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Burger, Not Well Done

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by Richard T. Stuebi

Last week, First Energy (NYSE: FE) announced that it was pulling the plug on a planned biomass conversion of its R.E. Burger coal powerplant.

This proposed project had been a source of controversy since it was first unveiled in April 2009.  At that time, special favorable treatment was being offered by the state of Ohio to the proposed project, wherein First Energy was to have received additional renewable energy credits (RECs) for agreeing to burn woody biomass instead of coal at the Burger plant.  This granting of so-called “bonus RECs” was accomplished by tucking a line-item into a completely unrelated bill, which was passed by the Ohio Assembly and signed into law by Governor Ted Strickland as part of a brokered deal with First Energy and local officials and labor leaders seeking to preserve employment at the beleaguered plant in depressed southeastern Ohio.

Alas, to many observers, the deal smelled a lot more like manure than burning wood:  a recent analysis by Bloomberg New Energy Finance hinted that the bonus REC provisions associated with the planned Burger biomass repowering could have potentially “obliterated” the Ohio renewable energy markets — a market that had only been created the prior year with the passage of SB 221 including the creation of a renewable portfolio standard (RPS) requirement for Ohio utilities.  The glut of extra RECs associated with the Burger biomass repowering would likely have fulfilled First Energy’s RPS requirements for years to come, thereby kneecapping the development of other worthy renewable energy projects in Ohio — which was, after all, the intent of the SB 221 RPS.

Assessing the aftermath of the Burger debacle:  Ohio lawmakers have created an unfortunate precedent for making exceptions to the RPS bill for politically-preferred projects.  First Energy spent a reported $15 million on engineering work for a project that has now died — and I’m guessing that First Energy’s customers will likely foot the bill for work that turns out to be irrelevant.  Lastly, plant employees find out that the grand pronouncements of the past year turned out to be hollow, and the economic promises were in vain. 

All in all, a story with no real winners and lots of losers.

Global Cleantech 100

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by Richard T. Stuebi

This past week in New York, at its annual East Coast investor forum, the Cleantech Group released its 2010 Global Cleantech 100, profiling the private cleantech companies that a set of panelists thinks has the most promise for large long-term impact.

Some highlights from the list and the report:

  1. In the panel’s eyes, the most promising company is Silver Springs Networks, followed by Zipcar, Opower, Bridgelux, and BrightSource Energy. Of course, the panel isn’t infallible: one of the 2009 Cleantech 100, Imara, flamed out even before 2009 ended.
  2. Energy efficiency displaced solar as the subsegment of cleantech with the most firms on the list, with 15. Solar and biofuels each account for 14 companies on the list. As big and active as the segment is, only one company in wind energy made the list.
  3. The U.S. remains the dominant geographic region for cleantech (55), with California far and away the leading state (33), and no other state with more than 8 (Massachusetts). However, Asia-Pacific (especially China) is fast on the rise.
  4. VantagePoint is the venture firm with the most companies on the list (14), one more than Kleiner Perkins.
  5. Corporate strategic partners and investors are increasing their cleantech activities. Google (NASDAQ: GOOG), IBM (NYSE: IBM), Siemens (XETRA: SIE), PG&E (NYSE: PCG), Landis & Gyr (a large global private company that itself is on the Cleantech 100) and General Electric (NYSE: GE) are at the top of the heap in engaging with companies on the list.

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

Kleiner Perkins on Biomass

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by Richard T. Stuebi

I was recently forwarded an article by Amol Desphande, partner of the renowned venture capital firm Kleiner Perkins, entitled “Investing in the Biomass Industry”, which appeared in the September 2009 issue of BioCycle magazine.

No doubt seeking to contrast Kleiner Perkins from its peers, Deshpande questions the prudence of investing in large-scale biorefining operations — whether first- or second-generation — and instead characterizes the attributes of biomass technologies that make for more appealing investment candidates:

  • Scales down and can operate in a distributed manner
  • Produces a product that is supply chain compatible (e.g., grid connection, pipeline access points)
  • Uses a feedstock that already has a supply chain
  • Has a beneficial reuse and is free of harmful contaminants or odors
  • Uses available feedstocks of low value and that require minimal pretreatment
  • Costs less than $5 million to demonstrate at semi-commercial scale
  • Consumes minimal water and parasitic energy
  • Has one step for its primary energy conversion (i.e., one primary unit operation, like an anaerobic digester)
  • Takes less than six months to build a commercial plan from “shovel in ground”

Apparently, Kleiner Perkins has seen a number of venture opportunities possessing most of the above characteristics, having invested in Amyris, Harvest, Mascoma, and Sundrop Fuels.

Deshpande closes passionately with the following call to action:

“This is the greatest time in history for entepreneurs in the biomass industry. Rising energy prices, public awareness, technology breakthroughs and carbon credits will make the next 10 years a great time to innovate…Distributed biomass power technologies are available and should be deployed in the short-term. Over the long-term, we probably need to change the way we grow our food. These changes present opportunities for entrepreneurs willing to take the challenge to innovate and transform biomass in a more efficient way.”

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

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