Worlds of Differences

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

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

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

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

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

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

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

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

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

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

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

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

Chinese Food For Thought

As I posted a few years ago, so many of the best opportunities for cleantech to have immediate benefit can be found in China.

Every day, evidence accumulates supporting this thesis.  Of course, this winter’s air pollution crises in Beijing and other cities made global news.  More gruesome was last week’s discovery of nearly 7,000 dead pigs floating in a river outside Shanghai.

The true extent of environmental abominations in China is unknown.  As this article indicates, the Chinese government guards a substantial body of data about environmental quality — and the Chinese citizens are getting increasingly angry about what they know they don’t know.

To the extent that there is good news to report, it is that China has clearly become a prime destination market for clean technologies to penetrate.

The Pew Charitable Trusts commissioned a recently-released study by Bloomberg New Energy Finance indicating that the balance of trade between the U.S. and China on three key segments of cleantech — wind, solar and smart grid — actually tilts more to China than from China.  This finding conflicts with conventional wisdom, which holds that cleantech exports from China to the U.S. must be dominating the balance of trade, as illustrated by the widespread evidence of Chinese companies dumping low-cost solar panels onto U.S. markets.

For years, knowing how vast the opportunity is, I’ve been trying to figure out how to better facilitate promising clean technologies in entering China to make a big environmental impact (and, of course, do well commercially and financially in doing so).   Of course, I’m not alone, and others have acted while I pondered:  organizations such as JUCCCE and the US-China Clean Tech Center have arisen in the past few years to offer their services.  I guess they’ve been able figure out what I couldn’t:  a clear strategy and compelling business model for serving as a conduit for cleantech dissemination into China from outside China.

ARPA-E Energy Summit 2013

ARPA-E Energy Innovation Summit 2013

arpa-e picOne of the bright spots in US policy has been the Department of Energy’s (DOE) Advanced Research Projects Agency – Energy (ARPA-E) program, which has bipartisan support. Both Republicans and Democrats have come out speaking favorably about the potential of ARPA-E’s contribution to wean the country from its dependence on fossil fuels, and also address the greenhouse gas emissions that is at the heart of the climate change problem. Inspired by the Defense Advanced Research Projects Agency (DARPA) under the Department of Defense, ARPA-E is intended to spur game changing technologies, in the same way that DARPA played a pivotal role in innovations that led to the creation of the Internet.

It was gratifying to know that ARPA-E supported “non-sexy” technologies. The electricity grid can be roughly divided into three components, power generation, transmission and distribution (T&D), and end use. Of these three, T&D has received the least attention and therefore the least investment.  While the public is more aware of the high profile renewable energy technologies and policies needed to lower our dependence on fossil fuels, less is talked about when it comes to the mundane innovations like the grid. Under ARPA-E, the GENI program specifically address how the grid can become “greener” and how to improve the uptake renewable generation.

To date, ARPA-E has disbursed nearly $300 million per year since 2009 and funded nearly 300 projects to universities, large companies, utilities, and start ups. At this year’s ARPA-E Energy Innovation Summit, almost all of the fundees participated in the exhibition.  Among the exhibitors, a couple particularly stood out.

Cree, Inc.

Using Silicon Carbide (SiC), Cree has developed power electronics that will have a major impact on the utility industry. SiC offers advantages over your typical silicon components, by increasing power efficiency from the 80%-tile to over 93%. Instead of bulky transformers that often weigh up to 10,000 pounds, they can be reduced to 100 pounds. This will not only make installations easier but also improve maintenance and enabled the grid to handle multiple types of power sources, including renewable energy generation that are intermittent in nature. Ultimately, these systems can used to support microgrid development in communities. Cree has already received over $5 million from ARPA-E and commercialized their technologies, including LED lamps that are currently available in hardware stores around the country.

General Compression

The uptake of renewable energy into the world’s power grids will require investment in energy storage in order to mitigate the variability of energy produced from solar and wind. Batteries continue to be expensive and are limited to specific applications due to their smaller capacities.

Compress air energy storage (CAES) has been under development for many years to address the needs of grid storage. Another ARPA-E fundee, General Compress has developed a 2 MW system that can be ramped up in as little as 6 seconds, much faster than similar systems under development. In addition, the operation can be reversed from expansion to expansion in as little as one second.

Moving Forward

ARPA-E sows the seeds of future success by providing funding at early stage development. At this years summit, one of the key questions is what is needed to take technologies to the next stage of private investment. Indeed, a policy environment, for example, that promises funding from DOE or other sources beyond ARPA-E is critically needed so that innovators will get into the process in the first place.

Elon Musk of Tesla Motors and recipient of a separate DOE loan program, has pointed out the enormous value of government programs like ARPA-E. Although not all projects will succeed like, for example the case of Solyndra, successes like Tesla can be game changing. He has pointed out that not only is the company able to turn a profit, but that it will be able to repay its loan ahead of time.

Another issue is the lack of energy expertise in the investment community. Attendees that I’ve talked to generally come from the IT field and are only stepping their toes into the energy field. There needs to be strong awareness that investing in energy is very different from IT and requires much more capital.

Better management to bring together different stakeholders is needed. ARPA-E was modeled on DARPA and in fact had intended to bring in DARPA to help build its capacity. At this year’s summit, DARPA officials had also come to discuss their future collaboration with ARPA-E and to bring capacity to the current management.



The Powerful Capabilities of AEP’s Dolan Labs

Thanks to the efforts of Chris Mather, co-head of the Tech Belt Energy Innovation Center, I was able to gain a tour of the Dolan Laboratories, located just outside Columbus, owned and operated by American Electric Power (NYSE:  AEP).

This facility is now highly unusual for the electric utility industry.  Back in the day, a few other utilities had their own laboratories to test the basic equipment upon which the power grid is based.  Alas, most of those laboratories have since been shut down or spun-out to private operators.  Indeed, now even the Electric Power Research Institute – the industry’s collective non-profit R&D organization – sometimes uses Dolan for their work.

The labs at Dolan include chemical and water testing facilities and civil engineering (especially related to concrete) capabilities that are mostly relevant for powerplants.  However, our tour was mainly focused on the Dolan Technology Center:  the set of facilities and equipment employed for testing assets downstream of generation, particularly transmission and distribution.

Electric power transmission and distribution lines look pretty benign, given the lack of moving parts.  However, the forces in (and around, and caused by) these cables are, well, shocking.

At Dolan, AEP has the ability to discharge 1.2 megavolts, which creates something not far removed from a lightning bolt.  In addition to electrical energy, the labs have physical equipment inside containment rooms that can impart extreme mechanical forces to push supporting items like conductors and mounts to their breaking points.  The resulting explosions unleash shrapnel much like a hand grenade.

Trust me:  do not try this at home.  I won’t get into any specifics, but the stories associated with working on grid infrastructure – usually when something is not right, often in difficult environmental conditions (night, rain, snow, wind, cold, heat) – are sobering.

A key function of Dolan is to quality check the supplies that AEP receives from its vendors before deploying to its grid, where failures harm service reliability, pose safety risks and are expensive to repair.

To illustrate, our host Bob Burns (Manager of the Dolan Technology Center) showed us how Dolan has been working to improve underground distribution cables.  Twenty years ago, due to the novelty of the technology, AEP rejected upon receipt about 5% of its underground cable purchases owing to unknown defects.   Dolan was able to identify the root causes of cable failure and work with manufacturers to dramatically reduce those failures by changing designs and production processes – with economic, reliability and safety benefits that redound not only to AEP but to the power industry at large.

In addition to its grid focus, the Dolan Technology Center also includes a number of end-use application testing facilities.  For instance, the main facility includes a dummy household kitchen containing a number of appliances (stoves, refrigerators, dishwashers, water heaters) and control systems, a spectrum of electric vehicle recharging stations, and various installations of advanced lighting and metering technologies.

Although we spent most of the tour indoors, outside were some other uncommon capabilities.  Down the road a half-mile was a former site of a small peaker powerplant, at which Dolan staff experiments with novel technologies relevant for microgrids, including grid-scale energy storage and small-scale distributed generation.  It was here that Dolan has been helping Echogen with their innovative waste heat recovery technology, and it is here that the Dolan is testing community energy storage approaches for AEP’s GridSmartOhio pilot program to be rolled out in suburban Columbus.

