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California Tradable RECs – Will They Ever Materialize?

by David Niebauer

California has led the nation in solar development on many fronts for a number of years, but there is one area where California has lagged significantly – the implementation of tradable renewable energy certificates (or TRECs).

As of this writing, there are five regional renewable energy tracking systems operating in North America, one national registry and three state systems. As early as June 2007, the California Energy Commission launched the Western Renewable Energy Generation Information System (WREGIS), which was designed to track renewable energy generation and create and track renewable energy certificates (RECs) for that generation. TRECs are an important tool for utilities in other states striving to meet their renewable portfolio standard (RPS) goals and help developers finance renewable energy projects in other parts of the country where TRECs are available. So why not in California?

The Basics

In California RECs are not yet tradable – all electric utility renewable energy purchases are “bundled” transactions. That is, the environmental attributes (e.g., RECs) are tied to, or bundled with, the energy itself. Therefore, the only way for utilities to comply with RPS requirements is to purchase renewable energy in bundled transactions from a qualifying renewable energy facility.

In States with unbundled or tradable RECs, electric utilities have two ways to meet with RPS goals: purchase renewable energy in bundled transactions (like in California) or purchase RECs on the open market. In States with TRECs the REC has been “stripped” from the energy and is traded separately. The energy is sold separately and is still supplied to the grid. The utility purchasing the REC may be and likely is completely different than the purchaser of the energy. Only the REC purchaser can count that energy toward its RPS goals.

Proponents of tradable RECs point out that the scheme will assist the State in achieving its RPS goal by balancing out geographical and transmission constraint differences from utility to utility. In California, for example, the State as a whole has considerable renewable resources, from geothermal to wind to solar – but these resources are not evenly distributed geographically throughout the State. Further, some areas with strong renewable resources have significant transmission constraints, making grid connection prohibitively expensive. A tradable REC regime would allow resources to be developed where cost and fit are most appropriate, and allow the environmental attributes (the RECs) to be traded among the utilities (and through intermediaries) to balance out these geographical and transmission constraint issues. As stated in the April 2006 California Public Utilities Commission (CPUC) Staff White Paper: “Importantly, under an unbundled and/or tradable REC framework, [a utility] can purchase RECs from renewable facilities largely irrespective of where those facilities are located or where the energy is ultimately delivered.”

From the energy developer’s perspective, RECs can provide an advantage for developing renewable energy sources. The ability to sell RECs in an unbundled transaction would mean that a developer would be able to negotiate with any utility or other buyer of RECs, rather than negotiating with only one utility in a bundled transaction. In states with TREC developers contract with one utility to provide energy at a relatively low cost and then sell the RECs to another utility or other buyer to enable his project to be economically viable. Where the developers must sell the energy and the REC to the same utility, the price of the energy might be too low to justify development. For this reason, tradable RECs can be a way to speed the development of renewable generation.

The California Log Jam
California has been taking slow, halting strides in the direction of permitting tradable RECs. In 2006 the California legislature passed Senate Bill (SB) 107, which gave the CPUC express authority to allow the use of tradable RECs for RPS compliance.
Three and half years later on March 11 2010 the CPUC issued a decision authorizing TRECs for RPS compliance in California (Decision10-030-021). The proposed scheme had a number of limitations but appeared to be a workable model. Most notable of the limitations was a maximum cap for IOUs of 25% of RPS compliance targets that could be met with TRECs. This limitation was to last only until the end of 2011 and was intended as a way to monitor the program before allowing unfettered use of TRECs. The other significant limitation was a price cap of $50 per REC. Again, this limitation was scheduled to expire at the end of 2011 unless the CPUC determined to extend the cap at that time based on further market studies.

The CPUC decision was made after conducting numerous workshops and receiving comments from interested parties. However, the entities that would have been most impacted by the Decision were not at all happy with the final outcome. Notably, the State’s IOUs and the Independent Energy Producers Association (IEP), whose members make up most of the merchant power producers in the State, filed objections and forceful motions to stay the decision. Prior to its implementation on May 6, only a few weeks after issuing the Decision, the CPUC granted an indefinite stay of Decision 10-03-021. This stay in still in effect.

The reasons for the stay, and the larger implications, are not at all clear. On its face, the stay was implemented in order to resolve objections raised by the IOUs and the IEP. Neither party liked the 25% limitation on use of TRECs to meet RPS requirements. Further, the IOUs, in particular, argued that the CPUC’s definition of a REC-only transaction would limit access to most out-of-state renewable resources, making implementation the TREC scheme unworkable.

Commissioner Grueneich’s Dissent

Commissioner Dian M. Grueneich filed a dissent to the stay that may shed some light on what is really going on. Commissioner Grueneich focused on the motion by the IOUs and claimed that the modifications urged by the IOUs would cause the “outsourcing of California’s renewable economy.” She points out that nothing had changed in the 60 days or so between the Decision and the Stay other than “the relentless lobbying by the utilities at this Commission and in Sacramento to overturn a decision they dislike.”

She continues:

“Since the RPS mandate was first signed into law, one message that has been repeated again and again from developers, from investors and from members of this Commission itself, is that market players need certainty and consistency in decision making in … order to make long term investments in California. This decision will disrupt renewable energy markets, threaten financing for existing and future projects, and compromise the careful work of the Governor’s office to ensure that renewable energy projects obtain their CEC permits and break ground expediently.”

Conclusion

Perhaps this is the (cynical) goal of the IOUs: to entangle the entire RPS movement in delay and uncertainty so that their own foot-dragging can be explained away and excused. Without clear guidance on a TREC program, the argument might go, how can they be expected to meet the State’s aggressive RPS goals? The IOUs have a long way to go to even comply with the 2010 RPS requirement of 20% renewable generation. In 2009, the IOUs collectively served 15.4% of their load with renewable energy. The CPUC estimates that the IOUs are expected to be at about 18% in 2010 and 21% in 2011 – assuming that existing contracts can be converted into operating facilities within that timeframe.

Or it may just be a bureaucratic quagmire that still requires time to work out. After all, the IOU’s fundamental argument in support of the stay, that out of state bundled transactions should not be defined as REC-only transactions and counted toward the 25% cap, makes sense.

California needs to get this right. Whatever system gets developed in California will be followed by other states, especially those in the WREGIS System, so a region-wide system must be supported by the final CPUC decision. We need a workable final decision soon so that we can move forward on the larger goal of lowering greenhouse gas emissions and building a truly sustainable energy infrastructure.

David Niebauer is a corporate and transaction attorney, located in San Francisco, whose practice is focused on clean energy and environmental technologies. www.davidniebauer.com.

Clean Technology Venture Investment Increases 65 Percent in First Half of 2010

Matches 2008 Investment Record

The Cleantech Group and Deloitte released preliminary 2Q 2010 results for clean technology venture investments in North America, Europe, China and India, totaling $2.02 billion across 140 companies.

Cleantech venture investment was up 43 percent from the same period a year ago. The number of deals recorded in 2Q10 was down from a record high of 192 in 1Q10, but still represents a strong quarter by historic standards. This completes 1H10, up 65 percent on 1H09.

Corporate activity around cleantech innovation has continued to play an important role in maintaining the levels of investment activity. Corporations are becoming key participants in many of the largest venture and growth capital investment rounds. Strong corporate involvement was evident again in the quarter’s top ten deals: Intel Capital, GE Capital, Shell, Votorantim, Alstom, and Cargill Ventures all contributed, the latter two making their first publicly disclosed venture-stage investments in cleantech.

Corporations have multi-faceted roles in cleantech. Any single utility or multi-national could play any or all of the following roles – investor, partner, customer, acquirer, or competitor. As such, their activity levels are a key indicator of the health and growth of the broader market for clean technology products. The strengthening of corporate commitment to renewable energy and broader cleantech are evident in the strong growth of multi-national corporate and U.S. utility investment for the first half of 2010 :

1H10, total announced capacity additions by U.S. utilities increased 197 percent compared to 2H09, from 1,393MW to 4,134MW, primarily driven by wind and solar. Power purchase agreements (PPAs) rose 148 percent in 1H10, compared to 2H09, from 621MW to 1,539MW, likely due to the pressure of meeting Renewable Portfolio Standards in many U.S. states. Corporate investment announcements from the global corporates tracked reached a new high of $5.1 billion in 1H10, a 325 percent increase from the same period last year.

“The significant strengthening of corporate and utility investment into the cleantech sector, relative to 2009, is very encouraging, given the key role they will play in enabling broader adoption of clean technologies at scale,” said Scott Smith, partner, Deloitte & Touche LLP and Deloitte’s clean tech leader in the United States. “Major U.S. utilities are increasing direct investments in wind and solar due to improving cost scenarios, favorable tax credits and incentives, and evolving pressure to meet Renewable Portfolio Standards. Meanwhile, the largest global companies are seeing the business case for operational cleantech integration, leading to record corporate investment. This uptick was driven by companies looking to improve energy efficiency and reduce carbon emissions in order to reduce operational costs, mitigate energy price volatility risk, drive sustainable growth, and comply with existing and pending regulations around carbon and climate change risk disclosure.”

