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Goldman Goes Green

Just before Thanksgiving, the prestigious investment banking firm Goldman Sachs announced a broad-reaching environmental policy.

Goldman Sachs Environmental Policy

The policy contains several important pledges. Most tangibly, Goldman aims to make $1 billion available for investments in renewable energy (and this is not mere talk, as Goldman bought the wind developer Zilkha earlier in 2005). Goldman promises to take environmental considerations more seriously when considering investment opportunities, for instance refusing to invest in projects that do not comply with local environmental laws. Goldman also intends to become more active in shaping environmental public policy, including the establishment of a think-tank to promote market-based approaches for dealing with environmental concerns.

But perhaps the biggest impact Goldman can have on the environment is by placing pressure on their clients — the largest corporations worldwide. Because Goldman is the channel to literally trillions of dollars in the global capital markets, what Goldman says really matters to clients. Goldman’s clients need to keep the doors open to the investor community, with a good reputation. If Goldman follows through on their environmental pledges, and uses “carrot-and-stick” with its clients to improve their environmental performance, then real beneficial action is likely to in fact take place.

Goldman joins GE and Wal-Mart as major global corporations with huge influence publicly committing to improving the environment in the past year. Titans of industry such as these will be critical in dragging the laggards — the big oil companies, auto manufacturers, electric utilities — into more responsible and proactive environmental practices.

Cleantech News – California’s $3 Billion Solar Initiative Broken Down

California PUC has made a huge splash with its solar rebate program. The pizzazz angle is quite good.

“The goal is to install solar energy on 1 million buildings statewide by 2017, generating 3,000 megawatts of electricity — the equivalent of six large power plants, or enough to serve 2.3 million people. By comparison, all the solar power installed in all 50 states today has a capacity of about 400 megawatts.” – San Jose Mercury News

CPUC Solar Initiative Page

But when we calm down the rhetoric, there are a couple of things to consider.

  1. On the surface, the global solar industry is roughly $3.5 Billion/ year, so a c. $3 Billion bill by California looks great. But consider it over the 11 year time program life, and let’s see how it looks. By 2017 at a 20% per year growth rate, around its current historical pace, the industry will be roughly $26 Billion per year, and will have installed $138 Billion worth of solar panels. That makes this PUC program not an enabler of the solar industry, but a 2.5% drop in the bucket. And since we already spend $300 million or so a year in California subsidizing solar, it’s really just confirming more of the same the long-term. Nothing to shout about.
  2. And keep in mind, that $3 Billion dollars is not the whole cost. At $2.80/watt subsidy, the California consumer will still pay 2x that again out of its own pocket to put solar on their roofs. We’re still buying solar panels mind you, which are a 2-3x more expensive source of electricity than we currently use. We are definitely not saving money here for years if ever.
  3. Is the rationale reducing our greenhouse gas emissions? Not a very good argument. We already get a lot of our power from other states, either coal power dirtying their skies, or hydro with very little greenhouse gas impact. And besides, the quickest way to impact our greenhouse gas emissions is to deal with automotive emissions, 3,000 MW of solar 11 years out is barely a ripple in our power emissions over that time. Bottom line, there are better ways to reduce greenhouse gases.
  4. Now, I will accept the argument that we are building a local solar industry. Japan did it very successfully with long-term subsidy programs. But I’m not certain the state should be subsidizing it at this point. American investors have probably sunk on the order of $1 Billion in private capital into solar investments over the past few years and the industry is rapidly increasing capacity, all without the PUC making a move. The solar industry is the biggest bright spot in the cleantech sector. What we are really doing here is providing long term stability for a subsidized market, and guaranteeing that the IPO market for solar stays hot up so the venture capital investors who got in the last few years make a bundle.
  5. But the big issue from my perspective is this: last year the California “million solar roofs bill”, was defeated in the legislature. Partly because California’s finances are in such a messy state that legislators couldn’t agree that we could afford it, partly from partisan infighting. Now by a 3-1 vote, 4 unelected people on the PUC have enacted roughly the same program, at the same cost to the state (and us), by taxing us through our electric bill. And we never had a say. The amount may be small per household ($0.55 to $1.10 per month per household were among the range of estimates I found), but it is very definitely taxation by unelected officials. And I don’t care for that one bit.

Don’t get me wrong, I’m all for solar power, and I think this is a good program and a fair use of dollars long term for the industry and the state, I just don’t like the way it’s been done.

Personally, I’d just as soon let Germany continue to subsidize solar programs and soak up our exports until the price comes down, then after they’ve paid the cost, roll out a massive solar program for a fraction of the cost.

China and India – Laggards or Leaders?

