A recent KPMG survey shows that most auto executives still believe hydrogen fuel cell cars are going to win and EVs are going to fail in the long run.  Many of the major oil companies believe that biofuels are fundamentally limited in scale, and oil is too carbon intensive so are looking at a EVs as a stepping stone to a natural gas feedstock, hydrogen powered fuel cell transport fuel future of some sort – in part because every molecule is needed.

This is crackers. thinks digital – electrochemical auto tech stack of the future rewrites the car and transport sector from well to driver and every business model in between.

Let me posit our future. In the new world order for transport fuel:

  • Renewable and battery costs keep falling
  • Effective “engine efficiency” continues to improve
  • Car weight for the average fleet and the average class goes down
  • AI makes smarter cars/optimized and self driving
  • Car sharing reaches dominant share and builds on driver-less and AI tech
  • Our cost/car mile falls by a third, for umpteen times better product

Complete rewrite of both the auto and fuel supply chain and distribution and ownership models in the process.  Think this is nuts? US CAFE standards alone as currently set would by 2025 remove about 40% of US gasoline demand.  And the technology to deliver that was in place before they were set.  My F150 has turbochargers, aluminum body and simply turns off every time I stop.  That’s 2005 technology.  Before EVs even really existed.  It will take another 5-10 years after 2025 for that to roll through the fleet and see the full impact, but the train has left the station.

What do people actually want out of their cars?  How about convenience, low cost, no traffic, no hassle, sex appeal, acceleration, comfort, personal control, less time in them, faster transport, always available.  What in that says IC engines invented c 1900 matter? Or that driving up to a gas station, getting out, taking time out of my day, putting in my credit card and sloshing combustible smelly stuff into the car while my kids ask when are we getting there is a positive addition to my life?

Then what do our 2035 cars actually look like?  They look hella cool and crush the IC engine and hydrogen economy forever.  Not just on cost, on functionality.

Here’s our digital – electrochemical auto tech “stack” of 2030-2040.

Ultra-light weight carbon fiber bodied – enabling less battery, smaller engines, more fuel efficiency.  Weight is a force multiplier. Car companies that get that will win, those that don’t will fail. The tech is already being adopted in EVs, and has been around for years.  Just needs more cost down and scale.

EV wheel based pod motor driven – enabling better turning radius, safety, traction control, ultra optimized driving, quad regenerative braking, torque improvement, engine redundancy, 2wd/4wd on the fly switching, drive by wire, lower center of gravity.  This was the old GM skateboard concept for fuel cells from 2002.  The engine tech just never got there.  It literally rewrites how you design a car and what you can do with it, and is the basis for Tesla. It becomes 4 distributed electric motors embedded in the wheels.  No drive train, transmission, alternator, big engine, engine compartment, the “drivetrain” and engine and wheels are just structural.

Lithium Ion type battery powered – while there are always more battery breakthroughs, it takes an industry of investment to scale and cost down battery technology.  LI is winning, and going to win.  No single company can change that.  It’s just a matter of what type of LI.  The key challenges with LI for auto are power to weight and volume, energy to weight and volume, charge/discharge depth and rate v life, safety, and cost – all headed in the right direction and often exponentially cumulative not linearly additive.  As a simple example, if the unit has a better depth of discharge/discharge rate v life, you need less battery capacity onboard for range, because you can run what you have harder.  If you add that to better weight ratio, you need less battery to carry the weight of the other batteries, and less volume, you need less car to carry the volume.

Think of it like an army with horses as it mechanized.  Horses need hay to eat.  Horses have to haul that hay.  The farther you go, pretty soon your horses are only carrying hay to eat, and you need another horse to carry you.  Which also needs hay…  Enter gasoline with a very high fuel to weight/volume ratio relative to horses, which can carry a day of fuel in few little cans in the back, and horses are gone.

Now the next issue with LI batteries is power to energy ration is fairly linear.  More power and more range meaning shifting the curve not moving on the curve.  The storage industry used this excuse as the need for flow batteries and fuel cells where you can divorce power from energy, just like adding a bigger gas tank (my F150 has 36 gallons, a tiny 2.7L engine with turbochargers, so I can haul, accelerate AND go 936 miles, making it to San Francisco with 1 stop for gas).  But today the industry is actually shifting the curves for LI.

PV/Nat Gas/Wind/Water Fueled  – So what powers this puppy?  Our grid mix is shifting, by 2040 we’ll be running wind and PV for low cost, natural gas for firming, and everything else becomes niche.  The PV module of 2018 costs like $0.40/Wp, already well below the broad grid parity targets that existed when I started out, and already cheaper than anything else in its best markets.  The train has left the station.

Optional Reversible PEM Fuel Cell/Electrolyzer Range Boosted – instead of a hydrogen fueled PEM fuel cell running the whole thing like auto and oil execs would love, and dealing with hydrogen fueling infrastructure or onboard reforming, both which have massive technical and cost problems especially when you need the size to run a full car, we’re going to get you your 1,000 mile range “PH”EV with a combination of undersized high tech without sacrificing acceleration, torque, and car size.  We’ll let you have your fuel cells, they just don’t happen the way you expect.  We’ll start with an APU.  This is 1960s/70s NASA tech, that I worked on 15 years ago.  It’s a reversible PEM electrolyzer/hydrogen fuel cell that run forward converts hydrogen into electricity, allowing a small metal hydride or pressure tank to provide energy storage and range, and run backwards breaks water down and makes electricity.  It’s not a mister fusion, but it’s damn close.  And the tech is not new, and while hard, is easier to handle at APU scale than fuel cell plus onboard reforming at engine scale.  Moral: fuel cells are as likely to be disruptive or supportive of EVs, not a replacement for or supportive of current energy supply and distribution models.

Onboard/Offboard PV Charged – We are going to have PV covered cars.  Not now, not in 5-10 years.  But it will happen.  The knock on this has been simple, not enough surface area to deliver the power needed.  And a long list of technical challenges.  Let alone handle peak v average load needs and range.  Concept cars yes, real cars no.  That won’t be true in 2035.  Car power requirements will be down by a factor or more (just like my 2.7L vs a 5L, for 97% of the torque and 85% of HP), PV performance /unit area up by a couple of factors, PV prices/Wp down by a factor, and the PV system in an integrated EV world provides more boost than it does prime mover.  At the very least it will be a cheap APU or battery trickle charger.  I’d like you to imagine a world where the current panel technology that delivers 20ish % efficient and costs $0.40/Wp for a c 300 W module moves to a high performance, multi-junction, or a clear single junction plus a multi-junction concentrated cell structurally replacing roof and hood and windows.  A car has surface area for say 3 modules, and needs 10s of KW worth of power.  An EV has c. 25-100 kwh battery today, I can easily imagine pulling 5-10 kwh/day off onboard solar, and combined in within home charging and our APU electrolyzer able to deliver a fuel stationless existence.  Keep in mind cars only drive <10% of their life.  My F150 sits in the sun, and a roof and bed just begging for PV.  PV becomes the low cost fuel cost reducer, range extender and APU trickle charger.

Inductive wireless home and parking lot /workplace charging – the real question, why exactly do I have to stop for fuel, and why exactly do I have to take my car to get fuel?  Why do I get out of my car to plug it in?  In 2035, you don’t.  Your parking space at home, work and while shopping or out is your charger.  And it’s plugged into the grid and the PV on the your roof and your car.  Amazon, Walmart, Netflix and Apple have provided the systems, and they advertise on the charger, so you pull into the parking spot on the one that has the best loyalty program, and let it charge while you go to work or in to eat.  The energy cost is so low, they bury it in Prime and your healthcare bill, and your onboard AI named Dinah makes the decisions on when and how much it needs.

V2G Enabled Home Backup-power and Integrated Smart Fuel /Charging Switching – these are not single sources of supply.  Your car battery is the backup power to your house, and charges from the cheaper of its own PV roof, your PV roof, or the grid wherever it’s parked as needed, without you thinking about it, and is smart enough to know when to pass up the expense.  It even has AI tech enabled by blockchain based smart contracts that negotiates with the provider in real time on how much energy it needs, the charging rate and price before it plugs in, or negotiates to sell its power back to reduce that location’s demand charges.  The onboard AI knows when to turn on the electrolyzer to make fuel, and when to run the fuel cell and batteries to get paid for peak power management.  Your average fuel cost goes down to a fraction of your latte budget (literally), and the new Microsoft AI cuts deals with other car AI’s next to it to create a short term monopoly and force that local utility to pay through the nose for peak supply, because the utilities don’t have top notch AI engineers.  And if the utility’s AI refuses, your AI just sells straight to the building owner or another car next to it.

Shared Model AI Self Driving and Fueling – car sharing and ride sharing will have a dominant market.  The cars will do the work with no driver.  The car will take care of its own maintenance scheduling and fuel.  It does the driving, and handles safety, and even shops for its own cheapest insurance based on its own driving history.  It will rent itself out to Uber when you aren’t using it, and schedule an alternative ride for you if it isn’t close enough. I will watch tv and conference calls in my car.

Recovered/Recycled – one gets the argument from time to time that there is not enough material to do all of this – lithium, cobalt etc.  Either of two worlds: we mine more because it is cheap, or we recycle any valuable metals just like we do the catalytic converters now.  2030 sees an explosion in metals extraction and separation technologies.  ExxonMobil’s massive Baytown refining operation turns into metals separation plants because oil volumes have fallen so much.

So what does all this mean? A lot.

  • Fuel demand taps out and becomes deflationary rather than inflationary.
  • No lubricants/low maintenance business
  • More materials mining and recycling
  • Destination and distributed fueling instead of corner Gas Station /Retail
  • Full employment act for electrical and electrochemical technologies and engineers
  • A massive new software industry for autotech and digital auto
  • My car takes itself in for fuel
  • Conventional mass transit take a hit
  • Dramatically cheaper insurance, safer cars
  • Car dealerships disappear – you buy your car at your house, it just drives over and takes you for a test drive, the salesman is pitching you remote from Iowa and the car takes itself in for maintenance when you are sleeping, negotiating the best rate along the way.
  • My car is super custom. 450,000 models not 4,500.
  • Cars utilized 80%+ of the time instead of 10%. “Net jets” for cars.
  • Rental car agencies are gone – Uber has become the new car rental agency.
  • Software, cyber security and General Counsel for Privacy all become C suite departments in transport and energy.
  • My car is so much cheaper, what am I going to spend my new disposable income?

How do we pay for it?

We are going pay more for cars, and save money.  Typical car today is $80K.  Yes $80K.  42% or $33K in car, $15K in gas, $12K in insurance $18K in maintenance over its life. In 2035 we are looking at $25-50K in car, 90%+ reduction in fuel costs, 50% reduction in maintenance, and 50% reduction in insurance, and your car will cost you 1/3rd less / month than today, but you don’t have to drive, get gas, or take it in for maintenance yourself and it is always where you want it.  And you can always rent it out on AirBnB, which was bought by Microsoft and has replaced Uber as the leading car sharing service.  The better your AI, the more money you can rent it for.

Not a bad world.

Don’t believe it’s possible?  17 years ago in 2001 I ran business development for the company behind, which was a hot player looking at an IPO at the time.  At the time, there was no cloud, IoT didn’t exist, Blockchain was well over a decade away, self-driving cars were not even a myth, Uber, Facebook, Netflix, did not exist and even Myspace was still 3 years away, Google was unknown – the best search engine was Northern Light.  Apple did not make phones, hell, smart phones were not a thing, solar was for crackpots not trade wars, oil was 24 months off a low of $10 barrel, and the term cleantech had not been coined.  Amazon and Walmart were not buying healthcare companies and Amazon was still just a bookseller.  And my 1996 car still had a digital clock and a tape deck not a computer and wifi.  But in another 17 years you think my vision is nuts?