It should be noted that AEP contracts out Dolan’s equipment and staff to perform services on behalf of third-parties, and that they have ample spare capacity.  Facilities like this are not found in very many places.  It’s an asset that the cleantech community should capitalize upon more fully.  If you need some specialized technical help related to the power industry – especially in on high-voltage issues – and you’re not able to find a place to get work done, I’m sure the good folks at AEP’s Dolan Laboratories would be happy to take your call to see if they can fit the bill.

EPRI’s View on Emerging Technologies

Writing in the January issue of POWER magazine, Arshad Mansoor (Senior Vice President of Research and Development at the Electric Power Research Institute) authored an article entitled “Emerging Technologies Enable ‘No Regrets’ Energy Strategy” to provide a soup-to-nuts vision of the future technology landscape for the electric power industry.

I don’t know that it’s possible that any player in the challenging U.S. electricity sector can pursue a path that is truly “no-regrets”, and it’s not easy to cover the gamut of technology possibilities of such a complex industry in one relatively brief article.  However, Mansoor’s essay does at least provide some visibility on the broad technology trends of the future, and lays out a taxonomy to consider the panoply of technologies that electric utilities will be facing in the years to come.

Mansoor begins by singling out the three key drivers facing the industry that imply “unprecedented change in the industry over the next 10 to 20 years — more change than in the previous 100 years”:

  1. The availability of natural gas and its increasing role in power generation.
  2. The expanding role of renewable generation.
  3. Technology challenges to reducing carbon dioxide, mercury and other emissions.

As an implication of these three forces at work, Mansoor outlines three categories of technologies that collectively represent a “no-regrets” approach:

  1. Flexible resources and operations.  This spans a variety of technologies to enable both the power grid and power generating sources to better accommodate the inherent variability of demand and an increasingly variable supply base in an uncertain world.  The range of technologies include energy storage, demand response, advanced transmission (e.g., HVDC, FACTS), improved software (for planning, forecasting and operational management), and fossil/nuclear powerplant operational flexibility.
  2. Long-term operations.  This seems to be centered on a variety of robotic technologies to improve the ability for utilities to remotely and efficiently monitor asset conditions and anticipate failures before they happen.
  3. An interconnected and flexible delivery system.  This covers a swath of technologies for power distribution and utilization under the umbrellas of “smart energy”, “grid resilience”, and “consumer-focused technologies”.  Smart energy covers standardization of communications protocols among the various devices on the grid, while capitalizing on the trend towards “big data”.  Grid resilience acknowledges the increasing concerns about security from man-made and natural disasters, with technologies ranging from unmanned aerial vehicles for damage assessment to using plug-in electric vehicles as a power source in the event of emergencies.  Consumer technologies acknowledges the trend towards ubiquity of the always-connected customer (not to mention utility employee), envisioning apps on smartphones and tablets to modulate or activate just about anything on the grid — from specific equipment at a powerplant or a substation to a particular light fixture at a house.

Alas, I think there are some gaps in this overview.  As a primary example, after acknowledging the prospect of tightening environmental regulations, Mansoor barely mentions air or water pollution control technology opportunities that electric utilities may need to consider — and it’s not clear where in his three categories such technologies would even fit.

So, I view Mansoor’s article as a good first starting point in developing a holistic perspective on the future of the electricity sector and how new technologies will reshape it.

It will be interesting to see if the industry evolves as much and as quickly as Mansoor asserts.  As one electric utility executive said to me and some colleagues many years ago, “no major innovation has been widely adopted in this industry unless and until it was essentially required by regulators.”  His point was that utilities are mainly judged by reliability and cost — and new technologies usually (at first) represent risk and entail higher cost than the status quo.  So, why exactly would utilities adopt something new?

I would like to hear EPRI’s take on why it believes that the electricity industry will change more in the next few decades than over the past century, especially given the dire political and economic situation facing the U.S. and the associated regulatory stalemates that are likely.  Perhaps Mansoor or his colleagues can write a follow-up article to address this very important question.

Chicago: Battery Central

At the end of November, the U.S. Department of Energy announced that it had selected Argonne National Laboratory in suburban Chicago to host the Joint Center for Energy Storage Research (JCESR), and bestowed upon it a $120 million grant over 5 years, alongside a $35 million commitment for a new 45,000 square foot facility from the State of Illinois.

As noted in this article in the Chicago Tribune, the goal for the JCESR is to improve battery technologies by a factor of five — five times cheaper, with five times higher performance — within five years.

One of the nation’s Energy Innovation Hubs just being launched, the JCESR has an impressive list of collaborators.  In addition to Argonne, four other national laboratories – Lawrence Berkeley, Pacific Northwest, Sandia and SLAC National Accelerator – will also conduct research under the JCESR umbrella.  University research partners include Northwestern University, the University of Chicago, the University of Illinois at Chicago, the University of Illinois at Urbana-Champaign, and the University of Michigan.  A long list of the leading venture capital firms active in the cleantech arena – including ARCH Ventures, Khosla Ventures, Kleiner Perkins, Technology Partners and Venrock – will serve on an advisory panel to help focus the research on commercially-interesting opportunities.  Corporate titans Applied Materials (NASDAQ: AMAT), Dow Chemical (NYSE: DOW) and Johnson Controls (NYSE: JCI) have loaned their names to the effort.

Whether it was because the team didn’t want their influence or because they didn’t want to be involved, no corporate representatives from the automotive or electricity industries are part of the JCESR constellation.

Especially when paired with the Galvin Center for Electricity Innovation just 30 miles away at the Illinois Institute of Technology, where smart-grid research is a primary focus, the JCESR announcement arguably leapfrogs the Windy City into the top echelon of cleantech technology research clusters, particularly as it relates to electricity management.

San Diego’s Smart Grid

I have to admit:  it’s hard for me to be terribly enthusiastic about electric utilities.  I know a fair bit about them; by my count, I’ve served about ten utilities in various consulting roles during my career.

While generalizations are always dangerous, for the most part, I think it’s safe to say that electric utilities can be characterized as highly protective of the status quo.  Utility executives and employees are typically competent, and take their mission for “keeping the lights on” very seriously, but they tend to be averse to change — the opposite of visionary.

For those of us who are trying to forge a new and better future, who see the eventual emergence of new and more environmentally-friendly technologies as natural and unstoppable as water flowing downstream, utilities can be large boulders in the river.

So it was with some skepticism that I began reading a couple of recent articles about the technology deployment efforts of San Diego Gas & Electric (SDG&E), an operating unit of the utility holding company Sempra Energy (NYSE: SRE).

In August, Power presented its 2012 Smart Grid Award to SDG&E, largely for its smart grid deployment plan (SGDP), which (in its own words) “empowers customers, increases renewable generation, integrates plug-in electric vehicles (PEVs) and reduces greenhouse gas emissions while maintaining and improving system reliability, operational efficiency, security and customer privacy.”

With this plan, SDG&E is aiming to enable a “smart customer” that is able to make more choices and have more control over energy decisions, a “smart utility” that manages a host of ever-advancing supply- and demand-side resources and the grid that integrates the two, and a “smart market” for customers and energy suppliers that preserves power quality and reliability on the grid while increasing price transparency.

In a separate article in EnergyBiz, a Q&A with SDG&E’s President & COO Michael Niggli reveals how extensive the SGDP roll-out has already been in San Diego.  All customer meters — 1.4 million electric, 850,000 gas — have been upgraded.  18,000 rooftop solar units totaling 138 megawatts (3% of peak demand) have been installed.  1600 PEVs are driving around town and plugging-in at various charging stations, bringing new meaning to the phrase “San Diego chargers”.

On top of this, a host of other less-visible advancements — extensive deployment of updated SCADA systems, weather sensors, wireless communications infrastructure — are bringing the grid in San Diego out of the 20th Century to the 21st Century.