Even among green enthusiasts there seems to be a feeling that our best efforts could be cancelled out by the growing energy demands of the developing world – particularly the massive economies of China and India which between them comprise 40 percent of the world’s people. This fear may prove unjustified if current trends continue and recent developments are carried to fruition. For example:

  • China’s solar industry already provides water heating for 35 million buildings.
  • India’s pioneering use of rainwater harvesting brings clean water to tens of thousands of homes and the country already has very active solar and wind industries.
  • China has contracted to convert over 10,00 diesel buses in 5 cities to run on hydrogen/natural gas.
  • The Chinese state energy company has pledged to spend at least $2.5bn on renewable energy projects over the next five years.
  • Just this month, China has passed a law that sets tariffs in favor of non-fossil energy such as wind, water and solar power and has set a goal of 15% renewables by 2020 – a massive target given the size of the economy!

Given China’s continued dependence on coal, some might say this is not sufficient but represents a huge commitment by economies struggling to develop and without repeating all the mistakes of the industrialized world. The WorldWatch Institute’s State of the World 20006 has a Special focus on India and China that reports on some of the strategies that China and India are starting to implement. It might just be that the Chinese and Indian pioneers are providing models for a new and sustainable economy and that we in the West are about to be leapfrogged!

Welcome to a New Blogger – Peter Beadle, Solar Exec and CEO of GreenJobs

I want to welcome our new blogger – Peter Beadle.

Peter is currently CEO of GreenJobs.com. He is an is an experienced technology executive and an expert on a wide range of green and energy technologies, including photovoltaics, fuel processing, fuel cells, and oil & gas technologies.

Peter holds a PhD in Physical Chemistry, and served President of BP Solar North America, launching and building the business to one of the largest in North America in the late 1990s. Prior to that he held a number of positions in R&D and technology management within British Petroleum.

Peter will be doing a Friday blog column around renewables.

The website for his current venture is http://www.greenjobs.com. Green Jobs is one of the few dedicated job sites for the renewables and cleantech industry. They put out the online Green Directory, as well as a weekly newsletter on People News in cleantech.

Welcome aboard, Peter.

The Forgotten Renewable Energy

When most people think of renewable energy, they think of hydro, or solar, or wind, or (increasingly) biomass. A few people think of geothermal. But that’s pretty much the list of renewables.

The most forgotten form of renewable energy, and one which I think holds more long-term promise than any other, is ocean-based energy.

The amount of energy that can be found in the ocean — thermal gradients, waves, tides, currents — is enormous, many times the amount required by the human species. As long as we have a sun and a moon (and when we don’t, we’ll have much bigger worries), then the ocean will contain a gargantuan amount of energy. And, it’s always there, day or night, almost completely predictable, unlike many other forms of renewables.

Of course, the challenge is to harness this energy in an economically viable fashion, and without causing adverse effects on marine life, aesthetics, shipping traffic, and so on. Scientists and engineers have been working on various technical approaches to capturing ocean energy for over two decades, and a lot of work remains to reach commercial viability. But, I believe that at least one of these technical approaches will eventually pay off in the next decade or so, and a big payoff it will be.

Believe it or not, unlike the masses and even energy industry experts, the Energy Policy Act of 2005 didn’t forget ocean energy technologies, including provisions for mandatory purchase requirements from ocean energy sources.

How did legislators manage to include ocean energy when everyone else had been overlooking it? Amazingly, it seems to have been because the companies in the ocean energy field — almost all early-stage privately-held companies, no big firms that you might have heard of — came together of their own volition to form the Ocean Renewable Energy Coalition. Web site Bully for them.

Let’s keep our eyes on ocean energy. I’m looking for much bigger things from the ocean in the future. It won’t remain forgotten for long.

Clean-Tech Investor Summit, 2006

If you haven’t tuned into it yet, the 2nd annual Clean-Tech Investor Summit is upon us, to be held Feb. 1-2, 2006 in Rancho Mirage, CA. The event is co-produced by my firm, Clean Edge. Last year’s event sold out, and this one should, too.

This year’s Summit features a solid line-up venture and private equity investors, corporate executives, entrepreneurs, and other notables, including a keynote from Thomas Werner, CEO of SunPower Corp. Werner’s address will be one of his first major presentation since SunPower’s highly successful IPO in November.

