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Synthetic Biology Startup Cemvita Factory Edges Amperon and SkyCool for $100K Cleantech.org Competition Win

We announced today that last night Texas based synthetic biology CO2 to products startup Cemvita Factory edged energy forecasting software startup Amperon and Stanford cooling materials startup SkyCool for the 2021 Cleantech.org $100K GS Beyond Energy Innovation Prize. Jeff Wolfe of energy storage company Veloce Energy, and whose executive team comes from market leaders Tritium and Stem, was the crowd favorite pitch. The crowd also ranked Cemvita, Amperon, and SkyCool next as well. Judges reported that all 6 finalists including Sapphire Technologies, a spinout of Calnetix led by CEO Freddie Sarhan formerly an executive at Praxair, and Annette Finsterbusch, CEO of lithium ion battery manufacturing startup EnPower, and formerly head of Applied Materials venture arm, had strong showings and support to make the top 3. All 6 startups had 7 minutes to pitch, and 8 minute Q&A from judges.

Finals judges were Robert Linck, Chief Investment Officer of Shell Ventures, Deb Merril, President of EDF Retail, and formerly founder and CEO of retail energy powerhouse Just Energy, Rodrigo Prudencio, who began investing at pioneering energy venture firm Nth Power, and was CEO of carbon software startup Hara, now heading Amazon’s Climate Pledge Fund, as well as Kevin Hahm, GM of Investments at GS Energy Group, representing the prize sponsor, and my partner Q Song at Energy Transition Ventures.

Cemvita is located in the energy capital of the world, Houston, Texas, and edged NY and Texas based Amperon, and Silicon Valley based SkyCool. Veloce also has split executive teams in California and Texas, and EnPower is located in Phoenix. Lisa Ann Pinkerton, long time cleantech sector journalist and PR executive as well as the Chair of Women in Cleantech & Sustainability, gave a talk during the break on “Getting to Yes”, and Cemvita will be interviewed on our podcast partner Futurized.co.

I haven’t organized a challenge or prize competition like this since launching Shell Gamechanger’s R&D innovation challenges some years ago as a Gamechanger project with Cleantech.org, and was extremely pleased with the overall quality of competition. The incubator and accelerator partners for the competition helped dramatically increase the quality of applicants, and the 25 startups in the semifinals had raised well over a hundred million between them. The aggregate fundraising in process for the semi-finals group was well into the hundreds of millions. We had several billion in energy transition investment capital represented in the judging from a handpicked slate of experienced investors and executives, and the 6 finalists made their decision hard. I will post the finals video of the event up on the Energy Transition youtube channel shortly, and add to the Cleantech.org LinkedIn page.

6 Finalists Named in Cleantech from CO2 to Storage for $100,000 Prize

Cleantech.org announced today that it has selected the 6 Finalists for our GS Beyond Energy Innovation Challenge in the following categories: Digitization of Energy, eMobility in Cities, and New Fuels.  The finalists will pitch in a virtual pitch event on July 21 with the top team winning the cash award of $100,000 with no strings, deliverables, or equity dilution.

Being on the selection team was a blast. We partnered with some of the largest accelerators and incubators in the sector for the Challenge:  Greentown Labs, Austin Technology Incubator, at University of Texas, Elemental Excelerator, Third Derivative, Techstars, though applications came from across a couple of dozen incubators and accelerators. Semifinalists and finalists were selected in a highly competitive multi-stage process of hundreds of startups, and range from first time startup teams to experienced executives, with solutions in software, carbon products, energy storage, distributed energy, new materials, and electric vehicle technology.  Getting down to the finalists was challenging, and I’ll say we had 4 more semi-finalists that we felt could have legitimately made an argument to be included in the finals and be competitive to win.

Each of these Finalists certainly can pitch well, and brings a different approach and technology to solving big energy and climate related challenges. Startuplandia is a fast paced, rough and tumble environment. If I had to give some free advice it would be this: nine months in a startup is a lifetime, and every startup that gets funded looks just as good on paper as yours to somebody – or it wouldn’t have gotten funding.  These six startup teams represent the top couple of percent of applicants and beat out a lot of good companies already.  They each have seen prior success and have had tens of millions in dollars invested in them from both investors and both government and corporate technology R&D grants.  The finalists have been through an average of 2.1 incubators and accelerators. But they each still have some rows to hoe to hit the bigtime and deliver.  The point of the Challenge was to find and showcase ideas that can change the world, and send a message that the challenges and opportunities in the energy transition are worth tackling, but you need to bring your A game.

I’m really excited about the group that made it this far, and looking forward to seeing who the judges pick as the winner on demo day.

Finalists are:

Amperon

Amperon builds real-time electricity demand analytics for energy retailers, utilities, grid operators, and energy traders

Cemvita
At Cemvita Factory, we apply synthetic biology to reverse climate change. We do this by engineering microbes to use carbon dioxide or methane as a feedstock for the production of carbon-negative industrial chemicals.

EnPower, Inc.

EnPower, Inc. is a lithium-ion battery company accelerating the shift to a more sustainable future. The company is expanding production in Phoenix, AZ to build high performance batteries for various electric mobility applications.

Sapphire Technologies

Sapphire Technologies’ energy recovery systems convert the energy wasted in pressure reduction processes into clean electric power. Our vision is to improve the way the world harvests and utilizes energy, and our mission is to enable substantial financial returns for our customers by harvesting wasted: pressure energy while reducing the global carbon footprint.

SkyCool Systems

SkyCool Systems has developed a breakthrough cooling technology that passively rejects heat to the sky in order to efficiently and sustainably run air conditioning and refrigeration systems. Unique to SkyCool Systems’ innovation is a fundamentally different way of achieving cooling and harnessing an untapped renewable resource: the cold sky.

Veloce Energy

Veloce Energy is enabling the electrification of transportation by removing physical and financial barriers to EV charging deployment and the development of grid edge infrastructure. Our purpose-designed battery energy storage and ancillary systems are like Legos™ to leverage the existing grid to do more, faster, at lower cost across multiple sectors.

Viewers can register to watch the Finals pitches and judging at GSBeyondEnergy.com. The finals judges are 5 highly experienced venture investors and executives from Chevron, Amazon, GS Group, Energy Transition Ventures, and EDF. 

What’s Changed in Cleantech Investing? Two things: Economics and Returns

I’ve been investing in cleantech since 2001, founded a bunch of startups, and have a good stack of exits to my name across every cleantech investing wave. In fact my last 4 investments have all exited. Not sure I’ll ever be able to say that again. And renewable power is cheaper than fossil. It’s fun to be able to say that now with a straight face.

Reflecting back, while a lot has changed, much has stayed the same. What has fundamentally changed are improved economics, and massively increased sizes of capital, exits, and returns, besides the obvious climate and policy pushes behind the energy transition. What hasn’t, is mispricing of risk. But hey, that’s what being a venture investor is all about, right?

Economics

Unlike a dozen years ago, when investing in cleantech was all about policy and we called it alternative energy because renewables were fundamentally more expensive than fossil: today it’s cheaper to build a renewable power plant than it is to even run a fossil fuel power plant. Policy frameworks are less the driver than energy economics. A decade ago policy frameworks were still a crucial minimum condition. Lazard research has been reporting for a while that in the US the average cost of solar and wind was cheaper than just the marginal cost of coal and gas generation. And shows energy storage within striking distance of peaking power plants at scale. If you haven’t read the Lazard report, it’s a must read. And in a great article on emerging markets, long a hard place for renewables to outcompete cheap coal, Bloomberg just noted solar is cheaper than coal in India.  Collapsing costs primarily in batteries and solar, have fundamentally and likely permanently altered the underlying economics of the key technologies in favor of cleantech and energy transition companies. This isn’t going away even if you think the policy frameworks are. And yes, on an unsubsidized basis.

Venture Returns – Is anyone making money?

The other change is increased raw size of markets, exits and returns.  A decade ago, returns in cleantech for venture funds still looked dicey, and while money was being made, the exist smaller, successes were much narrower, especially for mainstream venture funds who struggled to port their investment models from IT to cleantech. And I actually know a few funds from the early days that literally returned zero. Not just zero profits like 1x capital. Like awfully close to absolute 0x capital.  And for much of the last decade the private company unicorn phenomenon that drove a huge chunk of venture returns largely skipped cleantech deals, with only a handful of unicorns (C3 Energy as a rare example one of the few on the unicorn list for quite a while). In fact most of the key IPO and M&A exits were well in the <$1 Bil level – and the valley investor’s funds largely struggled with the sector. And aftermarket performance of cleantech IPOs in the pre 2010 timeframe was also choppy, even a rockstar company like First Solar is still 75% off its 2008 high (even though it’s at $92/sh vs the 2006 IPO of $20).

The returns improved in the succeeding 5 years. I was asked by one of my colleagues at Shell in 2015 what the best cleantech venture backed exits were. At the time, it was the Tesla IPO ($226 mm raised /$1.6 Bil IPO 2010), 60% Acq of Sunpower/Total ($1.4 Bil 2011), and Nest/Google ($3.2 Bil 2014), with a couple of dozen solid return venture backed exits mainly in the $50mm to $500 mm range.  Including a few nice IPOs like Sunrun ($251 mm raised/$1.36 Bil IPO 2015), OPower ($116 mm raised/$1 Bil IPO 2014), Silver Spring ($81 mm raised/$750 mm IPO 2013) and a few others. There were good exits, and plenty of money getting made for disciplined investors, but soon crowded out by other venture markets. However capital returns in cleantech in the last decade have not looked back, with a fatter tail post exit for long term holders than often in the early exit, and recent dramatically rising exit values.

Turns out that was just the beginning.  My favorite example now when asked did VCs make money in cleantech in the first wave? That single 2004 vintage venture backed deal and 2010 IPO, Tesla Motors, currently at $675 Bil in Market Cap, has alone carried insane venture like returns even if calculated on all the capital invested by the entire cleantech venture capital sector over its entire history, ignoring every other exit. 

Risk

The latest exit trend du jour is of course SPAC heaven, and while we all know this is likely to end rather badly, they have driven significant venture exits and returns, perhaps at the risk of poor aftermarket performance. But all is not forlorn, many of even the early IPO wins like Tesla, Sunrun and Enphase have literally seen venture like multi X growth and returns post listing – were investors to hold on.  And that’s likely to happen again – for the good companies. I had a great chat with an old friend Ira Ehrenpreis, an early Tesla investor, the other day on this very topic of when to hold and when to sell. Ira put his money where his mouth was and held Tesla. In that case it was definitely the right call – and not one I would have made as I’d likely have taken those awesome profits at or around the IPO in his shoes. Holding would also have been the right call with Sunrun and Enphase, which didn’t hit their stride until well post IPO, but not Opower, which peaked near its IPO at just under a billion, and was acquired by Oracle for about half of that a bit later. Will it be for the army of cleantech SPAC deals that don’t yet have product or revenue?