VENTURE INVESTMENT BY TECHNOLOGY SECTOR

The leading sector in the quarter by amount invested was solar ($811 million), followed by biofuels ($302 million) and smart grid ($256 million). Energy efficiency was the most popular sector measured by number of deals, with 31 funding rounds, ahead of solar (26 deals) and biofuels (13 deals). The largest transactions in these sectors were:

SOLAR – $811 million in 26 deals

Solyndra, a California-based thin film company raised $175 million from existing investors instead of following through with its planned IPO. BrightSource Energy, a California-based developer of utility-scale solar thermal power plants, raised $150 million in Series D funding from new investors Alstom and the California State Teachers Retirement System (CalSTRS) as well as existing investors; the deal followed a conditional commitment from the U.S. Department of Energy for $1.37 billion in loan guarantees that was made in February and Amonix, a California-based developer of concentrated photovoltaic (CPV) solar power systems, raised $129.4 million in a Series B round led by Kleiner, Perkins, Caufield & Byers.

BIOFUELS – $302 million in 13 deals

Amyris Biotechnologies, a California-based developer of technology for the production of renewable fuels and chemicals, closed the final tranche of a $61 million Series C round and also raised a further $47.8 million from Temasek Holdings; Virent Energy Systems, a Wisconsin-based developer of a catalytic bio-refinery platform, raised $46 million from Shell and Cargill Ventures; and Kior, a Texas-based developer of a catalytic cracking technology for turning biomass into bio-crude, raised $40 million.

SMART GRID – $256 million in 11 deals

Landis+Gyr, a Switzerland-based smart metering company, raised an additional $165 million from Credit Suisse to add to the $100 million it raised in mid-2009, while OpenPeak, a Florida-based developer of home energy management products, raised $52 million from Intel Capital and existing investors, and GreenWave Reality a Denmark-based developer of home energy management products, raised $11 million from Craton Equity Partners and other undisclosed investors.

ENERGY EFFICIENCY – $147 million in 31 deals

Nualight, an Ireland-based developer of LED illumination products for refrigerated displays in food retail, raised $11.4 million from Climate Change Capital Private Equity, 4th Level Ventures and ESB Novus Modus. This was the largest deal in the energy efficiency category after OpenPeak ($52million, as above).

VENTURE INVESTMENT BY WORLD REGION

North America accounted for 72 percent of the total, while Europe and Israel accounted for 24 percent, India 3 percent, and China for 2 percent.

NORTH AMERICA: North American companies raised USD $1.46 billion, down 11 percent from 1Q10 but up 47 percent from 2Q09. The total of 76 disclosed rounds was high by historic standards, but down by 41 percent from the record 128 in 1Q10. As the most significant region for VC investment, the sector trends broadly match those described globally. The largest deals were for Solyndra ($175 million), a California-based thin film solar company, BrightSource Energy ($150 million), a California-based developer of utility-scale solar thermal power plants, and Amonix ($129.4 million), a California-based developer of concentrated photovoltaic (CPV) solar power systems. California led the way, with $980 million (67 percent total share) in investment, followed by Massachusetts ($124 million, 8 percent).

EUROPE/ISRAEL: European and Israeli companies raised USD $476 million in 54 disclosed rounds, up 48 percent (by amount) from 1Q10 and up 100 percent from 2Q09. The largest deals were for Swiss smart grid company Landis+Gyr ($165 million) and French solar plant developer Fonroche ($66.1 million). The large growth capital deal for Landis+Gyr places Switzerland ($165 million, 1 deal) at the top of the country league table, followed by France ($82 million, 11 deals), and Norway ($59 million, 4 deals). The UK had the most deals (17) with investment totaling $59 million.

CHINA: Chinese companies raised USD $30 million in 5 disclosed rounds. The largest deal was for Prudent Energy, a developer of flow batteries, which raised $10 million from JAFCO Investment Asia, Mitsui Ventures and CEL Partners.
INDIA: Indian companies raised USD $59 million in 4 disclosed rounds. The largest deal was for Krishidhan Seeds, a producer and distributor of hybrid seeds for the farming industry, which raised $30 million from Summit Partners.

GLOBAL M&As AND IPOs

There were 19 clean technology IPOs during the quarter, totaling $2.31 billion, up slightly from 18 IPOs in 4Q09, also totaling $2.31 billion. China accounted for the majority of transactions, with 12 offerings, which raised a combined $1.73 billion (75 percent of the overall total). There were three North American cleantech IPOs in 1Q 2010, which raised a total of $304 million, the lion share netted by the high-profile $226m IPO of Tesla Motors on June 29, 2010.
However, the largest global cleantech IPO recorded during the quarter was Origin Water, a China-based developer of membrane filtration systems for municipal and industrial sewage treatment and recycling, which raised $370 million from an offering on the Shenzhen Stock Exchange. The company’s share price more than doubled during the first day of trading, valuing the company at about $3.3 billion.

Clean technology M&A totaled an estimated 160 transactions in 2Q10, of which totals were disclosed for 45 transactions totaling $6 billion. Two of the most significant deals were in smart grid: Swiss engineering company ABB acquired U.S.-based software maker Ventyx for more than $1 billion to provide it with broader access to the utility enterprise management market; and Maxim Integrated Products acquired U.S.-based smart meter semiconductor company Teridian Semiconductor for about $315 million in cash.

TOP GLOBAL VC INVESTORS

2Q10 Most Active Cleantech Venture Investors (# investments)
Carbon Trust Investment Partners 6 = Helveta, Green Biologics, Intamac Systems, ACAL Energy, Arieso, Concurrent Thinking,
Kleiner Perkins Caufield & Byers 4 = Amonix, Amyris Biotechnologies, Fisker Automotive, EdeniQ
Angeleno Group 3 = Amonix, Coda Automotive, EdeniQ
Draper Fisher Jurvetson 3 = BrightSource Energy, EdeniQ, Scientific Conservation
Khosla Ventures 3 = Coskata, Amyris Biotechnologies, Sakti3

The Cleantech GroupT, providers of leading global market research, events and advisory services for the cleantech industry, along with Deloitte, which provides audit, tax, consulting and financial advisory services to cleantech companies, released these preliminary 2Q 2010 results for clean technology venture investments in North America, Europe, China and India, totaling $2.02 billion across 140 companies.

Top Ten Energy Myths

by Richard T. Stuebi

I get a kick out of trite little lists that I can quickly report on and provoke some thinking and conversation.

And so it is that I recently came across the “Top Ten Energy Myths”, as suggested by Thomas Tanton, a fellow at the Pacific Research Institute.

As listed in the table of contents, the ten myths are:

  1. Most of our energy comes from oil.
  2. Most of our oil comes from the Middle East.
  3. We have no choice but to import vast quantities of oil.
  4. Offshore oil production imposes environmental risks.
  5. Reducing our peroleum (sic) use through alternative energies like solar and wind will increase U.S. energy security
  6. Energy companies will not invest in clean reliable energy.
  7. Renewable energies will soon replace most conventional energy sources.
  8. The U.S. consumes large amounts of energy and thus emits a disproportionate amount of the world’s greenhouse gases.
  9. Federal mandates for higher-mileage cars means less energy consumption
  10. Forcing drivers to use alternative fuels will help solve global warming.

As Tanton notes in the introduction, Mark Twain is attributed to have said that “it ain’t what you don’t know that gets you into trouble; it’s what you know that just ain’t so.”

And so it is: some facts are myths. But, then again, some facts are factual too, and some claimed facts are myths. For instance, at the conclusion of a brief commentary on these top ten myths in the February issue of Power, Tanton presents as “fact” that “increased oil production can have green results”, with the supporting claim that “new drilling technology, developed by private energy companies, has greatly reduced the risk of oil spills.”

Uhhhh…..

I guess the moral of the story here is that readers have to be pretty discerning when considering the writings of thought-shapers, to not accept commentary as absolute, definitive and permanently correct, but rather to look between the lines in identifying biases and competencies that underlie their arguments. And, if a writer is neither competent to discuss the topic, nor unconflicted in discussing the topic, readers are well-advised to not put a lot of trust in the writer’s opinions.

Richard T. Stuebi is a founding principal of NorTech Energy Enterprise, the advanced energy initiative at NorTech, where he is on loan from The Cleveland Foundation as its Fellow of Energy and Environmental Advancement. He is also a Managing Director in charge of cleantech investment activities at Early Stage Partners, a Cleveland-based venture capital firm.