Other speakers include:

  • Arthur H. Rosenfeld, Commissioner, California Energy Commission
  • Donald L. Paul, CTO, Chevron Corp.
  • Hank Habicht, CEO, Global Environment & Technology Foundation
  • John Denniston, Partner, Kleiner Perkins
  • Matthew R. Simmons, author of Twilight in the Desert
  • Paul Bieganski, Ph.D., Managing Director & CTO, Cargill Ventures
  • Ron Kenedi, VP of Solar Energy Solutions Group, Sharp
  • William K. Reilly, Former U.S. EPA Director

    I’ll be moderating a panel on corporate clean-tech strategies, featuring Ron Kenedi from Sharp, Ronald Pierantozzi from Air Products and Chemicals, and Juan-Antonio Carballo from IBM Venture Capital Group. My Clean Edge partner, Ron Pernick, will head up a session on how policy is shaping clean tech, with Hank Habicht of Capital E, and Dan Kammen of UC Berkeley’s Renewable and Appropriate Energy Laboratory.

    You can download the most recent agenda Here.

    Those who register by January 12 can redeem a special $350 discount off the regular registration fee of $1495. Register today by contacting the IBF Registrar, Cathy Fenn, at (516) 765-9005, ext. 21 or e-mail cathy@ibfconferences.com. Be sure to mention “Clean Edge.” You may also register at the IBF website and use keycode “Clean Edge” to get the discount.

    Hope to see you there.

  • Old Dams = Opportunity for Smallscale Hydro?

    I read a article (see below) recently about the state of the river dams in the US. The article quoted a number of something like 80,000 large dams. Article on Old Dams The author seems quite concerned in the wake of Katrina about the safety and replacement of aging dams. With good reason, as dating back to the 1800s Johnstown Dam disaster in Pennsylvania, aging dams have been a major concern in the US. The article is talking mainly about large dams, but it got me to thinking, if there is a similar issue in small dams as well, perhaps there is an opportunity to increase renewable energy production at a fairly low environmental cost by expanding small scale hydro.
    A bit of power history for those of us who don’t think about it often, but for centuries, the major non-animal source of power was small scale hydro power, driving mechanical works, grain mills etc. The advent of electricity and fossil fuel generation, of course, replaced that in the early part of the last century.
    Hydro power is by far and away the world’s biggest source of renewable electric power. But the primary knock today on hydro development as a major new renewable source is the large environmental footprint required. At the same time, just like wind turbine blade technology has advanced the efficiency of wind farms, water turbine blade technology as advanced the efficiency of hydro, including small scale.
    For those of you interested, I’ve listed a few of micro hydro turbine manufacturers and information about a wide range of sizes below.

    Micro Hydro Manufacturer

    I do know that there are several small companies, including Southwest WindPower, which is venture backed by the guys at Altira, who are helping drive a renaissance in small wind turbines for home use. And while I know the likelihood of a similar renaissance in distributed hydro ever taking off is extremely small, aging dams or not, it’s always fun to think about.

    How Energy Efficient Technology is Helping to Control Energy Costs

    Practical experience reveals that energy is a firm’s third-highest cost. Businesses are looking for the means to reduce costs, increase profits and satisfy ever-increasing demands to reduce greenhouse gas emissions and preserve the environment.

    With America’s commercial business sector leading demand, the cost of providing energy to the nation’s business and residential consumers is expected to easily exceed $200 billion this winter.

    George Burnes, President of SmartCool Systems Inc. (OTC.PK: SSCFF; TSXV: SSC), said recently that the primary driver towards commercial energy efficient technology is a desire to reduce operating costs. The Dow Chemical Company (NYSE: DOW), understanding the need for reducing consumer costs, is committed to helping consumers reduce their energy consumption by producing products that help lower electric bills while making a positive difference for the environment.

    Distributed Energy Systems Corp. (NASDAQ: DESC) delivers power to end users looking to supplement their grids, allowing for more control over their electricity supplies. “Technology is helping to achieve differentiated quality of service in a way that really wasn’t commercially viable even five or 10 years ago,” described Walter W. ‘Chip’ Schroeder, President of DESC. FuelCell Energy, Inc. (NASDAQ: FCEL), also sees significant value in being able to control power usage and costs through on-site systems to ensure that efficiencies are realized.

    International Rectifier (NYSE: IRF) anticipates energy savings through advancements in power management technology as the desire for energy-efficient products continues to increase.

    George Burnes, President of SmartCool Systems, Inc., explains “Recent geo-political instability in major fossil fuel producing regions has only served to increase public demand within North America to reduce dependence on fossil-fuelled electricity generation. This has resulted in cash and tax incentives being offered by utilities and local governments in many states and provinces to encourage industrial, commercial and institutional users to reduce electricity consumption through the installation of energy savings equipment.”

    Steven P. Eschbach, spokesman for FuelCell Energy, Inc added that a powerful driver is the reduction of greenhouse gases. “Again, getting the high efficiency back into the equation, the more efficient you are, the less harmful greenhouse gases you emit.”

    To Read the Full Report

    Welcome to a New Blogger – Mark Bitterman, Editor of Superconductor Week

    I want to welcome our new blogger – Mark Bitterman, the Editor of Superconductor Week.