MIT Mistakes and How Much an Uber Driver Actually Makes

MIT recently posted a sensationalist research article where the authors claim 74% of Uber and Lyft drivers earn less than the local minimum wage. Which begs the question, if the authors are right, why in the hell would hundreds of thousands of people do that? Are they all too stupid to do math, have no other options and are being taken advantage of by the Man, and the bright boys at MIT are showing them the way? I don’t think so. I think the bright boys at MIT don’t understand basic business, economics, or accounting.
The answer lies in tax efficiency, fixed cost and fixed asset allocation ratios, and marginal cost economics. One must look at it from the driver’s perspective, and ask why, if the authors’ survey data is right, is it still happening at scale and growing?
In my Uber riding experience, I ask drivers why they drive and how well they do and is this full time. Largely the responses are either: 1) I’ve been driving full time for a while and make good money, 2) I’m driving full time because I am between jobs and need to cover my car note, and make what I can until I get a new job, 3) I drive part time to a) fill my off hours, b) make some money on my commute, or c) drive until I’ve paid off my insurance and car note for the month then stop, or d) pay for a nicer car than I’d otherwise have.
Let’s start with the low hourly wage argument – The authors implicitly assume a couple of really, inaccurate assumptions that square the circle. Number one, they forget that of their $0.30/mile “cost”, only 20% is fully variable, gas, and the other 80% is fixed to mostly fixed (depreciation, insurance, maintenance) – their data, not mine. They basically argue that since “bulk of miles driven” are for ride sharing, all the costs should be allocated to the hourly wage of the driver. This makes no sense on multiple levels. Cars are fixed costs, drivers may or not be. This matters a lot because their total cost analysis is basically allocating all of that fixed cost on a variable basis when they are calculating driver profits. Drivers are assuming the opposite. Drivers are assuming that those car costs are largely fixed not variable. You can see that when they tell you things like “driving til my car costs are covered”. In fact, drivers are implicitly assuming that some of their labor hours and some of their fuel costs are ALSO fixed, which is quite interesting behavioral economics. The comments, I drive to cover costs on my commute, imply the driver is expecting to spend some or all of those hours driving and some of that gas money, and all of the other costs anyway. And a driver that says, I’m driving to fill my hours, cover my car note, or because I am between jobs is also arguing their labor costs are more fixed than variable – basically, “I was intending to be working anyway, so the “costs” to my household of the labor hour as non leisure were getting borne regardless” so I might as well take the highest revenue hour available at that time to cover them. What does this mean for profits? It means drivers are very, very rationally looking at most if not all of the costs that the MIT bright boys subtracted as fixed, and charging them to or spreading them across their full household base, not charging them to the hours driven. This is basic cost accounting stuff in any business. From a pure economics standpoint, if you have underutilized or absorbed fixed costs, you are better off taking any marginal revenue that exceeds your marginal cost, and your total profit, and net profit margin goes up. It’s called operating leverage. The only driver flaw in this allocation could be wear and tear, which they may be underestimating, but if it gets them a nicer car, and another they are just going to buy another one sooner, they probably don’t care, and neither does the economy.
One commentator in the TechCrunch article whines about the high 10-20% portion that Uber/Lyft take as holding down hourly wages. Ignoring the fact that even at this level Uber and Lyft aren’t yet making money, customer acquisition cost for any business (let alone what it costs a taxi driver without Uber) is usually $20-$100/retail customer (larger than the average Uber ride), usually a partially fixed upfront cost, and usually a material portion of the sale. If you think about it, the average retail gross margin is about 50%, meaning that the company who made the product gives up 50% of the customer value just to make the sale – on every sale. The average distributor gross margin in the 15-20% range, and virtually any business will give up 10% marginal commission to get a marginal customer without thinking. But Uber, at 15-20% does one better – they deliver you the technology to get the job done, they deliver you a customer at no upfront cost, a customer literally minutes from your “storefront” right now, let you pick between customers who have different price points (which is very hard for companies to do), they don’t require you even to commit minimum hours or even show up like any other customer or company, they handle all payment risk, they handle pricing, and enable you to get premium price in surge pricing without any extra work, and they pay you basically ASAP, not two weeks or monthly basis, let alone net 30, but we actually pay you in 90 because we are GE, don’t charge you Medicare and Social Security taxes, and allow you to create tax deductions for your own personal assets that wouldn’t otherwise exist. All for a small fraction of what it costs Fortune 500 companies with armies of people and top tier brands to acquire a customer and get their product to them. Yet, I should call this a bad economic deal for the driver?
We should probably even be looking at this as a net benefit, not cost. If you look at compensation surveys, employees will generally swap some amount of pay, perhaps as much as $5-10/+hour or 5-20%+ of compensation to get work complete flexibility in any job. Uber offers you that on Mark McGwire level steroids. So Uber drivers may be “grossing up” their labor rate by a fairly large amount, and moving in and out of the Uber market – especially if the alternative income opportunity is drive an extra average 30 minute commute to work (which the company does not pay for, to work another 5 hours a week getting from 35 to 40 (as most businesses try to do so they can afford the federally mandated time and a half).
Marginal Cost Economics – We should talk about the implicit idea the authors have that Uber driving is a bad deal for the marginal driver at the marginal labor hour. They note that 80% of drivers drive less than 40 hours a week, but then proceed to ignore the impact of the very rationale reasons why.
We have been inured to believing that for work hours, “overtime” should get paid more. But this simply is nuts. It’s just a modern labor law construct to stop abuse by corporations during the progressive era, and an incentive to get your employees to work extra for short spurts. But in fact, by hour 60 or 80 in a week, I guarantee we are all less productive per hour than we were at hour 20, and should in theory get paid less (and virtually every aspect of the economy and society does better if we pull more productive hours from people not currently working at a lower rate, than if we pull less productive extra hours from people already working at a higher rate). From a personal work choice perspective, you take your highest dollar first – only an idiot would choose to work a lower value wage first, and higher value one later. Of COURSE driving Uber part time should be lower $/hour than your main job, otherwise you’d have switched to full time, and so would everyone else (since the secret of Uber is reducing barriers to entry for new drivers), until the hourly rate was back down below the average full time labor rate again. Saying Uber drivers should get a higher rate for their last hour of work a week ignores every law of microeconomics. However, in the magic of gig economy, if might actually be freakanomically true in this unique case because Uber may be helping households absorb underutilized fixed costs and fixed assets in a highly tax efficient manner with very little friction, set up, and transaction costs.
Untaxed Driver Profits – The authors then argue that 74% of driver profit is in untaxed (and that this is bad for the economy/not fair etc.). They don’t seem to understand the definition of profit or how economies work. If most drivers are part of two income families, or are driving part time on top of another income (as they also mention, 80% of drivers are < than 40 hours/week), then driving makes perfect sense across a wide range of scenarios. From a driver’s perspective, you drive Uber as long as marginal revenue exceeds marginal costs (including the marginal labor rate you are willing to accept), or until you cover your fixed costs, and magically make your car note, depreciation, insurance, car repairs, and any gas you spent (that might have been expended anyway in the commute case) all become tax deductible, just like for any business. The authors want to charge this to the driver’s Uber income, at the nutty $3.37 hourly wage estimate they are using – newsflash 100,000 Uber drivers are not all so stupid and unemployable that they are working for $3.37 an hour – your analysis sucks. However Uber drivers appear to be doing the opposite – they are basically treating most of their expenses as fixed, and then ALSO sheltering higher tax rate income from their spouse or other job with Uber driving by shifting those expenses into the tax deductible category, and covering some fixed labor costs that they’d otherwise lose (from 0-c.80% of the labor hours depending on the driver). They are actually getting paid for those costs as tax efficient profit center, not charging them as expenses.
Meaning the Uber driver sees this as a very high revenue opportunity. We can always change the car tax deduction – but it would be very uncool for big businesses to get to deduct their cost of goods, but the small Uber driver business get told sorry, you’re with Uber, you can’t. In fact, that would get fixed real fast as Uber would just lease your car to you at below cost and take the tax deduction to equal offset. So is this bad for the economy? Ummmm, no. We are getting more marginal labor hours, more aggregate GDP and taxable income, more flexibility for workers, more use out of our installed vehicle base, which likely means more frequent and higher valued car purchases, fewer care note defaults, and using the same exact tax deal that every large business in America gets, just available to you and I Joe Schmoe only if we work more hours! You’ve got to be nuts to think this is a bad deal for the government or the economy. In fact, if Uber is successful enough to pull enough people /marginal work hours out of the workforce – maybe we’d finally see some wage inflation again.
30% of Drivers are Losing Money – Finally the authors claim that 30% of drivers are actually losing money once vehicle expenses are included. Quite possible, but not likely for very long, and it doesn’t likely matter. Two very interesting facts here. All of my analysis above says this is probably just an MIT cost accounting and tax allocation fantasy, nobody is that stupid to believe it except them. Second, they failed to analyze a timeline. I would bet that most Uber drivers who drive for a long time, make good money. Otherwise, they’d have stopped. It is likely that new drivers make less – why, well, some of the new ones aren’t very good, get bad reviews, aren’t efficient at finding riders, don’t have car and gas costs optimized for Uber, basically they are still little startups that haven’t learned the business yet. That’s true in ANY business. So it might be better to analyze, how well does a new driver do, how well does a good, experienced driver do, and how long and what does it take for a new driver to become smart and profitable in which markets. As a fun aside, I was once picked up for $12, 10 minute Uber ride home from a car dealership at 10 pm at night after I failed to negotiate the price I wanted on the car. My wife had dropped me off. The lady who picked me up lived literally yards from the dealership, usually drove Uber only on weekend nights in certain parts of town where she could get surge pricing, easy customers from 11 pm – 1 am before the drunks got out, to cover her auto costs on a very nice car and make going out money. She knew exactly what part of town and when she could make really high hourly rates, and when and where it was marginal. She was a college educated professional. She only took my ride because she was literally 3 minutes from the dealership, told me she was watching TV in her pajamas 5 minutes before, and her calculus, was effectively: $12 in her pocket or watch a bad rerun, right now. Who wouldn’t want to get paid $25-$30/hour plus a tax deduction to not watch bad reruns!
Let’s sum up with an example – In one hypothetical example a $15/hour (2x the minimum wage), employee currently employed 35 hours a week as a second household income (most families are 2 income) and offered a chance to work another 5 hours on Saturday afternoon at that job with a 30 minute commute. They might look at the same facts the authors describe and conclude: My alternative opportunity is $15/hour, less $3/hour for flexibility value (I’d rather work an extra hour a day on the way home, and value flexibility a lot more in my marginal hours as my Saturdays are family time), and after subtracting that and commute time and FICA, I make $9.30/hour cash pre tax or a measely $45/week cash. Screw that. In fact, in this example, the economy loses out on those labor hours and taxes.
Instead I drive 6 hours a week/24 a month for Uber effectively on my commute home or instead of watching TV, shift $300-500/month in car expense to tax deductible, saving up $100+ depending on my marginal tax rate, make $15-20/hour gross revenue, clearing $500-600/month, and keep my Saturdays. All with a total out of pocket of about $50 a month in gas, and costs I was going to spend anyway. That’s not a bad deal. It’s 2-2.5x the driver’s next best alternative, probably better than even overtime were it available, and more realistic given observed driver behavior than a fictional idea of 100,000 Americans choosing to work for $3.37/hr because they are too dumb to realize it until an MIT PhD points it out..
And just wait for driverless cars and more AI algorithms.

Exxon and Shell will Never Again Match Their Oil Market Share in Renewables

According to Bloomberg, cleantech global capital spending was $333 Billion last year, 40% of that in China.  That’s 3.5x bigger than the COMBINED capex total for Shell, Exxon, BP, Chevron, and Total.
Put another way, that’s enough capital to outspend 7 Shell’s and 7 Exxon’s.
These are staggering numbers.
Bloomberg reports cleantech venture capital was a paltry $4 Bil, meaning the whole sector was half the size of the Softbank Uber deal alone.
Inflection point may be behind us – our theme song: The world has turned upside down.
I am calling it here:  As wind and solar now start to mature, Exxon and Shell will never match their oil market share in renewables (Shell was a major wind and solar player 15 years ago, Exxon actually invented the lithium ion battery). Several of the majors, BP, Shell, Chevron et al had larger market share in renewables than oil up until about 2004.  Total, which bet heavily on Sunpower a decade ago, probably has the best chance to stay relevant, but even that is iffy.  They’ve let Sunpower’s effective market share shrink.
We are well past the trillion dollar mark in renewables and cleantech infrastructure spending globally.  IEA forecasts within 5 years global renewable power generation will be larger than the total power consumption of China, India, and Germany combined.
Even if the largest of the major oil companies were to shift half of their capex now into renewables, it is highly doubtful at this point they will ever achieve more than 1-2% total global market share over time – no matter what they do from here on out.
They probably have a 36-48 year window left, in which if they shifted 50% + of capex, they MIGHT be able to hold energy market share for the coming decades, if renewable industry growth rates collapse to low single digits.  But frankly, after that time, barring a massive asset sale + stock and debt acquisiton spree, or even now if the renewable industry keeps growing aggressively, probably would not be enough to do it.  They’d need to run a massive asset divestiture program and funnel the cash into heavy renewables investment before the installed base gets too much bigger.  And given debt loads, dividends, and need to keep cashflow up in their core, it is probably not a practical bet for any of their boards to make.  Math is math.  At this point the old seven sisters are probably reduced to being niche players in the energy future.
For reference ExxonMobil currently has about 2.3% share in global oil production.

