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VantagePoint Snares Kiwi Cleantech Venture Capital Talent

Leading cleantech venture capital firm VantagePoint Venture Partners this week lured away New Zealand power sector veteran Helen Priest to join its Silicon Valley office in cleantech. Helen had been heading corporate ventures for Meridian Energy, New Zealand’s largest and all renewable state-owned power company. With a reputation for being one of the largest cleantech venture investors, behind such moneyraising fiends as Miasole, BrightSource, Tesla Motors and Mascoma, but also as one of most polarizing firms in the venture capital sector, VantagePoint added some needed benchstrength.

Helen brings experience doing deals in carbon, green building, and a decade of energy experience prior to Meridian as head of strategy and then CIO for New Zealand’s grid operator, Transpower. In one move VantagePoint landed expertise in three of the hottest areas in cleantech venture: carbon, green building, and smart power. Helen’s linked in profile and bio are here.

Meridian is a story all by itself. The state-owned company is not even 10 years old since its formation in the breakup of the New Zealand national power company ECNZ in 1999. It was guided in its early years by Kiwi power icon Dr. Keith Turner, and since his retirement by longtime power and telecom executive Tim Lusk. While generally not on the radar screen in the US, Meridian has been one of the earliest and most aggressive energy technology investors in the world, with a tech portfolio of over $150 mm, and a track record for investing into energy trends years ahead of the curve.

All renewable, Meridian put in the first wind farms in New Zealand, and now has 2.6 GW under development or consent.

A few years after its formation, it made a hedge fund like bet on the Australian deregulation and renewable sector clearing over half a billion in profits when it sold (in contrast to US utilities like TXU who were never able to effectively profit from investments in the deregulating Australian market).

On the technology and services side, Meridian has backed investments or done corporate spin-outs in smart metering and energy IT (Arc Innovations and Powershop), distributed generation & efficiency (Energy for Industry, Damwatch and Whispertech – the largest stirling engine technology company in the world), green building (Righthouse), and carbon IT (Carbonflow, one of mine). It was also an early investor in fuel cells, superconductors (under founding CEO Keith Turner’s watch Meridian’s predecessor funded some of the original work behind 1G superconductor wire at the New Zealand national lab IRL), and energy venture capital (Nth Power). And it runs it all from a state of the art five star green building. And has recently begun making noises about a solar run.

As with venture, every bet didn’t always pay of. The Nth Power investment was in Nth’s second fund, which was before the current cleantech boom and hasn’t delivered returns, and its early fuel cell investment was Ceramic Fuel Cells, which did later deliver a successful AIM listing, but Meridian had declined to re-up. And as with most cleantech investors except for solar, their big tech bets haven’t yet exited to prove the returns, and it has been the project oriented side of the portfolio that carried the early profits. But with a portfolio loaded with energy efficiency and energy IT bets whose time has come, and a state-owned entity’s cost of capital behind it, Meridian will probably be punching outside their weight in the tech category, too.

Besides renewable energy and technology, Meridian also did some of the earliest carbon credit projects under Kyoto off its first windfarms, and later issued some of the first Gold Standard VERs ever (verified by DNV), again reaping profits from its early move. It holds the record for the highest price ever paid for voluntary carbon credits at over $100/ton for a tranche of Gold Standard VERs auctioned on Trademe, New Zealand’s eBay (proceeds donated to charity). And it also used its carbon project experience to brand as one of the first utilities globally to certify its whole utility as carbon neutral in 2007.

Meridian was not the first energy technology stop for Helen. Prior to Meridian, Helen held the CIO’s role as head of IT for Transpower, New Zealand’s transmission grid operator, and was Transpower’s head of strategy before that. A chemical engineer by training, she previously oversaw global strategy for New Zealand’s 11,000 strong diary cooperative, Fonterra. She has been Meridian’s representative to the boards of the NZ Green Building Council and Carbonflow. And now she’s moved back global with this position, moving to Palo Alto join VantagePoint.

Neal Dikeman is a partner at Jane Capital Partners and the CEO of Carbonflow. He is the Chairman of Cleantech.org and edits Cleantech Blog. Note; Meridian has been a longtime client of mine, and is an investor in Carbonflow, where I am serving as CEO.

ConocoPhillips’ CTO on the Future of Cleantech and Energy Technology

I had the opportunity recently to chat with Stephen Brand, the chief technology officer for ConocoPhillips (NYSE:COP), one of the largest major oil companies in the world. I have a long personal history with the ConocoPhillips organization. One of the first IPOs I ever worked on was the Conoco, Inc. IPO when DuPont spun it out in the late 1990s. At the time (pre dotcom) it was the largest IPO on record. My uncle worked for Phillips Petroleum on the other side of the company for 30 years. And for the last several years I have advised parts of the ConocoPhillips company in its emerging technology and alternative energy groups.