But what about non tech assets? When we turn to the global asset scale the numbers get just even more mind numbingly large. Just consider the global wind and solar asset investments which have been averaging just under a $1 Trillion every 36 months, at a relentlessly increasing MW/$. The industry is now up to the entire annual GDP of Germany spent on renewables generation globally in aggregate, and adding at the rate of one Philippines or Pakistan GDP every year, or one Italy every 3 years. Put in energy $ terms, annual renewables investment is already at about 2/3rds of the world’s annual E&P investment in oil & gas, and total renewables assets are now equal to total assets in BP, Chevron, ExxonMobil, Shell, Total, plus the top 10 national oil companies combined, and adding at the rate of a new major oil company by assets about every 365 days. And see paragraph above, power from those renewables is cheaper per kwh than the power from those fossil assets. Put in Silicon Valley terms, global renewables power generation alone, not technology, or anything else in cleantech, is adding just in assets the equivalent to the aggregate market cap of 100 average new tech unicorns each year.

These investments and exits and returns are not just PPP (“Paris, Policy, and Prayer”). And they have driven new corporate and financial investors into the sector.  Amazon for $2 Bil here, Bill Gates for a Billion there, Chevron, Shell, Aramco, etc for a few hundred million each in venture, and finally you’re looking at real money. Check out the fun WSJ article SPAC Demand to Draw VCs to Cleantech, for another take.  While writing this, two more, Quanergy and Embark, just announced in the last week. The returns aren’t just SPAC fodder of course. Solar products and services company Shoals Technologies, a 2021 IPO, and the most recent clean energy unicorn Aurora Solar, providing software to the industry, highlight the growing strength outside of SPACs.

However, like in the 2005-2010 time frame, risk is again getting mispriced by investors on a grand scale. That time it was thin film solar and cellulosic biofuels, and this time again SPACs are our perfect whipping post. Cases in point include Lordstown Motors, following on the Nikola debacle. Here are my favorite Lordstown articles:

Lordstown Motors warns investors it may go out of business – CNN.

Lordstown president dumped his stock to reportedly expand his turkey hunting farm – Yahoo! Finance

Watch the CEO on Jim Cramer discussing all his “orders”, and then Squawkbox discussing the meltdown, Jim Cramer discussing “where’d the orders go and I can’t help you anymore“.

Does anyone really want to bet against a sea change in mobility? Probably not. But did anyone not see the Nikola and Lordstown implosion coming? Anyone? And yet they are still at $7 Bil and $2 Bil market caps. Which would rank somewhere pretty high on the list of the top cleantech exits of all time up until like 24 months ago. A quote from an investor friend, “I know we should short it, but who really wants to take that risk?” I’ll let you decide whether the risk in those two are still mispriced…

This also highlights that no one in cleantech talks about the valley of death in cleantech financing anymore. A huge topic at every conference a dozen years ago. Good, and even no so great companies have access to later stage, corporate, and public capital that wasn’t visible a decade ago. Opening of course, the need for someone to fund some early stage companies to grow up and sell to the rest of the SPACs, right?

But bottom line, this is not 2008. It’s 2021, and the hype may be back, but the things that really matter in cleantech investing are very, very different.

24 Semifinalists Selected for Cleantech.org’s $100,000 Innovation Challenge

Cleantech.org, the first, and one of the top portals for technology commercialization in cleantech, has hosted an innovation challenge competition, with a $100K cash prize for the best energy startup product in Digitization of Energy, eMobility in Cities, and New Fuels. The semi-finalists were announced today. As founder and Chairman of Cleantech.org and one of the selection committee members (along with my day job in my new fund, Energy Transition Ventures), I’m excited at the list of semi-finalists, and had a blast meeting so many of the applicants. Thanks again to GS Beyond for hosting and funding this challenge, and to all the sponsors, partners, and project team. Cleantech.org has been quiet for a while, and I’m, excited to get it back in the game and looking forward to seeing the Cleantech.org network get more engaged again in solving the Energy Transition issues of our time. Please join our Cleantech.org Linked In group, which is over 40,000 members, or our Carbon Professionals Networking Group if you want to network with like minded people, or be involved in the next challenge.

5 of the semifinalists will be selected to pitch in the virtual pitch event on July 21 to win the cash award of $100,000 with no strings, deliverables, or equity dilution. The judges for the finals are absolutely lights out top notch, Kemal Anbarci, Vice President and Managing Executive at Chevron Technology Ventures, Rodrigo Prudencio, Amazon Climate Fund, Deborah Merril, President, Retail, EDF Energy Services, Kevin Hahm, Head of Investments for GS Energy, and my colleague Q Song from Energy Transition Ventures.

We had support from competition partners Greentown Labs, Elemental Excelerator, Third Derivative, Austin Technology Incubator, and Techstars. But current and alumni startups participated from almost every major accelerator and incubator in the sector, including competition as well as NREL Innovation Center, Cyclotron Road, Cleantech San Diego, Cleantech Open, CleanStart, Plug & Play, LACI, and BMW Urban-X among numerous others.  The semifinalists collectively have raised well in excess of $100 mm in equity and non-dilutive funding to develop products for the next generation of energy.  They range from pre-seed to late stage companies, and have been backed by over a hundred different venture capital funds, corporations and investors. I will say, we had a hard time convincing some startups that the $100K was actually cash, and actually no strings and no dilution. But it is. The GS Beyond executive director intends to wire money after the judges select. We are currently expecting as many as 7 or 8 pilots on our sponsor, GS’ assets will get run sometime in the next 6 months as well.

Semi-finalists are:

CompanyCategoryLocation
AllumeDigitization of EnergyLos Angeles, CA & Melbourne, Australia
AmperonDigitization of EnergyNew York, NY and Houston, TX
Blue Planet EnergyDigitization of EnergyHonolulu, Hawaii
Brimstone EnergyNew FuelsOakland, CA
CemvitaNew FuelsHouston, TX
DianomicDigitization of EnergyMenlo Park, CA
EnergyHawkeMobility in CitiesBoston, MA
EnPowerNew FuelsPhoenix, AZ
Hygge PowerDigitization of EnergyBoulder, Colorado
KUHMUTEeMobility in CitiesFlint, MI
LuminDigitization of EnergyCharlottesville, VA
MekaworkseMobility in CitiesAustin, TX
Origen HydrogenNew FuelsSan Carlos, CA
Packetized EnergyDigitization of EnergyBurlington, Vermont
PantoniumeMobility in CitiesToronto, Canada
QubitekkDigitization of EnergyVista, CA
ReJouleeMobility in CitiesSignal Hill, CA
SaaSChargeeMobility in CitiesNew York, NY
Sapphire TechnologiesNew FuelsCerritos, CA
SkyCoolNew FuelsMountain View, CA
South 8 TechnologiesNew FuelsSan Diego, CA
Switched Source LLCDigitization of EnergyVestal, NY
TeratonixNew FuelsPittsburgh, PA
Veloce EnergyeMobility in CitiesLos Angeles, CA, & Houston, TX

A few thoughts on the mix of startup applications and semi-finalists. I hadn’t done a challenge like this since launching Shell’s 1st Gamechanger Challenge a number of years ago, which actually started as a Cleantech.org project idea in 2013 (Shell Gamechanger startups did very well in this challenge, by the way). So we weren’t sure what to expect. Thanks to all the many investors, incubators and accelerators who assisted with getting the word out and coaching their applicants.

We ended with 9 in Digitization of Energy, 8 in New Fuels, and 7 in eMobility in Cities, though many startups could fit in multiple categories. Applicant quality was skewed, the top end of applicant quality was very high, likely from the focus on incubators and accelerator partners, though many of the strongest startups in the market do skip that step if they can attract funding without it, and we saw a number of high quality candidates apply directly. We ended up downselecting to a small group of approximately 60 candidates for the semi-finals, and a selection team member heard the pitch or interviewed almost all of those. There were a number of strong candidates that did not get in, thought we increased the semifinals from 21 to 24 to accommodate the quality of applicants. Primary selection criteria included team quality, uniqueness, product concept, and technical strength, traction, and fundability, though allowances were made to ensure inclusion across stages, and across technical and product categories. Several subcategories especially in areas of energy storage and electric mobility infrastructure were very crowded.

The geographic distribution was pretty typical, and with strong submissions from tech hubs in the West Coast and Northeast. Southern California and Texas were overrepresented from market statistics, as both regions had strong pushes from accelerator and incubator partners, Boston and was underrepresented. Major metros represented 3/4ths of the semifinalists, meaning small market startups were somewhat overrepresented compared to market statistics. Cleantech, energy tech, Constructiontech, and climate tech were well represented, Agtech was very limited, given the published topic areas. The submissions were heavy on batteries, storage, and EV and electric mobility infrastructure, and lighter on hydrogen and carbon than expected – possibly from the focus on product and MVP components in the application process, or the focus on incubator and accelerator applicant pools. We saw a good mix from materials to hardware to software. Consumer facing products and solar were underrepresented in applications. Biofuels applicants were almost non existent. All of our accelerator and incubator partners, Techstars, Greentown Labs, Third Derivative, ATI, and Elemental Excelerator placed semifinalists, and well over a dozen incubators and accelerators placed startups in the semi-finals, many of the startups had done more than one.

A significant number of the applicants had raised significant non-dilutive capital, and had prior investment rounds, though we saw, and included in the semis, a number startups that were smell of an oily rag pre seed level as well. Over 100 investors and funding sources were behind the semi-finalists, representing well over $100 mm in funding (though the median funding was lower). We did not track a full funding data set. While we didn’t track the data or use team diversity as a selection criteria, the diversity distribution looks like it punched well relative to the typical startup market, 1/4th of the semi-finalists had a female executive or cofounder, and 1/3rd had a non Caucasian executive or cofounder. Submissions from African American founders were very limited, and none scored well enough to be considered for the semi-finals.

All-in a great challenge launch, and I’m really looking forward to finalist selection and watching them pitch the lights out on July 21st for $100K, and you can find more details on the GS Beyond Energy Challenge competition website.

Speed in the Oil Patch – Automation at the Wellhead looks like Cleantech

I had a chance to wander around the Offshore Technology Conference this week and chat about some of the technologies on display.

OTC is still heavily a mechanical engineer’s conference.  Despite the high tech nature of the industry, in large part vendors are not yet leading customers, and steel still rules the day in technology.

One of the areas that interests me is speed.  Speed to find, speed to drill, speed to produce.  In every industry, speed kills.  (In the good way). Speed with more data and more controllability? That changes the way we do business.  Efficiency, speed, better, safer, cleaner.  That’s where the oil & gas industry is headed.