It is a Long Lane that Never Turns – Agtech Angel Investing 100 Years Ago

100 years ago my great grandparents were also angel investors – in Infrastructure, Media and Bee tech

They invested in media, ag / cleantech, and infrastructure.  Lest you think angel investing is new or VCs are smart – it really hasn’t changed much in a century.
In the 1920s my great grandparents were active angel investors in the Rio Grande Valley of Texas. The portfolio, that I know of, included a newspaper, a yacht club, a toll bridge over the Rio Grande, and a Bee business, called Ault Bee Co. I’ve actually got the “offering memorandum” for the follow-on into Ault Bee.  As you’ll see, not much has actually changed in the venture business in 100 years.  Take a read, and see if you’d have written the check!  Ault Bee appears to have been my great grandmother’s deal (or maybe she just handled all the money!)   Ok, maybe that’s changed, not many women venture investors these days.
The deal:
Ault Bee provided queens and bees to the local and North American market from south Texas by catalog sales.  The company had patented technology, including IP on cage designs to help keep bees alive during transit (a major yield issue as this was back before the refrigerated bee shipping of today).
Each Shareholder was asked to put up 3% of their original investment for a 10% short term 6-month bridge note to be paid back out of revenues from growth, with 10% attorney’s fees if sent to collection.
The deal timeline would impress anyone, and was all handled over the mail in <3 weeks to close after a meeting, presumably of shareholders or the board.
  • Oct 8th shareholder letter goes out
  • Oct 21st note paid that check sent
  • Funds receipt dated Oct 25th.
  • November 1st Promissory Note returned – deal closed.
 Legal was all handled on a promissory note taking less than half a page – sounds a hell of a lot better than a big Series A legal bill.
The offering memorandum itself totaled 2 pages. 1-page letter detailing the offering terms, and 1-page business summary and financials. Curiously, the income statement and detailed forecasts were left out, and the balance sheet is not in a typical GAAP format for today, how many times have we seen one of our startups do that!
The pitch is strikingly familiar, and includes almost everything you’d expect in a deal today:
A great call to action – it is a long lane that never turns, hinting at the same pivot issues our startups deal with today.
Use of funds: fund opex and capital to serve international and channel growth
Reason for the need – poor performance due to weather, timing, inability to serve orders etc.
A major growing channel – Montgomery Ward which they needed capital to serve. Montgomery Ward in 1926 would have been the equivalent of Tesla’s new Home Depot partnership announced this week, or a startup closing its Walmart or Amazon deal.
A pivot to a new international growth market – Canada, and need to move production to stem losses caused by environmental issues.
A note that opex had already been cut, and the founding CEO highlighting that he was working for less than market.
A call to investors for help recruiting top talent.
Her $500 original investment is about $7K in today’s dollars, out of a $70,000 round, which equates to about $1 mm in today’s dollars. But in 1924 average earnings were about $1,300, vs $50K today, and a model T cost $290. So they were investing about the equivalent of $20-$50,000 on that basis in relative terms.  This is not too far off the size and typical investment for 10-25K/person angel round today. She would have had a little less than 1% of the company’s equity. The company appears to have spent – c 6 years in – about 5% of its capital base on IP and 64% on capital equipment – not too far off numbers you might see today.
Even the topic is not dated – ag tech is a hot thing again, and bee hive losses have been in the news for several years as a major problem statement. One of the Ault Bee patent was even cited as recently as a 2013 patent on bee hive design!
In 2017 a small startup actually secured a small A round after a few hundred thousands in grants, to build decision support software to stem bee hive losses.
It is fascinating to me how little the venture business – supposedly invented in the last few decades – has actually changed. As for the portfolio returns – the data is lost to history, but my uncle recalls that the toll bridge and yacht club made good money (and both are still there 100 years later), Ault Bee and the newspaper did not. In fact, my grandparents acquired the newspaper CEO’s personal library as partial compensation for their investment in that business. But a 50% 100 year survival rate would not be bad. Interesting that media and “tech” deals did poorly, but the two infrastructure ones lasted a century.

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Water is like an open economy: Update from Paul O’Callaghan, CEO, BlueTech Research

You may have followed the discussions at the Davos World Economic Forum recently. Much of this of course is high level politicking, but it can signpost major trends in the general economy. A major theme this year was picked out in the report: The Fourth Industrial Revolution: what it means, how to respond. What are the implications for water?

Water is like an open economy. It is really a collection of disparate technologies that have a common denominator in that they ‘touch’ water in some way. So, in that sense any developments in technology should impact water. Fourth industrial revolution trends include things like 3D printing, artificial intelligence, predictive analytics, sharing economy business models like Airbnb, robotics and the micro economy. How long before water is impacted by these mega trends? We are told that the rate of disruption is increasing and will affect everything from automobiles to healthcare and energy.

I see technology providers becoming pseudo-operators. Through predictive analytics and remote real-time monitoring, sensors and automated controls will make plants more efficient through real-time process control, and robotics will be used increasingly in areas such as rehabilitation of ageing pipe infrastructure. Emerging economies may go to point-of-use drinking water treatment enabled by micro-economy based or service based business models. This disrupts the notion of centralised potable water networks as the sine qua non for meeting our water infrastructure needs.
Industrial water users may look to be part of the bio-based circular economy through resource ‘up-cyling’. Examples include nitrogen from industrial wastewater being used to produce animal feed substitutes, or organics to produce bio-plastics. 3D manufacturing may allow just-in-time manufacturing and delivery of spare parts, avoiding a need for inventories. It can also accelerate, and reduce the costs for, proto-typing and testing of new technologies, as explored by Stefan Urioc in this issue.

The major tech drivers may not be within, but from without. When looking for innovation, we – and I include BlueTech in this ‘Royal we’ – often focus on internal changes and improvements. It is good to see the broader canvas on which this all sits and how it is changing.

The theme for this year’s BlueTech Forum is 20:20 Vision: Insights to future proof your water strategy. Everything on the day is themed around this, from roundtable briefings to showcase sessions and panels. The companies in the Innovation Showcase will represent examples in the areas of predictive analytics, the bio-based economy, IoT and energy and resource recovery. The industrial themed sessions will look at the measures sectors such as oil & gas, food and beverage and apparel are taking to reduce water risk. Finally, to close and take us firmly away from any myopic water-centric world view, our keynote speaker, Dennis Bushnell, chief scientist with NASA, will talk us through some of the most significant challenges we face on the planet and the radical solutions being looked at to address these.

Is Tesla Really the EV King?

by Neal Dikeman, chief blogger, Cleantech Blog

Tesla Motors (NASDAQ:TSLA) has been the electric vehicle darling since almost the day it launched.  I’d argue there are some really neat aspects to its product and strategy, but it is far from a resounding market leader in EVs.

The Range and Battery Scale Advantage

There are a couple of really exciting things to like.  Pulling a quick summary of the prices of all the pure electric vehicles currently selling in North America, I ranked them by EV Price/ Range.  Tesla is and always has been the leader here.  Down in the <$300/mile range, half of the  i3.  Quite frankly it’s been the only game in town for a 200 mi electric car.

And as lithium batteries are the big ticket item in an EV, and Tesla loads up on them, that confers some advantage to go with that high ticket price.   It drives up its price and its range, and puts it still in a class by itself on range. But as you see when graph range vs price, packing all those batteries in also gives Tesla a huge nominal advantage over its competitors compared to where one would project it to be on price.  Tesla talks like this is all technology and battery management that is hard for competitors to match, I think it may be just as much a combination of purchasing scale and simply an illustration of relative cost absorption in a high range EV (at the lower 70-90 mi range of everyone else, the car cost swamps the battery cost, and differential cost of a few mi in range is much less important than the luxury premium).  You can see this illustrated in flatness of the PHEV version of the curve, and the wide differential between the i3 and LEAF, both very close in range.  Of course, as we are largely comparing prices not costs, some dirt in the numbers is also certainly present.

EV $ per Mileage

EV Price vs Range







PHEV $ per eMileage

Plug in hybrids as you’d expect show a much less dramatic differential and flatter curve, with most of the differential driven by luxury vs mass consumer car class than range.  The game in PHEV’s appears to be minimize battery for maximum consumer taste and performance output.




Future Impacts of Scale?

The interesting bet however, is what happens in the future.  Lithium ion batteries are one of the few fast falling cost items in a car, Tesla ought to be able to ride that curve down faster than the others, since it has both more purchasing power than its competitors (several x more battery kwh per car and one of the volume leaders in cars adds up), as well as a larger exposure in its vehicle unit cost structure in batteries than any of its competitors as the batteries make up such a major portion of its vehicle cost.

However, its attempt to vertically integrate upstream into  batteries with the gigafactory might well work against it here, as it gains leverage on the materials in the value chain, but loses leverage against the manufacturing cost, locks in on a single battery design, and has to recover significant capital outlays its competitors do not.

If the rest of the lithium ion industry can cost down as fast or faster than Tesla, it loses out quickly.  Alternately, when another car company rolls out a high range vehicle, Tesla’s advantage can erode fast.  And finally, it is unclear whether either the PHEV or short range EV strategies, requiring fewer costly batteries, simply continue to outpunch Tesla with consumers.  Like its zero emission credit advantage supporting profits when it first launched, this battery scale advantage may also be more short term than sustainable.

North American Market

But possibly most disturbing is trying to tie out this advantage to how Tesla is actually doing with this strategy in its core North American market.  It’s now been hot and heavy in North America for a couple of years.  Should be delivering results, but  things are not quite that rosy for a $20 billion market cap “market leader”.

It was not first, Nissan with the LEAF and GM with the Chevy Volt beat it to the market.

Its core initial US market has seen basically flattish sales growth YoY going on 2 consecutive years now, ostensibly as it scrambled to open new markets overseas, including its struggling Asian market.  But struggling to drive high growth in your first core market is never a good sign.  One wonders how much excess demand per month actually exists for an $80K electric sports car, and if some of Tesla’s shift of production to seed overseas markets is simply a strategy to keep its domestic demand levels pent up, out of concern that there is not adequate growth possible at this price point in one market to satisfy Wall Street’s valuation.  Not a bad idea, but does have implications.  In counter point, while GM and Toyota also struggled for growth, Ford and Nissan delivered strong double digit growth in Tesla’s home market while it stayed flat, and BMW has started to chew the mid luxury market in between.  One wonders if the strategy of twinning a low range low cost EV with PHEVs doesn’t simply deliver better product line punch than the high mileage high cost strategy.

Tesla is not the largest, and has never worn the crown of most EVs sold for a year, coming in 3rd and slipping to 4th in 2013 and 2014, and only barely edging out Ford so far for 2 months of 2015 and helped by weak Chevy sales months so far. Also probably helped as Tesla apparently had to shift about a month’s worth of car production into Q1 from production issues according to its annual letter.

NA EV Company Ranking

NA EV Company Ranking







Source: tracker 

Also pictured is the results from a second tracker with slightly different estimates claiming Tesla is actually ahead so far this year.

But almost as interesting to me has been the rise of the BMW.  That i3 which is almost double Tesla’s price/mile is doing rather well.  By some trackers has edged Tesla in sales of its i3 and i8 EV and PHEV in North America in 3 of the last 7 months, with less than a year under its belt.  Arguably the i3 was aimed more at the Volt and LEAF than the Model S, but getting even remotely close to caught by an upstart short range BMW product this early in its cycle was I am sure never part of Tesla’s plan.