    Mark is the leading journalist and writer on the superconductor industry. He is the Executive Editor of Superconductor Week, which is the most comprehensive and widely read newsletter covering the technology and commercialization of superconductors. Superconductor Week does original reporting, exclusive interviews, and expert analysis on both low and high temperature superconductors. We are very active in the superconductor industry and consider it a key technology area of energy tech and cleantech, so I’m excited to have Mark join us!

    Mark will be doing a Thursday blog column around strange and interesting news in superconductors.

    Their website is www.superconductorweek.com.

    Thanks Mark.

    What Will Superconductivity Bring to Cleantech in 2006?

    In 1986, high temperature superconductors (HTS) were discovered, capable of conducting electricity with zero resistance at a relatively warm -196 Celsius (-321 Fahrenheit). This presented the possibility of developing new generation of devices employing the extraordinary properties of superconductors using inexpensive liquid nitrogen as a coolant.

    Since then, efforts around the world have worked to develop HTS wires and other materials for use in a host of devices for electric power systems, including: superconducting power cables, fault current limiters, flywheel energy storage devices, magnetic energy storage devices, transformers, motors, generators, and more.

    The promise of such technologies devices is vast.

    In the U.S., HTS is hoped to provide grid stabilization solutions that reduce costs and inefficiencies in downstream transmission and distribution infrastructure, facilitate bringing online fluctuating renewable resources such as wind and solar energy, and extend the life of an aging grid by delivering more power more efficiently. Outside the U.S., in addition to these benefits, HTS is also seen as an important technology to help reduce greenhouse gases emissions.

    Driving the effort to realize the potential of HTS, venture capitalists, public shareholders, and government programs have poured countless millions into HTS R&D, yet commercial success has proven slow to materialize. Nonetheless, there are important indications of progress: more and more organizations are working to produce HTS wires, and major demonstration projects are underway around the world.

    The key to understanding the status R&D in HTS power applications is to track all the technologies involved, including cryogenic refrigeration, dielectrics, and superconducting materials. In addition, because no single country dominates in HTS R&D, the effort must be viewed globally. Two decades after the discovery of HTS, 2006 is sure to bring some exciting new advances. It will also bring the achievements of last year into greater perspective.

    Mark Bitterman
    Editor, Superconductor Week

    Mark Bitterman is the Executive Editor of Superconductor Week, the most comprehensive and widely read newsletter covering the technology and commercialization of superconductors. Original reporting, exclusive interviews, and expert analysis spans low- and high-temperature superconductors in small- and large-scale applications, from the proven growth of the MRI industry to the anticipated revolution of advanced power devices, from recent success in all-digital RF receivers to key advances in cryocoolers.

    Subscribe online at www.superconductorweek.com.

    Clean Coal: An Oxymoron?

    To many people who are passionate environmentalists, the words “clean” and “coal” couldn’t be more polarized opposites. The thought of coal directly implies powerplant smokestacks belching carbon dioxide emissions and other pollutants.

    Certainly, it is true that coal-burning powerplants have historically been largely responsible for high quantities of sulfur dioxide and nitrous oxide emissions that contribute to acid rain and local air quality non-attainment issues (e.g., haze, surface ozone). And, it remains true that coal powerplants continue to be perhaps the most important single contributor to global warming, by virtue of their high CO2 emissions.

    But, is a no-tolerance anti-coal perspective justified on an environmental basis? In my mind, no. In fact, it is theoretically possible to reconcile the concept of zero-emissions coal utilization. This entails the use of an integrated gasifier coal combined-cycle (IGCC), along with carbon sequestration.

    This is the vision of the FutureGen Alliance. FutureGen Alliance Announcement This initiative, announced in late 2005, embraces many of the largest and most important parties in coal-fired generation to develop a standardized coal-to-electricity technology that produces no air emissions. The combined-cycle part of the technology is well-understood, having been widely utilized for many years now. In contrast, there are two relatively new technologies that remain to be commercialized for the zero-emissions coal vision to be realized:

    The first is gasification technology — converting coal to a synthetic gas (“syngas”) similar to natural gas for use in the combined-cycle. There have been a number of gasification technologies employed for decades, and they work reliably, but none have yet to achieve the holy grail of being deemed “commercially economical”.

    The second is carbon sequestration technology — capturing CO2 emissions from the exhaust stream and then injecting it underground. Again, the science is well understood, but the economics of carbon sequestration have always been challenging, particularly because of the intensive energy requirements.