All of this will help SDG&E meet the goal of supplying 33% electricity of its electricity from renewable (mostly intermittent) sources while also accommodating potentially 200,000 PEVs by 2020 — which would be difficult if not impossible to achieve without advanced technologies such as those being deployed as part of the SGDP.

As impressive as this all is — and kudos to SDG&E for their accomplishments — it should be noted that San Diego citizens and California regulators were critical to this outcome.  SDG&E may have rolled out the SGDP effectively, but they may not have developed the plan at all unless there was strong push and pull from outside forces.

San Diego residents have been very proactive in installing new renewable and efficiency technologies in their homes, and have been actively seeking engagement with SDG&E on how to get the most benefit from them.  In Sacramento, California”s ambitious set of energy policies — a renewable portfolio standard (RPS), greenhouse gas reduction legislation (AB32), distributed generation goals, demand response mandates, and improved building and appliance efficiency standards — made it untenable for SDG&E to stand still with aging equipment based on decades-old technologies.

Lacking these external forces, I doubt that SDG&E would have made anywhere near as much progress in the smart grid and wouldn’t be far ahead of most other U.S. utilities, who do generally lack these forces.

The moral of the story is that electric utilities, as regulated companies, are reactive rather than proactive.  SDG&E should be applauded for being highly responsive, but let’s not confuse that with being visionary.  Indeed, it’s naive and maybe even unreasonable to expect utilities to be visionary.  All we, as cleantech advocates can do, to “get” utilities to “get it” is to ensure that there’s enough outside pressure for them to “get it”.

If more places across the U.S. were more like San Diego, the transition to the cleantech economy would probably be further along than it is.

Eaton Gobbling Share In Smart Grid

Cleveland-based Eaton Corporation (NYSE: ETN) is rapidly becoming one of the major players in the smart-grid arena.

The big recent news, announced on May 21, was that Eaton is acquiring Cooper Industries (NYSE: CBE), one of the leading suppliers of electrical equipment.  While the largest acquisition, it’s only one of several in the last five years for Eaton to de-emphasize its historical focus on truck components.  And, the pace of Eaton’s acquisitions appears to be increasing.

Last week, Eaton announced the acquisition of Gycom‘s electrical business.  In December, Eaton acquired E.A. Pederson, a manufacturer of medium-voltage switchgear.  Last August, Eaton acquired IE Power, which makes inverters for large-scale solar and energy storage projects.

It seems that Eaton is aiming to develop a more comprehensive toolbox of equipment to sell to electric utilities.  According to this article by Greentech Media, Eaton is now “the sixth largest company in terms of smart grid related revenues, putting it alongside grid and power giants like Siemens (NYSE: SIE), Schneider (Euronext: SU), Alstom (Euronext: ALO) and ABB (NYSE: ABB).”  Not to mention, GE (NYSE: GE) and Johnson Controls (NYSE: JCI) and Honeywell (NYSE: HON).

The consensus sentiment is that the bidding for buying up pieces of the smart grid technology landscape is only heating up.  Given several deep-pocketed acquirers flush with cash, it would be a good time to be a seller.

When the Sun Goes Bad

In late January, a significant solar storm unleashed enormous amounts of energy into space.  Here on Earth, warnings were issued that the bursts of solar radiation could significantly affect a lot of the things that we 21st Century humans take for granted, such as telecommunications, air travel, and power grid stability.  Alas, in the event, it was mainly a false alarm:  aside from increased aurora borealis displays, there were minimal disruptions to life as we now know it.  And, the world’s attention – diverted for a couple of moments – reverted to more mundane or trivial dramas.

That solar storm turned out to be a non-event, but that doesn’t mean that solar storms are nothing to worry about.  In 1989, a solar flare event plunged most of Quebec into a blackout

For quite awhile, the Earth has been very lucky:  the truly huge solar storms of recent decades flung their energy in a different direction across the universe, missing us.  We haven’t experienced a direct hit by a major solar storm since 1921, which in turn was smaller than the prior big event in 1859.  Of course, in those days, civilization wasn’t very dependent on electricity, telecommunications, and all the things enabled by electronics – so those storms didn’t cause widespread cataclysms.

In the February 2012 issue of IEEE Spectrum, John Kappenman’s article “A Perfect Storm of Planetary Proportions” provides a harrowing description of the probable impact of an epic solar storm, 10 times as powerful as the 1989 storm, but of a magnitude that the Earth has experienced many times over the eons.  As Kappenman says, “the bad news is that it’s likely – certain, even – that such a storm will happen again.  And when it does, it will be one of the worst disasters in recorded history.”

The biggest challenge facing us is that the electromagnetic pulses of a major solar storm will induce enormous electromagnetic fields that will fry high-voltage transformers in utility substations over continental-sized areas.  When these transformers explode, few people will actually be injured much less killed, but the grid will go down – and stay down.  Spare transformers of this size aren’t just sitting on the shelf in inventory.  Replacing one or two wouldn’t be a big deal, but replacing hundreds or perhaps thousands of them?  It could take years to get the grid back to its prior condition, and could take months to restore power in some pretty large areas. 

Consider the social chaos caused about an entire state, or a multi-state region, caused by 10 weeks without power.

Kappenman notes that there are technologies that can mitigate if not entirely eliminate this risk by damping or filtering the effects of electromagnetic pulses on transformers.  Yes, this would be another one of those “smart grid” technologies.  But, deployment requires mass-retrofitting of equipment throughout the utility grid, which in turn would be a public infrastructure project of the highest-degree – and there is substantial public apathy towards any additional expenditure on just about anything worthwhile in energy, much less anything that might not be needed for a few years or decades. 

No:  as with so many other challenges, we prefer to just muddle along, keep our fingers crossed, and hope that we can come up with a good response when confronted with a crisis.  Alas, there are very few human-induced crises comparable to that day when the star in the sky that we utterly rely upon for everything decides to give the Earth a big slap upside the head.


Report from Energy Innovation Summit

Last week, many of the leading minds of the cleantech world congregated in suburban Washington DC for the 2012 Energy Innovation Summit.

The Summit is mainly oriented as a showcase of some of the most interesting and promising technologies that have surfaced directly or indirectly as a result of ARPA-E:  the Advanced Research Project Agency for Energy, a subgroup of the U.S. Department of Energy that was launched in 2009.

Of all the cleantech conferences I’ve attended in the past 12 years, and there have been far too many, this was one of the best, for several reasons.

First, most of the speakers were excellent (= interesting + informed).  Often at these kinds of events, the roster is populated by some combination of bureaucrats that in actuality are mid-level paper-pushers and geeks that speak in such granular detail about science or engineering topics that no-one can understand.  Either way, the comments are usually delivered in monotone, to overeager junior audience members busily taking notes they’ll never read and dozing or smartphone-checking senior audience members that have heard most of the same boring nonsense before.  (Cynical, much?  Yeah, I know.)

In contrast, we got to hear from Dr. Steven Chu, the Secretary of Energy, who is arguably the most brilliant cabinet member of all time (having won the 1997 Nobel Prize in physics for the cooling and trapping of atoms with laser light).  Dr. Chu reiterated some of his recent stump speech on the need for technological leadership to maintain/enhance U.S. competitiveness in the global economy, and the risks encountered from the need to stay on the frontier (Solyndra, anyone?)

We got to hear from Dr. Arun Majumdar, the Director of ARPA-E, who is just about as smart and knowledgeable, and perhaps more passionate and dynamic, than Dr. Chu.  Just one nugget from Dr. Majumdar:  the design life of a utility transformer is 40 years, yet the average in-service age of transformers on the U.S. utility grid is 42 years.  (Yet another factor in the drive for the “smart grid”.)

We got to hear from Bill Gates – yes, that Bill Gates – who revealed a depth of insight and concern that one would only expect of someone who had been playing in the cleantech game and fighting the good fight for decades.  Sample observation from Gates:  “Energy innovation in the U.S. is underfunded by at least a factor of 2.”  Gates talked at considerable length about the need for more research in carbon sequestration and in nuclear – noting his interest in TerraPower.