BMW vs Tesla







Do note that all Tesla monthly numbers are somewhat suspect, as the company does not publish anywhere near the detail that other automakers do. Charitably it is just playing cards close to the vest?  Not just making it harder to analyze hidden growth misses?

All in all, a quite decent performance for a new auto maker, but far from the dominance you’d expect from a $20 billion market cap brand name.

The author does not own a securities position in TSLA.  Any opinion expressed herein is the opinion of the author, not Cleantech Blog nor any employer or company affiliated with the author.

EV King Tesla – Where Did the Cash Go?

by Neal Dikeman, chief blogger

Since it’s launch, cleantech darling Tesla (NASDAQ:TSLA) has delivered huge revenue growth in the electric vehicle market.  With a market cap of over $20 billion, it’s more than a 1/3rd of that of the massively higher volume GM or Ford.  Largely the market cap has been driven by phenomenal growth numbers, 60% YoY revenues last in 2014, and the company forecasts 70% increase in unit sales YoY in 2015.

But let’s take a deeper look.

The Company trades at 7.5x enterprise value/revenues, and 26x price/book.  At the current market cap, it needs to deliver the same revenue growth for another 4-5 years before normal auto net profit margins would bring it’s PE into line with the the other top automakers.  Of course, that assumes no stock price growth during that time either!  Our quick and dirty assessment test:

Take 2014 revenues, roll forward at the YoY growth rate of 60%.  Take the average net profit margins and P/Es of the major autos (we used two groupings, 2-3% and 20-25, and 7-8% and 12-17), roll forward until the PEs align, see what year it is (2018-2020).   That’s our crude measure of how many years of growth are priced in.  And it puts Tesla at between a $20-$50 Billion/year company (7-15 current levels) before it justifies it’s current market cap.  Or c. 300,000-1.5 mm cars per year depending on price assumptions.  Up from 35,000 last year.

Does it have the wherewhithal to do that?

Tesla Financials

 Well, looks awfully tight.  The numbers technically work, continued growth will cure a lot of ills.  But while nominally EBITDA positive now, the company has been chewing cash in order to sustain future grow.  2014 burned nearly $1 billon in cash in losses, working capital and capex to anchor that growth, almost as much in cash burn as the company delivered in revenue growth.

Positive progress on working capital in 2013 disappeared into huge inventory and receivables expansion at the end of 2014, and interest on the new debt for the capital expansions alone chewed up 10% of gross margin, while both R&D and SG&A continue to accelerate, doubling in 2014 to outpace revenue growth by more than 50%.

The cash needs this time around were fueled by debt, which rose over $1.8 bil to 75% of revenues.  Overall liabilities rose even more.  Current net cash on hand at YE was a negative half a billion dollars, seven hundred million worse than this time last year.

The company will argue it is investing in growth, and you can see why it better be.  With almost every cost and balance sheet line currently outpacing revenue growth, at some point a company needs to start doing more making and less spending.

So yes, continued growth outlook is still exhilarating (depending on your views of the competition and oil price impact), but the cost to drive it is still extremely high.  I think we will look back and see that 2014 and 2015 were crucial set up years for Tesla, and the really proof in the pudding is still probably 24 months in front of us.  And my guess is Tesla will be back hitting the market for equity and debt again and again to keep the growth engine going before it’s done.

 The author does not own a securities position in TSLA.  Any opinion expressed herein is the opinion of the author, not Cleantech Blog nor any employer or company affiliated with the author.

Forward Osmosis – Solving Tomorrow’s Water Challenges Using Nature’s Remedy

Nature has an ingenious way of extracting water, but does it have the potential to solve many of today’s global water challenges? Before going into more details on how nature’s way of extracting water can help cut energy usage in water treatment processes, an appreciation is needed of why energy reduction in water treatment is an essential prerequisite for continued global development.

Since water is used in all energy production processes and energy is used to generate fresh, potable water from impaired sources, water and energy are two sides of the same coin. Factor in that global fresh water resources are rapidly declining and energy prices are one the rise due to over-utilization of fossil fuels, you quickly realize that energy reduction in water treatment processes will make a tremendous positive impact on the challenges faced in this water-energy nexus.

Moving back to nature’s way of extracting water, you may have wondered how trees are able to extract water from the soil in which they grow to the leaves in the treetops? Or how mangroves are able to extract fresh water from the seawater surrounding their roots? Given the obvious lack of electrically powered high pressure pumps, nature has come up with it’s own way of generating the pressure needed to transport water in trees and to extract fresh water from seawater in mangroves. It turns out that nature extracts water by utilizing the principle of forward osmosis in which water diffuses spontaneously (and without the input of energy) across a semi-permeable membrane from a low concentration solution on one side of the membrane to a high concentration solution on the other side of the membrane. The driving force for forward osmosis processes being the difference in osmotic pressure between the aqueous streams on either side of the forward osmosis membrane.

Coming back to the trees and mangroves mentioned earlier, the intracellular solution of root cells contains high concentrations of sugars and other dissolved molecules, which in turn generate a large enough osmotic pressure to extract water from soil and seawater respectively and transport this water throughout the stems and leaves of these amazing biological systems.

Now, how can water transport in trees help solve the looming water challenges facing our world today? Well, fortunately scientists have been able to develop artificial forward osmosis membranes and systems for industrial water treatment applications. And since forward osmosis systems do not require electrical energy inputs other than the energy needed to pump solutions across its membranes, it is potentially possible to reduce the overall energy consumption of water extraction by 90% compared to traditional pressure driven technologies such as reverse osmosis and nano-filtration.

Wide-spread adoption of forward osmosis systems in industry is still limited due to lack of high-performing, large-scale system capacity as well as industry preference towards proven technologies with long-term operational track records.

A number of startups and tech companies are working in the area.


Oasys Water 


HTI Water

As well as ongoing research projects at a number of universities and labs around the world are working hard to commercialize forward osmosis technologies, so don’t be surprised if you – in the near future – start running into examples of forward osmosis being used to treat water in industries or even households.

CJK: Solving PM2.5

Signatories at the 15th Tri-Partite Meeting

Signatories at the 15th Tri-Partite Meeting

PM2.5, which are particulate matters less than 2.5 microns, are perhaps the most important type of environmental air pollution in Asia. Driven by high economic growth, coal plants, particularly those from China, give off these particulates. The problem is so serious that Korea and Japan are directly affected by this pollution. In fact, these matter are able to travel across the Pacific Ocean and contributed to a large part of the pollution in North America.

In spite of the political posturing taking place between Japan and Korea and China, the governments are actively working to address this challenge. Hosted by Ministry of Environment of Korea, the Environmental Ministers Meeting among Korea, China and Japan at the end of this April to implement an initiative on enhancing environmental cooperation and dialogue. The meeting resulted in a communique that was signed by Environment Minister Nobuteru Ishihara, Chinese Vice Environmental Protection Minister Li Ganjie and South Korean Environment Minister Yoon Seong-kyu at the end of their two-day talk in the South Korean city of Daegu. 写真-3Under the agreement, Japan and South Korea will offer technical assistance and support to China for the import, development, production, and deployment of technology for reducing the volatile organic compounds (VOC) that are PM2.5.

A simultaneous Business Forum was held in which  50 (21 delegations and 29 observers) participants from the three countries participated in the meeting. Japanese representatives introduced corporate activities related to reducing CO2 emission, and products that are energy- and resource- efficient. Concepts such as the Smart House and Communities were shown with model sites in Japan and China shown. One Japanese company introduced solutions and actual activities for water pollution management while a Chinese company shown activities in the “venous” industry such as solid waste resource, urban mining and hazardous waste disposal. The Korean representatives introduced their concepts of water / waste water treatment plants, biological treatment, landfill reclamation, and waste sorting and recycling, etc.

In one of the panel discussions, the participants discussed the roles played by the governments in waste management and how that differed from the role of private environmental businesses.  They also highlighted the technology developed and used on water reuse in Northeast Asia and how these can be utilized in other countries. In addition, the role of government in landfill management was emphasized and how governments should play a role in this aspect of the environment.

Seafloor Carpet Turns Surf’s up to Lights On

At the University of California, Berkeley, a team of engineers is pioneering ocean-source energy technology by using “carpet” to capture the energy generated by ocean waves.

The team, which includes wave energy guru and Assistant Professor Reza Alam, and Ph.D. Marcus Lehmann, an engineering researcher, aims not only to capture the kinetic energy contained in the ocean, but eventually to use it to purify seawater – drinking water being an increasingly diminishing resource on planet Earth.

This is particularly true where ever-growing populations living in coastal cities like Los Angeles demand greater and greater quantities of non-saline water for drinking, bathing, washing dishes and clothing, and for irrigation. (Re that latter, it’s disturbing to know that more than half America’s produce begins life in the warm, fertile and currently drought-stricken Central Valley).

As the United Nations Environment Programme (UNEP) notes, half the Earth’s population (about 3 billion people) lives within about 35 miles (or 60 kilometers) of a seacoast, and 75 percent of the globe’s largest cities are located on ocean shorelines. By 2025, that figure is expected to double.

The reason? Man has, since ancient times, migrated to the edges of oceans to take advantage of the edible wealth of sea life, which is more easily captured by fishing than land-based animals are by hunting. Coastal cities also capitalize on one of the oldest transportation modes known to man, namely shipping (which is less energy intensive than freight trains, trucks or airplanes).

Moreover, the Berkeley team has conducted experiments showing just how energy-rich ocean waves are. For example, less than 11 square feet (or one square meter) of their ingenious “carpet” – which is able to capture more than 90 percent of wave energy – is enough to power two U.S. households, or about 1,800 kilowatts of energy. One thousand eighty square feet, or 100 square meters, would generate the same amount of energy as a soccer field covered in solar panels. And all that energy would be generated in or near the world’s coastal cities, where the energy demand is greatest.

The system itself consists of a network of hydraulic actuators overlaid with a rubber mat whose future composition, presumably a durable and salt-water-resistant elastic composite, remains a secret at this point, according to Lehmann.

The cost of this energy is calculable. The cost of desalination can’t be estimated, since the wave energy project is still in its infancy vis-à-vis wave power conversion and absorption, but in its tertiary stages should surpass current desalination costs (from $.40 to $.90 per barrel in Saudi Arabia). A barrel is 31.5 gallons or 119.5 liters.

In these initial stages, however, Lehmann and colleagues are banking on a report from Carbon Trust which indicates that wave energy could produce more than 2,000 terawatt hours (or a phenomenal 2 billion kilowatt hours, or kWh) per year. This is enough to power two million U.S. homes, each using 1,000 kWh, which is well above the average.

Lehmann and his colleagues have also thought ahead to the environmental and sustainability issues. Unlike offshore wind (notably Cape Wind, the recipient of a $600 million loan that will not make it less of an eyesore from the Kennedy Compound in Hyannis Port, or less of an irritant to gas and oil tycoon, and Nantucket shoreline owner, Bill Koch), wave energy production is invisible.

This is because the project(s) rests about 60 feet under the surface, and in otherwise useless sea floor areas, or dead zones, like the Gulf of Mexico. This, forming at the mouth of the Mississippi River, in Louisiana, is the largest in the world. In addition, such projects will, in no location, impinge upon the visual and physical world dominated by fishing or recreational boating, or sea life.

The Alam/Lehmann team seems to have come upon the perfect recipe for “clean” energy. Still, as a rational person, I know nothing is perfect. Lehmann agrees:

“The exact location is part of our research. The downsides are more material needed for the same absorption efficiency at deeper water locations, and (the fact that) the ideal location will not be directly on the ocean floor to minimize environmental impact, sand erosion and sediment residue.”

Within the next two years, Lehmann anticipates testing the system in the field, in either Hawaii or Newport, Oregon, both of which provide wave test centers. (I expect the team to vote for Hawaii, as who wouldn’t?)

In the interim, Lehmann and colleagues continue to use the wave-testing tanks at UC Berkeley, the results of which were presented at the 10th European Wave and Tidal Energy Conference, Aalborg University, Denmark, September 2013.

One of the biggest hurdles to wave energy, according to Lehmann, may be the fact that each wave energy siting will require different materials, tools, and techniques, from the “carpet” material to the height of the hydraulic actuators.

“The challenge of wave energy is to design specifically for every individual characteristic of the designated wave site. Our system allows a lot of parameters to easily adjust.”

