, an increase in fuel economy from 30 mpg to 60 mpg for 2 billion cars achieves one wedge. The authors then imagine several hypothetical mutually-exclusive wedges, to demonstrate that climate stabilization can be achieved just by using the palette of technologies that are already commercially available (wind, nuclear, solar, efficient lighting, land-use practices, etc.).

At last July’s annual conference of the American Solar Energy Society held in Denver, the plenary discussions were framed around designing relevant climate stabilization wedges for the U.S.: what it would take for the U.S. to achieve its necessary contribution to climate stabilization — a more severe challenge, requiring about a 60-80% emission reduction by mid-century. These plenary discussions, and the resultant calculations, have been aggregated into a new report that presents wedges of emission reduction strategies that the U.S. could undertake.

The results suggest that the U.S. can achieve the required emission reductions through a mix of energy efficiency and renewable energy options alone — without requiring a mass-shift to nuclear. In other words, a robust move to the rich mix of available renewable resources in the U.S. — wind, geothermal, solar and biomass — along with a dedicated focus to capturing the vast efficiency improvement opportunities that can be found in our relatively wasteful energy system can alone produce an aggressive emission reduction to get us to climate stabilization.

Technology advancements can only make it more economic, but the point is: we absolutely can achieve climate stabilization, if we have the will to employ the technologies we already have at hand.

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