Superior Energy Services (NYSE:SPN) one of the largest drilling and wellhead services companies, picked up one of the technology awards with CATS, the Complete Automated Technology System.  Neat stuff.  Basically, take a small workover rig that needs half a dozen or so people and a lot of manual labor, modularize components into a truly mobile ready to use package, add more robotic material handling, soup up the control system, cut down to half the people, and automate completions.

  • Cuts labor.  They’ve got 3 people where they had 6.
  • Improves safety, now on 3 rigs running for 8 months, zero loss time incidents.  I asked how many he’d have expected in that time – 6.
  • Controllability and knowledge management.  Once automated, we can turn to a statistical management, not a black art.
  • Speed.  The units themselves are small units, so a bit slower in use if I follow correctly.  But more controllability means more predictability.  And a ready- to-use design means faster up, faster down, higher percentage of time on.

Quote: we won’t be building any more conventional ones.  These are expensive day rates, but all fully utilized.

 

Baker Hughes (NYSE:BHI) picked up another one of the awards with a steerable drilling liner technology called SureTrak.  Basically, same directional steering and drilling system, within liner in place, packed with logging-while-drilling and measurement-while-drilling sensors, once done, unhook the liner, and just leave it there.  Brand new, done it 8 times now, with Shell and Statoil according to one of the sales managers.  Same as before, automate and integrate a process, allow you to solve different and more technical problems, and deliver speed, less time up and down.

 

Eventually, we will automate our industry and move it all the way to the information age.  REALLY automate it.  Until then, one step at a time.  That sounds odd from an industry that uses seismic and ROVs and supercomputers.  But one of the guys at the Weatherford booth said it best when asked about the digital oilfield – is anyone yet using all of your digital oilfield software the way you think it should be used?  Answer, no, it’s all still very silo’d.

Why is it So Hard to Make Money in New Battery Technology?

Energy storage is still the rage in cleantech.  But after the collapse of A123 and Beacon, and the spectacular failure on the Fisker Karma in its Consumer Reports tests, fire  in Hawaii with Xtreme Power’s lead acid grid storage system and with NGK’s sodium sulphur system, and now battery problems grounding the Boeing Dreamliners, investors in batteries are again divided into the jaded camp, and the koolaid drinker camp.   Not a perjorative, just reality.  New batteries and energy storage is still one of the juiciest promised lands in energy.  And still undeniably hard.  Basically, investors are relearning lessons we learned a decade ago.

Batteries are just hard.  Investing in them is hard.  Commercialization of batteries is hard. So why is it so difficult to make money in new battery technology?

Above and beyond the numbers, there are a number of commonalities related to the commercialization and venture financing life cycle of battery technologies that seem to differ to some degree from other venture investments in IT or even other energy technologies.  Having looked at probably 100+ deals over the years, and on the back of an deep study we did a couple of years ago on benchmarking valuations in energy storage, here’s our take on the why.

Timing – Battery technology commercializations have historically tended to be one of the slower commercialization cycles from lab stage to market.  Startups and investors in batteries have a long history of underestimating both the development cycle, capital required, and the commercialization cycle, as well as underestimating the competitiveness of the market.

Special chemistry risk – There is significant risk in launching a technology in newer battery chemistry.  There have been only a limited number of new chemistries succeed, and when they do, as in the case of NiMH and Energy Conversion Devices, they are typically either co-opted by larger competitors obviating a first mover advantage (that advantage is typically much weaker in this field than others) or requiring expensive patent suits.  Also as in the case of NiMH, there is no guarantee the chemistry will have legs (just when it is hitting its stride, NiMH is already becoming eclipsed by Li-On.  This risk has proven to be especially high for new chemistries (like Zn type) that are not as widely researched, as the supply chain development does not keep pace.  In addition, the battery field is highly crowded, and research is old enough that and despite new chemistry in most cases truly defensible patent positions are extremely hard to come by, or provide only discrete advantages (ability to supply a range of quality product cheaply in high volumes (or with value add to the product) seems to be the primary competitive advantage).  Few battery technologies of any chemistry end up their commercialization cycle with anywhere near as sustained an advantage as their inventors expected.

High capital costs – In any case, almost all battery startups will require extremely large amounts of capital (on the order of US$50 to 100 mm+) to achieve commercialization (much higher for real manufacturing scale), and the end product margins tend not to be particularly high.  Even with stage gate, a very large portion of this investment (US$10-50 mm+), is generally required to be spent while the risk of technical and economic failure is still high.  In addition, during the manufacturing scale up phase post R&D, capital investment required per $1 of revenue growth tends to be linear, making these technologies capital intensive to grow.

Degradation of initial technical advantage – In many technology areas one can expect the performance of the final manufactured product to improve over the performance in initial lab results, In part because of the low cost target, high reliability, high volume requirements of this product type however, promising battery technologies, are often forced to make compromises in the scale up, manufacturing, and commercialization stages that mean the performance of actual product might be expected to fall from levels or rates seen in lab scale experiments (though cost may go the other way).    At the same time, battery performance of standard technologies, while mature, is a moving target, and during the time frame for commercialization, will often improve enough to obviate the need for the remaining technical advantages.

Size matters – Most battery products (whether batteries or components like anode or cathode materials or electrolyte), are sold to large customers with very large volume requirements, and highly competitive quality and performance requirements.  As a result, breaking into new markets generally is extremely hard to do in niche markets, and means a battery startup must prove itself and its technology farther and for a longer period of time than other technology areas (see capital costs, timing and down rounds).  Many battery components technology developers as a result will be relegated for early adopters to emerging customers with high risks in their own commercialization path.

Lack of superior economics from licensing – As a result of these size, capital cost, timing, and commercialization risk issues most battery technologies will command much lower and more short-lived economics than anticipated from licensing (or require expensive patent lawsuits to achieve), and will require almost as late a stage of development (ie manufacturing operating at scale with proof of volume customers) and commensurate capital requirements, as taking the product to market directly.

Propensity for down rounds – In addition, battery technology companies tend to have down rounds in much larger numbers in the post A rounds (Series B through D+) than other venture investment areas, as these challenges catch-up to investors and management teams who overestimated the scope of work, capital and timing required in the seed, A and B rounds.  In particular, battery investors have tended to invest in seed, A and B stage battery technologies (pre-scaled up manufacturing process or even lab and prototype scale) with expectations of typical venture style timing and economics.  Quite often instead, it is the B, C, or D investor group that post cram-down rounds achieve the Series A economics (even when the technology IS successful), and the seed, A and B investors suffer losses or subpar IRRs.

Chief Blogger’s Favorite Cleantech Blogs

I’ve personally written hundreds of articles over the years.  I selected a few I thought were pretty timeless or prescient, and worth rereading:

What is Cleantech?  Always a good starting point:

or try, The Seminal List of Cleantech Definitions

 

The “Rules” in Cleantech Investing – Rereading this one after the cleantech exits study we just did, wow, was I on the money!

 

VeraSun IPO analysis – Read this carefully, I predicted exactly what would happen, and try the later version Beware the Allure of Ethanol Investing

 

Cleantech Venture Capitalists Beware, What You Don’t Know about Energy CAN Kill you – The title says it all.

 

 

Cleantech Venture Backed M&A Exits? Well, Yes, Sort of . . .

When people ask me, are investors making money in cleantech, I tell them yes, but not by whom or in what you thought they were.

Most of the analyses of cleantech exits do not differentiate for venture backed companies.  So we conducted our own study.

In the last 10 years, Cleantech.org’s Cleantech Venture Backed M&A Exit Study shows a grand total of 27 venture backed cleantech deals > $50 mm.

All in all, very tough returns.   A number of 8 to 10 figure fortunes made, just laregly not by the investors spending the 9 and 10 figure investments.

19 where we had data on both exit values and venture capital invested, 8 where we had revenue estimates.

We found a 2.78x Median Exit Value Multiple on Venture Capital Invested

– Those exit numbers include the founders and management’s shares, so average returns to investors would be somewhat lower.

We found a 2.2x Median Exit Value Multiple on Revenues.

$13 Billion in total M&A exit value.  Not bad, until you realize that’s over 10 years where cleantech has seen tens of billions in investment, and we used a pretty broad definition of “venture backed”.  To get there we included Toshiba’s Landys+Gyr, Total’s Sunpower, EDP’s Horizon and ABB’s Ventyx deals.  Those are the top 5 deals by value, and represent 60% of the $13 Billion.  None were backed by investors you would normally think of as cleantech venture capital powerhouses (Bayard Capital, Cypress Semiconductor, Zilkha and Goldman Sachs, Vista Energy).  Three of them included prior acquisitions themselves.

Excluding those and looking at only the transactions where we had both valuation and exit data we found and even weaker $3.8 Billion on $1.8 Billion in venture capital, 2.1x.

Most surprising, if you looked at the list of investors in these Nifty 27 exits, you’d have heard of very few of them.  This is truly not your father’s venture capital sector.

The exits have a surprisingly low tech flavor, and were carried by renewable energy project developers, ESCOs, and smart grid, and solar balance of system manufacturers.

If we had limited this to Silicon Valley venture investors in high tech deals, well, you’d have wondered if M&A were a four letter word.

Interesting, isn’t it?  Contact me at dikeman@janecapital.com with any questions or if you’ve got deal data you’d like to see included.

How About A Sane Energy Policy Mr. Obamney?

It’s Presidential Election year.  Ergo, time to discuss our 40 year whacked out excuse for an energy policy.  Royally botched up by every President since, umm?

Objectives:

Make US energy supply cheap for the US consumer and industry, fast growing and profitable for the American energy sector, clean, widely available and reliable, and secure, diversified, environmentally friendly and safe for all of us.

or

Cheap, Clean, Reliable, Secure, Energy

 

An Energy Policy that leaves us more efficient than our competitors

An Energy Policy that leaves us with more and more diversified, supply than our competitors

An Energy Policy that leaves us more reliable than our competitors

An Energy Policy that makes us healthier and cleaner than our competitors

An Energy Policy that makes us able to develop adopt new technologies faster than our competitors

An Energy Policy that makes it easy for industry to sell technology, energy, and raw materials to our competitors

An Energy Policy that keeps $ home.

A Sane Energy policy

 

Think more drilling, less regulation on supply, lower tariffs, more investment in R&D, tighter CAFE and energy efficiency standards, simpler and larger subsidies for new technologies, less regulation on infrastructure project development.