ConocoPhillips has always been the quietest of the majors when it comes to the press, so I was delighted when Stephen agreed to speak on the record on energy technology, cleantech and alternative energy technology with Cleantech Blog. He recently also headlined the Rice Alliance for Technology and Entrepreneurship forum. Stephen himself came out of the Phillips organization from the exploration and production side of the business, originally starting as a geologist.

ConocoPhillips has always been a quiet leader, with technology budgets at levels swamping all but the largest venture capital organizations in cleantech, and was the first oil company to join US Climate Action Project and are part of the Carbon Disclosure Project. They are also quietly repositioning the company around a global energy strategy – not just oil.

This move tracks the history of the company. While one of the oldest oil companies in the world, 20 years ago Phillips was not generally considered a major player in the oil industry, and given the changes driven through M&A in the last 15 years, which Amoco, Mobil, Arco and numerous other massive organizations did not survive as independent, it certainly was not clear the Phillips would become one of the Tier 1 companies. But today, at $178 Bil in assets, it clearly is. The current CEO, Jim Mulva, took over as chief executive about 10 years ago, and the moves the company has made, including deals that brought Conoco, Inc. and Burlington into the fold, helped vault the company well above its historical presence. In some respects COP is positioned to do the same thing in energy and technology more broadly. Especially given that its annual capital expenditures of $15 Bil are on the same scale as the whole solar industry revenues or the global venture capital sector, and in one underreported move in the last couple of years they doubled annual technology spending to $500 mm.

I put a few questions to Stephen during our discussion to outline what all of this means.

Stephen, how important do you see technology to the future of the oil patch in general?

Neal, by 2030, global energy demand is forecast to be about 50 percent higher than it is today, even with improvements in energy efficiency. Emerging technologies will help us meet the world’s growing energy needs as we look for oil and natural gas in ever more challenging environments – for example the deepwater Gulf of Mexico and offshore Arctic – and in more challenging forms such as oil sands and gas hydrates. Innovation also will help us to minimize the impact on our environment and reduce greenhouse gas emissions.

In the 1980s/1990s oil companies under oil price pressure cut back on R&D drastically as WTI prices fell down to $10, was that a mistake in hindsight, even though it made financial sense at the time? Besides energy prices, what else has changed?

We take a long-term view of our business which enables us to stay focused on results. We apply a consistent, systematic business model with the flexibility to adapt to changing business conditions around the world, but we understand that we need to take a long-term perspective of for innovation that will develop future business opportunities. ConocoPhillips is committed to invest in people, technology and projects that allow us to safely, reliably produce oil, natural gas and to develop the next generation environmentally superior fuels to sustain our economy and way of life.

In which area is technology most important for the energy business?

Technology is important in every segment of our business. It is one of the most important tools we have for finding and producing new sources of oil and natural gas, but also for developing and delivering energy in new, more efficient ways. For example:

New exploration technology – 3-D seismic – allows us to detect undersea oil and gas deposits at great depths with minimum impact on the environment;
Breakthroughs in lithium-ion battery technology greatly improve the safety, power and reliability of batteries for hybrid vehicles, thereby improving fuel economy and reducing emissions;
A “coal-to-gas” technology that allows the use of this abundant resource in an environmentally superior manner;
Innovations in carbon capture and storage will allow us to address concerns regarding global climate change.

You have announced the long term transition of ConocoPhillips from an integrated oil company to a global energy company, what does this mean, and how does that apply to technology?

Yes, ConocoPhillips is not looking just at oil for the future of our company, but energy broadly. Technology is a key part of that transition. Any moves into new markets for any company requires access to innovation and technology. The ConocoPhillips Technology group has more than 350 scientists and engineers – 50 percent of them with Ph.D.s. These are the people driving our innovations and our transition as we become more technologically sophisticated. One of the most significant aspects of that transition, I believe, will be our ability to recruit and retain the kind of scientists and researchers who can develop the next generation of energy. That’s one reason why ConocoPhillips is creating a new 400 acre global technology center outside of Denver, Colorado and why budgets have gone up.

I’ve followed the Company for a while, but can you share some perspective on COP’s technology budgets are with our readers, and how and where they have been growing?

We have doubled our research and development spending. In 2008, we invested $500 million in technology – technologies that improve our existing assets, as well as those that create new emerging businesses. We expect that figure to grow in the future. As I mentioned, our global technology center, projected to open in 2012, is another indication of our emphasis emerging technologies and their role in the future.

In the last several years ConocoPhillips made a number of moves in technology, including a much reported biofuels effort, but also launched a groundbreaking lithium ion battery electrode business called CPreme. But more broadly what technology areas is COP interested, and how might you rank them?

Safety is always our top priority; and we believe safety is very much tied to operational reliability at all our facilities, which is large part a technology problem. But in addition to using technology to enhance operational reliability at our core upstream and downstream facilities, we’re focused on identifying breakthrough technologies that can deliver energy while lowering greenhouse gas emissions – next generation energy including alternatives like biofuels and renewables like solar and geothermal; and technologies to reduce industrial CO2 emissions.