China Invested $88 billion in High Speed Rail in 2009

Clean Edge’s 2010 Clean Energy Trends forecasts growth for high-speed rail and renewables
Clean Edge included high-speed rail (HSR) for the first time in its annual Clean Energy Trends report which tracks key developments in clean-energy markets. China is leading the surge in HSR according to Clean Edge:

China’s Ministry of Railways spent $88 billion on HSR projects in 2009 – part of an existing $300 billion plan to expand and connect all of the country’s major cities with a projected 10,000 miles of dedicated HSR lines by 2020.

There will be more high-speed rail added in China over the next five years than the rest of the world combined, says Keith Dierkx, director of IBM’s Global Rail Innovation Center in Beijing. Global HSR manufacturers like Kawasaki Heavy Industries, Alstom, GE Transportation, Siemens, and others have formed joint ventures or partnerships in China. A Canadian-Chinese joint venture, Bombardier Sifang, recently won $4 billion from the Chinese government to manufacture up to 80 high-speed trains. These same companies are developing opportunities in other emerging countries like Brazil, Russia and South Korea.

HSR’s main development challenge is its high price tag. The 800-mile Beijing-to-Shanghai line will cost an estimated $32 billion – in the same cost ballpark as the gargantuan Three Gorges Dam hydroelectric project.

Maglev potential projects in Japan, China, and the United States are also discussed in the Clean Energy Trends.

A United States 17,000 mile high-speed rail system is envisioned. With 30 states committed to renewable energy growth, electric HSR will help the nation be less dependent on oil. Clean Fleet Report forecasts that high-speed rail ridership will exceed one billion within three years, from over 600 million today. Clean Fleet Reports about U.S. High-Speed Rail.

China Also Leads in Renewables Growth

“Despite severe economic conditions, clean-energy markets were able to hold their momentum in 2009 as many regional and federal governments and private corporations focused on clean-energy investments as a way to pull out of the global economic tailspin,” said Ron Pernick, Clean Edge co-founder and managing director. “From the smart grid and energy efficiency to renewable energy generation and advanced battery storage, clean tech continues to be a major driver of regional job growth, economic recovery, and technological competitiveness.”

China is expected to lead RE growth. China could end up spending $440 billion to $660 billion toward its clean-energy build out over the next ten years, according to estimates discussed in the Clean Energy Trends.

The annual Clean Energy Trends report, now in its ninth year, can be downloaded for free.

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

Renewables Supply 10 Percent of U.S. Energy

According to the most recent issue of the “Monthly Energy Review” by the U.S. Energy Information Administration (EIA), renewable energy (i.e., biofuels, biomass, geothermal, hydroelectric, solar, wind) provided 10.51% of domestic U.S. energy production during the first nine months of 2009 – the latest time-frame for which data has been published.

Domestic energy production from renewable sources grew by 4.10% during the first nine months of 2009 compared to the first nine months of 2008 – an increase of 0.228 quadrillion Btu’s. Most of that growth came from wind which expanded by 28.46% during the first nine months of 2009 compared to the same period in 2008.

The mix of renewable energy sources consisted of hydropower (35.16%), biomass (30.72%), biofuels (20.25%), wind (8.17%), geothermal (4.52%), and solar (1.17%). Renewable energy’s (RE) contribution to the nation’s domestic energy production is now almost equal to nuclear power, which has been holding fairly steady in recent years at 11.6%.

“When Congress resumes its debate on pending energy and climate legislation in 2010, it would do well to take note of the clear trends in the nation’s changing energy mix,” said Ken Bossong, Executive Director of the SUN DAY Campaign. “Renewable energy has proven itself to be a solid investment – growing rapidly and nipping at the heels of the stagnant nuclear power industry – while fossil fuel use continues to drop.”
In the electricity sector, conventional hydropower accounted for 6.89% of U.S. net electrical generation during the first nine months of 2009 while other renewable energy sources (biomass, geothermal, solar, wind) accounted for 3.32% — for a total of 10.21%. By comparison for the first three quarters of 2008, renewables accounted for 9.18% of net electrical generation.

While renewably-generated electricity has grown, overall net U.S. electrical generation was 4.72% lower for the first nine months of 2009 compared to the first half of 2008 with coal-generated electricity dropping by 12.86%.

The U.S. Energy Information Administration released the “Monthly Energy Review” on December 23, 2009. It can be found at: http://www.eia.doe.gov/emeu/mer/contents.html. The relevant tables from which the data above are extrapolated are Tables 1.2 and 10.1. EIA released its most recent “Electric Power Monthly” on December 16, 2009; see: http://www.eia.doe.gov/cneaf/electricity/epm/epm_sum.html. The most relevant charts are Tables 1.1 and 1.1.A

Al Gore Prioritizes Energy Innovation

By John Addison (10/12/09). Vice President Al Gore is optimistic about a meaningful agreement in Copenhagen that includes the United States and China. During his keynote speech at the Society of Environmental Journalists Conference (SEJ) in Madison, Wisconsin, he acknowledged that negotiations are going slowly, because climate change is complex and involves consensus of almost all nations, but that a new agreement is likely.

The need for a global agreement is urgent as the burning of coal and oil heat the earth. Melting glaciers and depleted aquifers make healthy water scarce for more Americans and unavailable for a billion people. Draughts are causing damage to many states. Lack of water affects the ability to grow food. Interrelated eco-systems are showing their stress and the problems are starting to get visible on Main Street. Mr. Gore observed, “Never before in human history has a single generation been asked to make such difficult and consequential decisions.”

Mr. Gore stated, “We’re borrowing money from China to buy oil from the Persian Gulf to burn it in ways that destroy the planet. Every bit of that’s got to change.”

At SEJ, I asked Vice President Gore about the most promising innovations to reduce our dependency on fossil fuels such as coal and oil. Mr. Gore identified a number of areas where Americans are innovating.

Energy efficiency tops his list for innovation that is making an immediate impact. Many new buildings have a fraction of the greenhouse gas emissions of the buildings they replace due to innovative design, materials, windows, and water management. Older buildings are made more energy efficient with better insulation.

Mr. Gore identified wasted heat as an underestimated opportunity. He sees room for significant innovation in combined heat and power and in the reduction of wasted heat.

Super Grid will Spur Innovation

He sees the super grid as an opportunity for a high level of efficiency. The super grid envisions a national network of high capacity electricity transmission. It would include energy storage, high reliability, and smart grid intelligence. High voltage lines have far less energy loss than lower capacity. A super grid could deliver much of America’s needed energy from untapped wind that blows in middle states from the Dakotas to Texas. Super Grid Wikipedia Description

Mr. Gore feels that a super grid could bring a transformation comparable to the Internet. The super grid and smart grid technology is already attracting major investments from firms like KPCB where Al Gore devotes part of his time as a partner. KPCB Greentech Portfolio He pointed to energy storage and demand response as major super grid areas of opportunity.

A portfolio of renewable energy solutions can power the nation according to Mr. Gore. Wind supplied 40 percent of the incremental energy added in the United States in 2008. Concentrating solar power is another renewable that is promising where up to 15 hours of energy storage, such as molten salt, can be used. Vice President Gore sees the greatest innovation in solar photovoltaics as a “distributed distribution architecture” is put in place.

Enhanced geothermal at one to two kilometers underground has the potential to meet our need for baseload grid power. Gore said, “There is an estimated 35,000 year supply of enhanced geothermal to meet U.S. energy needs.” This industry will benefit from the drilling and drill bit innovation existing in the oil and gas industries.

Historic Transformation of Automobile

In the future the need for getting baseload power from coal will be diminished by grid energy storage innovation. Gore said, “There will be a historic transformation of automobile fleets to and plug-in hybrids and all-electric vehicles. That vehicle fleet will serve as a massively distributed battery.” Electric Vehicle Reports

He continued, “Innovation of battery storage is likely to be extremely significant.”
Video of Vice President Gore’s discussion of energy solutions.

New Climate Agreement in Copenhagen

“We have all the tools to solve three or four climate crises.” Vice-President Gore expressed a level of optimism that surprised a number of the 500 journalists in attendance. He is optimistic that the Senate will approve some form of the Boxer-Kerry legislation and that it will be Conference Committee pending when Copenhagen convenes. It will have compromises that will discourage some environmentalists and some business interests. Gore said, “The large number of defections from the National Chamber of Commerce is a sign that business leaders want to be part of the solution.”

He reminded those concerned about a climate crisis that in 1987 the Montreal Protocol was also criticized as too weak. In Montreal, Canada, on September 16, 1987, the Montreal Protocol on Substances that Deplete the Ozone Layer was signed into agreement by 24 major countries of the world, including the United States. These countries recognized that it was critical to be leaders, rather than wait years for all nations to agree. The agreement was ratified and then signed by President Ronald Reagan.