An accommodation which wind and solar seem unable to grant. For example, the Mojave Desert solar project mandated the removal of native (and seriously endangered) desert tortoises. And it’s now common knowledge that wind energy companies have filed at least 14 separate applications that would allow them to kill eagles, albeit inadvertently through turbine blade rotation.

Boeing’s SBRC Makes Biofuel from Agricultural Rejects

A decade ago, biofuels were considered the Holy Grail of combustion-engine fuels.

Measurably cleaner than fossil fuels, they were the proverbial light at the end of the tunnel, at least according to some clean energy experts.

Fast forward to 2008, when the biofuel industry’s withdrawal of food crops such as corn, rice, wheat and palm oil caused a world-wide food crisis that affected almost everyone, but the poor most of all. Prices jumped from 102 percent (for rice) to 204 percent (for corn). Food riots spread from Haiti to Bangladesh, and from sub-Saharan Africa to Egypt.

Closer to home, but no less desperate, the most impoverished residents of Mexico and South America were reduced to eating nothing but corn tortillas, since the cost of the cornmeal precluded also buying vegetables on the little money they could scrape together at the end of the day.

It was Darrin Morgan who said, “Corn ethanol is a perfect example of how not  to do things.”

Morgan, who is the Seattle, Washington-based Director of Sustainable Aviation Fuels and Environmental Strategy at The Boeing Company, is refreshingly blunt. Sometimes that directness seems the only way to reach people bombarded by the deluge of 21st century information sources.

And Morgan’s news is exhilarating: Boeing’s research consortium (Boeing, Honeywell UOP and Eithad Airways; known jointly as the Sustainable Bio-Energy Research Consortium (SBRC) at the Masdar Institute of Science & Technology in Abu Dhabi has found a class of plants that can grow in the desert, on salt water.

These plants, known as halophytes (or xerohalophytes), have been adapted by Nature over thousands of years to survive harsh growing conditions, notably saline water and desert soils. These halophytes are also nearly indifferent to high temperatures and water shortages, making them ideal for the purpose.

Nature also, and perhaps unintentionally, made these halophytes low in the lignites that make plants grow upright and bind their structure. This means that it takes much less energy to extract the highly useful sugars that go into making of superior biofuels – a discovery that seems to be a first, since no one else appears to have patented the process.

The final step of the equation, notes the SBRC, is incorporating aquaculture; the raising of plants and fish in a cooperative, water-based environment. This final stage provides a perfect complement to halophytes, which thrive on fish wastes comprised of the very ingredients found in chemical fertilizers. The entire pilot project fits on a two-hectare plot within the Masdar City limits, and bears the name “integrated seawater energy and agriculture system”, or ISEAS.

Is it sustainable?

“Yes!” says Jessica Kowal, Boeing Commercial Airplanes Environment Communications representative. “In fact, that sustainability awareness is what a colleague of mine called ‘the triple bottom line; economic, social, and environmental.”

Kowal also reminds me that Boeing has other partners around the globe, most recently with South African Airways, or SAA, and the Roundtable on Sustainable Biomaterials (RSB), an enterprise which aims to help small landowners enter the biofuels marketplace.

But Boeing does not follow in the path of some other multinational monopolies like Monsanto, which requires that farmers grow a single, genetically modified and licensed crop.

“What we are seeing is that, in some cases, there may be opportunities to develop new biofuel crops. That is, to add a crop to a farmer’s itinerary.  It’s not an either/or scenario, it’s an ‘and’.” Kowal notes, adding that Boeing and its partners are very much committed to the idea that this initiative has to be productive on many levels, including the environment, in countries where they roll it out.

The fact that the initiative relies on two resources that are considered worthless in most locations – salt water and desert soil – is a big plus. The addition of fish or shrimp, as in aquaculture, is clearly a value-added proposition. The fact that Boeing’s consortium is also looking at a newer and even more energy-efficient fuel conversion technique puts the initiative well over the top. That both the FERC (United States Federal Energy Regulatory Commission) and the UAE, or United Arab Emirates, are offering their leadership is, in Kowal’s words, “very exciting!”

“The aviation industry has been looking at biofuels for a long time, and there is a real desire to find an alternative to petroleum.”

Welcome to the real Holy Grail. And for those who cite the aviation industry as being highly pollutive, Kowal is quick to note that it accounts for only about two percent of transportation industry emissions according to a 2013 fact sheet from the IATA, or the International Air Transport Association.

It’s hard to imagine, but in the not-too-distant future major airlines may operate in a very real near-zero-emissions framework, without having to buy into carbon credits or ecosystem “fixes”.

Not that that’s a bad thing.

Cliff Majersik, IMT, Identifies Efficiency as Energy’s Biggest Asset

The Institute for Market Transformation (IMT) is a Washington, DC-based nonprofit working in the areas of energy efficiency, green building, and environmental protection. Much of IMT’s effort goes toward correcting inadequacies in the construction/remodeling vertical that prevents investors from taking a stake in energy efficiency and sustainability in the United States.

Cliff Majersik, Executive Director, referred in this interview to a guest post in another clean tech blog which details the 2013 end of a former U.S. – Russian nuclear energy program called Megatons to Megawatts.

As Majersik points out, the diminution of nuclear fuel stocks is not as disconcerting as it initially seems on paper, even though nuclear energy now provides about 20 percent of America’s electrical energy. The reason is simple: where nuclear energy historically leaves off, energy efficiency takes over.

This, as noted by John A. Laitner, a researcher at the American Council for an Energy-Efficient Economy (ACEEE), has been the case since 1970. In fact, Laitner observes, efficiency has met 75 percent of new service requirements in the nation.

For Laitner, the information is a selection of graphs and charts. In layman’s terms, between 2004 and 2010, the U.S. upped its energy efficiency spending by 80 percent, or about $574 billion in 2010. In that same year, energy providers spent 170 billion on infrastructure, but investment in energy efficiencies topped $90 billion, or more than half that amount.

Majersik stresses the importance of efficiency.

“The fact is that (since 1970) our economy has fundamentally transformed. Everyone used to drive around in clunkers that got 15 miles to the gallon, and everyone used to live in homes that were completely uninsulated and had incandescent lights and antiquated leaky ductwork serving furnaces and air conditioning.

“That has changed, and as a result energy use occupies a far smaller portion of the overall economy, even as population rises and engineering develops more and more products which run on that energy use.”

Majersik hesitates to pinpoint the largest area of potential future energy conservation, but suggests that buildings, both commercial and residential, are the likely – if often unsung – heroes.

“But don’t ignore the whole landscape. Homes, businesses, offices, cars, heavy vehicles, and industry; all have become more energy efficient.”

On a city-by-city basis, Majersik favors New York City, and is it any wonder given its energy conservation policies from benchmarking through mandatory sub-metering for large tenants? Not to mention the mandatory audits that provide information to occupants, building departments, energy providers and a host of other interests on the real cost of energy. New York even has retrocommissioning – a long name for a building “tune-up” which evaluates the total structure and suggests ways in which owners and landlords can increase efficiency without breaking the bank.

Tack on a mandatory decadal lighting upgrade, from incandescents to compact fluorescents, or CFLs – and then one more step to the LED technology that is taking the industry by storm – and you have one of t he world’s biggest cities sipping energy instead of gulping it.

The  result? New York now spends considerably more money on people, by making buildings more comfortable, than it does on energy, which often has to be imported, at considerable expense and without the attendant job creation if the same energy were generated in the U.S.   

Even so, there’s a long way to go. Majersik points to mortgage underwriting, which may evaluate the thickness of the glass doors in front of your future home’s fireplace, but not the thickness of the insulation in the attic.

“At the federal level (Fannie Mae or Freddie Mac),  mortgage loan guidelines tell the lender to look at the potential borrower’s income, credit score, mortgage payment, home insurance and real estate taxes.  They do not look at the new home’s potential energy bills, even though those bills are larger than either insurance costs or property taxes.”

Not surprisingly, an IMT-generated study has shown that people who choose energy efficient homes are better at paying their mortgages in a timely fashion. This might simply be the result of having more money in their bank accounts after the energy bills are paid. But it might also tie in to their higher sense of what is good for the planet.

Whatever the cause, these eco-neighbors are 32 percent less likely to default on their mortgage, and 25 percent less likely to prepay a mortgage – which is good for homeowners, but bad for lenders.

Majersik sums it up:

“By not factoring energy efficiency into mortgages, we are under-investing in energy efficiency. This initially provides hopeful homeowners fewer options for financing. It also forces them to eventually deal with their energy-hog dwellings as the price of electricity skyrockets on the back of natural gas supplies (which peak oil supporters say was reached in the 1990s).”

This dealing is prohibitively expensive. While a builder can buy and install solar panels and efficient windows at a discount from retail because they buy in bulk, a homeowner will be forced into top-dollar negotiation or into less energy efficient alternatives, whether windows,  solar panels, or an Energy Star furnace and air-conditioning unit.

“More than 90 percent of new mortgages are issued following federal mortgage underwriting guidelines.” Majersik notes.

But that is changing, as people from all walks of life and all lifestyles see the looming danger in an earth overheated by burning fossil fuels. In fact, it would be fair to call these initial decades of the 21st Century “The Race to the Finish”, as clean energy technologies struggle to replace a century’s worth of fossil-fuel excess before we pass the climactic point of no return.

LEED v4, the Evolution of Green

It’s particularly troubling to those of us watching the energy efficiency marketplace to see one program or another take a hard hit. That’s why the 2010 class action lawsuit by Henry Gifford against the US Green Building Council – the parent organization of LEED (Leadership in Energy and Environmental Design) – had such wide-ranging responses from both efficiency experts and the public.

When Gifford led the charge – for fraud, wire fraud, unfair competition, unjust enrichment, deceptive trade methods, and false advertising (with Sherman antitrust and RICO violations thrown in just to make sure nothing was missed) – the building energy efficiency movement turned into a flooded anthill. Some professionals couldn’t get far enough away from the maligned USGBC: others kept going back to try and close the floodgates of criticism.

Did the USBGC deserve to be dragged through the mud? Yes, said Gifford, who admitted that LEED criteria had cost him lucrative efficiency work because he doesn’t participate in the system. No says the USBGC, which pointed out that Gifford capitalized on the difficult metrics of LEED before 2009, and then persisted in the same vein even when LEED made requirements stricter and began demanding proof.

Moreover, Gifford isn’t an engineer, and his efforts were more damaging to “green” building – the real focus behind LEED – than an entire cohort of anti-greens wearing funny hats and carrying placards.

Not to mention that much of the pressure behind the controversy was the result of LEED standards (e.g., Cradle to Cradle materials certification) which plastic industry professionals say left them out of the green construction loop. In fact, it was this bias that inspired the U.S. Chamber of Commerce to support another green building leader, the American High-Performance Buildings Coalition, which reportedly manages to mesh green building with chemically-derived materials.

Enter Brendan Owens, Vice President of LEED technical development, who works with volunteer committees to elaborate and streamline LEED rating systems. In this role, Owens is also focused on LEED’s newest evolution, LEED v4. Owens liaises, via USGBC’s executive committee, for ASHRAE/IES/USGBC Standard 189.1, a 2011 metric for “total building sustainability” that can be applied to all but residential low-rise buildings. He is also a representative to the International Code Council for the International Green Construction Code, and on the board of directors for the New Buildings Institute, where his qualifications as a licensed professional engineer help craft new green-building developments.

It would be wrong to suppose that the 2011 lawsuit turned LEED into the ugly stepsister. In fact, according to Owens, LEED recently crossed the 20,000 certified commercial project mark globally, with another 45,000 buildings in the pipeline. On the residential side, 16,000 homes meet LEED standards, and another 30,000 to 40,000 are in the queue.

But Owens refuses to get into the minutae of green. Instead, he says:

“What LEED v-4 represents to me is the natural evolution of the green building market over the past 10 to 15 years, and the increasing ability of the construction industry to engage in high-performance green building both domestically and around the globe.”

As the causative agent, he cites a significant transformation in the status quo of the building marketplace.

“We have seen technologies that were considered “fringe” 10 years ago become mainstream strategies that are popping up in building codes all over the world.”