We got to hear from the Fred Smith and Ursula Burns, CEO’s of Fortune 100 companies FedEx (NYSE: FDX) and Xerox (NYSE: XRX), along with Lee Scott, the former CEO of WalMart (NYSE: WMT), talking about how energy technology innovation is critical to these goliaths of business.

I couldn’t attend all of the sessions because of various other commitments, and I purposely avoided sitting in on the remarks of the politicos – including Bill Clinton, Senator Lamar Alexander (R-TN), and Representative Nancy Pelosi (D-CA) – because (a) I’m disgusted with the state of the political environment and discourse in the U.S. these days,  (b) I’m confident that these speakers have arbitrarily-close-to-zero to say that would be useful or relevant to someone trying to actually create value with new cleantech innovations entering the commercial marketplace, and (c) I had better things to do when they were talking.  But, what I did hear from the keynotes and panels I did attend was generally pretty interesting and informative.

The networking at the event was impressive.  Many of the leading cleantech venture capitalists were milling around, along with actually-empowered senior executives of leading industrial corporations sponsoring truly novel stuff in energy technologies.  I only wished the name tags were of a larger font, so I could better see the identities of some of the people I was passing by, knowing that I was missing connecting with someone I really wanted to get to know.

But perhaps the most important reason that the Summit was such a positive event for me was the quality of the technology innovations and innovators that exhibited at the show – spanning from university research projects to start-up ventures to large corporations such as General Electric (NYSE: GE), Boeing (NYSE: BA) and Cree (NASDAQ: CREE).

At times over the years, I feel like I’ve seen or heard pretty much everything in cleantech, which sometimes makes me wonder if everything that could be invented or needed to be invented was already being worked on.  An event like this put lie to this misbelief.  People were talking about exotic/crazy stuff like wireless electric vehicle recharging while roaming.

After just the first day, I could see that there were lots of promising technologies being worked on really big opportunities beyond the set I kept seeing over and over again.  Moreover, most of these initiatives were led by entrepreneurs that were not only committed but also much more competent and capable than the tinkerers that represented most of the cleantech innovation realm a decade or so ago.

My overall impressions of the Summit gave me good hope that we are making real progress in the cleantech world, and that there’s a lot more for me to do and be excited about in the decades to come.  I myself was recharged on the fly.

Banking on a Low-Carbon Energy Future

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Predictions For Cleantech In 2012

It’s December again (how did that happen!?) and our annual time for reflection here at Kachan & Co. So as we close out 2011, let’s look towards what the new year may have in store for cleantech.

There are eggshells across the sector for 2012. Global economic uncertainty in particular is leaving some skeptical about the chances for emerging clean technologies. And those who watch quarterly investment data, or who look only in a single geography (e.g. North America) may have seen troubling trends brewing this past year. But the true story, and the global outlook for the year ahead, is—as it always is—more complicated.

As you’ll read below, we predict a decline in worldwide cleantech venture capital investing in 2012. But as you’ll also read below, we believe the gap will be more than made up by infusions of corporate capital. And the exit environment, depending on who you are and where you list, still looks robust in 2012 for cleantech (it may not have felt so, but it was actually surprisingly robust in 2011, according to the data. See below.) All in all, if you’re a cleantech entrepreneur seeking capital, our advice is brush up that PowerPoint and work the system now… while there’s still a system to work.

Because, as we detail below, the largest risk, to cleantech and every sector in 2012 we believe, is the specter of precipitous global economic decline and the systemic changes it might bring. Details below.

Here are our predictions for cleantech in 2012:

Cleantech venture investment to decline
In the face of naysayers then forecasting a cleantech collapse, in our predictions this time last year, we called an increase in global cleantech venture investment in 2011. We were right. At this writing, total investment for the first three quarters of 2011 is already $6.876 billion, with the fourth quarter to report early in 2012. Given historical patterns (fourth quarters are almost always down from third quarters), we expect 2011 to close out at a total of ~$8.8 billion in venture capital invested into cleantech globally. That’d be the highest total in three years, and second only to the highest year on record: 2008.

cleantech 2012 predictions venture investment
Total 2011 investment is expected to show growth from 2009’s figures once the fourth quarter (dashed lines, estimated) is added. However Kachan predicts total venture investment in 2012 to decline from 2011’s total. Data: Cleantech Group

Yet in 2012, we expect global venture and investment into cleantech to fall. Not dramatically. But we expect cleantech venture in 2012 as measured by the data providers (i.e. companies like Dow Jones VentureSourceBloomberg New Energy Finance,PwC/NVCA MoneyTree, and Cleantech Group) to show its first decline in 2012 following the recovery from the financial crash of 2008. Our reasoning? There are factors we expect will continue to contribute to the health of the cleantech sector, but they feel outweighed by factors that concern us. Both sets below:

On one hand: What we expect to contribute to growth in cleantech investment in 2012

  • China gets a hold on its economic turbulence – For five years now in our annual predictions, both here at Kachan and when I was a managing director of the Cleantech Group, we foretold the rise of China as cleantech juggernaut. Yet, now with China having become the largest market for and leading vendor of cleantech products and services by all metrics that matter, and now receiving a larger percentage of global cleantech venture capital than at any point in history, there have been recent warning signs. New data just in (for instance, falling Chinese property prices and sluggish export growth because of faltering first world economies, not to mention the first decline in clean energy project financing in China since 2010 as wind project financing declined 14% in the third quarter of 2011 on fears of over-expansion) suggests the Chinese economic engine is slowing. On the face of it, that might look bad for cleantech. But we put a lot of faith in China’s central government and the seriousness with which it views this sector as strategic. Even now, the country has just gone on the record forecasting creating 9 million new green jobs in the next 5 years. Nine million! And China has a good track record in executing its 5-year plans.
  • Rise in oil prices – Cleantech is a much wider category than energy. But for many, renewable energy is its cornerstone. And while there’s no question about the long-term markets for renewables, the biggest factor affecting their short-term commercial viability is the price of fossil-based energy. The good news: indications are that oil prices are headed upwards in 2012, which should be expected to help make renewables more economic. Naysayers maintain that a poor global economy will destroy demand for energy, keeping the price of oil artificially low. For much of 2011, the price of oil was relatively low. But we argue the price per barrel will continue its inexorable rise in 2012 given continued growth in the size of the global market for oil, driven by market expansion in the developing world. Further adding to the expected oil price increase is a little-known fact: there’s been a decline in the quality of oil the world is seeing on average. And the poorer the quality of the oil, the more it costs to refine it into the products we require. Oil prices are headed up.
  • Corporations’ even stronger leadership role – Corporate venturing was up in 2011, possibly setting new record highs, according to the data providers (4Q data not in yet.) Cleantech corporate mergers and acquisitions globally were up in 2011, again possibly setting new record highs, according to the data. The world’s largest companies assumed the leadership we and others predicted they would last year at this time—and indications are they will continue to do so in 2012, with balance sheets still strong.
  • Solar innovation as a perennial driver – Investment into good old solar innovation and projects is still strong, and has remained so for years, while other clean technologies have risen and fallen in and out of investment fashion. And that’s despitemost solar companies being in the red and having billions of dollars in market capitalization disappear over the last year. As some solar companies will continue to close up shop in 2012, look for investment into solar innovation to remain strong in 2012 as the quest for lower costs and higher efficiencies continues.
  • Persistence of the fundamental drivers of cleantech – The sheer sizes of the addressable markets many cleantech companies target, and the possibilities for massive associated returns, will continue to draw investors to the sector. Why? The world is still running out of the raw materials it needs. Some countries value their energy independence. More than ever, economies need to do more with less. Oh, and there’s that climate thing.