A process for nations to phase-out production of dangerous CFCs and halons was established. Developing countries were giving extra years to comply. Years later the agreement was strengthened in Copenhagen. Now 191 nations have agreed to the Montreal Protocol and are phasing-out the destructive gases from China to Chile and from India to Indonesia.

The Montreal Protocol is proof that the major nations of the world can agree to stop destroying our atmospheric shield.

A new climate agreement in Copenhagen would accelerate innovation and growing commercial success of efficient buildings, fuel efficient transportation, a transformative super gird, and renewable energy.

Mr. Gore’s new book – Our Choice: A Plan to Solve the Climate Crisis – will be available November 3. It will include the important role of innovation in reducing our dependency on fossil fuel.

The complete audio recording of the speech can be heard on the Society of Environmental Journalists.

By John Addison, author of the book – Save Gas, Save the Planet – now selling at Amazon and other booksellers.

Feed-In Tariff = Feeding at Trough?

by Richard T. Stuebi

One of the more popular policy prescriptions often made by ardent renewable energy advocates is the adoption of a “feed-in tariff” (FIT).

With a FIT, the government sets a price for electricity supplied by a qualifying renewable energy source, and the price is usually sufficiently high to produce a good return for the investor to install the renewable energy project. This, in turn, provides a substantial economic motivation for the growth of the renewable energy sector.

Supporters love the fact that a FIT policy provides a long-term, stable, predictable, and lucrative return on renewable energy investment. Naturally, this leads to booming markets for renewable energy where FITs are in place.

FITs are in wide use in many parts of the world – mainly in Europe, but increasingly in Canada as well. Correspondingly, these markets are experiencing exploding growth for renewables.

However, to date, traction has been slow to come for FITs in the U.S. because the policy mechanism is innately at odds with the prevailing philosophy of the American economy: to let market forces sort things out.

In the U.S., the renewable portfolio standard (RPS) has been the preferred policy mechanism to promote the penetration of renewable energy (along with the predictable potpourri of incentives and subsidies buried in the piles of the tax codes). In an RPS, the government sets a target for a quantity of renewables to be adopted by a certain date – and then lets market forces dictate what mix of renewables will supply the requirement, as well as the price implications of that mix.

By contrast, a FIT explicitly puts the government in the position of price-setter, and picks technological winners by placing prices as a function of the renewable energy technology in question.

If the price of the FIT is set too high, unquestionably this pushes renewable energy adoption, but tramples competitive forces in doing so: bad (meaning, to me, highly-uneconomic) projects get done, and/or companies or investors make outrageous profits. On the other hand, if the price of the FIT is set too low, then the policy won’t have any impact at all: no incremental investment in the desired renewables will occur.

In other words, the government has to be able to set the price at exactly the right level to induce a lot of investment – but no higher so as to provide a free wealth grab, and no lower so as to discourage the market from happening at all. No government is that smart to be able to perfectly set the price of a FIT. So, in practice, FIT prices are very high – and the renewable energy interests profit immensely from it.

Although FIT policy has historically gone nowhere in the U.S., that may be changing, as FITs are starting to get more serious consideration. In early 2008, the California Public Utilities Commission adopted the first FIT in the U.S., to promote up to a maximum of 480 megawatts installed. Earlier this year, the city of Gainesville, Florida enacted a feed-in tariff for its municipal utility. Even in Michigan, not considered one of the leading states in pro-renewables policies, the Public Service Commission is considering a pilot feed-in tariff.

I am not sold on the FIT mechanism as good policy, because it is so heavy-handed and arbitrary. However, as the rest of the world adopts FIT policies, they extend their leadership over the U.S. – and the leadership is not just in market size, but also in technological advancement. If the U.S. doesn’t maintain technological leadership, then we’ve lost arguably our best asset. If a FIT policy is necessary to be leaders in renewable energy, then maybe it’s a necessary evil.

It wouldn’t be the first time I’d have had to swallow hard in lukewarmly supporting a policy that otherwise I find fundamentally challenging.

Some have argued that the aggregate economic subsidy associated with a national FIT policy is outweighed by the faster reduction in costs associated with renewable energy advancement promoted by the FIT, plus the avoided expenditures on fossil fuels displaced by the increased renewable energy production caused by the FIT. It’s an interesting argument, but counter-intuitive to me, and I’d like to see some quantitative support for this line of reasoning.

Richard T. Stuebi is the Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become Managing Director of Early Stage Partners.

Renewables That Even Coal-Based Utilities Can Love

by Richard T. Stuebi

Generalizations are always tricky, but it’s safe to say that many employees of many electric utilities whose generation plants are mainly coal-fired have a hard time feeling very enthusiastic about renewable energy. You can imagine the rants: renewables are tiny and negligible, renewables aren’t baseload, renewables are for wimps.

So, it’s interesting to me when coal-based utilities can find something nice to say about renewables. Last week, the Electric Power Research Institute (EPRI) — the U.S. R&D organization funded by companies in the electricity industry — announced its efforts to test the addition of solar thermal collectors to fossil-fueled powerplants, in an effort to reduce the amount of fuel that these plants need to burn for generating electricity.

The test project involves powerplants operated by Progress Energy (NYSE: PGN) and Tri-State Generation & Transmission Association, and is co-sponsored by The Southern Company (NYSE: SO) — all sizable coal-based utilities.

Of course, these utilities are motivated by practical considerations more than they are by being viewed as “green”. For them, the important green is money: the use of solar thermal can reduce per-kilowatt-hour variable costs, which can increase plant profitability in wholesale power markets. And, the use of solar thermal will reduce the per-kilowatt-hour emission rates of fossil powerplants, which will reduce compliance costs under a likely future cap-and-trade program for carbon emissions.

Not to mention, the installation of solar thermal at existing fossil powerplants may qualify for compliance with renewable portfolio standards that now exist in many states — and that may come into law nationally under the Obama Administration.

It may not be as sexy as photovoltaics or wind turbines, but the economics of solar/fossil hybrid power generation should be pretty compelling. If so, solar thermal augmentation at fossil powerplants may become very widespread, perhaps unseen and out-of-mind, but nonetheless making sizable dents in the energy industry’s emissions footprint.

Thanks to Keith Johnson of the Wall Street Journal for making me aware of this EPRI study, and for quoting me in his post to the WSJ‘s Environmental Capital blog last Friday.

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. Later in 2009, he will also become a Managing Director of Early Stage Partners.

Pragmatism for the New President

by Richard T. Stuebi

I consider myself an equal opportunity offender. Many people in the energy industry or those who for some reason don’t believe in climate change think I’m somewhat of a radical. On the other hand, many ardent environmentalists think I’m too apologetic, conservative or pessimistic about what carbon reductions can realistically be achieved in what time frames and at what costs.

Therefore, I appreciate it when I find someone who makes well-argued, nuanced and balanced statements like those I would attempt to make. A recent example: a September speech at the Metropolitan Club in Washington DC by David J. O’Reilly, the Chairman and CEO of Chevron (NYSE: CVX).

I was particularly pleased by his comments on renewable energy and climate change. O’Reilly was quite clear and blunt: “Renewable energy is very real. We need it. It will be an essential part of the future I envision.” His only caveat, which I agree with: “It’s not realistic to suppose that it can replace conventional energy in a timeframe that some suggest,” referring to Al Gore’s well-intentioned but wishful-thinking goal of 100% U.S. electricity supply from renewable energy by 2018.

As for climate change, his comments were also measured and reasonable: “There is no doubt that carbon dioxide concentrations in the atmosphere have increased. And although there is uncertainty about the future impacts on climate, most people agree that it’s not a good idea to continue unrestricted hydrocarbon combustion. And I agree.” This line acknowledges that climate science is still subject to considerable uncertainty (see, as one example, a recent paper published in Geophysical Review Letters by two MIT Earth and Planetary Sciences professors), while at the same insisting that it’s very worthwhile to move concertedly towards lower carbon intensity in the likely case that the increased concentrations of carbon dioxide in the atmosphere will lead to unfavorable impacts on the planet.

O’Reilly closes by noting the importance for the next President to mobilize the public in a sustained commitment for change. “We need collaboration to achieve real progress. Businesses and consumers need affordable energy. Young and old want renewable energy. Republicans and Democrats seek reduced emissions….Today, public sentiment supports action on energy policy. That action should lead to a future of greater energy efficiency, enhanced supplies of all forms of energy and reduced emissions. While I am concerned about the urgency of the situation today, I’m also optimistic. I believe that, by the time my grandchildren are my age, our energy system will look much different. But we must get started now.”