 

A couple of key action items:

  • Support the development of new marginal options for fuel supply, and support options that improve balance of payments, whether EVs ethanol, solar et al
  • Make crude oil, refined products, Gas, LNG and coal easy to import and export
  • Drive energy efficiency like a wedge deep in our economy
  • Support expansion and modernization of gas, electric, and transport infrastructure
  • Support long term R&D in both oil & gas, electric power, and renewables
  • Reduce time to develop and bring online new projects of any type (yes that means pipelines, solar and wind plants, offshore drilling, fracking and transmission lines).
  • Support policies and technology that enable  linking of energy markets
  • Challenge the OPEC cartel like we do EVERY OTHER cartel and break the back of our supply contraints
  • Support the export of our energy industry engineering, services and manufacturing  sectors overseas
  • Incorporate energy access into the core of our trade policy
  • Support deregulation of power markets
  • Support long term improvement in environmental and safety standards
  • Broadly support significant per unit market subsidies for alternatives like PV, wind, biofuels, fracking as they approach competitiveness

Or we could do it the other way:

  • Leave ourselves locked into single sources of supply in a screwy regulated market that involves sending massive checks to countries who’s governments don’t like us because that’s the way we did it in the 50s?
  • Keep massive direct subsidies to darling sectors so the darling sectors can fight each other to keep their subsidies instead of cutting costs?
  • Keep a mashup of state and federal regulatory, carbon and environmental standards making it virtually impossible to change infrastructure when new technology comes around?
  • Promote deregulation in Texas, and screw the consumer in every other market?
  • Every time there’s a crisis, we can shoot the industry messenger in the head, stop work, and subsidize something.
  • Continue the Cold War policy of appeasing OPEC so they can keep us under their thumb for another 30 years
  • And drop a few billion here and there on pet pork projects

Come on guys, stop the politics, let’s get something rational going.  Oh wait, it’s an election year.  Damn.

And in the meantime how about making energy taxes (a MASSIVE chunk of your gasoline and power prices) variable, so they go DOWN when prices go up.  Then at least the government’s pocket book has an incentive to control cost, even if they’re incompetent at putting together a policy that does so.

The End of Nuclear Power? Or Just the Beginning?

This week’s news: US NRC freezes decisions on new reactor, license renewal applications

“The US Nuclear Regulatory Commission voted unanimously Tuesday not to issue final decisions on granting licenses to build new nuclear power reactors and 20-year license renewals to existing ones, pending resolution of the agency’s waste confidence rule overturned by a court in June.

The commissioners, however, also ordered that NRC review of these license applications continue and that the agency’s Atomic Safety and Licensing Board Panel not accept or deny new challenges that may be filed in these proceedings relating to waste storage issues.”

Nukes in the US not dead of course, but the revival still on hold?

 

The post Fukushima nuclear future in Japan?  Still shut down, the replacement generation fleet still a patchwork.  The future is . . .?

 

And Germany?  Trying to get out of nukes puts intense pressure on gas (from Russia), renewables, and the grid.  As well as adds costs. Prognosis unclear.

 

Has Fukushima changed China’s nuclear energy ambitions? Or just its technology choices?

 

And exactly what are the costs for nuclear?  I will say generally, that on a cents per kwh basis, the broad lowering of interest rates benefits nukes better than any other form of power but hydro, given the combination of high portion of the of costs from the capital, and the high capacity factor.

 

So is the end of nuclear power’s 50 year challenge to coal power insight?  Or are we on the verge of a resurgence?  Situation unclear at best.

David Anthony’s Last Question – Can We Power the US Solely off of Solar?

By Tao Zheng, with David Anthony, an active cleantech venture capitalist, who passed away in April 2012.

 The sun is the champion of all energy sources, in terms of capacity and environmental impact. The sun provides earth with 120,000 terawatt (TW) energy, compared to technical potential energy capacity of single digit TWs from other renewable sources, such as wind, geothermal, biomass and hydroelectric. More energy from the sun hits the earth in one hour than all of the energy consumed on our planet in entire year. In the last blog, we estimated that the technical potential of electricity generation from rooftop photovoltaics (PV) can take over 1/3 of U.S. electricity consumption demand. The next question is: can we power the U.S. solely by solar energy, technically? The answer will rely on development of utility-scale solar farms and energy storage solutions.

Assuming the rest 2/3 of U.S. electricity demand can be fulfilled by utility-scale PV solar farms, we can estimate how much land required to install such solar farm systems. The total U.S. electricity demand in 2009 was 3,953 TWh with 1% annual growth projection in next 25 years. Two third of U.S. electricity demand is about 2,635 TWh. The PV power density is calculated with a weight-averaged module efficiency using market share for the three most prevalent PV technologies today: crystalline silicon, cadmium telluride, and CIGS. The resulting PV power density is 13.7 MW/million ft2, assuming an average module efficiency of 18.5% in 2015. If we assume 10 hours/day and 200 days/year with sunshine, the annual available sunshine time is 2,000 hours. The total land required for solar farms to generate 2,635 TWh, can be calculated as:

Total Land Required = Total Energy Generated / PV power density / Annual available sunshine time

                                 = 2,635,000/13.7/2000 = 96.2 ×109 ft2 = 8,937 km2 @ 100 × 100 km

Therefore, to generate energy equivalent to 2/3 of U.S. electricity demand, we need to install solar panels in a tract of land with size of 100 by 100 km, the area about 0.1% of U.S. land. Technically, to provide electricity for entire U.S. demand, we only need to cover PV-accessible residential and commercial rooftop with solar panels and install solar farms in desert area equivalent to 0.1% U.S land. In addition to rooftop and desert, there are many opportunities for installing PV on underused real estate, such as parking structure, airports, and freeway margins. PV can virtually eliminate carbon emissions from the electric power sector.

In comparison, Nathan Lewis, professor at Caltech, predicted a solar farm with land size of 400 by 400 km to generate 3 TW energy to power entire America. The represented area is about 1.7% of U.S. land size, comparable to the land devoted to the nation’s numbered highways. As shown in Figure 1, the red square represents the amount of land need for a solar farm to match the 3 TW of power demand in the U.S. Of the 3 TW energy, only 10% represents electricity demand, and the rest represents other energy needs, such as heating and automobile. Thus, Lewis’ calculation is consistent with our estimation: 10,000 km2 solar farms can generate enough electricity to fulfill 2/3 U.S. demand.

Figure 1. Solar Land Area Requirement for 3 TW Solar Energy Capacity to Power Entire U.S. Energy Demand. (Source: Prof. Nathan Lewis group at Caltech).

One of big challenges using solar to power U.S. grid is intermittency of sunlight. Solar energy is not available at night, and the variable output of solar generation causes voltage and frequency fluctuations on power network. Energy storage technology can smooth the output to meet electricity demand pattern. There are many grid energy storage technologies, from stationary battery to mechanical storage methods. Pumped hydro technology is clearly a better choice for solar energy storage, due to its high energy capacity, low cost, and public safety assurance.

For solar to have a dominant role in the electric power generation mix, in addition to power storage infrastructure, upgrading America’s transmission grid is required. In contrast to traditional electricity generation, solar power collections are distributed across numerous rooftops or centralized in utility-scale farms. Distributed solar requires grid operators to install smart grid technology to monitor power supply and demand and balance thousands of individual generators with central power plants. The current century-old transmission grid needs to be upgraded with high-voltage lines to carry electricity from remote solar farms to consumers. The American Recovery and Reinvestment Act (ARRA), signed into law by President Obama in 2009, has directed $40 billion to accelerate the grid infrastructure transformation.

The U.S. photovoltaic market has been growing quickly in recent years. In 2010, the U.S. installed 887 megawatts (MW) of grid-connected PV, representing 104% growth over the 435 MW installed in 2009. Current trends indicate that a large number of utility-scale PV power plants are in the south and southwest areas, such as in the sunny deserts of California, Nevada and Arizona. For example, the Copper Mountain Solar Facility in Boulder City, Nevada, is one of the U.S. largest solar PV plants with 48 MW capacity, as shown in Figure 2.

Figure 2. One of the U.S. Largest Solar Plants, the Copper Mountain Solar Project with 48 MW photovoltaic in Boulder City, Nevada.

Historically, solar PV deployment has been limited by economic factors, since solar energy is too expensive to compete with traditional fossil fuels, due to lack of economies of scale. However, the cheapest solar cells are now being produced for as little as 70¢ per watt. They are selling for about $1.26 per watt, with prices expected to drop to $1.17 next year. Most anticipate the price of solar module, such as thin film, will hit 50¢ per watt within four or five years. First Solar, the world’s largest maker of thin-film solar panels, has told investors that production costs will range between 52¢ and 63¢ per watt by 2014. When companies can produce solar photovoltaic modules for less than 50¢ per watt, solar energy will reach grid parity. Grid parity refers to the point at which the cost of solar electricity rivals that of traditional energy sources, such as coal, oil, or nuclear. The solar module price drop is driven by cheaper manufacturing costs, lower costs for such crucial raw materials as silicon, and rapidly improving technology. A recent study even claims solar grid parity is already here today, based on a legitimate levelized cost of energy (LCOE), calculated the cost in $/kwh. The value of LCOE is determined by the choice of discount rate, average system price, financing method, average system lifetime and degradation of energy generation over the lifetime. Figure 3 illustrates the effect of initial installed cost and energy output on the LCOE value. For a PV system with production cost at $0.5/W, the initial installed system cost will be $1.5-$2/W, after considering labor cost and module margin. If we assume energy output is 1500 kWh/kW/yr, which is reasonable in south west area in the U.S., the LCOE value in Figure 3 will fall in the range between $0.06/kWh and $0.08/kWh, the lower side of grid parity value for the U.S. residential electricity rates range.

Figure 3. LCOE contours in $/kWh for solar PV systems for energy output versus initial cost of the system for a zero interest loan, discount rate of 4.5%, degradation rate of 0.5%/yr and 30 year lifetime (Courtesy of Prof. Joshua Pearce at Queen’s University)

Based on the analysis above, it is reasonable to believe we can power the U.S. electric grid solely by solar PV, technically and economically. Thomas Edison had a great quote on solar energy: “We are like tenant farmers chopping down the fence around our house for fuel when we should be using Natures inexhaustible sources of energy — sun, wind and tide. … I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.”

 

David Anthony was the Managing Director of 21Ventures, LLC, a VC management firm that has provided seed, growth, and bridge capital to over 40 technology ventures across the globe, mainly in the cleantech arena. David received his MBA from the Tuck School of Business at Dartmouth College in 1989 and a BA in economics from George Washington University in 1982. David passed away in April 2012. 

Tao Zheng is a material scientist in advanced materials and cleantech industry. He held 20+ patents and patent applications, and published many peer-reviewed papers in scientific journals. Tao Zheng received his B.S. degree in polymer materials sciences from Tsinghua University in China, and a Ph.D. degree in chemical engineering from University of Cincinnati. He obtained his MBA degree with distinction in finance and strategy from New York University, Stern School of Business, where he was designated as “Stern Scholar” and received “Harold Price Entrepreneurship Award”. 

Cleantech Blog’s Parameters for a Workable Energy Policy

Energy is life, the rest runs on it.

Since the 70s through every presidential administration and every Congress, we have had an energy policy that boiled down to fighting the cold war through oil and getting lucky on locally sourced coal and gas.  It’s not a zero planning energy policy, we’ve spent money, defined policies, written rules, set goals, etc.  We’ve just done our planning with 50 year old assumptions and zig zagged our way to idiocy.