    If these two technologies can be commercially improved, making sequestered-IGCC economically-viable, then our future energy and environmental situations are much more assured. We have plenty of coal to last for well more than 100 years, and if we can use it in an environmentally-benign way, it seems like a no-lose resource for us to employ, until we can get to some energy system (solar with storage? hydrogen fuel cells? fusion?) that can realistically serve the human species for millenia.

    More Cleantech News – Honda Enters the Solar Business

    There is more bad news for cleantech startups looking for an easy time of it in the solar business. Honda has announced it is entering the solar business and will start shipping from a 27.5 MW plant next year.

    Good news perhaps, for the industry overall, further validating that we are in a massive growth period that could bring solar into the mainstream (or else a solar manufacturing bubble). However, probably bad news for solar startups expecting to compete in what is becoming a more and more competitive market for solar panels.

    Honda is the first car maker to enter the solar market, with what one report said would be an investment in the US$85 mm range. I’ve been saying for a while that US and European startups need to worry about the major industrials like GE, as well as the Japanese leaders in solar production, closing the window of opportunity for a new startup to build a significant position. Honda now joins the ranks of Kyocera, Mitsubishi Electric, and Sharp as major Japanese industrials leading the solar sector.

    All that being said, at 27.5 MW and with no established distribution, Honda has a long way to go to become one of the big boys. By the way, all the notes I could find said that the cells would be non-silicon thin film manufacturing processes. I would be interested if anyone knows what the process is Honda is using, and where it was developed.

    Article on Honda For another interesting new solar player, take a look at my previous post on the coming NYSE IPO of China’s Suntech.

    2005 Recap

    Ah, the usual pundit’s retrospective at the end of the year. Here’s my take on the top 10 most significant developments in 2005 for the cleantech industry, in the usual descending Letterman format:

    10. The Energy Policy Act. Sure, it’s a dog’s breakfast of incoherent and often contradicting provisions. And, it’s the most painfully arduous and boring reading imaginable. Wikipedia Summary of EPAct. But, the EPAct will ultimately have numerous important ramifications on the cleantech sector. Biofuels mandates, extensions of the renewables PTC, accelerated tax depreciation, and gobs of grant pork. It will take years to sort it all out and see the effects trickle out into the market, but the aggregate impact will be significant. Unfortunately, not as significantly helpful as a well-thought-out energy policy would be, but alas.

    9. Utility CEOs “getting” climate change. The CEOs of Duke Energy (Paul Anderson) and Cinergy (Jim Rogers) made news earlier this year when they took public stands in support of a clear government policy to address the growing concern of global climate change. (These two CEOs also made news by agreeing to merge their respective companies. Coincidence?) Clearly, most of the rest of the utility industry is scared to death of the climate change issue, as they are amongst the biggest contributors of greenhouse gas emissions. However, the fact that two prominent CEOs broke ranks suggests that the tide may be turning, albeit sooooooo slowly. Board resolutions on climate change by serious institutional investors are also helpfully putting pressure on the issue. Once a majority of utilities embrace the need to do something about climate change, something material will finally happen in the U.S. on this critical front.

    8. The “Peak Oil” debate. An increasing number of observers are projecting that the peak of Saudi oil production (and hence the peak of conventional oil production) will occur in a rapidly approaching timeframe — by some estimates, within the next 10 years. Perhaps the most eloquent and credible of these observers is the oil/gas investment banker (and adviser to the Bush Administration) Matt Simmons, whose 2005 book Twilight in the Desert has received considerable notice. Twilight in the Desert. Personally, I believe the so-called “peak oil” debate is framed incorrectly in some important aspects, but its key point — that oil production as we now know it has a finite remaining duration — holds a lot of validity. And, the troubling implications of this conclusion have captured the imagination (fears, actually) of many influential people, with significant incipient benefit to those of us in the cleantech community.

    7. $60 oil, $3 gasoline, $10 natural gas. High energy prices piss people off — and get them to take notice. “How can I cut my energy bills?” “What can I do to reduce my driving?” “Should I buy a hybrid?” The pocketbook can drive powerful changes in behavior, which should in the long-run have major environmental benefit. High energy prices also make economic room for new clean technologies, as well as provide impetus for further R&D and proactive public policy. For these reasons, let’s hope these high energy prices stay with us.

    6. Katrina (and Rita). Hurricanes have been happening for millenia. Only now, it seems like there are more of them, and stronger ones. Hmmmm, could it have anything to do with climate change? Not provable, but worth considering — and many people are now beginning to connect the dots. Katrina was a truly dark tragedy for the U.S. on many levels, but perhaps something good can come from it if mass public thinking about environmental matters has been shaped positively.