Wise words, in my humble opinion. Let’s hope our new President can pull us together, in the face of declining oil prices and weakening economic conditions, towards a new resolve on energy.

A good start for the President-elect would be to read an open letter written by Ernest Moniz, the Director of the MIT Energy Initiative in this month’s Technology Review. Moniz’s four-pronged recommendation for a major step-up in Federal commitment:

1. Implement carbon dioxide emissions pricing, presumably through a cap-and-trade system
2. Add a surcharge on energy to generate $10-15 billion annually for the next 10-15 years to spend on development and deployment of new low-carbon energy technologies
3. Establish a mechanism spanning the various bureaucracies of the Federal government that will lead to a truly coherent energy policy — perhaps by appointing an energy advisor to the President
4. Commit to implementing a “smart grid” within 10 years

When one considers that the Federal government now allocates less than 3% of its research dollars to energy, down from10% in 1980, it seems pretty clear that the U.S. doesn’t put its money where its mouth used to be, and needs to get much more serious. Step one will be a President who himself is serious, and doesn’t fall prey to cheap populism or get swayed by protecting the interests of a select set of constituencies.

We need to stop the dogma and hyberbole from both sides, buckle down, and get on with it. I hope our new President can lead the way.

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 Energy Policy Act of 2008

by Richard T. Stuebi

Betcha didn’t know that there was an Energy Policy Act of 2008, did you? Well, you won’t find any bill of that name. But, the passage of last week’s appropriately titled “Emergency Economic Stabilization Act of 2008″ is almost tantamount to an energy bill.

The Senate prepared a nice summary of the energy-related provisions that were stuffed into the bill during the chaotic process to get something passed promptly that would reassure the financial markets. I have yet to review all of the provisions, but it’s clear that many of them have favorable implications for a variety of clean energy technologies, inluding wind, solar, energy efficiency, hybrid vehicles, biofuels, and smart grid.

It’s nice that there has been at least one small silver lining to the dark cloud of financial implosions in the past few weeks.

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.

First Impressions of China

by Richard T. Stuebi

I just returned from my first trip to China – a whirlwind ten-day tour spanning the cities of Beijing, Shanghai, Guangzhou, Xiamen and Wenling – involving a number of private meetings (some with senior public officials) as well as public presentations at PennWell’s China Power Oil & Gas conference and at a cleantech symposium hosted by the American Chamber of Commerce in Shanghai (AmCham Shanghai) at the annual China International Fair for Investment and Trade.

It is impossible in a brief blog post to give a detailed report on my visit, or to more broadly comment meaningfully about the profound issues confronting the whole world as a result of China’s rise and arrival to world pre-eminence. With this note, I will only attempt to offer some immediately apparent observations related to cleantech issues and opportunities in China that emerged for me from my visit.

Pollution. It is well-known that China is experiencing tremendous environmental challenges, with almost a million Chinese estimated to die each year prematurely from health issues stemming from poor environmental quality. Air visibility can sometimes be less than a mile on what would otherwise be an ordinary hazy humid summer day, although frankly, I was expecting the air pollution to be worse than it was. On the other hand, the water situation shocked me. China’s Ministry of Environmental Protection (formerly known as the State Environmental Protection Adminstration) is said to admit that 60% of the country’s rivers are polluted to the extent that they can’t be used for drinking, and I have heard claims from American sources that a majority of Chinese rivers are so bad that the U.S. EPA would deem their waters to be unacceptable for industrial purposes (much less for drinking). Even at the finest hotels, guests are warned not to drink the tap water, and bottled water is generally provided as part of the room rate. (In case any of you are eating while reading this, I won’t bring up the public toilets.) The other major surprise for me was how much worse the pollution situation was in the countryside than in the cities. Bad air, disgusting water and (especially) litter are much more starkly obvious in the poorer rural areas – a powerful indication of the positive correlation between income/wealth and environmental quality. This reinforced to me how important it is to promote (rather than to retard) economic growth in China, so as to facilitate environmental improvement both for the sake of the Chinese and for the world.

Electricity sector. Although I haven’t investigated in any detail, what I heard suggests to me that the electricity industry in China is on the verge of a financial breakdown, analogous in some ways to the California fiasco of the early 2000’s. Retail electricity prices are subsidized (heavily for large industrial customers), and allowed wholesale prices to generators are fixed. However, coal prices are on the rise, because the mining industry is sufficiently fragmented and privatized that government attempts to set the prices are ineffective. Since the vast majority of the electricity in China is produced from burning coal, the combined effect of increasing coal prices and steady electricity prices is putting a financial squeeze on many generators – so much so that in some cases generator firms are reducing output from their plants. It is unclear how long this can go on before electricity supply inadequacy (already a problem) becomes acute. The financial health of China’s electricity sector ought to be important to the cleantech industry, because a collapse of some type might jeopardize the attainment of the government’s ambitious clean energy aspirations that have been set forth in its Renewable Energy Law.

Manufacturing. In some parts of the U.S. (such as here in Ohio), we like to think we are a manufacturing powerhouse, but China makes us look like pikers. The ascendancy of Chinese manufacturing is nowhere near its peak: with several hundred million people still living in desperate poverty (pre-industrial conditions) in the hinterlands, the prospect of earning US$1000 per year by moving to the city to work in a factory represents a five- or ten-fold increase in income and quality of life. In other words, unless/until fuel prices make transportation of goods prohibitively expensive, stringent emission reduction programs become binding in China to double or triple electricity prices, and/or the yuan-dollar relationship alters dramatically, its huge labor cost advantages can only enable China to further strengthen its already dominant position in global manufacturing – excepting certain niches of production (items with very high shipping costs such as wind turbines, items with limited labor input due to capital-intensive production processes, items still in low-volume early production runs). Outside China, we will generally be relegated to being the technology innovators, the product designers and system integrators, the sellers and distributors, the installers and the service people. Rather than rue that position, let’s embrace it. Because of their production orientation, my speculation is that the Chinese are not so strong in innovation, leaving it to others to be the technology pioneers. After being bombarded by souvenir hawkers and market barterers who make undifferentiated “me-too” offers and compete almost solely on price (or on aggressiveness or loudness), I also conclude that these Chinese will not be the leaders in identifying customer needs as they emerge and evolve, nor in delivering high-value (not price-based) solutions to meet those needs. Those games are for us to play, so let’s go after them.

Capital. It is abundantly clear to any observer on the street that China is awash in money. In Beijing and Shanghai, designer consumer goods and high-end automobiles are not ubiquitous, but they are evident. (In Xiamen, I saw an Audi A8L – a $120,000 vehicle in the U.S. – with police lights on top of the roof. Nice cop car! Does your town have a municipal budget that would support a fleet including one?) I met venture capitalists looking for deals in China, as well as a bevy of consultants who facilitate technology transfer and commercialization into China. However, I didn’t see much evidence of interest in foreign investment by Chinese parties. For the cleantech revolution to be amped up, we need to make the case that this Chinese capital is well-served being deployed outside China – not only for good financial returns, but to generate more future opportunities for Chinese domestic investment.

Inefficiencies. Centrally-planned economies (e.g., the former Soviet Union) are legendary for begetting ridiculous systemic inefficiencies. The Chinese economy is quite a bit different – the central government indeed establishes absolute policies, but only at a very general level, providing minimal specific guidance and instead allowing individual actors almost complete autonomy to comply within the bounds of what’s permitted – but the inefficiencies are nevertheless astounding. I speculate that the inefficiencies are driven more by the explosive growth of the economy – averaging a mind-boggling 9.9% per year for a 30 year period since 1978 – which propels businesses and individuals to act quickly, with much replication and little reflection or innovation. A vivid illustration of this is the abundance of highly inefficient mini air conditioning units (rather than more efficient central air conditioning systems) in relatively new high-rise buildings, presumably because they’re cheap and quick and easy to replicate. The resulting inefficiencies also reach into the social realm: schedules are set late, remain fluid and dynamic up until the event, and tardiness is common. The Chinese way of doing things thus requires some acclimation for those of us accustomed to considerable structure and discipline.