From Owens’s perspective, V-4 advances the definition of high performance by focusing on green verification, where significant design-to-operation performance gaps create precisely the kind of seeming obscurantism that Gifford complained about. Unfortunately, Gifford’s lawsuit merely muddied the waters and left an undefended frontier that anti-green (and anti-climate change) individuals used to their advantage.

Fortunately, LEED’s four certification levels (Certified, Silver, Gold and Platinum) have not changed, and the use of formerly “brown” materials (like plastic) will get a pass of sorts. That is, LEED hopefuls will be encouraged to use green materials, but will not be penalized for using ‘bad’ ones (Owens’s word, not mine).

“The materials market, as much as any other venue, has experienced significant transformation. The revisions that were made in November of 2013 were a complete reworking of the way that we think about the materials from which we make buildings.”

LEED’s Cradle-to-Cradle lifecycle assessment of materials remains very important, but it may not be the deciding factor in certification. As Owens notes:

“We also encourage builders to focus on the other things that the lifecycle assessment – and the way it is currently practiced – isn’t very good at exposing. For example, what kind of impact a product has on human health, or its effect on the ecosystems from which it is extracted.”

For example, bamboo – used in everything from floors to furniture, and even in eating utensils – is billed as ultra-green (fast to replenish itself, needing only a little water, easy to process). But if the bamboo grove being harvested is also the habitat of beloved panda bears – not really bears and symbolic of peace rather than the occasionally lethal aggressiveness of real bears – the product is definitely not green. One would be better off using real oak parquet.

It is this significant shift in the way project teams are encouraged to think about materials that Owens feels is most important. For example, when asked about biofoam, an insulative agent derived from soybeans, he replied that ‘there is no such absolute as a “green” material (or a red one, or a brown).”

“It’s a question of how you use it, and the alternatives. We are encouraging product teams to focus on materials for which disclosure activities have occurred. This includes not only a green profile, but a human health profile and a sourcing profile. When you have all three, you have a complete picture of the product.”

Bottom line, says Owens, LEED v-4 is focused on “intregrative processes, design and operation” – a wholesome approach that most would agree supports and furthers the aim of green building.

Now if we could just get everyone to agree on what those aims are ….

Silent Guardian: Drones without the Scare Factor

Over at Bye Aerospace, Inc., Founder George Bye and colleagues are designing drones. But don’t worry. The Denver, Colorado company, founded in 2007, isn’t the site of the next Evil Empire, and the drones which will eventually start going out the door (here or elsewhere, but not under their own power) are meant for peaceful occupations, including defense and security operations aimed at hardening borders, for example – a worthy cause given the recent incursions by Mexican drug cartels.

What other peaceful occupations, you might ask? For me, what immediately comes to mind are African elephants, whose herds have been thinned almost beyond breeding potential thanks to constant poaching by small groups of men illegally killing them for the ivory in their tusks.

Once the ivory is collected, from mature animals which would otherwise serve to teach, constrain, and lead the herd to safety, the rest of this amazing animal is often left to rot, even though malnutrition is ubiquitous across the continent. Nor is there any doubt that the culling is accomplished to the sights, sound and smells of terror and pain, with infants left to die when the herd is wiped out. In fact, with poaching figures rising about the same percent annually and threatening to reduce breeding populations by at least 25 percent over the next decade, experts are beginning to panic. According to Tom Milliken, an Ivory Trade expert and wildlife trade monitoring executive at TRAFFIC, “We’re hugely concerned.”

But perhaps less so now that drone technology has proven itself useful in guarding endangered animal species in Kenya. As Bye and team point out, their Global Range Solar/Electric Hybrid Surveillance Aerial Vehicle is low maintenance and high performance, delivering advantages that park rangers – no matter how well-intentioned – can’t.

Going by the name Silent Guardian, these solar-electric hybrid unmanned aerial vehicles (UAVs) beat out all the competition when it comes to surveillance. Unlike manned vehicles, this solar-powered craft can stay aloft almost indefinitely, almost anywhere around the globe, using the power of the sun and the science of solar photovoltaics (PV) to achieve what is known as ISR, or “persistent Intelligence, Surveillance and Reconnaissance.”

Speaking from Bye Aerospace headquarters at Denver’s Centennial Airport, due south of the Family Sports Center Golf Course, George Bye is quick to note that the company is well-prepared to offer not only scalable aeronautical engineering consulting services, but to integrate those concepts with advanced technologies, notably clean energy.

For Bye, who has always been in the thick of aeronautics, his previous and lengthy experience as a former Air Force pilot (think Desert Storm), and his immersion in the industry for 40 years, signal the type of experience that can sort viable alternatives from pie-in-the-sky proposals. This is perhaps why the company’s flagship offering, Silent Guardian, goes one step further than the typical offering – high-altitude, long-range mission persistence – by promising to deliver global range mission persistence.

This ‘higher and longer’ offering is what Senior Vice President (Government Programs) Kerry Beresford describes as “the next evolution in aircraft design, offering a level of performance and capability that will re-define the typical ISR mission.”

And what is a typical ISR mission? Bye and Beresford see it expanding into a social safety net in the near future. Citing Hurricane Katrina as an example, Bye compares the actual use of P3 aircraft to the potential (future) use of Silent Guardian, which could have provided 24/7 monitoring of both Katrina’s movement and its effect in minute detail – a role the P3s were unable to fill since they had to be landed, refueled and provided a new pilot at regular intervals.

“We could have monitored Hurricane Katrina from a weather forecasting and detail of movement 24/7 operation instead of sending up P3s. Then, of course, taking Katrina to the next step, we have overhead the potential ability to locate survivors and resources, and use communications on drones to recover cell phone connectivity immediately.”

Katrina isn’t the only scenario to benefit from “persistent, global” flight ability. Besides wildlife and natural resource monitoring, these Silent Guardian prototyped drones – which can stay up for weeks, at 10 percent of the cost of typical solutions like Cessna or Piper Cub planes – will also accurately trace the location of piped resources like oil, gas and water, and measure suitability for wind turbines, for example, by recording and calibrating wind flow.

The same is true for mapping power lines, examining terrain for water resources, checking the moisture content of the soil in areas plagued by forest fires, and even monitoring such fires to predict the sort of anomalous windstorm that killed 19 firefighters in Arizona in the summer of 2013. And UAV’s can do this without the cost of an expensive airplane, fuel, a pilot, and continual maintenance.

The one clear advantage of drones in wildlife surveillance, according to Bye, is that poachers see there is no longer a place to hide. Where the Piper Cub must fly over a swathe and then turn back to keep the area under observation, or return to base for refueling, Silent Guardian can simply hover. Imagine how nerve-wracking that would be if you were planning to kill a bunch of wild animals for their tusks, fur, flesh or fat!

Taking advantage of its “crosswork”, which incorporates individuals from other companies like Boeing and United Launch Alliance, LLC (a joint venture of Boeing and Lockheed Martin), Bye and colleagues maintain a finger on the pulse of the aerospace industry. As Bye notes:

“The applications and missions for UAV aircraft appear to be growing as airborne persistence is enhanced. Silent Guardian is a unique hybrid platform to serve these growing mission requirements.”

But Bye Aerospace isn’t flying on one wing. Two other UAV programs with close ties to Bye Aerospace, Silent Falcon and Starlight Lighter than air Solar Electric UAV, are being designed to circumvent the fact that most UAVs are “defense oriented, mission specific and not well suited to civil use”.

Perhaps most important, Bye Aerospace is committed to providing scalable services ranging from product development to complete aircraft assembly. And it is this wide-ranging flexibility that promises aerospace innovations fit for the 21st Century.


Has a Cleantech crash spurred the need for Bluetech innovation?

The recent CBS 60 Minutes documentary, The Cleantech Crash, was an apocryphal tale of wasted government funding and failed companies, and left one feeling sorry for a much maligned Vinod Khosla, deemed to be a prime architect behind the ‘failed cleantech revolution’. Khosla has rallied with a strong and stirring rebuttal in open letter to CBS.

Cleantech, (if narrowly defined by in terms of renewable energy technology), is indeed in the doldrums.

The figures quoted by Michael Liebrich, founder and chairman of the advisory board for Bloomberg New Energy Finance, at the Ceres 2014 Investor Summit on Climate Risk support this. Global investment in clean energy fell for the second year in a row to $254Bn last year with investment in Europe falling from $98Bn to $58Bn, a drop of 41%.

The vision for a green revolution has not materialized and this is primarily as a result of two things: shale gas and the global economic crisis.

Shale gas, and unconventional fossil fuels in general, have pushed the timeline for a cleantech transition towards low-carbon energy systems out by at least 50 years. As a result, energy security has ceased to be a political driver in North America as a result of unconventional fossil fuels.

Indeed, the global economic crisis has impacted projects in many industry sectors. The downturn halted the upward pressure on oil prices and sidelined the economic viability of renewables, which must compete with and are benchmarked against an incumbent energy system with an ever-changing and volatile canvass.

The economic viability of renewables are linked to oil prices. In fact one of the single biggest challenges to building a stable economic platform for renewable energy, is the volatility of fossil fuel energy, where the goal-posts keep moving.

Appetite to address climate change is gone, but climate change is not

Whatever appetite there may have been in the good times to address climate change and spur a move towards a low carbon economy with feed-in tariffs and production tax credits is now gone. Both of these support mechanisms are under pressure and the very notion of a carbon tax seems like a distant out of context idea from the pages of a history book.

There is no money, political will, or need (in terms of primary energy needs) to fund the transition to a low carbon green energy economy.

While climate change may have disappeared from the political agenda and the media, it continues to do its work quietly, and occasionally loudly, as we experience extreme weather events.

The ascendancy of unconventional fossil fuels and resulting demise of cleantech renewable energy are working in tandem to compound water pressures

Ironically, the ascendancy of unconventional fossil fuels and the resulting demise of cleantech renewable energy create more pressure on water resources and hence more water technology opportunity than would have been the case if we had transitioned to a low carbon economy.

From an operational perspective, solar PV and wind energy use essentially no freshwater and they help mitigate climate change.

On the other hand, both conventional and unconventional fuel energy sources require water in the extraction process and create produced water, which has to be treated.

Currently, we meet almost 80% of our primary energy needs through fossil fuels and that looks set to continue for the coming decades. It’s been reported that the world average freshwater intensity for conventional on-shore oil extraction is 21m3/TJ, while shale gas freshwater intensity ranges from 3-17m3/TJ.

The subsequent carbon emissions from combustion accelerates climate change, which again, puts more pressure on water resources and leads to intense rainfall events which have to be managed.

The cleantech energy revolution was never going to solve our water issues, but its absence exacerbates them.

Water is now more than ever inextricably linked to the future of how we provide energy for the planet and feed the people on it.

Cleantech is alive and well in areas of energy efficiency, resource recovery and water re-use

The cleantech umbrella includes more than renewable energy, and is alive and well when it comes to areas such as energy efficiency and resource recovery.

There is still a compelling business case and opportunities in saving energy and recovering resources and in general doing more with less. There are opportunities to convert waste and wastewater to energy and to recover nutrients and other valuable materials.

Based on recent analysis, we estimate there is 49 million MW hours of energy potential present in municipal wastewater each year in the USA and 1.1 million tonnes of phosphorous entering municipal wastewater plants in Europe, equivalent to 34% of total EU phosphorous imports each year.

All of this creates for opportunities for value generating innovation and re-evaluating systems efficiencies to create cleantech opportunities.

This is reflected in the fact that in 2013 27% of the water investments tracked through the BlueTech Innovation Tracker mapped to energy and resource recovery. When we look at highly disruptive technologies by theme, again there is a concentration and clustering around energy efficiency and resource recovery, with 29% of Disrupt-o-Meter™ highly disruptive companies in the energy and resource recovery area, 13% in low energy desalination.

All of these have a compelling value propositions in their own right, as does water re-use.

Interesting times ahead for water

There is a Chinese saying – may you live in interesting times – which is regarded as both a blessing and a curse. Whether we like it or not, we are living through such times, and I believe the changes we will see in the water system in the next two decades will represent a very unique period in our history in terms of how we manage water.