    5. Wal-Mart goes green. Everyone’s favorite whipping boy, Wal-Mart made a splash in October by declaring serious environmental commitments: 100% supplied by renewable energy, zero environmental waste, all products environmentally sustainable. These lofty goals come from a major policy statement on Wal-Mart’s future in the 21st Century by CEO Lee Scott. Wal-Mart’s 21st Century Leadership Speech. Being the commercial behemoth that it is, when Wal-Mart throws its weight around, the rest of the economy listens. If Wal-Mart is sincere about these environmental goals, and can light a fire under its entire supply chain to drive them to help Wal-Mart meet its goals, big things are afoot.

    4. GE’s Ecomagination initiative. In the summer, GE’s CEO Jeff Immelt announced that products/services addressing environmental concerns would become a major platform and organizing theme for the company’s growth.Jeff Immelt on Ecomagination. This is a seismic shift from a company with unparalleled respect in and impact on the global industrial marketplace. GE probably figured that, if it can make a killing in the wind turbine market, there are lots of other opportunities to be found in cleantech. Good for them. Make it happen. If anyone can, GE can.

    3. BP doubles down on renewables. As noted recently, BP is increasing its commitment to renewables by pledging to invest nearly $2 billion in the coming years on a variety of wind, solar and hydrogen initiatives. BP will form a new business unit called BP Alternative Energy to hold these initiatives, making more true the company’s tagline “Beyond Petroleum”. BP Alternative Energy Announcement.

    2. Kyoto Protocol implementation. True, the U.S. stayed out of the Kyoto treaty. Nevertheless, Kyoto did go into effect early in 2005, and the signatories around the world are now “officially” (whatever that means) bound to its provisions. Accordingly, a robust carbon trading market is now beginning to emerge, especially in Europe. As carbon trading takes off, it will spur entrepreneurial developers to accelerate adoption of clean technologies for cost-effectively capturing trading value, while reducing carbon emissions. Somehow, some way, someday, the U.S. will get into the game too.

    …and finally, the most important thing to happen to the cleantech sector in 2005…

    1. The launching of Cleantechblog. Surely, this new forum for discussion will rapidly revolutionize the energy and environmental sectors! Kidding aside, congratulations and thanks to Neal Dikeman for his vision and leadership in launching this site this past summer. I appreciate the opportunity to contribute.

    All in all, not a bad year for cleantech, but not good enough for my tastes. We still don’t have a sane energy policy that discourages pollution and promotes cost-effective efficiency and clean supply options, by eliminating egregious subsidies and protective barriers on mature segments of the energy sector and instead structuring market rules with appropriate pricing signals that reflect competitive forces while internalizing the economic costs of emissions and security risks associated with fossil fuel use. We still have enormous apathy by the American public on energy and environmental matters, and opposition by most consumers and many of the major energy companies towards anything but a “cheap energy” strategy — emissions be damned. We still don’t have enough private investment capital flowing to the sector — in part because we still haven’t had a big success story in cleantech like Microsoft or Dell.

    While we’re moving in the right direction, let’s hope for better in 2006. Happy holidays everyone.

    Chinese Solar Company Headed to the NYSE

    Catching in on two booms – the boom in Chinese firms headed to the US stock exchanges, and the boom in solar IPOs, Suntech Power, has filed to list on Nasdaq.

    They are raising $300 mm in ADRs, and reporting revenues of the last 9 months of $137 mm 13% profit. That puts them in the top 10 in solar production worldwide.

    SEC filings

    A couple of interesting comments:

    • It’s mostly export business, with Chinese solar sales maybe a fifth of total. So while the Chinese domestic solar business is growing, and solar is a part of the future power mix China is trying to build, the market there is still extremely small.
    • The firm is less than 5 years old, and has grown extremely rapidly. I have been espousing the danger the US and European solar manufacturers are facing from the major Japanese competitors for some time. Now it looks like we have to add Chinese manufacturers to the list.
    • The company was profitable at c. 25 MW/year of annual capacity. That is a lower volume breakeven than most the US firms have been able to achieve.

    The long and the short of it is Suntech looks like a company to keep an eye on whether you are an investor looking to get in on the IPO, or a competitor trying to watch the fast changing market dynamics.

    Has Broadband over Power Lines Finally Made it?

    TXU just announced that it is spending $150 mm over 10 years to roll-out power line carriage or BPL (broadband over power lines) – delivery of broadband internet access of powerlines. TXU Article. This a major win for cleantech investors, and could add a new player to the crowded world of highspeed internet access.
    The technology behind this roll-out is provided by privately held Current Communications, www.currentgroup.com, backed by investors including Cinergy, EnerTech Capital, Goldman Sachs, Google, The Hearst Corporation, and Liberty Associated Partners.
    The idea of delivering broadband access over power lines has been around for years. It has generally been one of those technologies that has “lots of potential, and always will have lots of potential.” Code for never going to actually make it.
    The big knocks technically on BPL are these:
    • Getting quality over the powerlines tends to be a trickier problem than at first blush, so delivering the higher level speeds (and voice over IP) can be problematic.
    • The electric transmission “pipe” delivers into the last mile, we have power lines going to every home, but the technology typically requires “routers” of a sort, to get around things like transformers. In case you missed it, the US has A LOT of transformers. And there are typically lots of those things right before the our houses, so the last mile becomes costlier than expected.