Are you looking to do more in-house R&D or external partnerships?

Both. We are actively recruiting for our own efforts, and to foster technology innovation, we have several co-ventures with Iowa State University, the Colorado Center for Biorefining and Biofuels and the U.S. Department of Energy’s National Renewable Energy Laboratory. We also established the ConocoPhillips Energy Prize, in partnership with Penn State, to recognize new ideas and original, actionable solutions that can help improve the way our country develops and uses energy. The first awards will be announced in October.

Okay, so then do you see COP making technology acquisitions at any time in the future, or will it all be homegrown?

We are supporting innovation inside and outside the company. While we have not made any technology acquisitions, being open to new concepts and innovation means that we would not rule that out.

As far as the internally grown R&D efforts, you’ve had a major expansion in the works for some time but hasn’t gotten much press. Can you share a little about the upcoming Denver technology center?

Our Louisville, CO, technology and learning center outside of Denver, slated to open in 2012, will be a center of innovation for us. In Louisville we will have a purpose-built facility where we can work to explore new and expanded research and development opportunities in upstream, downstream, environmental, renewable and alternative technologies. This is also part of our push to recruit and retain top talent.

Oil and gas is not the only core technology area for the company. COP has had a long history in materials technologies, and most people don’t know has developed some of the most innovative lithium ion battery technology in the world. Can you talk some about Cpreme?

Our CPreme ® graphites are the highest-performing anode materials currently available for lithium-ion batteries. We are rapidly scaling up to meet growing transportation demand. We are also developing high performance cathode material to help reduce the cost of batteries, while meeting demanding automotive industry performance standards. This product will be available soon for testing by battery manufacturers, and we have begun commercializing the technology – not only can we develop new technologies but we can move from R&D to the commercial side.

And the COP biofuels program has gotten lots of press, what can you share about that?

We are engaged in development and production of new biofuels that have a better environmental footprint than existing sources. We currently produce renewable diesel fuel at our Whitegate refinery in Ireland using vegetable oils as a feedstock, and are testing the process at our Borger refinery in Texas as part of our arrangement with Tyson Foods to utilize by-product animal fat as a feedstock. We are also doing research – internally and outside the company – on new biomass fuels. We have a joint development agreement with Archer Daniels Midland to develop fuels from agricultural wastes and a relationship with Iowa State to research all phases of biofuels. We are also a founding member of the Colorado Center for Biorefining and Biofuels, a cooperative research and educational center devoted to the conversion of biomass to fuels and other products and where we will be studying the prospects for algae in biofuels development.

What else do you see COP looking at alternative energy? Solar? Wind?

We look at those innovative alternatives where there is potential for technology to make a significant breakthrough. With our emphasis on research and development, alternatives like solar, geothermal, clean coal and battery technology are where we put our efforts, in addition to moving forward on renewables like biodiesel and cellulosic ethanol.

And I should ask before I let you go, when exactly did COP decide to create the position of “CTO”? That’s not a typical oil company title.

Well Neal, officially I’m the senior vice president for Technology. ConocoPhillips created the position in 2007 to better centralize and coordinate research and development (R and D) efforts that had always gone on in different parts of the company. This focus on R and D allows us better pursue projects that help strengthen energy security and to better allocate financial resources to invest in new technologies that reduce the environmental impact of our operations.

Stephen, thanks for finally coming on the record with us. It is exciting to see what’s going on.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org.

Climate Change Policy Thoughts, McCain, Palin, Obama, Et al

Those of you that know me know that fighting climate change is an issue near and dear to my heart – and day to day life, since I am currently involved with a start up working on helping to deliver even better transparency and environmental integrity to carbon credits.

So as a small government, energy focused, environmentally conscious, social liberal, fiscal conservative, who has worked in both oil & gas and alternative energy, I had a lot to like about the McCain-Palin ticket. And I’ve stated that and my reasons for it, and gotten ripped for it for an audience on this blog that is commendably and passionately progressive when it comes to these issues, but unfortunately doesn’t always read to the end of the blog articles or do their research before ripping me for being Republican. But one key area I struggled on was where Palin came down on climate change. Luckily for the 182 small government, energy focused, environmentally conscious, social liberal, fiscal conservatives like me left in America, John McCain’s climate change position has apparently rubbed off on her. Like her or not, this is a very good sign for progressives. It means we as a nation are joining the climate change fight no matter who wins the election fight.

To those of you who say we should have signed Kyoto, don’t forget, Obama, GW Bush, Hillary Clinton, and John McCain all agree on this one, multilateral climate change legislation has to include China and India committing to something. (Hillary actually flopped on this topic). And China and India haven’t agreed. The Senate voted something like 98 to 0 during the Clinton years saying no to Kyoto if China didn’t agree to caps.