One of my first ever blogs over five years ago touched on this topic:

My comments at the time after the 2005 energy bill:

We need to achieve low oil prices, and ensure that no one country is able to control our fuel supply. We have just passed a new Energy Bill. It does not do so. What we do need to do: Drop the ANWR fight and instead break the back of OPEC, slash consumption, and work closely with China.

But first things first.  This time I’d like to simply lay out the parameters of what ought to be in a workable, comprehensive, energy policy for the US in a post cold war era, where economic powers are shifting, where the war on terror is real, where environment matters, and where energy supply sources are changing and maybe getting more expensive.

Cleantech Blog has defined 20 parameters needed in a good energy plan.

  1. Has a clear cut and articulated vision – including acknowledging that energy security is not just  “energy independence”
  2. Deals with both demand and supply issues holistically
  3. Considers least cost path in any change
  4. Is phased in manageable ways
  5. Takes into account our current supply mix, load growth forecasts, and geographic considerations
  6. Includes both transport fuels and electric power
  7. Provides us with least cost or comparative advantage in energy both today and in the future vis a vis our core economic competitors
  8. Provides secure and interchangeable supply of energy resources and flows both domestic and cross-border
  9. Doesn’t destroy our current energy industry
  10. Allows time for energy and industry change
  11. Does the least environmental damage possible, and includes ongoing improvement in environmental impact
  12. Survivable under multiple energy demand growth scenarios and resource supply shocks in a global world
  13. Provides reliable energy to our industry and population
  14. Deals with or changes the current state and federal regulatory and permitting structures
  15. Considers the practicalities of infrastructure change, both lead time, economics, financing, technology, and regulatory
  16. Deals with the political considerations of OPEC and the Middle East
  17. Takes into account supply resources where we do have a comparative advantage
  18. Is fair and equitable during any shift in costs for one region or group
  19. Addresses and capitalizes on technology improvement in the US and globally
  20. Deals with China and India and Brazil as rising consumers and producers of energy resources

The energy policy itself should be simple in concept, and the energy plan hellishly detailed and complex in implementation.  But we desperately need this energy plan.

Energy is life, the rest runs on it.

Cleantech Parasites

It dawned on me today, that after buying green ecommerce store Greenhome.com 8 months ago, we put up links to the site on CleantechBlog.com, and included special coupons for all our Cleantech Blog readers and Cleantech.org members in the monthly emailings.  Here I thought people who were making a living off cleantech might *gasp* care about walking the walk and might appreciate it.

I think Greenhome.com saw a total of 3 coupon downloads out of that, and two were spam.  Worse, I’ve gotten more than that many personal comments asking why I’d clutter up the cleantech site with blog columns about green products.  On Saturdays no less, when the weekend traffic falls off 75%.  For the record we pulled those columns a few months ago

Fine save your money or buy somewhere else, but that rate is so abysmally low, it made me wonder if the entire of my audience is completely hypocritic.  And yes, it’s the web.  And yes, I DO pay attention.   I can see what pages y’all click on, and where you comment, I moderate every single one. And several times a week I read every Yahoo, Facebook and LinkedIN comment, and systematically delete and block anyone I find that spams, no appeals.  When I ignore you, it’s because you’re being annoying, I mean err, “that comment does not meet our unpublished comment policy or is not conducive to the health of the CleantechBlog.com and Cleantech.org community”.

So I’m pretty sure this group likes to read and talk and b*%&h about cleantech and a greener better world.  But do you actually care?

 

Do you actually think about cleantech, green products, and energy or water use when you’re not at work?

How many of you actually have a solar system?

How many of your light bulbs are now CFLs or LEDs?

How many have done an energy audit?

What green/ecofriendly versions of a product have you actually bought?

Do you know what makes that product green?

Do you actually recycle/compost?  Do you do the minimum required, or make an extra effort? At your home?  At your office?  Do you even know?

Do you have a clue what your energy bill is?  How many kW hours you use per square foot?  How that compares to the average? – For the record, when I asked a number of people that question at the last Cleantech Forum, I got a bunch of very polite laughs.

 

Or, and please excuse the language, are you just a cleantech parasite sucking off the teat of the government subsidies in cleantech?  Warren Buffett literally eats the food from the restaurants he owns, right?  Do you even bother to turn your lights off? 😉  What’s the phrase?  Oh yeah, “the choice is yours”.

It’s The End Of The World As We Know It (And I Feel Fine)

Last week, I was made aware of an extraordinary essay published by GMO called “Time to Wake Up:  Days of Abundant Resources and Falling Prices Are Over Forever” written recently by Jeremy Grantham, the legendary investment strategist.

I don’t use the word “extraordinary” lightly.  The essay is immense in its historical sweep, extensive in its analysis, eye-opening in its implications.

To Grantham, the long era of economic growth we have enjoyed commonly known as the Industrial Age is doomed by a declining supply of resources — especially, unreplenishable fossil fuels, but other metals as well — inevitably limited by a finite planet, in the face of intense competition and the unsustainability of never-ending exponential growth.  The human race will have to move on, somehow, into a different era.

When I sent this essay to some colleagues, suggesting that they would find the paper thought-provoking, one responded very critically, noting that Malthus in the late 18th Century and many others since (see, for instance, 1972’s The Limits of Growth) have been wrong in predicting the imminent collapse of human progress.  I replied that Grantham in fact invokes Malthus, goes into some detail on why his forecast was incorrect at that time, and makes a quite compelling case of why this time could (emphasis, could) be different.  My colleague then went off on a rant, to the effect of “We optimists assume we’ll find answers to our challenges and we usually do, while you pessimists see major problems ahead and want all of us to incur extreme costs and inconveniences to conform to your apocalyptic views and address your fears — which are usually wrong.”

Well, I don’t see it so pessimistically.  Grantham is saying we may well have daunting challenges in front of us — but I personally like challenges.  Grantham is also saying that these are simply the fundamentals of supply and demand, and investors can make wiser bets taking these factors into account — and I personally am allocating my capital and my time with the aim of making gains under some variation of the kind of future environment that Grantham describes. 

These are huge opportunities for those of us in the cleantech community.  Whatever the outcome, I’m not going to be miserable along the way.

One of the rubicons to be crossed in a lifetime is to accept finitude without falling into gloom.  As Grantham notes, we Americans are pretty poor in coming to grips with tough issues.  But, there’s just no way around it.  The Second Law of Thermodynamics states that, purely based on physical laws, the universe is in a perpetual and irreversible state of decay.  As John Maynard Keynes famously said, “In the long-run, we’re all dead.”  With a little more verve, I prefer to roll with R.E.M.“It’s The End Of The World As We Know It (And I Feel Fine)”.

7 Book Reviews in Cleantech and Energy

Sandor Schoichet s a longtime Cleantech Blog reader, and Director of Meridian Management Consultants.  Sandor has EE and SM degrees in Electrical Engineering & Computer Science from MIT, where he studied artificial intelligence, office automation, and business process reengineering, and completed a joint program in Management of Innovation at the Sloan and Harvard business schools. He holds undergraduate degrees in Information Sciences and Philosophy from UC Santa Cruz.  He published these book reviews on our sister site Cleantech.org, and following our Cleantech Bookshelf,  we liked them so much we’re republishing them here as a Reader’s Choice Bookshelf.

Natural Capitalism: Creating the Next Industrial Revolution
by Paul Hawken, Amory Lovins, L. Hunter Lovins

If there was one key to turning around the damaging business and environmental practices of modern culture, what would it be?  ‘Natural Capitalism,’ the seminal 1999 call for a broader focus on sustainability, presents an overwhelming case that the key is resource efficiency and effectiveness.  Just as conventional capitalism is all about using financial capital effectively, so ‘natural capitalism’ is about expanding that bottom line focus to include the  natural resources and ecosystem services underlying the ability of business and society to function in the first place.  The authors argue that with appropriate shifts in business perspective and government policy, our economy could be something like 90% more efficient in its use of irreplaceable natural resources, thereby mitigating ecosystem impacts, enabling global development, and staving off climate change.

Throughout history, until very recently, man has been a small actor in an overwhelmingly large world.  Most of the book explores how this has given rise to our ingrained cultural patterns of wasteful resource utilization, limited focus on capital efficiency, and drive for production volumes, while assuming unbounded access to subsidized natural resources and ‘free’ ecosystem services.  Shifting perspective to include natural capital on the business balance sheet, and to expand lean manufacturing principles beyond the factory walls is what’s required to address the ecology/climate change nexus.  This change in perspective is embodied in a range of sustainable business concepts, including the ‘triple bottom line’ (profits, people, and planet), and the ‘cradle-to-cradle’ model for recycling products and integrating industries to eliminate ‘waste’.

The basic principles of natural capitalism put forward can be summarized as: (1) focus on natural resource efficiency (2) using closed loop, biomemetic, nontoxic processes (3) to deliver more appropriate end-user services (4) while investing in restoring, sustaining, and expanding natural capital.  Following these principles leads not to constraints on business or lowered expectations, but an enormous range of new business opportunities to profit from improved efficiencies and environmentally beneficial activities.  One of the best expressions of this perspective comes in the discussion on climate change, providing a refreshing contrast to the recent spate of bad news on this front: “Together, the [available business] opportunities can turn climate change into an unnecessary artifact of [our] uneconomically wasteful use of resources.”

While the authors deliver an awesome, deeply researched articulation of their vision, showing with many examples why it’s important and how it can work within our current capitalistic economies, the book has two key flaws.  First, it falls prey to the syndrome first articulated by Paul Saffo, founder of the Institute for the Future, of confusing a clear vision of the future with a short path.  This combines with an  excessive reliance on sheer volume of examples to make their points, too many of them poorly explained, bristling with non-comparable numbers, and substituting hand-waving for real outcomes.  Deeper exploration of fewer examples might have illustrated the principles better, and have been much easier to read.  Also, 11 years after the original publication, many of the examples are seen to be hastily chosen and and used to support glib and overreaching conclusions that make the authors seem naive.  Examples include the advent hydrogen powered cars (“hypercars”), the potential for shutting down Ruhr Valley coal production in favor of direct social payments to coal workers, or the imminent triumph of the Kyoto Protocols for international carbon trading.  And, while much attention is paid to articulating the perverse incentives, misguided taxes and subsidies, and split responsibilities that impede more efficient system approaches, there’s short shrift given to new technology adoption rates, the scale of existing infrastructure investments, or the political complexities of changing incentives and subsidies.

However, if you are interested in understanding the genesis and foundations of the modern sustainability movement, this is a fundamental text.  Despite its flaws, after 11 years the fundamental argument and principles hold up well and are still inspiring.

Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future
by Robert Bryce

Bryce bills himself as a purveyor of “industrial strength journalism,” and ‘Power Hungry’ doesn’t disappoint. Starting with a clear statement of his own energy policy – “I’m in favor of air conditioning and cold beer.” – Bryce provides a muscular, data-driven analysis of our modern industrial civilization and the changing mix of energy sources that power it. This is an eye-opening discussion that does an unusually good job of conveying the scale of our existing energy infrastructure, and the challenge of providing adequate energy supplies for the future, not just for the US and Europe, but for the developing world and the third world as well, under the constraints of economics and decarbonization. Bryce articulate four energy imperatives – power density, energy density, cost, and scale – and uses them as a consistent framework for looking at what he calls the “Myths of Green Energy.” His “myths” run the gamut from the idea that wind power can really reduce overall CO2 emissions, to the idea that the US lags other countries in energy efficiency, to the idea that carbon capture and sequestration could work at scale, and intriguingly, even the idea that oil is a dirty fuel compared to the alternatives. While the debunking of green alternatives has flaws, especially in the lack of attention to advanced biofuels, smart grid technologies, and green building materials, it is refreshingly apolitical – focused on facts, practical alternatives, and the requirements of scale. In some ways Bryce ends up with conclusions similar to those of Bill McKibben in his recent book ‘Eaarth’: we will not be able to turn the tide on atmospheric CO2 quickly enough, the scale is too large, the transition times are too long, the pressure for global development is too great. We will have no choice but to mitigate some problems and adapt to the rest. However, instead of advocating acceptance of a “graceful decline” as McKibben does, Bryce lays out an energetic path forward, a “no regrets” policy he dubs N2N: shifting electrical generation aggressively towards natural gas in the near term, while investing in advanced nuclear technologies for the long run. The strongest element of the book is how he effectively links the future economic health of the US with rising prospects for the rest of the world … and that will take massive quantities of carbon-free power, not only for economic development, but for mitigating unavoidable climate change impacts as well. ‘Power Hungry’ is a challenging and valuable read for everyone interested in green energy and an effective response to the climate crisis.

Whole Earth Discipline: An Ecopragmatist Manifesto
by Stewart Brand

Brand, as ever, is a clear and forceful writer, fearlessly putting himself on the line with specific recommendations and a call to action. This is the Plan missing from Al Gore’s otherwise excellent textbook, ‘Our Choice: A Plan to Solve to Climate Crisis’ –harder-edged, more urgent, more tech-savvy, willing to name names, kick butt, and provoke a reaction. This is the place to start if you’re ready to move beyond the conventional green perspective and really get a grip on what responding to the climate challenge entails. Frightening and exhilarating at the same time!

Eaarth: Making a Life on a Tough New Planet
by Bill McKibben

I’m conflicted about this book, and McKibben’s style in general. First, this is a valuable contribution to the debate about how to think about climate change and appropriate goals for our planetary future. McKibben actually presents many good ideas (in the second half of the book), rooted in a realistic and compelling vision of how our world is changing and how we need to adapt. However, his writing style, especially when presenting bad news (the first half of the book) is just “one damn thing after another,” an endless listing of specifics without adequate context or meaningful analysis … he apparently does not understand that anecdotes are not evidence. While he makes his argument most energetically, and has lots of suggestive detail that appears to support it, in the cases with which I am directly familiar he is guilty of taking things out of context, then making gross simplifications and overreaching generalizations. And this is too bad, because, overall, I think he’s basically right, and that his suggestions for change are excellent. Probably the most important aspect of this book is simply his tough, clear-eyed situation assessment of the damage that’s already been done, the building momentum of environmental change, and the need to get on with a meaningful response. I worry, though, that by beating us over the head with a stream of bad news, and then framing his suggestions for a response in terms of achieving a “graceful decline”, too many people will be turned off and won’t hear the good ideas towards the end of the book. The grand project of changing our culture so that we can live in a durable and robust symbiosis with our environment on a global scale … that’s not a graceful decline, but a call to help create a new age as exciting as any that went before.

Turning Oil Into Salt: Energy Independence Through Fuel Choice
by Anne Korin, Gal Luft

This slim volume is the clearest and most direct analysis I’ve yet seen of oil’s position as a strategic commodity, and the potential for open fuel standards to enable a market-based pathway to transportation fuel choice. Especially notable for its independent perspective … we hear so much about the need for ‘drop in’ petroleum equivalents and the ‘ethanol blend wall’, but not nearly enough about other approaches that might emulate the open interface model that has driven the phenomenal growth of the internet. Absolutely required reading for anyone interested in clean energy, the potential contribution of biofuels to achieving energy security, and the practical steps that we need to take to move down the path.

Science as a Contact Sport: Inside the Battle to Save Earth’s Climate
by Stephen H. Schneider, Tim Flannery

If you care about the big picture of climate change that’s driving the urgency behind global environmental agreements and the commercialization of greentech, then Schneider’s ‘Science as a Contact Sport’ is must reading. The book achieves two objectives in an engaging and forceful manner. First it is a great introduction to the science of climate change, presented through Schneider’s personal experience as a key participant in its development. And second, it provides much-needed insight into how the issue has played out in the US legislature and the global media, again from an up-close and personal point of view. Democracy and government are both messy systems, but still are forums where the environmental and greentech communities must ultimately triumph, and Schneider’s personal experience should be of value to everyone engaged in the battle. Some elements of Schneider’s message echo Al Gore’s discussion in ‘The Assault on Reason,’ but are presented in a clearer, more direct, and better operationalized manner. Highly recommended!

Why We Hate the Oil Companies: Straight Talk from an Energy Insider
by John Hofmeister

Hofmeister writes with refreshing directness and lack of pretense about two key ideas: the disconnect between “political time” and “energy time” that drives legislative dysfunction in energy and environmental planning; and his own proposal for an independent Federal Energy Resources Board to fix it. Most of the book is a walkthrough of the current US energy business and infrastructure … the “straight talk from an energy insider” part. He convincingly lays out an array of problems with the approaches advocated by just about everyone, from left-wing environmentalists, to right-wing “infotainers”, to the energy and utility power industry itself … with special scorn for the disastrous and long-running failure of our elected officials of all stripes to address our energy needs in a serious manner. The book provides a prescient and unnerving in-depth background to current newspaper reporting on the BP spill disaster in the Gulf (it went to press just before the explosion and blowout). Hofmeister is on less firm footing, however, when he switches to his proposal for an independent energy regulatory agency modeled on the Federal Reserve. While he surely gets an ‘A’ for boldness and for thinking outside the box, how this is supposed to work and how we are supposed to get there in advance of a national energy disaster akin to the Great Depression, are both left up to “grassroots pressure.” All I can say is that I hope his non-profit, Citizens for Affordable Energy.org, is successful at pushing his ideas onto the national stage, and helping to build a consensus focus on practical solutions. Highly recommended … wherever you stand on these complex issues, Hofmeister will push your buttons and make you think about what a real solution might look like.

5 Cleantech Wishes for 2011

Five things I’d like to see in cleantech 2011.

  1. A fuel cell in one of my blogger’s houses.  This one’s actually in progress, so hopefully it’s a gimme.  So come on Marc, we’re waiting for the pictures and the blog!
  2. More cleantech IPOs.  Come on guys, the market’s been rolling, we ought to be able to deliver ONE good IPO or two?  We did see RigNet (NASDAQ:RNET) get out in a $60 mm IPO.  RigNet’s a telecommunications for remote and offshore oil and gas markets but maybe no one outside of Texas counts it.  Of course, a nine year old c. $80 mm in revenues/$25 mm in EBITDA company backed by long time cleantech investor Altira, ought to to make the list.  And Chinese LED maker SemiLEDS (NASDAQ:LEDS) made it out in an $89 mm IPO.  So maybe the IPO market isn’t dead to cleantech, and after market performance is guaranteed to go badly, at least for profitable companies.
  3. And speaking of LEDs, I’d like to see lots more of them next year – in houses, on street lights, hanging from Christmas trees.  And I’d like to see them brighter and cheaper.  And I probably will!
  4. A major cleantech conference in Houston.  Perhaps someday rivaling the OTC – Offshore Technology Conference.  When that happens, perhaps we’ll know cleantech has arrived as a real sector.
  5. Lots of EVs!  I admit it, I don’t think much of venture backed EV startups, but I’m really excited to see some EVs.  I imagine them like the herd of tractors in the tractor tipping scene from the movie Cars (don’t ask why, that’s just the mental image I have).  And since I’m testing driving an Nissan Leaf Electric Vehicle a couple of weeks, this wish is bound to come true.  I will definitely be blogging it.

Here’s thanking all our Cleantech Blog and readers and Cleantech.org members for your support. Happy holidays, and good luck in a new year!

A Cleantech Energy Funding Adventure

by Jason Barkeloo, CEO of Pilus Energy

My business partners and I discovered an innovative way to unlock energy stored in carbon compounds. After a little back-slapping and “atta-boys,” we sought to raise the capital to launch a pilot. This led to another discovery; the destructive impact the economic crisis is having upon the capital markets. This means innovation, which requires capital, does not have the fast movement opportunity to market that capital provides.

It is a long way from the days when a business plan with a dot com name could attract large amounts of capital. Many funders are accustomed to the software funding model. It is very different from funding a cleantech energy company. Cleantech energy producing firms may have software, but they may also have hardware, which requires manufacturing. Most funders do not like manufacturing. They prefer software. The funding requirements for energy production are substantially different because they require more time and capital. More time means the return on investment (ROI) will take longer. Consequently, their capital will be tied up longer. More time and capital mean more risk. Investors seek to reduce or avoid risk.

Cleantech innovations for distributed production remind me of the evolution from centralized servers and node computing models to the distributed Internet. As personal computer functionality increased, the computing power of the server was distributed to the edge of the network. Similarly, energy production will distribute as new innovative technologies develop. This is an opportunity for investors. If you did not recognize the transition from centralized computing to distributed computing, this is the opportunity to realize the distribution of energy production.

Before we get to a distributed-centric model, we will have a hybrid model. This will be an intermediate position before distributed becomes the norm.

Funding Structure Changes: The Vacuum
Generally speaking, Limited Partners (LPs) are significantly disappointed with the returns their venture capitalist (VC) money managers have provided. As a result, less capital is flowing into VCs. The vacancies along Sand Hill Lane in Menlo Park, CA attest to this. The seeming capital availability growth in China also provides insight into the changing VC landscape in America.

The population of VCs that remain is smaller. As one of my entrepreneurial colleagues told me last week, “It is one thing to kiss a lot of frogs to find a funding prince, but it’s a whole lot harder finding them when they are vanishing.” It struck me that amphibians in the natural world are also becoming extinct. Now, before we try to get VCs on the Endangered Species list, it is important to mention that their industry is evolving. In the interim though, there is a vacuum.