On the other hand: What worries us about the prospects for growth in cleantech investment in 2012

  • Investor fundraising climate tightening – Today, limited partners (i.e. “LPs” – the organizations and/or wealthy individuals that fund venture capital companies) are still bankrolling cleantech worldwide; in its 3Q 2011 Investment Monitor for clients, the Cleantech Group details 34 dedicated cleantech and sustainability-focused funds receiving billions in capital commitments internationally in the third quarter of 2011 alone. But we expect a slowdown in venture fundraising in 2012. Blame Solyndra for negative American LP sentiment. Or blame the lack of rock star returns in cleantech of late. But there are more indications than ever that some LPs are becoming increasingly reluctant to fund cleantech. They’ve been grousing about cleantech for years. But the politicizing of the Solyndra bankruptcy has amped the rhetoric higher than ever, and will foster a self-fulfilling prophesy in 2012, particularly in America, we believe.
  • Waning policy support in the developed world – Expected conflicting government policy signals to continue in 2012. Don’t expect cleantech-friendly U.S. policy leadership in 2012, an election year. We wouldn’t be surprised if the ghost of Solyndra and other U.S. Department of Energy stimulus grants and loan guarantees continued to haunt American cleantech through the whole of 2012, making any overt U.S. government support of clean or green industry unlikely. While cleantech is far from solely an American phenomenon, there’s no mistaking that the (now expired) American national loan guarantee program helped loosen private cleantech capital in an immediately post-2008 shell-shocked economy. However, continued uncertainty over the future of the U.S. Treasury grants program and production tax credits is holding the U.S. back. Policy support suffers elsewhere in the developed world. For instance, in the UK, investor confidence was recently dealt a blow by a dramatic drop in solar feed-in-tariff (FIT) rates, and the erosion of renewable policy support in Germany and Spain is well known.
  • Lag time of negative sentiment – Even if the sky indeed started falling in cleantech (and we don’t believe it yet has), it would take a few quarters to show in venture or project investment numbers. Remember, deals can take quarters to consummate. Transactions being counted now may have been initiated a year ago. Fear takes several quarters to manifest. Which is why we believe today’s uncertainty will start to show in 2012’s performance.
  • VCs still circling their wagons – In 2007, before the financial crash, the percentage of early stage venture investments into new cleantech companies was roughly the same as later-stage venture investments into established companies. Since the crash of 2008, deals have remained skewed—both by number and size of deals—towards later stage companies, illustrating investors’ preference to keep existing investments alive than take risks on new companies. While the exact ratio varies quarter to quarter, and from data provider to data provider, there have been generally fewer early stage companies getting funded. That’s hampering cleantech innovation. We expect the trend to continue into 2012.
  • Perennial concern about exits and IRR – Despite the size of its massive addressable markets and near-record amounts of capital entering the space today, on the whole, cleantech investors are still seeking the returns that many of their web and social media tech brethren enjoy. Even now, 10 years into this theme that we started calling cleantech in 2002. That’s not for lack of exits; 2010 saw the largest number of cleantech IPOs on record (93 companies raised a combined $16.3 billion) and 2011 has already had 35 without the last quarter reporting. And cleantech M&A activity in 2011 was strong and significantly higher than last year. No, the concern is for lack of multiples. For instance, 8 of the 14 IPOs of the third quarter of 2011 were trading below their offering price as of the publication of the Cleantech Group’s 3Q 2011 Investment Monitor. Don’t let anyone tell you exits aren’t happening in cleantech. They’re just underwhelming. And/or they’re happening in China.
  • Macro-economic turbulence, collapse, or at least, reform – They’re the elephants in the room: The Occupy movement. Arab Spring. Peak Oil. The continued and growing mismatch between overall global energy supply and demand and food supply and demand. Ever-increasing debt and trade deficits. Currency revaluation or political/military developments. Any or all of these could spur another massive global economic “stair-step” downwards of the scale we saw in 2008, or worse. Concern about all of these points and the impact they’d have on the cleantech sector weighs heavy on us here.

Venture dip made up for by rise in corporate involvement
The world’s largest corporations woke up to opportunities in cleantech in 2011, making for record levels of M&A, corporate venturing and strategic investments. General Electric bought lighting and smart grid companies. Schneider Electric bought some 10 companies across the cleantech spectrum. Corporate venturing activity was high, as were minority-stake investments. In just the third quarter alone, ZF Friedrichshafen invested $187 million in wind turbine gearbox and component maker Hansen Transmissions of Belgium, Stemcor invested $137 million into waste company CMA in Australia, and BP invested $71 million into biofuel company Tropical BioEnergia in Brazil. And there were dozens more minority stake transactions like these throughout the year.

Look for even more cash-laden companies to continue to buy their way into clean technology markets in 2012, supplementing the role of traditional private equity and evidencing a maturation of the cleantech sector.

Storage investment to retreat
Significant capital has gone into energy storage in recent quarters. In 3Q11, storage received $514 million in 19 venture deals worldwide, more than any other cleantech category. Will storage remain a leading cleantech investment theme in 2012? We’re betting no. Here’s why.

Storage recently made headlines as the subsector that received the most global cleantech venture investment in the third quarter of 2011, the last quarter for which numbers are available. An analysis of the numbers, however, shows the quarter was artificially inflated by large investments into stationary fuel cell makers Bloom Energy and ClearEdge Power. Do we at Kachan expect more investments of that magnitude into competing companies? No. Why? Even if you believe analysts that assert that stationary fuel cells for combined heat and power are actually ramping up to serious volumes (oldtimers have seen this market perpetually five years away for 15 years, now), just look how crowded the space currently is. Bloom and ClearEdge are competing with UTC Power, FuelCell Energy, Altergy, Relion, Idatech, Panasonic, Ceramic Fuel Cells and Ceres Power … just some of the better-known 60 or so companies vying for this tiny market today. And many are still selling at zero or negative gross margins.

But the main reason we’re not bullish on storage: Smoothing the intermittency of renewable solar and wind power might turn out to be less important soon. Sure, nary a week goes by without announcements of promising new storage tech breakthroughs or new public support for grid storage (e.g. see these three latest grid storage projects just announced in the U.S., detailed halfway down the page.) But we believe that utility-scale renewable power storage might be obviated if utilities embrace other ways to generate clean baseload power.

In 2012 or soon thereafter, we expect those clean baseload options will start to include new safer forms of nuclear power (don’t believe us? Read Kachan’s report Emerging Nuclear Innovations—U.S. readers, don’t worry: nuclear innovation won’t apply to you.) Or NCSS/IGCC turbines powered by renewable natural gas delivered through today’s gas distribution pipelines (see The Bio Natural Gas Opportunity). Or even geothermal (gasp!) or marine power (see below). All of these promise to be less expensive than solar and wind when you factor in the expense of storage systems required—incl. electrochemical, compressed air, hydrogen, flywheel, pumped water, thermal, vehicle-to-grid or other—if solar and wind are to be relied on 24/7.

Marine energy to begin coming of age
I’m a closet fan of marine energy, despite today’s extraordinarily high cost per kilowatt hour. We started covering wave, tidal and ocean thermal energy conversion equipment makers in 2006. Anyone who’s heard me talk publicly on the subject has had to suffer through hearing how I’d much prefer invisible kit beneath the waves than have to gaze upon solar and wind farms taking land out of commission.

In 2006, the lifetime of equipment from then-noteworthy companies like Verdant Power and Finavera (which since exited marine power after a failed test with California’s PG&E) in the harsh marine environment could sometimes be measured in days. The designs just didn’t hold up. Even Ocean Power Delivery, now Pelamis Wave Power, with its huge, snakelike Pelamis device, had hiccups in early onshore grid testing. Back then, the industry clearly had a long way to go.

Today, six years later, we think it’s time to start taking marine energy seriously. A high profile tidal project is now underway in Eastern Canada’s Bay of Fundy. Several weeks ago, Siemens raised its stake in UK-based tidal energy developer Marine Current Turbines from less than 10% to 45%, because it liked the predictability of ocean energy, and Voith Hydro Wavegen handed over its first commercial wave project to Spain. And last week, Dutch company Bluewater Energy became the latest vendor to secure a demo berth at the European Marine Energy Centre at Orkney, Scotland—the most important global R&D center for marine energy. Things are going on in marine power. Still, its major hurdle is the large variation in designs and absence of consensus on what prevailing technologies will look like.

2012 won’t be the year marine power becomes cost-competitive with coal, or even nearly. But you’ll hear more about marine power in 2012, and see more private and corporate funding, we predict.

Increased water and agricultural sector activity
Look for increased venture investment, M&A and public exits in water and agriculture in 2012.