The main difference between US politicians has been the willingness of every one on this list except Bush to work to push through some sort of cap and trade in the US – independent of a multilateral framework like Kyoto. McCain has been pretty lock step with the Democrats on this one. And then smaller differences emerge in their approach to tough the caps should be, and whether the profits from trading ought to go into the government coffers as a new (Iraq war size massive) tax, or back to industry to fund future abatements. Of those, Obama talks the toughest game, but McCain is the only one who has ever tried.

The problem with a unilateral approach to cap and trade is that it’s about like going into Iraq unilaterally – it’s a bad a idea. Carbon is a global problem, and lots of separate policies aren’t likely to solve it without significant economic collateral damage. And worse, with cap and trade or taxes, if we try to have separate markets or tax schemes, it means we likely get a different price of carbon in California than in Texas than in China, than in Europe. And if there is no way to equalize the price by trading credits in linked markets, the only route left for industry is to shift production out of the country with the highest price, or lose out to competitors from those markets with lower prices. If the markets aren’t linked (which Obama supports in small amounts and McCain in medium amounts), we will definitely see these geographical price differentials. Then industry will respond by shifting production to China and India, whether it’s overt or not, they won’t have a choice. The power of the consumer dollar will force it to some degree. And the tighter the US carbon legislation is compared to the Kyoto, the bigger incentive to shift production overseas. Hence Obama’s position on 80% auctions for very rapidly implemented, very tight caps results in a large tax windfall to the US government, and a correspondingly large effective price differential on the price of carbon from the US to Europe even, let alone the US to China which still has caps. Where as McCain-Lieberman’s slower and lighter (but still much faster and tighter than Kyoto) plan with explicit links to Kyoto markets, would result in more moderate price differentials. If the markets are linked (meaning you can buy Chinese credits to meet California demands), but the local carbon regulations are tighter, industry has less of a need to shift production ourseas, but can instead cans sometimes shift it’s carbon purchases overseas instead of labor or other materials, but instead we would still see an increased trade imbalance as dollars flow to China to pay for the carbon.

Basically, if the US cap and trade is tighter than foreign cap and trade, either manufacturing has to go off shore, or if the markets are linked and you can buy carbon offshore, then either dollars could go offshore for carbon to keep jobs and production home. That’s why the big push for multilateral climate change, carbon trading markets, and environmental regulation that moves in lockstep with our biggest trading partners.

Hey wait, does that mean that the Democratic position on climate change will actually exacerbate outsourcing to Asia and trade imbalances even MORE than the Republican position this time? ‘Fraid so. The thing I like about McCain on climate change, is that despite getting a bad rap on economics, he’s the only candidate who’s bothered to include the impact on you and I into the complex calculus of climate change legislation.

It’s a catch-22 with no real way out, and a lot of bad options. The worst option however, is doing nothing. Luckily, with Palin now toeing McCain’s line on climate change. That option may finally be off the table.

What is Cleantech?

By Neal Dikeman

Google recently opened its Wikipedia competitor, styled “knol” or unit of knowledge. I wrote a definition of what is cleantech to put up on knol, and upon reflection, it’s probably an overview worth passing around.

Cleantech, also referred to as clean technology, and often used interchangeably with the term greentech, has emerged as an umbrella term encompassing the investment asset class, technology, and business sectors which include clean energy, environmental, and sustainable or green, products and services. (See various definitions below.)

The term has historically been differentiated from various definitions of green business, sustainability, or triple bottom line industries by its origins in the venture capital investment community, and has grown to define a business sector that includes significant and high growth industries such as solar, wind, water purification, and biofuels.

Cleantech was popularized in large part through the work of Nick Parker and Keith Raab, founders of the Cleantech Venture Network (now Cleantech Group) from 2002 onwards beginning as a term to describe the “green and clean” technologies, especially including solar, biofuels, fuel cells, water remediation, and renewable power generation, that venture capital investors were turning to in increasing numbers as the next trend in technology investing after the collapse of the tech boom in 2001. The Cleantech Group developed and operates a popular conference series and investor membership organization for the category. They registered or acquired a large number of the cleantech related domain names, and a number of cleantech related trademarks, though no trademark exists for the term cleantech itself. The initial target of the conferences were venture capitalists and startup companies operating in sectors covered by the term. Since then the term has come into wide use in the media, broader investment community, and many of the underlying industries that make up the umbrella sector, and spawned numerous conferences, websites, magazines, indices, newsletters, and companies, growing into the third largest venture capital investment sector behind IT and biotech.

While no one person or organization is generally credited with coining the term for its current purpose, besides the Cleantech Group, attribution is sometimes also given to energy technology consultancy Clean Edge, whose principals include green business journalist, author and speaker Joel Makower, and Ron Pernick and Clint Wilder, authors of the 2007 book Cleantech Revolution. Before it’s popularization as an investment asset class and technology category, “cleantech” as a word typically referred to dry cleaning or cleaning supplies equipment, as evidenced by the fact that many cleantech related domain names are still owned by companies in those fields.