Our firm attracted enough pre-Seed funding to find and protect an important discovery. The amount of pre-Seed funding we needed for our cleantech discovery was significantly more than a friends-and-family round a software firm would raise. However, when our Company scales, our visionary investors will be rewarded handsomely, as well they should be.

The Company’s next milestone is revenues from a pilot. We must do this with our breakthrough technology as a minimum viable product. We will need more funding than most traditional angels will risk. If we could find a VC that would partner with a pre-revenue cleantech energy producing firm, the amount needed would be too low. As we are pre-revenue, going straight to a Series A with a VC is about as probable as getting Republicans and Democrats to [fill in the blank].

The funny thing is, governments are starting to fill the due diligence and risk reduction activities that angels need. No experienced angel is going to make a significant investment if there is no VC to fund the next level of a Company’s growth. Therefore, angels are starting to look to government for the nod and wink as to who are the winners and losers. I do not make a habit of saying things about an endorser’s expertise to conduct endorsement activities. Suffice it for me, if an angel is comfortable, then I am comfortable.

As part of the evolution of the capital landscape, I see an enhanced role for corporate joint ventures (JV). This may require a bit more “corporate” flexibility of the entrepreneur than s/he is accustomed. However, the corporation likely has resources and expertise than can assist the company’s growth. Of course the corporation gets the first right of refusal for licensing, product distribution, marketing, sales, and even liquidity. Since I am presently in such discussions it is best to shut my thoughts (aka, my mouth).

Back to the governmental funding role for a moment. Tax-payer funded programs like the small business innovative research program (SBIR), and similar programs, can be a very slow road to growth. We are fortunate. Our research team is well versed in grant writing. Surviving in academia requires the ability to pursue and manage grants. We were luckier still to get a top-notch writer who can do science, technical writing, and journal authorship. As a grant-writing company we accept, begrudgingly, that our deployment timeline is painfully lengthened by this funding strategy. We estimate an added twelve to eighteen months over angel funding to get a pilot completed. Speed is critical to capture markets. Hopefully, our competitors are experiencing the same slog.

The other downside is that grant requests for proposals (RFPs) serve as the starting point for grants. Those RFPs are usually not issued for breakthrough technologies. It is a breakthrough because no one else thought of it; hence no RFPs are issued in advance. Being ahead with innovation can slow down the startup even further. Securing a grant for an innovation will require political help expanding unsolicited RFP Programs and reducing the timelines.

The danger with this phase of capital market evolution is the vacuum left by vanishing VCs and angels who feed deals to VCs. Filling the vacuum requires time and experience. The time lost filling the vacuum results in less innovation to help grow the economy. Innovation keeps our economy healthy (or regain its health). Innovation begins with education and free markets. Funding innovation should not have government competing against the market. Perhaps government can participate in the innovation market?

As it turns out, the government is already participating in the market. Starting with innovation incubators like the Department of Defense (DoD) Defense Advanced Research Projects Agency (DARPA) and its two year old Department of Energy (DoE) twin, the Advanced Research Projects Agency for Energy (ARPA-E), to development stage programs like SBIR, to its own VCs like In-Q-Tel. What is needed now is to reduce the timelines for awards. Providing ROI mechanisms for tax payers beyond the promise of jobs may help streamline the process.

Additionally, government can encourage large firms sitting on capital to invest in startup innovations. Startup entrepreneurs can also encourage corporations to invest.

Conclusion
The longer it takes to fill the funding vacuum, the further American innovation will lag. Capital does not respect human borders. It will flow where it can grow. Entrepreneurs have a responsibility to their investors to follow the money. Therefore, innovation will follow the money too.

America is at risk of losing its cleantech innovation advantage. While America waits for the void of innovation funders to be filled, other countries are moving forward. American Federal and State governments might consider fast-tracking their cleantech funding programs. The United States Patent Office (USPTO) offers a fast-track cleantech energy patenting process. However, most of us understand the dangers associated with a fast-tracked patent when it comes to defending it, particularly for re-examination. However, the USPTO is commended for taking a leadership role in trying to maintain the innovation pipeline. The thinking is that a company with an issued patent is more fundable than one without.

Lastly, the American governments might also encourage established firms to take risks with innovative startups. If existing corporations can fill the funding vacuum, innovations might come to market more quickly. Such a strategy might also rapidly increase American economic health. How do you think Federal and State governments can incentivize cash-rich corporations to take investment partnership risks with startups?

Valuing the Electron

I am struggling to find a single function in our society that is not impacted by the electron. The electron is a negatively charged particle that fuels digital work. It makes software work on hardware. It powers motors and manufacturing. It lights our bulbs and amplifies our sound. In my opinion, the electron is the unsung hero of the Internet age.

If the generation, distribution, storage, potential work, and informatics of the electron were properly valued by the market beyond just metering it, a new market and industry could erupt.

Thus far, the electron is not valued for its ability to enable our society to function. Because electrons cost money to generate, distribute, and store, a commodity metering model developed at the founding of the industry. That model is due for a change. It is outdated and does not truly reflect the important role the electron now serves as a platform. As a necessary service, regulations overtook the industry. More on this later.

It might seem strange in the digital computer and Internet age that the value of the electron was not measured in it’s ability to do the digital work. Outside the some 150 utility companies in the USA, its genesis and work value was ignored. But what happens if you start valuing the electron for the work it can perform, just like software as a service might be valued?

I am not proposing that utilities be valued like Internet service providers (ISPs). Rather, I suggest the genesis, storage, and/or transmission of the electron be valued relative to the criticality of the digital work the electron performs. A distributed electricity producer or centralized utility are creating a platform. The market has not valued this. Or has it and the Genie just needs to be released?

The electron enables fascinating technologies. Generating and distributing electrons remains archaic, inefficient, and undervalued. Most do not know that nearly fifty percent of centrally generated energy is lost in vampire effects ranging from friction in power lines to voltage step-down to the appliance plug.

When the world is able to value the electron for the real value and future potential technologies, cleantech energy production will generate another Internet-like growth phenomenon. The value of the electron extends far beyond software and web pages. It is the platform that everything else in the modern technological world is built upon. Interject a solar flare, equipment failure, loss of fuel, or nuclear force, and the platform is disrupted and society stops. However, absent such events the electron moves on powering societies critical functions. The nice thing about the benevolent electron is anyone can build and monetize services upon it.

The highly regulated utility industry does not have the same unbridled freedom to monetize the platform it facilitates. Politically, it is realized the electron is critical to do work that maintains modern human life. It enables necessary functions from 911 telephone calls to heaters and air conditioners; from traffic lights to water purification. As a result, the production and distribution of the electron is classified as an essential service. This classification results in regulation. Highly regulated markets do not attract innovation because they can not attract capital. Capital investments are not made because the regulation prevents the proper monetization (such as valuing the electron as a platform). And so the circle continues. Meanwhile the infrastructure ages and begs for innovation.

Nordhaus and Shellenberger have it right. In their article, “How to Change the Global Energy Conversation” they argue that stimulating innovation in the energy production market is more effective than regulations such as emission caps (The Wall Street Journal, 29 Nov 2010). I add the following caveat. Allowing business model innovation is as equally important as technological innovation. For example, you might imagine getting your electricity for free in exchange for providing usage data the producer can monetize.

The lack of competition gives the impetus to a highly regulated environment. One can envision policy-makers grappling with the idea that an unregulated market would result in an extra abundance of overhead power lines. But what would happen if competition and market forces were unshackled electron generation and distribution? Perhaps distributed energy production would push forward and make overhead power cables obsolete?

Policy is often a preemptive action, or reaction, to the absence of a solution. That is, instead of entrepreneurial innovation being the response brought against the problem, a policy is crafted instead. In the case of the overhead power lines, historically there was little incentive for entrepreneurs to develop distributed power generation to get rid of those unsightly and expensive power lines. Getting into the power generating business is haunted by the shadow of regulation – and that keeps capital from enabling innovation. Everybody loses when such a closed environment surrounds such an open platform.

If the generation and distribution of electricity were opened it would incentivize the growth of the industry. This explosive growth would create multiple new industries and millions of new jobs.

For cleantech energy production to realize its market potential, the value of generating the electron must reflect its ability to foster technological progress. It is time to open the generated of electrons (electricity) so as to match the openness the electron itself enables. It is time to let markets and entrepreneurs solve energy production and distribution problems. The resulting industry will be an open platform. It will enable new industries and explosive job growth. This may include creating jobs to remove and recycle those nasty overhead power lines.

Guest blog bu Jason Barkeloo of Pilus Energy.

Can I Hate the Solar Bill of Rights and Still Love Solar Power?

by Neal Dikeman

A few of you may have run across the Solar Bill of Rights Petition that’s floating around the web.  I was really excited at the idea, until I read it.  For a good environmental conservative like me, I had a lot of trouble swallowing the actual demands, despite the fact that a whole bunch of my friends and people I respect are already signatories.  To be honest, instead of being excited over the soaring rhetoric and call to action, or enthralled by the detailed and well thought out solutions to the thorny issues around power deregulation, local choice, and distributed energy, and my first response after reading it was along the lines of “where do they get off”.  It reads like a very self serving, our child is prettier than your child, our cause is more important than your cause, partisan politics please subsidize me call to unlevel the playing field, and ignores all the devils in the details.

Whereas the reall Bill of Rights is a carefully crafted attempt to reserve rights to protect the individual from the state, this feels like an attempt to use the state’s engines to smash all opposition to particular industry, and local choice and the rights of the people and businesses affected be damned.  Not my idea of a Bill of Rights.

To my friends who know how much I believe in the solar sector and its promise – I’m sorry, I’m sorry, I’m sorry in advance of you reading this.  But somebody please bring me a new version of the Solar Bill of Rights worth signing.

The text of the Solar Bill of Rights is below in italics, with my thoughts and questions after each point.  Read through for yourself, and post your comments on the blog.  Tell me whether you think I should sign, and Cleantech Blog should endorse it.  Or post suggestions for amendments we can propose, and we’ll write our own.

We declare these rights not on behalf of our companies, but on behalf of our customers and our country. We seek no more than the freedom to compete on equal terms and no more than the liberty for consumers to choose the energy source they think best.

1. Americans have the right to put solar on their homes or businesses


Millions of Americans want to put solar on the roof of their home or business, but many are prevented from doing so by local restrictions. Some homeowners associations have prevented residents from going solar through neighborhood covenants, which allow for the association to veto any changes to a property’s aesthetics. Some utilities and municipalities have also made it prohibitively time-consuming and/or expensive to have a system permitted or inspected.