At one point, only cleantech industry insiders championed water tech as an investment category (and, frankly, at only a few hundred million dollars per year on average, it still remains only a small percentage of the overall average $7B annual cleantech venture investment.) Industrial wastewater is driving growth in today’s water investment, with two of the top three VC deals of the last quarter for which data is available promoting solutions for produced water from the oil and gas industry, and the largest M&A deal also focused on an oil and gas water solution. Regulations aimed at making hydraulic fracturing less environmentally disruptive to will spur continued innovation and related water investments in 2012.

Where water was a few years ago, agriculture investment appears to be today. There was more chatter on agricultural investment than ever before at cleantech conferences I attended around the world this past year. Expect it to reach a higher pitch in 2012, because of:

Investing in farmland is even resurfacing, in these uncertain times, as a private equity theme.

Remember the food crisis three years ago, when sharply rising food prices in 2006 and 2007, because of rising oil prices, led to panics and stockpiling in early 2008? Brazil and India stopped exporting rice. Riots broke out from Burkina Faso to Somalia. U.S. President George W. Bush asked the American Congress to approve $770 million for international food aid. Those days could return, and they represent opportunity for micro-irrigation, sustainable fertilizer and other water and agriculture innovation.

And so concludes our predictions for 2012. What do you agree with? What do you disagree with? Leave a comment on the original post of these predictions on our site.

This article was originally published here. Reposted by permission.

Bringing Security to the Grid in an Unsecure World

It’s long been on the short-list of things that keep utility planners and security experts awake at night:  hackers find a way to enter the control system of critical infrastructure and command it against the interests of users.

Well, it appears to have finally happened:  in early November, a small water utility in downstate Illinois reportedly experienced a cyberattack from a source in Russia, in which a pump was repeatedly turned on and off until it failed.  The event is under investigation by the Department of Homeland Security and the FBI.

In some ways, it’s surprising that this first incident took so long to occur.  Hackers and terrorists are determined and many have access to the latest in technologies, while the information systems and governing architecture of the U.S. utility grid is essentially decades old.  The SCADA systems typically in use to manage utility assets are generally antiquated, with proprietary code, and who-knows-how-many bugs and loopholes and vulnerabilities since they were programmed by people who are now mostly either retired or dead.

There’s a lot of hype about “smart-grid” technologies to manage the grid and its assets for better efficiencies.  Not much of the smart-grid discourse centers on security issues.  But, it would be pretty stupid for a newly refurbished smart-grid to remain so vulnerable. 

I’ve heard from reliable sources that blowing up just a few of the most critical substations in the U.S. would cause prolonged and wide-reaching blackouts until new equipment such as large transformers could be fabricated, as quantities of these things don’t just sit on the shelf. 

Let’s hope that the relative silence about grid security in the smart-grid space is more a function of desired stealthiness than of inattention or neglect.

“Off the Grid and Into People’s Homes”

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

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

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

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

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

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

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

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

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

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

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

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

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

Home Energy Management: Premature Jocularity

One of the hottest cleantech investment segments in recent years has been home energy management (HEM).  HEM technologies enable households to remotely and/or more wisely manage their energy use, enabling lower consumption for equivalent (or better) quality of life:  climate control, lighting, entertainment, cooking, etc.

In the space of just a week or so, two of the leading information technology giants — Microsoft (NASDAQ: MSFT) and Google (NASDAQ:  GOOG) — announced last month that they were pulling the plug on their in-house HEM efforts — efforts that had been launched with great fanfare not long ago.

As reported in such postings as this one and that one and (more humorously) yet another one, Microsoft’s Hohm and Google’s PowerMeter will be discontinued due to lack of customer uptake. 

At best, HEM is an idea before its time, dependent upon smart meters and other so-called “smart grid” technologies to enable a lot of the highest-value functionality of HEM.  At worst, HEM is an idea whose time will never come — simply because most households simply don’t care that much about energy — and won’t spend a lot of time to save a few bucks on their energy bills, preferring to spend that incremental hour playing a video game or surfing social media. 

I’m inclined to the latter interpretation:  while energy management for commercial/institutional buildings can/will be a big deal, simply because the value at stake is significant and building-owners have sufficient profit-motivation to take action to improve financial results, energy management for homes will be a tougher play, due to constrained budgets and limited customer mindshare and appetite for taking action to save relatively few dollars.

Regardless, HEM continues to attract big bucks from outside investors.  iControl Networks just fetched over $50 million from such tech stalwarts as Cisco (NASDAQ:  CSCO) and Kleiner Perkins, and Siemens (NYSE:  SI) invested in Tendril at almost exactly the same time as Microsoft and Google announced their abandonment of HEM.

So, what does Google and Microsoft know that the others don’t?  I’m not exactly sure, but I can say with confidence from first-hand observation and experience that a lot of investment capital that is often referred to as “smart money”…isn’t.

Time will tell if any of these investments generate good returns, but the past and present hype about HEM feels premature, if not unwarranted.

Wind, Water and Sun can Power Our 240 Million Cars and Everything Else

Mark Jacobson Lecture Our Promising Future of Electric Cars Powered by Renewable Energy

Our Promising Future of Renewable Energy

The cleanest solutions to global warming, air pollution and energy security are wind, water, and solar power (WWS).  As Dr. Mark Jacobson walks me through the numbers of his, Dr. Mark Delucchi, and their teams’ multi-year study, the renewable energy solution stands out as the clear winner. Dr. Jacobson is a Professor of Civil and Environmental Engineering at Stanford University and an advisor to the U.S. Department of Energy.

Wind power has been doubling in capacity about every three years. It’s now over 200 GW; in 3 years it will be over 400 GW. 36 U.S. states generate enough wind power to replace one or more coal or nuclear power plants.  U.S. wind grew 39 percent in recession year 2009. In a growing number of global locations from Hawaii to Denmark, wind is the least expensive way to generate power. Their WWS study includes both on-shore wind power, which is plentiful from Texas through the Dakotas and offshore with enormous potential along our Pacific and Atlantic coasts and our Great Lakes.

Solar includes the photovoltaics that cover homes and the faster growing PV that covers commercial roofs. It also includes the grid-scale PV and concentrating solar power (CSP) that generates the equivalent power of a natural gas or coal plant. The water in WWS includes hydropower, our most widely used source of renewable energy, and geothermal power, which uses steam to drive turbines.  Water also includes emerging, wave and tidal power generation.

WWS can meet all of our needs for electricity. WWS can also meet all of our need for heat and for transportation.

At the same time that we see high growth of WWS, especially wind and solar power, we are also experiencing transformational growth of electrified transportation. Mark Jacobson points out that electric propulsion is four times as efficient as internal combustion. Health concerns, energy security, and economics make combustion a loser. Every year we see more battery electric vehicles (BEV), electric rail, and even hydrogen fuel-cell vehicles (HFCV) such as the 20 buses that transported 100,000 visitors during the last Winter Olympics.

From a technology standpoint WWS can meet all of our needs in 20 to 40 years.  How far and how fast we move to reduce greenhouse gas and health-damaging emissions depends more on politics, sunk-costs and inertia than on what is feasible.  Faced with the growing threats of global warming such as heat waves, water scarcity, failed food production, continued growth of WWS is essential.

Electric Cars End Our Dependency on Oil and WWS Ends Our Dependency on Coal

By 2015, several forecasts put one million to 1.5 million electric cars on the U.S. road. Having recently purchased a Nissan Leaf, I believe the forecast. My electricity bill is a fraction of what I paid at the gas station to put on the same miles. With current incentives, my electric car cost $22,000. Prices are likely to decline for electric cars while gasoline prices are forecasted to increase.

Mark Jacobson has driven his Tesla Roadster 16,000 miles. He charges his Tesla with the same solar photovoltaics that power his entire house. By going Mark Jacobson Driving Tesla Our Promising Future of Electric Cars Powered by Renewable Energyto energy efficient electric appliances and solar water heating, their utility bill is at the minimum needed for a couple of gas burners on the stove for a few favorite meals. Mark and his wife don’t just talk about the transition to WWS – they live it.