The sector and the term came into its own in the 2005 and 2006 time frame, when mainstream institutional investors, led by CalPERS and CalSTRS, began allocating investment into venture funds in the environmental, alternative and renewable energy sectors, and adopted cleantech as a term of choice for the description of that asset class, lending credibility to the sector.[3] Also the 2005 time frame saw the emergence of blogs dedicated to following the sector, the earliest of which included Clean Break by Canadian journalist Tyler Hamilton, Cleantech Blog edited by merchant banker Neal Dikeman (ours of course), and Cleantech Investing (since acquired by Greentech Media) written by venture capitalist Rob Day, which helped to proliferate the sector and the term. But possibly most significant, the 2004 to 2006 time frame saw the emergence of financial and capital markets successes in the solar, wind, and ethanol industries that make up large portions of the various cleantech related stock indices, driven by changes in policy incentives and fuels standards in the US and Europe. Other factors attributed as major drivers in that time frame include rising energy and commodity prices, increased consumer awareness of sustainability issues, and the start of the Kyoto Protocol based carbon trading mechanisms. The combination of these events began to attract significant amounts of capital and awareness to the sector.

Definitions of what is included in cleantech vary among among industry participants, but the most cited definitions of cleantech would certainly include the running definition in Wikipedia and the definition provided by the Cleantech Group.

From Wikipedia:“Cleantech or clean tech is generally defined as knowledge-based products or services that improve operational performance, productivity or efficiency while reducing costs, inputs, energy consumption, waste or pollution.Cleantech is differentiated from green technology since it generally refers to the emerging financial industry (as opposed to the actual technology in which the industry invests). Specifically, the investment focus includes water purification, eco- Efficient production techniques, renewable energy, green technology, sustainable business. Since the 1990s the financial community began more active interest and investing into the Cleantech space.” Note: The definition on Wikipedia has changed since this 2007 version.The Cleantech Group also developed within their own definition a market segmentation and taxonomy of what sectors was included in the the cleantech sector, which has served as a reasonable proxy for an official definition. Cleantech Defined by the Cleantech Group:

“Clean is more than green. Clean technology, or “cleantech”, should not be confused with the terms environmental technology or “green tech” popularized in the 1970’s and 80’s. Cleantech is new technology and related business models offering competitive returns for investors and customers while providing solutions to global challenges. Where greentech, or envirotech, represents the highly regulatory driven, “end-of-pipe” technology of the past with limited opportunity for attractive returns, cleantech is driven by market economics therefore offering greater financial upside and sustainability. The concept of cleantech embraces a diverse range of products, services, and processes across industry verticals that are inherently designed to,
Provide superior performance at lower costs, Greatly reduce or eliminate negative ecological impact, Improve the productive and responsible use of natural resources

Cleantech spans many industry verticals and is defined by the following eleven segments,
Energy Generation
Energy Storage
Energy Infrastructure
Energy Efficiency
Transportation
Water & Wastewater
Air & Environment
Materials
Manufacturing/Industrial
Agriculture
Recycling & Waste”

Also of key note, the term “greentech”, which as previously noted is often used interchangeably with cleantech, was popularized by venture capitalists John Denniston and John Doerr of Kleiner Perkins, and has become almost a synonym for cleantech since about 2005 as more mainstream venture capital and Wall Street investors began entering the sector increasing numbers, and arguably searched for a term to use to differentiate their investment strategies from past investors. Largely because of its use[1] by these notable venture capital fims, the term was heavily picked up in the mainstream media – as well as new media startups like Inside Greentech (since acquired by the Cleantech Group) and Greentech Media. Riding on the coattails established by “cleantech” – greentech is sometimes characterized as more than just a subset of the cleantech umbrella. It has also been suggested that greentech is the re-emergence of an older term that never quite found broad appeal from its use in the early 1990s or prior. This contrast is illustrated by a quote from John Doerr in Red Herring Magazine on the differences: ““Clean tech,” as many past efforts at environmentally friendly industry have been called, hasn’t panned out from an investment standpoint, said Mr. Doerr, but “greentech” will. The difference? The word “green” means money is to be made, he said. It’s about advances in areas such as nanotechnology and alternative fuels that mean that companies will succeed in the future where past efforts have failed.” – Red Herring[4]This rise of the term greentech began a small debate on which term was most appropriate, and the Cleantech Group responded in numerous articles, with one example here: “”Who wants green air or green water”? The greentech term (and we use small caps unless referring to an org) is very retro and smacks of EPA type regulation. The whole reason we brought the cleantech term to market five years ago was to advance a new concept that reflected technological improvement and new concept. As you know, often cleantech is purchased primarily for non-environmental reasons even though it may offer significant environmental benefits. While some media outlets may be using the greentech term, just about all corps, Wall Street players and VCs who are active in the area use the term cleantech. We think there is room for various terms, eg “resource efficient” but from a capital markets perspective its important there is one term so that a defined asset (allocation) category emerges.”[2] – Keith Raab, CEO and Founder, Cleantech Group

References
KPCB’s Greentech Initiative http://kpcb.com/initiatives/greentech/index.html
Cleantech vs. Greentech http://cleantechblog.wpengine.com/2007/07/cleantech-vs-greentech.html CalSTRS/CalPERS 2005 Cleantech Conference Announcement http://www.calstrs.com/newsroom/2005/news03082005InvestConf.aspx
John Doerr Touts ‘Greentech’ 01 October 2006, Red Herring Magazine http://www.redherring.com/Home/18901

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is the founding CEO of Carbonflow, founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org, and a blogger for CNET’s Greentech blog.