I loved this one, at first blush.  A right to solar?  Terrific.  Then I started thinking, hey wait a minute.  HOAs and deed restrictions are a core defender of local property rights.  Where do we get off retroactively telling the massive number of property owners and zoning boards, we’re sorry, despite the fact that you can’t get 50% vote of your neighborhood to approve changes to the agreement you all live under in your democratic process (and that your neighborhood may have had for 100 years), here’s your new amendment.  That smacks of eminent domain to me.  I hate the use of eminent domain to benefit a specific constituency.  Needs lots of nuance before I could get behind this one.

2. Americans have the right to connect their solar energy system to the grid with uniform national standards


Currently, each state (in some cases, each utility) has a unique process for connecting solar systems to the local electricity grid. National interconnection standards will create a uniform process and paperwork, creating a simple process for the homeowner and a standardized physical connection for manufacturers. Connecting a home solar system shouldn’t be any more complicated for the homeowner than setting up an Internet connection.

Got to love standards, but who’s going to set them?  That part always creates big winners and losers.  Telecom standards for that local internet connection were supported by the government, but never did we have a mandate all ISPs shall go DSL, right?  Oh, and by the way, all local utility grids are very different in design.  Some can do things that others can’t.  How exactly will that be reconciled, and who will pay for it?  Like this one but Devil’s in the details and I don’t think these guys have thought it through.

3. Americans have the right to Net Meter and be compensated at the very least with full retail electricity rates

Residential solar systems generate excess electricity in the middle of the day, when the owners aren’t usually at home. Net metering requires the utility company to credit any excess generation to the customer at full retail rates at a minimum – effectively running the electricity meter backwards when the system is generating more electricity than the occupants of the house are using. Allowing customers to net meter is critical to making solar an economically viable option for most homeowners.

Net metering is a terrific idea in principal, but 1) again, not all grids are capable of handling the impact easily, especially if it’s at volume, 2) right now our always available power distribution system is paid for by charges buried in your power usage bill, if the net metering house still wants the benefit of being hooked up to the grid, how are they compensating the rest of us for the on demand infrastructure use?, and the big one 3) why is retail a fair price?  Saying the utility (in many places owned by you and I) has to buy all the power its customer produces at the same price it would retail it to you is about like saying your local grocery store has to buy the 10 lbs of tomatos you grow at retail.  They buy the rest of their tomatos in volume, with delivery and quality restrictions, for a much lower price (and for the non produce they send back the unsold volumes to the manufacturer);  and 4) which utility has to buy it?  In places like Texas which are deregulated, you can choose your provider.  Shall we pick one at random and force them to buy our power at the highest price they’ve ever sold to any customer?  That sounds fair.

Then I read that last line again, ummh, so you deserve a “right” because the only way it’s profitable for you is if you make somebody else buy it at higher than their current cost?

4. The solar industry has the right to a fair competitive environment


The highly profitable fossil fuel industries have received tens of billions of dollars in subsidies from the federal government for decades. In addition, fossil fuel industries are protected from bearing the full social costs of the pollution they produce. The solar energy industry and the public expect a fair playing field, with all energy sources evaluated based on their full, life-cycle costs and benefits to society. Therefore it is critical that solar energy receive the same level of support, for the same duration, as the fossil fuel industry.

I’m getting really, really tired of this argument.  Renewable and solar advocates conveniently ignore that even incorporating a kitchen sink approach to fossil fuel subsidies (and heaven forbid we add the massive percentage of solar R and D spent by governments over the years), the solar subsidy is many, many, many times higher the fossil fuel subsidy level on a per unit basis (i.e, if we gave the solar guys the same subsidy per kilowatt hours or btu equivalent that they claim the fossil fuel industry gets, the solar industry would never have started.  And it smacks of total smarminess to have this argument right below the “let us sell back power at retail rates” subsidy demand).

Or maybe we should just add as a corollary that all Americans have the right to shares and dividends from any venture capital backed solar company which receives greater than 1/3rd of its funding from a DOE loan program or other public R and D funding and later benefits from a subsidy that Americans pays for in their regulated utility bill.  I’ll go look in my mailbox tomorrow and see if my check arrived.

5. The solar industry has the right to produce clean energy on public lands

America has some of the best solar resources in the world, which are often on public lands overseen by the federal government. But even though oil and gas industries are producing on 13 million acres of public lands, no solar permits have been approved. Solar is a clean, renewable American resource and solar development on public lands is a critical component of any national strategy to expand our use of renewable energy.

Hang on, big fan of leasing national natural resources in a fair and responsible manner, but I don’t necessarily want solar, oil, or ANY industry to have an unrestricted right to use my share of the public lands without environmental reviews, an open and transparent process with stakeholder inclusion, and a competitive market.  While I want to see solar thrown up all across the country, why should the solar industry be demanding this as a right?  The wind industry doesn’t?  The hydro industry doesn’t?  The geothermal industry doesn’t?

6. The solar industry has the right to sell its power across a new, 21st century transmission grid


Over the last 100 years, the transmission grid in the United States has been built as a patchwork of local systems, designed and planned to meet local needs. As the needs of customers have changed, so has the way the electric industry does business. What haven’t changed are the rules crafted in an era of coal-fired power plants. What is needed now is an investment in infrastructure to connect areas rich in solar resources with major population centers.

Uh, I’m a big advocate of an advanced grid.  And the cost here is measured well into the 11 or 12 figures, or significant portions of total GDP.  Let’s not write checks and demand someone else’s body has to cash them.  This is a tremendous topic but totally does not belong in a solar bill of rights unless the solar industry is ready and willing to pay for it (which in turn would be unfair to ask of them alone either).

7. Americans have the right to buy solar electricity from their utility

Many utility companies have never considered offering their customers the option to purchase clean solar energy, rather than dirty energy from coal or other fossil fuels. Nation-wide over 90 percent of people support increased use of solar energy, and over three-quarters believe it should be a major priority of the federal government. Despite this, only around 25 percent of utility customers in the U.S. have the ability to actually purchase clean, renewable power from their utility, and only a fraction of those programs offer solar energy. Utilities should be required to offer the electricity source that their customers want.

Dude, a few years ago California voters voted down a solar initiative because of cost, only to have the CPUC implement it anyway.  We could do the right thing and just deregulate like Texas and New Zealand did (instead of stupidly like California tried), and I could buy dirt cheap 100% wind power, hydro power, 20% wind power, natural gas only power, average grid mix, cap and save, fixed rate, floating rate, or any other different combination a marketer can dream up.  Oh wait, since all other forms of renewable power are cheaper than solar, I’d buy that 11.4 cent/kwh all wind power than the solar.  Maybe that’s why the solar industry wants their private right.  How about, every American has the right to buy power in a free market and switch providers when they want to?  And then let’s make the subsidies we give all energy companies transparent, as opposed to making new back door ones?

8. Americans have the right to – and should expect – the highest ethical treatment from the solar industry


Solar energy systems are an investment as much as a physical product. Consumers deserve top-quality information and treatment from solar energy providers and installers. Consumers should expect the solar industry to minimize its environmental impact and communicate information about available incentives in a clear, accurate and accessible manner. Finally, consumers should expect that solar systems will work better than advertised, and that companies will make every good faith effort to support solar owners over the life of their systems. Read SEIA’s code of ethics.

This is just plain odd.  I wasn’t aware we needed this.  Maybe I missed something important about how ethical the solar industry is today?

I’m sorry guys, this whole SOB of Rights just reads as very self serving.  But bring your comments, if the weight of Cleantech Blog readers want me to, I will sign it and we will support.

Neal Dikeman is the chief blogger of Cleantechblog.com, and creator of Cleantech.org, a huge advocate of solar and policy powered financing and R&D, he just doesn’t like using his government to support hidden subsidies to pick winners.  He is a partner at cleantech merchant bank Jane Capital Partners LLC, and has helped found or invested in companies in carbon, solar, superconductors, and fuel cells.

Why Conservatives Are Bad on Energy: It’s All About the Costs

By Tom Rooney, CEO SPG Solar

Conservatives,  let’s talk about energy. And why so many conservatives are so wrong — so liberal, even — on wind and solar energy.

Let’s start with a recent editorial from the home of ‘free markets and free people,”
the Wall Street Journal. Photovoltaic solar energy, quoth the mavens, is a “speculative and immature technology that costs far more than ordinary power.”

So few words, so many misconceptions. It pains me to say that because, like many business leaders, I grew up on the Wall Street Journal and still depend on it.

But I cannot figure out why people who call themselves “conservatives” would say solar or wind power is “speculative.” Conservatives know that word is usually reserved to criticize free-market activity that is not approved by well, you know who.

Today, around the world, more than a million people work in the wind and solar business. Many more receive their power from solar.

Solar is not a cause, it is a business with real benefits for its customers.

Just ask anyone who installed their solar systems five years ago. Today, many of their systems are paid off and they are getting free energy. Better still, ask the owners of one of the oldest and most respected companies in America who recently announced plans to build one of the largest solar facilities in the
country.

That would be Dow Jones, owners of the Wall Street Journal.

Now we come to “immature.” Again, the meaning is fuzzy. But in Germany, a country 1/3 our size in area and population, they have more solar than the United States. This year, Germans will build enough solar to equal the output of three nuclear power plants.

What they call immaturity our clients call profit-making leadership.

But let’s get to the real boogie man: The one that “costs far more than ordinary power.”

I’ve been working in energy infrastructure for 25 years and I have no idea what the WSJ means by the words “ordinary power.” But, after spending some time with Milton Friedman whom I met on many occasions while studying for an MBA at the University of Chicago, I did learn about costs.

And here is what every freshman at the University of Chicago knows: There is a difference between cost and price.

Solar relies on price supports from the government. Fair enough — though its price is falling even faster than fossil fuels are rising.

But if Friedman were going to compare the costs of competing forms of energy, he also would have wanted to know the cost of “ordinary energy.” Figured on the same basis. This is something the self-proclaimed conservative opponents of solar refuse to do.

But huge companies including Wall Mart, IBM, Target and Los Gatos Tomatoes figured it out. And last year so did the National Academy of Sciences. It produced a report on the Hidden Costs of Energy that documented how coal was making people sick to the tune of $63 billion a year.

And that oil and natural gas had so many tax breaks and subsidies that were so interwoven for so long, it was hard to say exactly how many tens of billions these energy producers received courtesy of the U.S. Taxpayer.

Just a few weeks ago, the International Energy Agency said worldwide, fossil fuels receive $550 billion in subsidies a year — 12 times what alternatives such as wind and solar get.

Neither report factored in Global Warming or the cost of sending our best and bravest into harm’s way to protect our energy supply lines.

Whatever that costs, you know it starts with a T.

All this without hockey stick graphs, purloined emails or junk science.

When you compare the real costs of solar with the fully loaded real costs of coal and oil and natural gas and nuclear power, apples to apples, solar is cheaper.

That’s not conservative. Or liberal. That comes from an ideology older and more reliable than both of those put together: Arithmetic.


Tom Rooney is the CEO of SPG Solar, one of the largest solar installers in the US.