With the 240-mile range of his Tesla Roadster, range has rarely been an issue. Yes, on a trip to Sacramento, he had to plug his Level 1 charger into the outlet in his motel room, extending the cord out the window to his electric car. On one trip to Modesto, he had to convince his hotel manager to turn-off their decorative water fountain so that he could use the fountain’s electric outlet to trickle charge overnight. The vast majority of the time, he is riding on sunlight.

Public charging infrastructure is expanding, renewable energy growth continues, and lithium battery prices fall as gasoline and diesel increase in cost. Our cars are getting cleaner and more electric.

Jacobson and Delucchi looked at the lifecycle impacts of different types of cars and various fuels. Alternatives were ranked according to their impacts on global warming, pollution that impacts our health, water supply, land use, security issues such as terrorism and other impacts. The study evaluated nuclear, coal and natural gas with sequestration, advanced biofuels, and included hybrid and plug-in hybrids vehicles. Our best scoring alternatives, in the following order, are electric vehicles using renewable energy:

  1. Wind – BEVs
  2. Wind – HFCVs
  3. CSP – BEVs
  4. Geothermal – BEVs
  5. Tidal – BEVs
  6. PV – BEVs
  7. Wave – BEVs
  8. Hydro – BEVs

Pure battery-electric cars were the big winner in their study with most of their power coming from wind and solar charging. Hydrogen from wind electrolysis scores best for vehicles requiring extended range such as buses, ships using hybrid hydrogen fuel cell propulsion, and aircraft using liquefied hydrogen combustion. Mark Jacobson’s articles for Scientific American, Energy Policy, testimony to Congress and the EPA, and more can be accessed at his Stanford website.

The study used existing technology that can scale to broad commercial deployment. At first glance, growing to 11.5 TW of WWS globally looks impossible, a closer look shows that many of the study’s assumptions are conservative because only today’s technology is considered. The shift to electric vehicles powered with renewable energy will be easier if vehicles are built with much lighter materials, or if we succeed with breakthrough battery chemistry such as lithium air. The electric car/renewables scenario timetable also improves as U.S. drivers continue their trend of driving fewer miles thanks to record urban density, transit, flexwork, and aging boomers.

In Energy Policy Jacobson and Delucchi write, “”Although we focus mainly on energy supply, we acknowledge and indeed emphasize the importance of demand-side energy conservation measures to reduce the requirements and impacts of energy supply. Demand-side energy conservation measures include improving the energy-out/energy-in efficiency of end uses (e.g., with more efficient vehicles, more efficient lighting, better insulation in homes, and the use of heat exchange and filtration systems), directing demand to low-energy use modes (e.g., using public transit or telecommuting instead of driving)….”

Vehicle to Grid and other Storage

A 100% WWS United States must deal with the variability of wind and solar. This is an important reason that wind, water, and solar power are all needed to meet our 24/7 demands. Large-scale deployment of wind and solar will require a Supergrid network of high-voltage lines that can move electricity from mid-American wind farms and desert solar plants to cities and industry. With a national Supergrid, WWS is largely achievable without storage and even without using pricing and demand response (DR) to make energy demand more level. He walked me through a California study that he co-lead in 2005 showing that WWS would meet 99% of California needs, even during peak hours on a burning summer day. With our growing use of DR, intelligent energy management, and storage, large scale WWS can be deployed more quickly.

Byron Shaw of GM quipped, “Cars are like cats, they sleep 22 hours per day.” Most cars are parked when the grid faces peak demands. Why not let people make money charging at night at a discount and sell electricity back to the grid at peak at premium pricing? The model works well for individuals and businesses with solar power.

Jacobson and Delucchi write, “The use of EV batteries to store electrical energy, known as ‘‘vehicle-to-grid,’’ or V2G, is especially promising, albeit not necessarily easy to implement…. In order for V2G systems to provide operating reserves to compensate for hourly variations in wind power (again when wind power supplies 50% of US electricity demand), 38% of the US LDV fleet would have to be battery-powered and be on V2G contract.”

Yet 38 percent will not need to sign V2G contracts because V2G is just one of many ways to store wind and solar power until needed. Utilities currently use nighttime wind energy to pump water uphill. The next day at peak hours the water flows downhill driving generators. Grid-scale batteries, compressed air storage, and storage towers coupled with concentrating solar plants are all in early stage use.

Easier than It Looks

Meeting 100 percent of our energy and transportation needs with wind, water, and solar power seems as daunting as putting a man on the moon. Mark Jacobson and Mark Delucchi state in Energy Policy, “With sensible broad-based policies and social changes, it may be possible to convert 25% of the current energy system to WWS in 10–15 years and 85% in 20–30 years, and 100% by 2050. Absent that clear direction, the conversion will take longer. “

Their WWS scenario can meet our electricity, heat, and transportation needs. The technology is here, but it will take considerable political will to overcome the subsidies, market barriers, and change required to meet all needs with WWS.

In several ways, the transition will be easier in the United States. We already have more vehicles than people with drivers license, in contrast to the explosion of middle class drivers in Asia now buying their first car.

In the United States we have achieved strong growth of wind and solar. Now we are successfully deploying smart grids and electric cars. WWS does not require technology breakthroughs, yet dramatic innovation is likely in the next two decades in battery technology, solar efficiency, and urban mobility that requires fewer car miles.

Jacobson and Delucchi only assume reasonable progress in energy efficiency. New lighting technology, such as LED, can cut 80 percent of lighting’s 27 percent of total electricity demand. Making electricity cheap during vehicle charging hours and more expensive during peak hours will make a huge difference. In the United States, 80 percent WWS is achievable in the next two or three decades. 100 percent is like putting a man on the moon – it looked impossible until we did it.

What If…?

…someone invents an economically-competitive energy storage technology that could be deployed at any electricity substation at megawatt-hour scale?

…the power grid were brought up to 21st Century standards to match the true power quality needs of our increasingly digital society?

…high-speed rail was not the exclusive province of Europe and Asia?

…customers had real choice about electricity supplies, via ubiquitously cost-effective on-site generation options?

…cities and industries pursued viable cogeneration options with real vigor, and companies like Echogen revolutionize the capture of waste heat?

…the use of fracking was reliably paired with other technologies and solid oversight to assure that local water quality is not harmed when shale gas is produced?

…recovering coal and tar sands was undertaken only via mining approaches that don’t leave huge gouges in the earth’s crust?

…all companies involved in the mining and burning of coal would honestly acknowledge and deal responsibly with the environmental challenges associated with coal?

carbon sequestration technologies are more than just a pipe dream and can be widely applied with confidence that no leakage will occur?

…environmentally-responsible technologies were commercialized to produce oil from shale in the Piceance Basin, making the U.S. self-sufficient for years to come?

Joule is really onto something and can produce liquid fuels for transportation directly from the sun?

…fuel cells expand beyond niche markets via continuing improvements in technology and economics to penetrate mass-market applications?

nuclear fusion could ever become viable as a technology for generating electricity?

…new technologies for the production and use of energy in a more environmentally-sustainable matter were responsible for a major share of new jobs and economic growth in the U.S.?

…we stopped sending hundreds of billions of dollars overseas every year to fight both sides of the war on terrorism?

…we stopped subsidizing mature and profitable forms of energy?

…we determined that climate change was simply too big of a risk to keep ignoring and decided to tackle the issue out of concern for the future?

…Americans were willing to pay at least a little bit more for energy to help defray the costs of pursuing much — and achieving at least some — of the above?

…we later found out that we didn’t spend that much more money and also found ourselves living on a healthier planet and in a more fiscally-solvent country with a viable industrial future?

…certain fossil fuel and other corporate interests would cease misinforming the public on many economic and environmental issues related to energy consumption?

…Democrats and Republicans could come together and do what’s best for the country rather than what’s best to strengthen or preserve their party’s political power?

…more Americans cared about the above than who wins American Idol, Survivor or Dancing With the Stars?

Seven cleantech companies Silicon Valley just learned about

As a reporter and analyst, I wrote about hundreds of cleantech companies. As a managing director of the Cleantech Group, I spent years listening to hundreds of pitches, coached companies on presenting to institutional investors and helped facilitate cleantech deals around the world. Just last month, I served on a committee at the request of the Canadian consulate in San Francisco to evaluate companies to present at a cleantech investor event.