Sustainable energy indices mixed, broad markets and commodities retreat (week ending 7/25)

Author: Mark Henwood

Emerging Markets, EAFA, and S&P500 all fell this week. Commodities (DJP) fell another 4.4% on top of the previous week’s 7.8% decline.

Renewable Electricity suffered a modest loss for the week. One of the components, EarthFirst (EF.TO), continued its steep decline losing another 20.9% on the week. Since the company appointed its new CEO on June 12 the stock has dropped 46% on thin volume. In the intervening period the company reported an approximate 10% increase in cost for its Dokie project, a reduction in the project’s estimated energy of 2.3%, and delivery of 24 MW of wind turbines to the project site. Investors are betting the company lands its project financing and secures additional contracts in other solicitations. As I previously noted, project issues have magnified effect on company valuations in this strategy.
Solar gave up 5.4% this week and is now down 34.4% for the year. But not all the companies are suffering the same decline. In particular, First Solar (FSLR) is only down 1.8% for the year and has now become 25% of the market cap of Camino’s index. Does their technology warrant this dominant position in the strategy? Examining one of their recent project’s sheds some light on the question.

On July 10, 2008 the California Public Utilities Commission approved a 7.5 MW contract between First Solar’s FSE Blythe project and Southern California Edision. Unfortunately much of the economic information was not disclosed but some key data can be gleaned from the record. First, the company is projecting a significant 27% capacity factor for the project, significantly higher than typical estimates for PV projects. But equally important is the company is pursing the development receiving a price at or below the “market reference price” which is based on a highly efficient modern thermal plant. After accounting for some messy seasonal and time-of-use factors the project will receive approximately USD 0.14/kWh plus a 10% tax credit. If FirstSolar can make money at this project then they are very near the holy grail of grid parity. Maybe their dominate valuation makes sense and the company is becoming an execution risk on how fast can they grow.
Mark is the founder of Camino Energy, an information provider specializing in globally traded sustainable energy stocks. He also is an investor in sustainable energy stocks and has positions in Renewable Electricity, including EF.TO.

Sustainable energy indices mixed, broad markets gain while commodities retreat (week ending 7/18)

Author: Mark Henwood

Emerging Markets, EAFA, and S&P500 all rose this week partially on reduced pressure on commodities (DJP) which fell 7.8% for the week.

Biofuels shares responded mid-week to news that Verasun (VSE) was keeping 330 MGY per year of new capacity idle. As I wrote in my post for the week ending June 13th with tight margins it comes as no surprise that producers are reducing production plans . With ethanol consuming somewhere around 30% of corn supplies the cost of corn should respond to a reduction in ethanol production. Reduced ethanol supplies should be supportive of stronger ethanol prices. At some point an equilibrium will be reached.

Later in the week UBS upgraded the ethanol sector to a buy on “improving margins”. VSE’s price (and others) responded strongly gaining 21% on Friday and ending the week up a huge 49% at USD 6.12/share. With this big change I thought the margin on producing ethanol would have materially improved. True, corn has been dropping significantly since the start of July with the December contract closing Friday on the CBOT at USD 6.28/bushel. But ethanol has been falling also in July, with the December contract closing Friday at USD 2.36/gallon leaving the “corn crush” margin at the same slim USD 0.2/gallon it was in the middle of June when Verasun’s stock price was below USD 5.0/share. I’m not sure I understand the improving margin argument.
The LED-Lighting strategy continued to disappoint falling an additional 9.9% for the week with a cumulative decline of 35% since we started tracking the sector at the end of March. Orion Energy Systems Inc. (OESX) lost 38.7% of its value for the week after it reduced its guidance for 2009 to a 25-28% growth rate, down from its previous 50% expectation. With its long term potential, I’m looking for signs this strategy may be fairly priced after this year’s big correction.
Mark is the founder of Camino Energy, an information provider specializing in globally traded sustainable energy stocks. He also is an investor in sustainable energy stocks and has positions in Renewable Electricity.

The Dating Rules for CIGS in Solar

I’ve been saying for a while, that with enough money, someone is bound to crack the CIGS nut in thin film, and deliver the cleantech sector another First Solar (NASDAQ:FSLR) like renaissance for the always around the corner technology.