Urban mobility. Reflecting the economic explosion, people are constantly trying to get somewhere. Even though the big cities (especially Shanghai and Beijing) have reasonably well-developed public transportation systems (including modern subway systems), and even though the per capita level of car ownership in China is only less than 10% of what it is in the U.S. (reflecting the amazing fact that private auto ownership was forbidden in China until the mid-1990’s), traffic is truly chaotic in urban areas. It is said that there used to be bicycles everywhere in China, and while many still remain (often abiding by well-designed separated bicycle lanes), many bicycles appear to have been replaced and superseded by electric scooters that are clean and silent. (By the way, the silence isn’t always a good thing, as any aimless and unattentive walker is under a constant threat of being steamrolled by an aggressively-driven scooter stealthily zooming in from behind.) It appears to me that “rules of the road” is an oxymoronic concept in China, as vehicles undertake passes in the most imprudent circumstances and drive on the left or on the right almost on discretion. (Of note, traffic lights are world-class: many have timers indicating the number of seconds remaining for a green light or red light.) Taxis are about as ubiquitous as two-wheeled vehicles and are unbelievably cheap – an hour ride of perhaps 30 miles might cost the equivalent of US$20 – but you’ll never complain about a Manhattan cab ride again. As a consequence, drivers and pedestrians alike must be vigilant to protect their lives. And, it is a good thing for all concerned that foreigners are not allowed to drive; when you rent a car in China, you also get a Chinese driver, who is well-accustomed to seeing driving behaviors evidenced in the U.S. only at race tracks and demolition derbies.

Air service. Air travel in the U.S. has nothing on China. I was impressed with the very new and modern airport terminals in all of the cities I visited. The primary domestic airlines (Air China (LSE: AIRC), China Southern (NYSE: ZNH), etc.) have thoroughly modern Boeing (NYSE: BA) and Airbus fleets – no Soviet-era Tupolevs here anymore, no reason to worry about making it alive to your destination. Fares are reasonable – and they still serve meals (though Chinese airline food is no better than the U.S. airline food of days past).

Language. I am no linguistic expert. I struggle with English, and my high school experience in studying French convinced me that I do not possess the language gene. But, since it doesn’t use an alphabet and is incredibly reliant in verbal communication upon imperceptible shifts of tone, Chinese (Mandarin) is a whole ‘nother level of challenge. I am not raising this issue as an interesting or amusing tangent, but rather because the language barrier (and overcoming it more satisfactorily) will be truly fundamental in determining the future success of Chinese-American relations. As the work of Maturana and Varela shows compellingly, humans live in language: that is, they make assessments of the world and create new possibilities only through language. Without sharing a language, it is simply not possible to come to agreement on the current situation or to invent directions for beneficial action. In my time in China, I experienced a deficit of good translators – more properly termed, interpreters – who were strong in both Mandarin and English, and who were also knowledgeable enough about the subject matter to convey the fully nuanced intentions of the speaker. (To illustrate, I would hear a Chinese speaker utter 60 seconds of Mandarin, and the English translation would hesitantly be passed on, usually some banal statement like: “China uses a lot of energy”. Come on — I know in his minute of talking he must have said something more insightful and detailed that that!) If we’re going to enable massive/rapid cleantech transfer into and adoption within China, there’s going to have to be an order of magnitude expansion of cleantech-knowledgeable people that also possess high degrees of English-Mandarin fluency.

As Mark Twain once was alleged to have said (though in actuality the maxim was coined by the French philosopher Blaise Pascal), “I have made this letter longer than usual, only because I have not had time to make it shorter.” I apologize for my rambling incoherence. I’m still digesting what I observed from my first visit to China, with an aim towards developing and executing an approach to work more systematically with/in China on cleantech opportunities. The above is merely my first transcription of my emerging thoughts. I don’t know what it all means yet, but I do know that there’s something pretty important in here somewhere.

One final anecdote to wrap up: during my trip, I had the pleasure of being able to connect personally with the U.S. Assistant Secretary of Commerce David Bohigan, as he happened to coincidentally be leading a group of U.S. business people on a clean energy trade mission to China and India. As Mr. Bohigan noted to me, the relationship with China and the need for clean energy will be the two most dominant forces shaping the U.S. economy in the 21st Century.

So, at least one bit of clarity has so far pierced the fog in my mind: it is incumbent upon the U.S. cleantech community to engage meaningfully with/in China, as it is there that the largest opportunities both for wealth creation and for environmental improvement lie.

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.

Real Security after 9/11

Op-Ed by John Addison (9/11/08). My ninth trip to teach a workshop at Two World Trade Center never happened because of the great tragedy 9/11. For years Sun Microsystems, my former employer, had invited me to conduct a series of workshops about technology and strategy. Much of the Wall Street ran on Sun servers, Java applications, and Sun network technology. Reliability, performance, and the ability to recover from disaster were reasons that New York continued to run after the disaster. Sun’s tagline was reality – “The Network is the Computer.”

On September 11, 2001, thanks to heroes like Avel Villanueva the hundreds of people working for Sun Microsystems in Two World Trade Center all quickly evacuated the building and survived. When Avel saw the damage and fire at One World Trade Center, he paged everyone at Sun to leave Two World Trade Center as quickly, “Please, with calmness, go to the nearest exit. This is not a drill. Get out.” He repeated this from the reception area several times. Only after several pages and inspecting the vast 25th and 26th floors did Avel personally leave. Three minutes later the second plane hit Two World Trade Center.

Although it must have been difficult to continue working after such a tragedy, the people at Sun understood that New York depended on their ability to keep working. Within 24 hours almost all Sun employees were doing their jobs at other Sun locations, homes, even nearby cafes. Sun effectively used its own networking technology with an iWork program that enables employees to work at home, at an office near their home, or be highly productive anywhere with a mobile device and wireless network connection.

Flexwork is one way that we are now more secure. The vital work of millions can continue even if a building cannot be accessed or part of a city is closed. Wireless and Web 2 enable collaboration, communication, and knowledge work to continue anytime and anywhere. People are most effective working some days at one location, other times at home, others at a customer or supplier location. We can take advantage of the new flexible workplace solutions to annually save millions of wasted hours and billions of dollars of fuel. Flexible Work Article

Every time that we go through an airport, we are aware that important steps have been created to make U.S. entry and travel more secure. Yes, despite the hassle and loss of some privacy, Homeland Security has been valuable in keeping terrorism at bay.

As our current president reminds us, “We are addicted to oil.” As we continue to spend billions for oil for countries hostile to our way of life, we continue in the words of Thomas Friedman to “finance both sides of the war on terror.” In his new book, Hot, Flat, and Crowded, the Pulitzer Prize winning author shows us how to be free of this addiction.

Americans are not waiting ten years to replace a fraction of our foreign oil with new oil from Alaska. Americans are reducing our oil use now. Confronted with high prices at the pump, U.S. citizens drove 12 billion fewer miles in one month. People are taking advantage of flexwork, public transit, car pooling, sharing rides and sharing vehicles. Two car households are buying fuel efficient cars and increasingly keeping their gas guzzlers parked. 40,000 Americans now drive electric vehicles that do not use a drop of oil. In ten years, we will be driving millions of electric vehicles. EV Reports

Twenty-three percent of our increased supply of electricity in 2007 was from renewable energy. We have enough wind to power the nation including transportation. We have enough solar. Scientific American Article Yes, it will take time, money, high-voltage lines to major markets, and added jobs. Green is producing green. While many areas of our economy are currently suffering, renewable energy and energy efficiency are growing rapidly creating jobs and corporate profits. Global Trends in Sustainable Energy Investment 2008

Real security requires more than airport checks, less foreign oil, and cleaner transportation. Real security starts with the commitment to give our children a better world. Future generations deserve nourishing food, clean water, and protection from disease. Global warming has now put over one billion at risk of not getting enough water and food. Glaciers are disappearing. Water systems are stressed as oceans rise and water tables deplete. Hurricanes attack our coastal cities with increased intensity. Draughts weaken our ability to grow food at affordable prices.

Yes, there are those in Congress who are chanting “drill, drill, drill,” but we cannot end our addiction to oil with more oil. Elected to represent their people, not special interests, these legislators threaten to stop funding renewable energy unless Big Oil can drill anywhere it pleases. Others want to undermine states rights, removing their ability to regulate greenhouse gas emissions within their state.

Fortunately there are wise leaders in both parties committed to put a limit on our greenhouse gas emissions, encourage conservation, put us on a path to a sustainable future that is more secure for our children.

In Mr. Friedman’s new book he recalls a Chinese proverb, “When the wind changes direction, there are those who build walls and those who build windmills.” America can renew its world leadership with innovative solutions to an emerging climate crisis. We can lead in wind power, solar, geothermal, building efficiency, materials that are lighter and stronger, zero emission cars and zero emission cities. From information technology to clean technology, from flexwork to sustainable communities, let’s build windmills not walls.

We can be inspired by heroes like Avel Villanueva who got everyone to safety. We can also celebrate the millions of ordinary heroes who are building a more secure future for our children by living a more sustainable life today.

Copyright 2008 © John Addison. Permission to reproduce on the web with preservation of this notice. Portions of this article will be included in John Addison’s upcoming book.

There’s water in dem dar clouds!