So I’ve seen a lot of cleantech companies pitch well, and some not so well.

Last week, I had the privilege to help present seven strong cleantech companies actively seeking capital to investors in Palo Alto. And the two-dozen institutional cleantech investment firms in the room liked what they saw.

Read more

Matthew J. Schiltz Named Group CEO; Powerit Receives $5 Million in Funding from Investors

Media Contact:
Sarah Grolnic-McClurg
Thinkshift Communications/Pounce PR

(SEATTLE, March 1, 2011) Powerit Solutions, an international cleantech company that plugs energy-intensive businesses into the smart grid, today announced two actions that will fuel the firm’s continued growth and development. 

Effective March 7, 2011, Matthew J. Schiltz, a seasoned chief executive, will serve as group CEO of Powerit Solutions. He will lead Powerit’s international operations and take a seat on the company’s board. Concurrent with his arrival, the firm has secured an additional $5 million round of investor funding.

“Sometimes the stars really do align,” says Claes Olsson, chairman of the Powerit Solutions board of directors. “This fresh infusion of capital, coupled with Matt’s hiring, will launch a new era. We have ambitious plans under way on several fronts, and now we have bolstered our resources and leadership expertise, better preparing us to enter into new partnerships and channels and move even more deeply into the industrial and commercial energy management sectors.”

Matthew “Matt” Schiltz to Serve as Group CEO

Schiltz has served as president and CEO or COO for five highly successful technology companies since 1989. His track record in building high-growth technology companies encompasses all aspects of leading, building, growing, funding, and managing. His leadership helped each of his past five companies earn a spot on the Inc. 500 and/or Fast 50 lists due to their explosive growth. At Powerit Solutions, Schiltz will take the company’s proven technology and traction to scale.

Says Schiltz about his new position, “I’m excited to be leading Powerit Solutions—a dynamic, growing cleantech firm that is well out of the gate. Powerit’s proven energy management technology is producing terrific results for customers and the company has clear momentum. Armed with a leading solution in the growing smart grid sector, Powerit is very well positioned and we see great potential for accelerating growth even further.”

Most recently, Schiltz was president and CEO of DocuSign. Recruited by the board in 2007, he transformed the start-up into a market leader in electronic signatures. He closed three rounds of financing that totaled over $25 million, ran strategic business development relationships with leading corporations like Microsoft and, and grew shareholder value by more than 900 percent.

New Round of Financing Brings Fresh Capital

Powerit Solutions has also just completed a new round of financing with a $5 million investment from five funds. Black Coral Capital, a fund focused on the cleantech sector, led the round as a new investor; the other four were existing investors from prior rounds.

The investment will finance Powerit’s plans to scale these initiatives:

•Extend the company’s reach in key vertical manufacturing sectors with its Spara energy management technology.
•Develop partnerships with OEMs and energy services firms that want to use Spara technology to connect their customers to the smart grid.
•Add channel partners in North America and internationally.

“Powerit Solutions’ Spara technology is a valuable tool for smart grid connectivity, as we see in their work with Auto-DR, for example,” says Rob Day of Black Coral Capital. “Unlike a lot of smart grid companies that just have good ideas, Powerit’s ideas have become products that are already producing real benefits from the smart grid—customers are reducing their electricity bills and increasing operational efficiency.”

“Powerit is an established leader in energy management, with active installations operating around the world,” Day continues. “And we think Spara’s flexible technology will integrate well with partner services and products. That will help build Powerit’s value.”

About Black Coral Capital
Black Coral Capital is a fund investing in the alternative energy/cleantech space. It invests in a wide variety of cleantech arenas, both directly and through funds. Black Coral was formed in late 2008 and is building its presence in North America, with offices in New York, Boston, and Montreal. For more information, visit the Black Coral Capital website.

About Powerit Solutions
Powerit Solutions is a Seattle-based international cleantech company that plugs energy-intensive businesses into the smart grid. Powerit’s Spara technology enables users to automatically increase energy efficiency, cut peak-rate usage, participate in demand response programs, and respond to dynamic pricing advantageously—without compromising quality, production, or comfort. For more information, visit the Powerit Solutions website.

Report from Grid Integration of Renewables Conference at Stanford

By Andrew Longenecker, guest contributor 

 The TomKat Center for Sustainable Energy’s “Grid Integration of Renewables” conference, which took place at Stanford University’s Jen-Hsun Engineering Center on January 13, 2011, brought together professionals and students to discuss various aspects of the integration of intermittent sources of power to the grid. The conference facilitated the discussion on technological, political, and international perspectives, bringing together a variety of views to create a comprehensive perspective on a very important problem.

Jeff Bingaman, US Senator from New Mexico, where he is Chairman of the Senate Energy and Natural Resources Committee and Chairman of the Subcommittee on Energy, Natural Resources and Infrastructure, opened the conference with his keynote speech. He first noted the importance of taxes for support for renewable energy (estimating that 80% of renewable energy support comes in the form of taxes) and indicated concern that these were not permanent features of the industry, as the Production Tax Credit (PTC) expires in 2012 and the Investment Tax Credit (ITC) expires in 2016. In discussing what to expect for the next two years, Bingaman was cautious, noting three separate “things to keep in mind”: there is a politically polarized environment (and upcoming election in 2012), there is strong ideological resistance to active government role in the transition of our economy to a clean economy, and there is an adverse budget situation, causing difficulties in finding the money to maintain spending on tax programs. He noted that there is an opportunity for a “clean energy standard” instead of a “renewable energy standard,” but cautioned against supporting “clean energy standards” that are simply veiled proposals designed to cut the current renewable energy programs.

Jeffrey Byron, appointed to the California Energy Commission by Governor Arnold Schwarzenegger in June 2006 who served as Presiding Member of the Energy Commission’s Research, Development, and Demonstration Committee and is a member of numerous other energy-related committees, gave the second keynote speech of the conference. He had an optimistic perspective of California’s accomplishments to date, particularly in regards to the prospect of reaching the target of 33% renewables by 2020. However, he acknowledged that there are challenges: lack of legally established renewable portfolio standards, no real-time pricing, lagging on renewables goals (e.g., California did not make its 20% renewables goal), and a lack of sophisticated thought about procurement of electricity in California. Further, he viewed the energy structure in California to be overly complicated, with too many stakeholders with overlapping jurisdictions and coordination issues. He emphasized the need to seek greater collaboration among constituents (e.g., electricity imports from neighbors), continue cost improvements, revise interconnection standards to pass costs accurately among stakeholders; create a path toward putting all generation on equal footing, and to improve the measurement of the grid. He closed his speech by emphasizing that people and policies really do matter and encouraging everyone to demand more from their government representatives. His view is that the United States and the world are looking to California’s leadership to develop the clean technologies and policies that the world will use.

The rest of the conference included speakers and panel discussions covering a broad range of topics. There sessions represented a wide variety of backgrounds, ranging from utilities (e.g., PG&E), academia (e.g., Stanford University, University of Delaware), government and non-profit institutions (e.g., NREL, Center for Energy Efficiency and Renewable Technologies), international perspectives (including professors from Germany, the United Kingdom, and Denmark), and startups like SunPower. One frequently mentioned topic was the need for flexibility in the grid in order for renewables to prosper. Speakers mentioned numerous potential sources for grid flexibility, such as automated demand response programs, dynamic pricing (which may come to California as early as 2013 for residential customers), renewable imports from neighboring areas (as well as intra-hour scheduling of renewable imports), smart charging of electric vehicles, and of course, storage. Debbie Lew from NREL shared two interesting examples of areas with large renewable shares (around ~30% renewables) that experienced significant difficulties in managing loads. Drastically increased volatility from wind intermittency, as well as significantly lowered minimum loads, caused massive problems for the system (e.g., cycling and ramping schedules for conventional plants, increased complication in load management). However, speakers were generally optimistic on the significant opportunities in solving these problems, particularly in California’s leadership on the issue.

Please note that presentations from the conference will be posted at