That’s not because it’s easy, or even because it’s a good idea to try, but when well over a billion dollars in investment pours into a given technology, something is bound to come out the other side – eventually. A seductively high efficiency potential technology with very low potential materials costs, CIGS has been just over the horizon for a decade or more, but has enjoyed a huge influx of capital and increase in the number of programs chasing in over the last 5 years. Similar to other solar thin film technologies, device complexity, effective yield, throughput, and process control issues are always the bugaboo.

Given its seductivenes, its somewhat capricious nature, and the siren filled history of the technology, perhaps we should think of CIGS like a woman, and all men need a few dating rules of the road to keep in mind before we jump in. Here are mine (for CIGS, not women):

Number one, like most thin film technologies, $100 mm in investment is the ante up to play the game. Just because you spend it doesn’t mean you get real product out, and with CIGS, you tend not to know whether anything is workable until oh, say $50 to $100 mm is already spent.

Number two, what you think you know, you don’t. Until the pilot plant has been operating for a few years, companies generally really underestimate what they don’t know.

Number three, remember those experiments and great idea you sold your investors on, the hard part is not there, the hard (read risky) part is ALL in the “it’s just engineering” end of the scale up process you told the investors was “fairly straightforward”. This isn’t IT, it’s deposition with a very commoditized end product.

Number four, whatever the projection as far as timing, add 3 years, maybe 5. I’m not kidding here, I said years.

Number five, when the words “fast”, “roll to roll”, “reel to reel” or anything else equating to speed in the process are in the pitch deck, translate that to read excruciatingly slow in the development timeline, and lots of “issues” popping up in those nasty yield and process control areas.

Number six, when investing, be very careful about that “yield” number and the “capacity” numbers they made up based on it. All thin film development companies keep “little black books” with the data and charts on every process run they’ve ever made. Read every single one of those charts, and ask lots of stupid questions about why only 4% of the total square footage produced is above 6% efficiency in run XYZ. Think in terms of “effective total average yield”. That’s where the problems are hiding.

CIGS watchers have a number of darlings to follow. There’s Miasole, which now under new management is rumored to have substantially tightened down its development discipline to take it’s shot, Nanosolar, another Silicon Valley venture darling that has been described by many observers along the lines of, “never met hype they didn’t like”, but with a seductively low cost printable process if they can get it to work, Solyndra, the “stealth” company with the big sign on I-880, Heliovolt, the Texas-based hot CIGS deal of last year, which burst on to the fundraising scene on the back of it’s still extremely early stage “FASST” technology. And those are just the largest of the US based venture backed deals, without including Honda, IBM, DayStar, Ascent Solar, Solopower, and literally dozens upon dozens of others around the world with significant backing (though all at a very, very early stage). Wikipedia has a decent cut at a list, though by no stretch of the imagination comprehensive.

My best estimate is that most of the venture investors in each of those deals personally looked in depth at the manufacturing process of single digit numbers of competing approaches before investing. And only read the little black book on two of them. That strategy was tried, with ahem, “mixed” results, in fuel cells a few years back. We’ll see how well it works in thin film solar.

And of course, as with most things in solar, the major players should probably be watched more carefully than the startups. I’ve always liked larger companies to crack thin film issues, in no small part because the term “stage gate” tends to mean something to them.

But my personal favorite for front runner currently is Arizona based Global Solar, a solar company I have been following for years. Their announcement a few months ago of 10% efficiency in production runs, was pretty much lost in the crush of press around solar, for reasons unfathomable to me.

While admittedly not yet proven in a full production environment (they are working on the scale up to 30 MW plants) they do have the massive advantage of having run virtually the only operating CIGS pilot plant in the world – and I believe has shipped more volume of CIGS product than anyone if not everyone else. True to form, that technology, which originally came out of the Tuscon Electric backed ITN Energy Systems labs in Colorado which later did Ascent Solar, has had an estimated $150-$200 mm plus invested in it over the last decade, before Solon AG bought the company for a reported $16 mm. Though to be fair, current management under CEO Mike Gering was brought on well into that process. So while I’ll keep my fingers crossed that some one will crack the CIGS nut, and continue to be flabbergasted at the $1 Bil plus valuations estimated to have been acheived by some of the startups named here for very large science projects, when it comes to the one to watch, Global Solar is my personal pick.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is the founding CEO of Carbonflow, founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org, and a blogger for CNET’s Greentech blog.

The Next Big Thing in Cleantech Venturing

As always, the venture community is looking for its next big thing. The cleantech world is no exception. Despite the dearth of exits, so much capital has flowed into the cleantech sector that investors need new places to put it. So despite my promise to certain friends not to blog certain funding rumors in each category, the top 4 contenders are:

  1. Green building materials – I’m not sure it would be my thing, but investors across the board seem to think this area is ripe for a hit.
  2. Carbon IT – With some sort of cap and trade a near certainty, the interest is picking up in one of the few areas in carbon that looks like a “venture bet”. I should know, I have one of these companies myself.
  3. Food related technologies – High food prices and rising fertilizer costs, what can I say?
  4. N-generation solar technologies – Everyone not in the first wave is looking to get in to the 4th wave. Not sure venture investors will fare better in the 3rd or 4th wave than they did in the second, but they are going to try.