Eco Pro 2013

This December, I had the pleasure of attending Eco-Products Exhibition (Eco-Pro) 2013 in Tokyo, Japan. Though not well known outside of Asia, Eco-Pro is the largest event of its kind in this part of the world. In its 15th year, 185, 000 visitors attended this years event with 711 participants showcasing their environment-oriented products, services, and technologies. Though a majority of them are well-known big companies, mid- or small-size enterprises (SMEs), NGOs, and universities had a large presence as well.

Every year, Eco-Pro features a particular theme. With the recovery of Fukushima on everyone’s mind and the uncertainty in fossil fuel supply, the focus on 2013 was on renewable energy.  In July 2012, the government of Japan introduced a feed-in tariff (FIT) to promote energy generation from renewable resources including solar, wind, geothermal, and biomass. As a result, the application for the development of renewable energy reached 13 GW (million kW) in February 2013, only six months after the introduction of the FIT scheme. For investors in these projects, this policy guarantees 100% purchase of all power at a fixed price for electricity generated by solar PV systems larger than 10kW.

In spite of this monumental achievement, only about 10% is actually generating power. Japan still gets less than 2% of its energy from renewable sources (excluding hydropower).

The key to integration of renewable energy sources, which are highly intermittent, is it the deployment of energy storage systems to store energy when it is not needed and release it when demand is higher.

As one of the largest solar PV panel maker in the world, Kyocera is also operating a utility scale solar plant (so-called mega-solar projects) with a rating of 70 MW, enough to power 22,000 households in Kyushu. To store the excess energy produced during the daytime, the company has developed 14.4kWh lithium ion batteries at the household level. The capacity is sufficient to operate a refrigerator and TV simultaneously for 24 hours during power outages. While these units cost $24,000, smaller batteries from Panasonic can be purchased for as low as $9000.

The interface between renewable energy generators and the grid or battery system is an area of technology that is undergoing rapid innovation and is one of the barriers to deploying widespread renewable energy systems. In Japan, NEC has developed inverters that requires no power conditioning. That means direct current from a solar panel can go directly into a battery without being converted into alternating current (AC), which is how electricity is generally transmitted on a grid. This eliminates power loss and boosts overall efficiency.

While the technologies demonstrated here are inspiring, the institutional aspects of solar projects was also highlighted at this year’s Eco-Pro. Developing the market conditions to properly manage solar projects remains a big challenge. In Japan, mega-solar projects are typically profit-driven rather than as CSR. There is a concern that after the 20-year FIT period is over and the initial costs have been paid off, the operators may lose interest in maintaining these facilities, which would be a detriment to the local community it serves.

Nevertheless, these projects can contribute to the well-being of society if managed appropriately. For example, in Inami town in Wakayama prefecture, the local government is working with private businesses and its university to develop their solar project. This is the first public-private partnership of its kind of Japan and is operated by Plus Social. The company will take in the revenues under this scheme while supporting local activities in Wakayama prefecture and Kyoto. At the same time, Ryukoku University will play an important role in educating the public in Inami town.

Innovations in Vehicles

Another major area of innovation for the environment is in cars and other vehicles in the transportation sector. Complementing the integration of renewable energy are electric vehicles that could not only use emission-free electricity from the sun or wind, they can act at storage mediums to accommodate the variable nature of these sources on the grid. Below are three automotive technologies featured at this year’s Eco-Pro. They demonstrate new innovations that not only use less energy, but also reduce pollution.


toyotaToyota’s Prius has set the standard for hybrid vehicles with not only domestic sales but also a formidable international market. At this Eco-Pro, they showcased the new Prius HPV, which can be wirelessly charged when parked. By parking properly over a power source, the vehicle is charged by a system consisting of an on-board charging unit, a wireless communication control, and a secondary coil. It relies on resonance between the oscillating magnetic field between the two coils so that power can be transmitted to charge an exhausted battery. With the 4.4kWh lithium-ion battery pack, the car can be charged in 90 minutes.


BridgestoneAs one of the world’s largest producer or tires for vehicles, Bridgestone has begun development of next generation Air Free (non-pneumatic) tire. Today’s conventional tires requires an inner tube. Although their durability and use have improved substantial since vehicles first came on the road, their disposal has been problematic. Often they are left in landfills where the results could be toxic if they catch on tire. On the other hand, Bridgestone’s new concept tires have no inner tube or metal components inside.

With a unique structure of spokes stretching along the inner sides of the tires supporting the weight of the vehicle, there is no need to periodically refill the tires with air, meaning that the tires require less maintenance. At the same the worry of punctures is eliminated. The spoke structure within the tire is made from reusable thermoplastic resin, and along with the rubber in the tread portion, the materials used in the tires are 100 percent recyclable.

While the R&D and have only been going on a couple years, the company expects to commercialize them in a few years. They will first appear on light vehicles and those that travel short distances in the city.


mazdaAs companies around the world are now touting their efforts to improve the energy efficiency of their products but also in their production process, the car industry is not standing still.

Car companies have poured enormous investments in building vehicles with better mileage but some are also developing new technologies to lower the energy consumption during the production process.

Mazda demonstrated their superlight aluminum engine, but they also showed how the manufacturing could be improved. It turns out that the most energy intensive part of automobile production is not the assembly itself, but the painting process. That’s because it consists of multiple coats of paint that have to be baked. By applying a new process, Mazda has been able to paint their cars with fewer steps, less volatile chemicals, and less energy in the coating process.

Predictions For Cleantech in 2014

Continuing a tradition since 2007, once again we bring you some end-of-year thoughts about where we think the cleantech investment theme is going.

Our cleantech-specific analysis and advisory firm Kachan & Co. focuses on this space. We publish research reports. We get briefings from companies introducing new technology. We publish a cleantech analysis service. We’re quoted in the press. We pore over what’s going on in the world in clean/green tech markets and have made some informed calls over the years, like China’s cleantech dominance, the rise of efficiency technologies and the downturn in cleantech venture capital funding.

This year, we’re of the opinion that industry-watchers should take heart. Especially if you’ve been on the page that cleantech is past its prime or otherwise unworthy of your attention of late. Why? Because we’re more optimistic about the year ahead in cleantech than in our last two years of predictions (read 2012 and 2013), which were uncharacteristically negative for a firm that’s often been something of a cheerleader for the cleantech space.

What’s different this year? As you’ll read below, we believe the world turned an important corner in cleantech in 2013.

Gradual recovery in 2014
If you’ve not been looking carefully into the tea leaves this past year, you may have missed the quiet recovery already underway in cleantech, a process we expect will gain even more momentum through 2014.

We had the chance to take a close look at the fundamentals of cleantech this fall in co-authoring a new (and free!) 38-page research report. Titled Cleantech Redefined: Why the next wave of cleantech infrastructure, technology and services will thrive in the twenty first century, the paper analyzes the most recent investment research available across a number of industries and major impact areas.

One section of the report compares the cleantech wave to other technology booms of the last 50 years, like the dot com boom, the networking craze, biotech, the PC and the microprocessor. We found a number of parallels and a number of reasons for optimism comparing the cycles. After 20 years in technology, personally, the more I looked at the data, the more it felt I’d seen this movie before. After an initial frothiness and correction, there’s always a resetting of expectations and execution and a gradual “climb out” of the trough. Gartner calls it a hype cycle. And climbing out of the trough is where we are today in cleantech.

The recent downturn in venture capital investing in cleantech doesn’t mean the sky is falling. The dip becomes less threatening when viewed in the historical context of how venture capital always spikes early in emerging categories, later to be augmented with other sources of capital, such as often-unreported corporate and family office investment, as industries develop. It happened in the dot com, networking, biotech and PC eras, and this transition is now well underway in cleantech, as shown below. We offer a lot more detail, with additional figures and graphs, in our report.

Venture capital playing a lesser role

While venture capital was the dominant source of clean technology financing in California in 2008, it played a lesser role in 2012. Source: CB Insights, Collaborative Economics. Excludes project finance and unattributed investments.

Another takeaway from the above: Pay less attention these days to venture capital investment as an indicator of the health of the cleantech space. You risk not seeing the real picture.

In addition to an analysis of patterns in venture funding in previous bubbles vs. what’s occurring today in cleantech, our 38-page analysis on the state of cleantech today also looks at overall investment levels into clean and green innovation and projects. It contemplates what’s to be learned from models like the technology adoption life cycle (of “chasm” fame.) It factors in the recent recovery in publicly traded cleantech funds and other metrics.

In all, based on what we learned writing this report, we forecast a continued recovery in cleantech. Not an exuberant one—we’re betting those days are over—but look for a clear upward trend in many things cleantech in 2014, i.e. corporate, private equity and family office investment, venture debt, project finance, M&A, interesting new innovation, new product announcements, etc. But don’t hold your breath for classic venture investment to increase appreciably.

Term cleantech to stay alive and well
There’s been speculation about whether the term ‘cleantech’ that my previous firm is credited with coining will, or should, persist. My colleagues sometimes suggested the phrase should quietly go away—that our job was to ensure that clean and green propositions are eventually added to all products, that all forms of energy become clean, that all synthetic chemistry and toxins be replaced with natural, biological solutions because these are ultimately the less expensive and potentially only real ways to accommodate more people on the planet.

My current cleantech research & consulting firm Kachan & Co. worried further about the future of the term cleantech this summer. I, myself, had something of a crisis of confidence after a set of cleantech power players I interviewed in Silicon Valley shared the extent to which they’ve been distancing themselves from the phrase. It seemed this summer that many of the investors, lawyers and global multinationals I’d worked shoulder-to-shoulder with for years had started considering cleantech a dirty word.

But today, at the end of 2013, we now predict the term cleantech to persist through 2014 and beyond. We have come to appreciate how our datapoints from the summer were very regional, and how the rest of the world is still enthusiastically embracing the term as shorthand for environmental and efficiency-related technology innovation.

We also now suspect that investors and service providers who recently distanced themselves from the phrase may have been too quick to do so, and anticipate a restoration of the cleantech-related teams at many of these firms. Why? Call it what we will in the future, the fundamental drivers of resource scarcity, energy independence and climate change aren’t going away. The largest companies in the world are demanding more and better clean and green products and services than ever before. And that’s driving a recovery.

Cleantech term search history

The peak in global search traffic for the term cleantech and its subsequent decrease and stabilization mirrors the Gartner hype cycle. Is a gradual climb up again in the cards, as the hype cycle suggests? We predict yes. Source: Google Trends.

Realistically, cleantech teams at private equity investors, law and consulting firms may rebuild in 2014 under the auspices of “energy,” “advanced materials,” or other related monikers drawn from the taxonomy of cleantech. But massive funds earmarked for this space are being raised again (e.g. just this week: Tata/IFC: $400 millionIndustry Ventures: $625 millionthe UN’s Green Climate Fund: $TBD, expected to be massive) and these sort of numbers are representative of opportunity. And we think it’ll still mostly be called cleantech.

Crowdfunding emerges as viable in unexpected ways
Forget what you know about Kickstarter and Indiegogo. Donation-based crowdfunding only has limited usefulness for companies seeking seed or other early stage funding in cleantech.

In 2014, look for equity and debt-based crowdfunding platforms to catch their stride and serve as legitimate ways for cleantech vendors and project developers seeking to raise relatively modest amounts of capital. (Which isn’t to say we expect the U.S. SEC to sort out all regulations in 2014 around Title III raises under the country’s Jobs Act. We expect that equity and debt-based crowdfunding plays in cleantech will leverage Reg D in the U.S. and other similar regional constructs worldwide in the short term to help companies raise money.)

In 2014, expect selected efficiency, “cleanweb”-style big data, collaborative consumption and other capital efficient plays to be able to raise hundreds of thousands of dollars for themselves in equity or debt via horizontal crowdfunding platforms like AngelList or FundersClub, or industry-specific debt and equity portals like MosaicSunFunder or a host of other emerging platforms. Under current regulations, such crowdfunded raises may ultimately be feasible up to $1 million per company per year in the U.S.

Which will likely make crowdfunding less attractive in 2014 for big, capital-intensive cleantech plays.

Underperformance in EV sales, and risks to growth rates
Betting that the future of transportation will be all-electric, and that 2014 will be THE year of the electric car, finally? Think again.

Enthusiastic bloggers breathlessly paint the picture that electric vehicles (EVs) are flying out of the showrooms (as in here and here), but they’re selling slower than expected by analysts, with only 150,000 expected sold worldwide in 2013.