With seawater covering seventy-one per cent of the Earth’s surface, at an average depth of four kilometers, and another 1,000,000,000,000,000 liters of water in the first kilometer alone of the earth’ atmosphere, water could hardly be described as a rare element. Its more a case of ‘water water everywhere and not a drop to drink‘. I’m going to highlight a few different ways in which renewable energy can be used to produce drinking water.
One of the readers last week commented that use of wind turbines or wave energy to power desalination would be a great idea. Well in Perth Australia they are doing exactly that. Perth Australia has now established one of the largest desalination plants outside of the Middle East and set up a wind farm to power it. Electricity for the desalination plant, which has an overall 24MW requirement, comes from the new 80MW Emu Downs Wind Farm, located 30km east of the town of Cervantes. (anyone else see the irony here… Miguel Cervantes, …Don Quixote, Windmills?)

Speaking of windmills, another Australian, Max Whisson, an energetic septuagenarian inventor, believes he can solve the current water crisis with his Water Windmill invention, a unique technology to extract moisture from the atmosphere. The concept is to use windmills to cool air and extract water directly from the air and was partly inspired from an African beetle, Stenocara, who manages to be completely water sufficient by standing on his head in the desert and using cooling plates on his body to extract water vapor from the air. Here is a link to a video
showing the wind turbine in operation. The “Whisson Windmill” will make it possible to get adequate water anywhere at any time, drought or no drought” says Dr. Whisson. Given that between 1% and 4% of the earths atmosphere is water vapor, he may be onto something.
Max also had another concept he called a ‘Water Road’ which Nick Bruce featured on his podcast, the CleanTech Show. In the “Water Road”, seawater is transported inland in black pipes covered with Perspex; solar energy heats up the water at it travels through the pipes to 70-80 C. Water vapor is produced and condensed several hundred kilometers inland to provide water for irrigation. The genius of both of his ideas is the direct conversion of primary energy to the desired end result which is pure water. They are very early stage, conceptual as far as I can tell.

Another technology being developed by the New Mexico State University uses low grade heat and a vacuum to run a distillation process. The system can convert saltwater to pure drinking water on a round-the-clock basis – and its energy needs are so low it could be powered by the waste heat of an air conditioning system. At the risk of losing you, here’s the 101 of how it works. The system consists of two 30-foot vertical tubes – one rising from a tank of saline water and the other from a tank of pure water – which are connected by a horizontal tube. The natural effect of gravity creates a vacuum in the air space above the water column. The lower pressure in the headspace causes water to evaporate at a lower temperature, (this is why water boils at lower temperatures on top of a mountain). Then they use waste heat, for example from an air conditioning system, to heat up the saline water (e.g. seawater or brackish groundwater) to 10 -150 C more than the freshwater. Water vapor from the salt water column travels across the horizontal bridge and condenses in the freshwater column.
Commenting on its energy efficiency, one of the inventors, Nirmala Khandan, an environmental engineering professor in NMSU’s Department of Civil Engineering said “That’s the trick of this vacuum, we don’t have to boil the water like normal distillation, so you can use low-grade heat like solar energy or waste heat from a diesel engine or some other source of waste heat.”
So there you have it. Both energy and water are present in abundance on the planet and if we can use our ingenuity, we may be able to harness and access both in a sustainable manner.

Paul O’Callaghan is the founding CEO of the Clean Tech development consultancy O2 Environmental. Paul is the author of numerous papers environmental technologies and lectures on Environmental Protection technology at Kwantlen University College. He is chair of a technical committee on decentralized wastewater management in British Columbia, is a Director with Ionic Water Technologies and an industry expert reviewer for Sustainable Development Technology Canada.

Is Al Gore Nuts?

In his speech in Constitution Hall this week, former Vice President and renewable energy investor Al Gore extolled a stretch goal challenging America to achieve 100% renewable power within 10 years. The quote: “Today I challenge our nation to commit to producing 100 percent of our electricity from renewable energy and truly clean carbon-free sources within 10 years.” And my favorite part: “When President John F. Kennedy challenged our nation to land a man on the moon and bring him back safely in 10 years, many people doubted we could accomplish that goal. But 8 years and 2 months later, Neil Armstrong and Buzz Aldrin walked on the surface of the moon.”

That statement is about like challenging your 2 year old to finish college by the time she is 12. Not exactly practical, more than a little crazy, and likely to be either ignored, or if you push it, to cause lots of therapy sessions by the time she is 8. I will, however, credit him with getting almost every renewable energy platitude I’ve ever heard into one succinct speech.

He does raise lots of good points about the need for a new energy policy not built around shipping dollars to the MidEast for oil (a definite must), for long term support for renewables (it is critical for us to get off our fits and starts mish mash idea of renewable energy policy), and for moving faster and larger to fight climate change (a topic near and dear to my heart, and one that is only partially helped by making broad statements about how fast the sky is falling, I mean, the glaciers are melting). In fact, there is no better way to give anti renewable energy and climate change naysayers fuel and ammunition than to make statements like these. Any path we go down, I’d still rather challenge that two year old to do something they can achieve, not try and make it through college by age 12 – especially if I’m asking her to pay for it. Slow and steady wins the race.

The core of Al Gore’s argument in his speech on the practicality of a 10 year all renewable energy goal boils down to this quote from his speech on fuels:

“What if we could use fuels that are not expensive, don’t cause pollution and are abundantly available right here at home?

We have such fuels. Scientists have confirmed that enough solar energy falls on the surface of the earth every 40 minutes to meet 100 percent of the entire world’s energy needs for a full year. Tapping just a small portion of this solar energy could provide all of the electricity America uses.

And enough wind power blows through the Midwest corridor every day to also meet 100 percent of US electricity demand. Geothermal energy, similarly, is capable of providing enormous supplies of electricity for America.”

And this one on costs and technology:

“To those who argue that we do not yet have the technology to accomplish these results with renewable energy: I ask them to come with me to meet the entrepreneurs who will drive this revolution. I’ve seen what they are doing and I have no doubt that we can meet this challenge.
To those who say the costs are still too high: I ask them to consider whether the costs of oil and coal will ever stop increasing if we keep relying on quickly depleting energy sources to feed a rapidly growing demand all around the world. When demand for oil and coal increases, their price goes up. When demand for solar cells increases, the price often comes down.”

These quotations, while partially true and very seductive, are highly misleading in this context. The effective conversion rates of that energy to usable electric power or liquid fuel is still horrendously low, and requires lots and lots of capital expenditures, and thousands of miles of new transmission lines to implement. And that’s not taking into account the state of technology – as an industry we really are the two year old in my analogy.

So given those conversion rates and the current high capital expenditures per unit of energy, the cost is still 5-20x (depending on what you count) the cost of conventional electric power generation (yes I know, unless you add in the carbon price and environmental externalities, but that’s still extra cost any way you slice it . . . unless you’d like to subsidize mine). Frankly no serious analyst is suggesting that within 10 years, given the state of technology and the best case forecast capacity, that solar can make up more than a small single digit fraction of even electricity needs or that wind can make up more than a meaningful minority share (let alone after doubling the global power demand by replacing liquid fuels in cars with electricity, which Al Gore also suggests), especially given lead times on power plants and transmission lines.

Most likely even if the technologies were already cost comparative, which they are not – if you need evidence, just look at our wind and solar industries in their current tizzy because their biggest subsidy programs are up for renewal this year – most analysts wouldn’t project a fabled grid parity on cost for renewables for at least the next decade, and certainly not at scale. So Mr. Gore’s statements on cost and technology are in part true, but imply a maturity level in these industries that just doesn’t exist yet. Given manufacturing scale up issues on the technology, transmission infrastructure requirements at least as large as the new generation requirements, and long lead times on building projects of this size (industry executives point to seven year time frames just to build a single transmission line), probably reaching even significant low double digit percentages of carbon free power within ten years is a stretch (excluding large hydro and nuclear which we already have but are hesitating to expand) across the whole nation. Notwithstanding that California has managed to come close to its target 20% number over the last decade, that’s one state leaning on the resources of many states, using the best available sites, federal subsidies paid for from all of our pockets, and that took a decade. When it comes to carbon capture and storage for coal fired generation, a concept with lots of legs – if it works – 10 years just isn’t enough time to achieve scale. The first big pilots are scheduled over the next several years, and there are too many unknowns to bet the farm on, without the lead time and capital cost issue. Though still definitely worth trying.

And as far as paying for it, there was an article in the San Francisco Chronicle today calculating our Federal government long term liabilities at $450,000 per American already mainly for Medicare and Social Security. Actually trying to replace our entire fossil fuel infrastructure within 10 years would push that to how much? Somebody please do the math before we launch a government funded mission to the moon, or legislate that our citizens pay for it instead. On costs, Mr. Gore made the statement in his speech “Our families cannot stand 10 more years of gas price increases.” I agree, but Mr. Gore, your 10 year, hell for leather, man to moon race for 100% renewable energy would guarantee just that.