    That being said, these are engineering challenges that companies like Current have been working hard to solve.

    But perhaps the real challenge is that the window for powerline carriage is shrinking. The big advantage is obvious, if you can make it work well, BPL allows electric utilities to deliver data and communications services over a massive already in place infrastructure, possibly substantially reducing costs. However as cable, DSL, satellite and wireless broadband make bigger and bigger inroads, reduce costs, and gain market share, the window for BPL to make its mark will get smaller and smaller. If BPL is to become a major player in the broadband world, it needs to get some big wins on the board.

    Personally, I would love to see BPL roll out and put more pressure on telecom providers. So keep your fingers crossed.

    Kyoto, Carbon Credits, and a Big Market for Cleantech

    I have just returned from a trip to London to evaluate some business opportunities in carbon trading stemming from the commencement of the Kyoto protocol. I was surprised by the level and intensity of interest in this market.

    A few relevant trends I noticed:

    • Significant interest by investors in carbon and emissions trading. Including numerous private equity style investment funds being raised to trade carbon credits and develop carbon offset projects.
    • Deep government support for technology, trading mechanisms, and public awareness. For more information, check out www.thecarbontrust.co.uk, the site for a government funded independent organization focused on reducing the UK’s carbon footprint.
    • A broad-based industry interest in clean technology, far surpassing what we see in the US. This trend is illustrated not the least by massive advertising campaigns from industry and government about the need for cleaner fuels, lower emissions, and more environmental and sustainable awareness. One of the most notable ad campaigns, which Americans will also be aware of, is British Petroleum.
    • And perhaps of real concern for us in America, a broad distrust of the US government and the Bush adminisitration, especially its motivations when it comes to the environment.

    Energy Executive Survey Findings

    The consulting firm Capgemini recently polled 125 senior energy executives on a variety of topics concerning the future of the energy industry.

    Capgemini Energy Executive Survey Press Release

    Among the interesting questions and responses in the poll were:

    1. “What is the technology that has the greatest potential to transform the energy industry by 2015?” 41% responded with clean coal technology, 27% said advanced meter reading, 25% said fuel cells.

    2. “What will be the price of oil ($/barrel) in 2010?” Fully 80% thought that oil prices would remain higher than $40, with 34% predicting prices above $70, and 9% expecting prices over $100.

    3. “What is the best way that an energy company can demonstrate industry leadership?” 33% suggested customer care, 24% said environmental record, 22% said safety, and only 21% responded commercial success.

    4. “What is the top threat to the growth of the energy industry?” 51% responded with government regulations, 27% were most concerned with an aging workforce, 16% were concerned about consumer backlash to rising energy prices, and only 6% raised terrorism as the greatest threat.

    Of course, these results don’t really mean anything, because they just represent opinions about how the future will play out, and energy industry executives have historically shown no special aptitude for making accurate predictions on the future of their own industry. But, it is interesting to get an insight on the current collective state of mind of the leaders of the companies that arguably have the biggest impact on the environment.

    Auto Efficiency: A Huge Opportunity

    Last Tuesday night, I had the pleasure of attending the holiday party and opening celebration for the Boulder office of the Rocky Mountain Institute.

    Rocky Mountain Institute Web Site

    For those who may not be familiar, RMI was founded by Dr. Amory Lovins, one of the few people in the energy arena who truly deserves the label “legend” and “guru”. At the party, Amory treated us to an extemporaneous 20 minute talk focused on RMI’s latest research project, funded in part by the U.S. Department of Defense, entitled “Winning the Oil Endgame”.

    In a nutshell, “Winning” outlines a multi-decade strategy to wean the U.S. off of oil entirely — clearly, a laudable goal. The main elements of the “Winning” story are reasonably simple. The U.S. can cut its oil consumption by half through increased efficiency, and supply the other half with alternative fuels (biofuels, natural gas, ultimately hydrogen). The second part of the story is very interesting to examine in its own right, but it is the first part of this story that intrigued me: cutting oil consumption in half. Is this really possible?