Most industry watchers believe EV adoption will be spurred by governmental support in the form of subsidies, infrastructure funding and concessions such as free parking, access to high-occupancy vehicle (HOV) lanes and congestion-zone toll exemptions, along with broader adoption of wireless charging and smart-grid innovations. But, in our analysis, there are other forces causing risk to the growth rates of electric vehicles.

As we forecast last year (read “The internal combustion engine strikes back”), there have been innovations taking place in internal combustion engines (ICE) that could forestall the timing of an all-electric vehicle future. Even more surprising to us have been the substance and volume of fuel cell vehicle announcements this year from the world’s leading automakers—which are likely at least partially responsible for the quiet doubling of certain fuel cell companies’ share prices in 2013. Yes, you read that right: Automotive fuel cell companies’ shares are UP!

In 2010, my line to journalists that “the jury was in, and the future of transportation was to be all-electric.” In 2012, my talking point was that the near-term future of transportation was to be all-electric. In 2013, I started talking about fuel cells possibly succeeding all-electric in the far future of transportation, once costs come down. In 2014, fuel cell approaches may get even more ink and undermine the aggressive uptake expected for electric vehicles.

And that’s not necessarily a bad thing, for if their fuel (hydrogen, methanol, or in some cases formic acid or others) can be created in low-cost, sustainable ways, fuel cell vehicles could ultimately have less of an impact on the planet, given that the power required to drive EVs often comes from dirty sources.

Rare earth profits to be made in unexpected places
Fortunes will not be made in 2014 in rare earth element mining companies. Reconsider buying into rare earth element mining companies or associated funds. If holding rare earth mining investments hoping they’ll return to stratospheric levels of yore, consider getting out of them.

Why? In the short term, we think recycling will be one of the few rare earth plays with upward motion. Much of the industry has been focused on new mines to meet growing demand for rare earths. But recycling of rare earths is gaining momentum quietly, and stands to accelerate in 2014 given the increasing costs of mining and cost and schedule overruns at high profile sites like Molycorp’s Mountain Pass California mine.

  • Brussels-based company Umicore is at the forefront of recycling technologies for critical metals. At its site in Hoboken, Belgium, the company recycles about 350,000 tons of e-waste every year, including photovoltaic cells and computer circuit boards, to recover metals like tellurium. In 2011, it started a venture to recycle rare earths from rechargeable metal hydride batteries (there’s about a gram of rare earths in a AAA battery) at its Antwerp site, in partnership with the French company Solvay.
  • Japanese car company Honda announced this March that it has developed its own in-house recycling program for metal hydride batteries, which the company plans to test using cars damaged by Japan’s 2011 quake and tsunami.
  • The Critical Materials Institute of the U.S. Department of Energy is developing a method that involves melting old magnets in liquid magnesium to tease rare earths out.

Watch for more and more companies to be introducing rare earth recycling plays. And watch for a near future trend encouraging electronics manufacturers to design their products to be easier to break apart for rare earth element recovery in the first place.

Getting rare earth metals out of modern technology is hard, since they’re incorporated in tiny amounts into increasingly complex devices. A circa-2000 cell phone used about two dozen elements; a modern smart phone uses more than 60. Despite the relatively high concentrations of rare earths in technology, it’s traditionally been easier to chemically separate them from the surrounding material in simple rocks than in complicated phones.

Recycling is perhaps the best route forward for elements where demand is expected to level off in the long run. Expect demand for terbium and europium, for example, to fade as fluorescent bulbs are eventually replaced with much smaller LEDs. But for other elements, like neodymium, new supply is needed. Currently only tiny amounts of neodymium are required for ear-buds of smartphones—but high-performance wind turbines need about two tons each. But it’s only these sort of large quantity applications that are expected to drive the need for new mines.

Other potentially appealing rare earth plays in 2014 include new processes at existing mines to improve processing yields, and the development of alternative materials to obviate the need for rare earth elements.

More on the subject in a brief on rare earths to our analysis service subscribers.

And so concludes our predictions for cleantech in 2014. What do you agree with? What do you disagree with? Leave a comment on the original version of this post on Kachan’s website.

This post is reproduced by permission and was originally published here.


A former managing director of the Cleantech Group, Dallas Kachan is now managing partner of Kachan & Co., a cleantech research and advisory firm that does business worldwide from San Francisco, Toronto and Vancouver. The company publishes research on clean technology companies and future trends, offers cleantech data and analysis via its Cleantech Watch™ service and offers consulting services to large corporations, governments, service providers and cleantech vendors. Kachan staff have been covering, publishing about and helping propel clean technology since 2006. Details at

Skyonic, It’s Not Your Parent’s Carbon Capture Technology

It should come as no surprise to those of us who follow environmental issues vis-à-vis climate and pollution that Norway this week walked away from the longest-running and most disappointing carbon capture plant in the world.

Norway, sadly, is not the first, but its abandonment of Mongstad follows a familiar pattern of enormous hope and dismal acceptance: carbon capture and sequestration, or CCS, is an unachievable ideal at this time given the current technology.

Or, to put it more bluntly (as global energy/carbon capture firm Aker Solutions does), “The carbon sequestration market is dead.” A sentiment reiterated by Environmental News Network (ENN), which as recently as 2012 wrote: There are several ways to remove CO2 from a stack gas. None have reached a commercial basis yet due to the expense of the processing.

And nowhere is it more dead than in the United States, where the 2003 Bush brainchild called FutureGen – built on the hopes and limited success of NexGen, among others – was abruptly canceled in January of 2008 because of concern about cost overruns.

The definition of insanity is repeating a consistent failure in expectation of success. CCS currently falls under that definition. Unfortunately, it will be close to impossible for any new coal power plants to meet the climate regulations proposed by the Obama administration without using carbon-capturing technology. And, putting money where its mouth is, Energy Secretary Ernest Moniz has announced $84 million in grants to make CCS technology a reality.

The technology behind Austin, Texas-based Skyonic is already well ahead of the pack. Plants called Skymine pull carbon dioxide and other elements from flue gas in a patented technique called Carbon Capture and Utilization (CCU) or, alternatively, Carbon Capture and Mineralization.

And that, says Skyonic Director of Communications Stacy MacDiarmid, is precisely what happens. Carbon dioxide, or CO2, becomes sodium bicarbonate, or baking soda (NaHCO3), an almost ubiquitous chemical used in medicine, in personal hygiene, as a household cleaning agent, in baking and cooking, in  industry (as an amine or nitrogen-based hydrocarbon neutralizer), a corrosion inhibitor and rust preventative, for hydrolysis (hydration) of concrete, in water treatment plants to balance water pH, in the manufacture of fabrics, leather, glass, and plastic, as the suppressant in fire extinguishers, to control air pollution from burning waste, as well as in foundries, aluminum production, ethanol production, brick making and in drilling operations, where it keeps drilling fluids and the like within the proper pH range. In effect, Skyonic is talking millions in consumer and industry spending for a very basic but widely useful chemical. To say nothing of other chemicals like sulfur and nitrous oxides, which can also be drawn off flue gases.

Skyonic, which is currently operating its test plant, broke ground on a commercial-scale plant this summer. It will, according to MacDiarmid, begin operations in the last quarter of 2014, “…at full production of all anticipated products and byproducts.”

Skyonic Skymine plants, each roughly the size of a dual-axle semi-trailer truck, cost about $125 million for a 75,000-ton direct capture plant, which also delivers 225 tons of carbon offsets for a yearly total of 300,000 tons of offsets. This includes all construction and equipment, and the immediate prospect of capturing chemicals to sell to the marketplace.

For those firms wanting to capture more than 75,000 tons, the Skymine plant is also scalable. Not infinitely scalable, of course, but enough so that factories and power plants can capture enough to more than meet their mandates under the Environmental Protection Agency’s, or EPA’s, Acid Rain Program.

Moving forward thanks to U.S. Department of Energy (DOE) loans – $3 million for the R&D phase, another $25 million to bring the venture to commercial scale – Skyonic is also funded by major energy industry players to the tune of $128 million.

Skyonic’s advantage over CCS plants is that its operation is monetized. All the byproducts extracted from flue gases via slipstream operations have an immediately tangible value, including the sulfur and nitrous oxides already regulated by the EPA.

Thus, while the commercial cost per ton of flue gas “cleaned” via CCU is $45, the cost to utilities and other carbon emitters for CCS is, according to a Harvard study, $150 per ton in 2008 dollars. Other estimates put CCS costs as high as $300 per ton.

It would be nearly impossible for any new coal power plants to meet stringent climate regulations as proposed by the Obama administration without using carbon-capturing technology. And, putting money where its mouth is, Energy Secretary Ernest Moniz has announced $84 million in DOE grants to make CCS technology a reality. Really.

Unlike CCS, Skymine costs include transportation. In fact, according to the DOE, CCS increases coal-fired electricity costs by 70 percent, and that’s before the additional cost of building pipelines and establishing reservoirs. For consumers, this means a doubling (or more) of current energy costs.

Are there any future limits to CCU efficiency? Yes, says MacDairmid. “Our process is most efficient at 90 percent. Thus, even in a complete carbon capture and conversion, we would probably never get more than 90 percent of carbon and other emissions.”

CCS can’t do that well, even at best estimates. In fact, in what sounds like a final death knell for CCS, SmartPlanet puts the cost of carbon capture via fossil fuel plants (coal, oil and natural gas) so high that consumers will end up paying more for coal-fired electricity  than they will for renewables, which are already approaching parity.

To MacDiarmid, who detoured from a professorship in her post-grad world to working for Skyonic because it offered her an actual mission – what she cheerfully describes as ‘something impactful’, the one takeaway she wants people to remember is that Skyonic carbon capture and utilization is profitable, retrofittable and scalable.

Which sounds to this writer like a recipe for success. Baking powder biscuits, anyone?

Smart Cities

Two events I attended this month brought home the importance of cities as centers of solutions for urban sustainability and climate change. In the absence of a global agreement to limit greenhouse gas emissions, cities around the world have already made efforts to decarbonize their economies. Global networks like the C40 include energy and climate as major issues that cities need to tackle if they are to be responsible stakeholders.
LockeMy colleagues at Cypress Rivers invited me to attend the China 2.0 Forum at Stanford University. The keynote speaker was one other than US Ambassador to the PRC, Gary Locke. While the focus of his talk was on the need for financial reforms in China, Ambassador Locke made note of country’s crucial role in the climate problem and how local governments were already taking the initiative there. Every week, the US embassy in Beijing is being contacted by city and country officials who are finding a wide variety of technologies from waste management to transportation solutions.

Indeed, the opportunities are enormous for win-win as American companies can provide the necessary know-how to help these cities find appropriate solutions for their energy and environmental challenges.

SCWOver in Asia, the concept of smart cities have been promoted for several years. Although there is no standard definition, a smart city is characterized as one that uses well designed planning and advanced ITC to create conditions that are conducive to economic growth comfortable lifestyles, and responsibility for the environment.  As a technology driven country, Japan has made enormous efforts in this area with several model cities. Among them, Yokohama is considered one of the “smartest” and has been the host of the annual Smart City Week. These include innovations for local energy production and delivery, water procurement and distribution, and waste management and recycling.

Another highly touted model in Japan is the Kitakyushu Model, which offers know-hows in urban development by integrating waste management, energy management, water management, and environment conservation. Case studies include Kitakyushu Ecotown which has high concentration of recycling plants. In a toolkit in the package, it also has a checklist for making a master plan. They are available on the web.

This year, the discussion at Smart City Week focused on the concept of public-private partnerships (PPPs). Also known as business to government (B2G), it is a framework at the city and municipal level for facilitating, and in some cases, financing the implementation of infrastructure projects. Not only do technology providers play an important role in these relationships, real estate are often promoting these types of projects from energy efficient buildings to urban restructuring. Moreover, these projects must also look at how to better engage residents as stakeholders in their communities. While technology plays an important role, awareness and behavior play as important of a role.

What makes innovation at the city so important in the global scheme is that successes at this scale can be easily learned from each other. These experiences to share ideas and what works can build the confidence and trust needed towards building a global consensus to limit greenhouse gas emissions. Indeed, smartening our cities will be an ongoing process but meetings like Smart City Week give leaders and implementers to discuss what works, what doesn’t, and why.