So while extolling stretch goals for a two year old is probably a good idea, let’s keep it within the realm of possibility, and not just make grandiose statements for media effect. Now if Al Gore’s silly challenge on renewable energy was simply a trojan horse to get people talking about how to move forward on fighting climate change and addressing our long standing energy policy issues, I’m all for that and am happy to help. After all, the words Al Gore and climate change make for very searchble blog articles! But personally when I make outlandish statements, I do like to bring an modicum of practicality to the discussion.

I will leave you with one final note, and please remember, I am actually a proponent of the ideals in Al Gore’s speech, I just prefer to get there in one piece. One theory on the effect of the history of the man on the moon driven space race that Mr. Gore challenges us to copy basically says that we pushed for a single high profile goal so fast and furious that we effectively skipped ahead and outran our infrastructure and capabilities to get a nonscalable shot at the moon in the target time frame. The theory goes on to suggest that’s why after reaching the moon so fast we haven’t progressed at the same rate in space since, and had we taken it slower, we would have gotten there a few years behind, but might be on Mars by know. Akin in a military campaign to outrunning your supply chain, and then getting your army surrounded and destroyed – or perhaps invading a country half way around the world, winning the war in weeks and forgetting to prepare for the peace. And just to show that I can deliver as many platitudes in one article as Mr. Gore, that’s why you never get involved in a land war in Asia.

Energy and environment are the two pillars of everything in our lives. Mr. Gore and I want the same thing, but he thinks we can’t afford not to swing for the fences – I think we can’t afford to mess it up.

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

Aloha

by Richard T. Stuebi

I have the pleasure of writing this posting from one of the most beautiful places on the planet, Hawaii, where I am lucky enough to travel regularly to visit family.

In 1995, while lounging on the Big Island, I decided to shift my career away from conventional energy towards alternative energy. I saw what was then considered a big windfarm at South Point — 37 Mitsubishi 250 kw turbines. Many of the hulking machines were not turning, even though the wind was consistently strong, no doubt because of mechanical difficulties. Still, I was intrigued, and foresaw the need and possibilities for renewable energy — especially in places like Hawaii that rely upon imported oil for virtually all of its energy needs. I had just been reading The Prize, Daniel Yergin’s awesome history of the oil industry, and it wasn’t hard to conclude that we as a society needed to move off of oil for a variety of environmental, economic, and geopolitical reasons.

Every time I return to Hawaii, I take measure of how much renewable energy has been installed. Solar, wind and bioenergy technology and economics have improved considerably, and of course oil prices have skyrocketed. The local utility companies, owned by Hawaiian Electric Industries (NYSE: HE), have actively pursued collaborative integrated resource planning efforts to engage the public in shifting to a more diversified and cleaner energy supply.

And yet, 13 years after I first took note of the situation and opportunity, oil still dominates Hawaii energy supply, even though there’s been significant additions of renewable energy. Solar panels are nowhere near ubiquitous. A few new windfarms have been installed, but considerable potential remains untapped, stymied presumably by aesthetic issues. With its history of sugar production, biofuels should do well here — but they aren’t much of a factor so far. Even the geothermal resources associated with the volcanic activity is not fully exploited.

If renewable energy can’t make massive/rapid inroads in Hawaii, where can it do so? It seems to me that the Aloha State represents an excellent laboratory for CleanTech Revolutionaries to study the barriers to widescale advanced energy technology/infrastructure adoption — and more importantly, how to overcome them. At minimum, Hawaii represents a cautionary tale of how hard and slow it will be for CleanTech to change our world.

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

Edison International Says Solar is the Great Untapped Resource

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

Solar Power 2007

By John Addison (10/2/07) Like a castle under siege, Solar Power 2007 was such a hot event that registration had to be closed a week prior to the conference opening in Long Beach, California. Over 12,500 people attended last week. There was enthusiasm for high growth and technology advancements in photovoltaics (PV) and in large-scale concentrating solar power (CSP).

In 2006, PV grew over 40% to $20 billion in revenue and over 2,500 MW of new solar power. Renewable Energy World. The European Photovoltaic Industry Association (EPIA), forecasts a €300 billion industry by 2030 which will meet 9.4 per cent of the world’s electricity demand. By 2030, solar is forecasted to be the least expensive source of energy in many sunny regions of the world.

In the last 12 months, over 40% of PV installations were in one country – Germany – where high feed-in tariffs make it financially compelling to sell solar power to the electric utility than to buy power from the utility. Some presenters argued that even in select U.S. markets, such as Hawaii, subsidized solar is at price-parity with grid delivered electricity.

PV prices have fallen 90% in the past twenty years; 40% in the past five. This is good news to counter a hot-climate future as solar prices drop and coal prices increase.

The PV growth rate would be higher, but polysilicon will be scarce through 2010 according to most forecasts from the conference’s CEO panel. Polysilicon supply is expected to triple by 2010 from 2006 capacity. The shortage has also been a driver of technology that delivers the required electricity output with less silicon. These technologies include thin film, high efficiency PV, organic, concentrating PV (CPV), and balance of system improvements.

World leader, Sharp (SHCAY) is participating in all these technologies. Sharp continues with market share leadership, despite little growth due to the polysilicon shortage. Sharp plans to bring online new capacity to maintain leadership. Q-Cells (QCEG.F) and Kyocera (KYO) have taken market share from Sharp with their high growth. Suntech (STP) wants to take advantage of China’s low cost structure and vast market to surpass all.

First Solar (FSLR) has the cost to beat with its cadmium telluride (CdTe) alternative to polysilicon. First Solar’s (FSLR) production costs are $1.25 per watt of generating power vs. $2.80 for traditional solar systems. In the next few years, First Solar plans to be the first to achieve $1 per watt. This year, First Solar did not have an exhibit at Solar Power 2007. It is backlogged for several years, with contracts for $4 billion through 2012. Other cadmium telluride producers are in early-stage mode.

Public utilities had a record presence at Solar Power 2007. Many are mandated to increase their renewable portfolio. For example, the California RPS program requires that by 2010, 20% of their electricity will be from renewables. By 2020, it must be at least 33%. SB1368 closes California to coal produced electricity unless CO2 sequestration is used. This leaves California utilities highly vulnerable to the price of natural gas, providing an added incentive to diversify to renewables.

Utilities are especially interested in large-scale CSP plants delivering 10 to 600 MW. Four GW of CSP is being installed globally. Southern California Edison and San Diego G&E have contracted for 500MW with Stirling Energy Systems. This large-scale plant will include 20,000 curved dish mirrors each concentrating light on a Stirling engine. Other large-scale plants in Europe will also provide hours of thermal storage so that plant output can match the peak load demands of utilities. This counters the utilities’ concerns about intermittency of PV and wind. CSP costs are projected to drop to 8 cents/kWh, making it competitive where coal and natural gas greenhouse gas producers must buy greenhouse emission credits.

By 2010 major utility PG&E will meet its 20% target of delivered electricity from clean renewable energy. This will include 553 MW of concentrating solar power (CSP) from a new Solel project. When fully operational in 2011, the Mojave Solar Park plant will cover up to 6,000 acres, or nine square miles in the Mojave Desert. The project will rely on 1.2 million mirrors and 317 miles of vacuum tubing to capture the desert sun’s heat. It will be the largest CSP project in the world. Solel utilizes parabolic mirrors to concentrate solar energy on to solar thermal receivers. The receivers contain a fluid that is heated and circulated, and the heat is released to generate steam. The steam powers a turbine to produce electricity.

FPL Group announced $2.4 billion investments in CSP and smart-grid technology. The planned investment includes up to $1.5 billion in new solar thermal generating facilities in Florida and California over the next seven years, and up to $500 million to create a smart network for enhanced energy management capabilities. FPL plans to build 300 MW of solar generating capacity in Florida using Ausra http://www.ausra.com/ solar thermal technology. The company recently received a $40 million in funding from Silicon Valley venture capital firms Khosla Ventures and Kleiner, Perkins, Caufield & Byers (KPCB).

Ray Lane, a Managing Partner at Kleiner Perkins gave a compelling opening keynote speech at Solar Power 2007. He declared that there is no energy shortage, because there is no shortage of sunlight. Mr. Lane showed a map of 92 x 92 miles of desert in California and Nevada. Using CSP, that unoccupied area could generate enough solar power to meet all power needs in the U.S. Challenges of such a project include multi-billion dollar investment in high-voltage lines to carry the electricity to remote cities. Storage is another major challenge. Although these investments are significant, the potential will drive strong CSP growth.

Expect solar to continue with its historic 35% growth over the next decade. Forecasts for solar supplying over 9% of the world’s energy needs by 2030 are achievable.

John Addison publishes the Clean Fleet Report. For articles describing the use of solar power in transportation.