    Through compelling statistics, analysis and logic, Amory convincingly argued that, yes, such reductions in oil consumption are really possible. He noted the enormous energy penalty imposed by our vehicles’ weight: only about 5% of a car’s loaded weight is associated with the human cargo, and only about 12% of fuel burned to move the car’s loaded weight is transferred to the wheels, meaning that less than 1% of automotive energy consumption is truly useful in transporting the human being. Yes, that’s right, less than 1% of the energy content of all oil consumption produces the result that is desired. This is the best that a mature auto industry can do, even with untold billions of dollars of R&D investment over the past hundred years?

    Therefore, the big lever on auto efficiency is to reduce the weight of cars. Of course, a behavioral switch away from SUV’s to lighter cars would be an easy start. But RMI doesn’t assume this as a requirement for their analysis. Rather, RMI claims that the technologies to cut any car’s weight (without downsizing) in 1/2 or more are available today. Of these technologies, the most important is the use of incredibly light yet incredibly strong composites in lieu of steel. Low-weight auto designs incorporating composites, if done in an integrated manner, can also reduce auto manufacturing costs dramatically. Detroit ought to be paying attention. I’m guessing the Japanese are.

    This nugget is just one of dozens (hundreds?) of really interesting and provocative observations in “Winning”. Obviously, anything past a few years looking ahead in the energy and transportation sectors involves some major speculations. In the uncertain and volatile future that faces us, maybe not all of the projections and possibilities offered in “Winning” will ultimately be borne out, but I strongly suspect that many are very legitimate. The sponsorship of USDOD, combined with forewards written by George Schulz (ex-Sec’y of State under Reagan) and Sir Mark Moody-Stuart (ex-Chairman of Royal Dutch/Shell), give credence to the contents of “Winning”. It is not the work of a naive utopian, but rather deserves serious consideration by sober policy-makers, businesspeople, and citizens. Get the book.

    Winning the Oil Endgame

    In Praise of BP

    In contrast to ExxonMobil (whom I’ve ripped in a previous post), BP recently announced a significant increase in commitment — meaning, capital investment — in alternative energy.

    BP Press Release

    In forming the new business unit BP Alternative Energy, BP CEO Lord Browne also indicated an expected $1.8 billion of investment over the next 3 years, spread across solar, wind, hydrogen and gas-fired power generation. This is not a trivial move on BP’s part, and further separates them from the rest of the energy incumbents.

    Clearly, a firm such as BP is able to afford such a strategy because of the enormous profits that it is generating in a $60/bbl and $10/mcf world. But, then again, ExxonMobil, Chevron, ConocoPhillips and others are also making huge profits, without the same degree of interest and involvement in alternative energy. Let’s tip our hat to BP, and apply some peer pressure to the others.

    And, while we’re at it, we’d like to see an electric utility take more decisive and significant action to boost alternative energy. In the past few years, utilities have rushed like lemmings back to the core businesses and abandoned any novel business growth idea. Perhaps this is supportable short-term thinking to shore up balance sheets in the face of Wall Street pressure, but utilities run the risk of abdicating their long-term future to players like BP who see an opportunity and aren’t afraid to stake out favorable positions.

    As Lord Browne stated in a speech reinforcing the formation of BP Alternative Energy, its strategy is “focused on the power sector, and that is deliberate.” Sounds like a shot across the bow to me.

    Lord Browne Speech

    Fuel cell membrane/MEA market dynamics

    The core technology in PEM fuel cells remains the MEA and membrane. Stack technology is becoming a commodity. But the solution to a low cost long term durable high performance membrane is elusive. The major player Dupont still owns this market with their nafion category of products. Several challengers have risen to try their hand, but really have ben unable to make a major dent in Dupont’s nafion, or the industry need. By my guess the challengers still have only in the very low double digit millions in revenue.

    As an example, rapid growing Hoku Scientific, the latest craze for investors, is on a run rate of c. $5 mm in revenue. It is even making a bit of money. However with a market cap of $150 mm, a bit aggressive.

    Take note: That market cap is close to the total volumes of commercial PEM fuel cell sales for Hoku’s entire target customer base.

    Polyfuel, another membrane producer, took the AIM route, and is of a similar size.

    The problem for the membrane and MEA producers is 3 fold:

    With the advent of the challengers, their is not a big enough near term market for any of them to grow profitably (the whole PEM fuel cell market in terms of cost for total pilot and commercial units shipped is well less than $200 mm/year)

    • PEM fuel cells are being supplanted in R&D spending by SOFC and DMFC or microPEMs (which either do not need membranes like these, or need far less square footage of membrane).
    • The prices and performance are still not where the fuel cell industry needs them to be to commercialize, even if it can get the rest of its act together.
    Not an easy challenge.

    Publicly traded MEA Companies:
    Polyfuel (LSE:PYF.L)
    Hoku Scientific (NASDAQNM:HOKU)

    Privately held or divisions:
    Dupont
    3M
    Gore