I had a chance to visit one of the Gaia Hotels, which bills itself as a new eco-hotel chain, this weekend. The experience put those four contending areas in a bit of a new light, as the creator of the Gaia ecotel concept toured me around and shed some light on the decisions that went into them from the demand side. (Note: “ecotel”, “bit of a new light”, “shed some light”, “demand side”, all good cleantechisms).

After launching a LEED Gold Certified facility in Napa Valley a little under two years ago, Gaia opened a new one in Northern California, focused on outdoor recreational travelers, which they expect to achieve at least LEED Silver. I had lunch with Wen Chang, the creator behind Gaia, this Saturday. When it came to green building materials, I was frankly amazed how much impact the LEED program had on the design and materials selection, and how big a selling point LEED was to this concept. Everything from using photovoltaic panels and Solatube daylighting, to low flow shower heads, low water usage and local landscape selection, and chemical free gardening and stormwater management, all the way to the carpet made from recycled materials, CFLs in the night stand, and sustainable forest products. Talk about demand stimulus, after an extensive tour, I was ready to buy a green building materials company myself. Especially since the ecotel was booked solid!

And of course front and center in the lobby, there were Renewable Energy Credits (though not carbon credits) purchased from our friends at Renewable Choice Energy, to offset the power usage, and a monitoring system to show power and water usage, and solar production.

Moving on to the food technology, the Gaia Anderson restaurant is not yet open, but is intended to be an organic and locally grown food (I assume that Napa will count as “local” for the wine, but I did not ask!).

No eco friendly building in this day and age would be complete without a solar panel on the roof. Gaia Napa’s solar system is apparently providing 10% of the electricity needs on site, while at the Gaia Anderson, the panels have not yet arrived. But perhaps the most telling for would-be solar barons, Wen Chang did not know or care whose technology powered the solar panels. Only that they arrived and worked.

All in all, quite an eye opening one day “deep dive” into the demand side of the four top contenders for cleantech’s next big thing. (Pardon the expression deep dive, I’ve always found that term amusing, especially since cleantech VCs use it all the time now to describe the 6 conferences they went to and 12 business plans they read to become an expert in, say, solar, so I couldn’t resist.)

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is the founding CEO of Carbonflow, founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org, and a blogger for CNET’s Greentech blog.

Is Corn Ethanol Lowering Gas Prices at the Pump?

Despite providing the largest portion of alternative fuel in the US, corn ethanol gets a lot of flack in the circles Cleantech Blog runs in. The usual culprits go something like this: Corn ethanol is heavily subsidized (yes it is). Corn ethanol does not reduce greenhouse gas emissions (sort of, it really, really depends on your assumptions). Corn ethanol contributes to the fertilizer driven “deadzone” in the Gulf of Mexico (maybe, another complicated topic). Corn ethanol drives up the price of food (a topic for another day).

But the main argument for supporting corn ethanol production has always been about energy independence and fuel switching. Enabling a new source of supply into our gasoline supply chain should in theory, put some some downward pressure on gasoline prices at the pump, and keep those energy dollars at home rather than send them overseas.

So the real question is, does it?

A very interesting paper was published at Iowa State last month says yes, US ethanol production (almost all from corn) has reduced gasoline prices at the pump $0.29-$0.40 per gallon, depending on the region. Further, that the reduction came largely at the expense of profits the refining industry would otherwise have made (indicating perhaps that our ethanol production helped US consumers at the pump, but did not impact world oil prices).

In their paper entitled The Impact of Ethanol Production on US and Regional Gasoline Prices and on the Profitability of the US Oil Refinery Industry, authors Xiaodong Xu and Dermot Hayes analyzed the impact on price at the pump and refining profits of adding ethanol to the US gasoline fleets by separating the impact of ethanol from the major variables like gasoline imports, refining capacity, refining utilization rates, hurricanes, market concentration in refining, stocks, and seasonality, that generally affect gasoline price.

I find their $0.29 to $0.40 per gallon results a surprisingly large number, indicating that ethanol production, while providing on average well less than 5% of our gasoline supplies over their study period, could have affected prices at the pump downward to the tune of greater than 2 to 3 times that percentage level. That result is a huge win for ethanol proponents, as it suggests that adding ethanol to the US fleet has significantly benefited consumers (as one would expect), and also suggests that the ethanol subsidy program (at about $0.40 per gallon for 5% of the US gasoline production works out to around a 1 to 2 cent effective tax on gasoline at current levels) may well have paid for itself up to 20x over or more. The studies authors are careful not extrapolate too much from the results, but they are certainly interesting enough to warrant significant further research, and argue a strong case for further corn ethanol support.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org, and a blogger for CNET’s Greentech blog.

Cleantech Blog "Power 10" Ranking Vol. I

I spend most of my day meeting and talking to companies in the cleantech sector. And those of you who know me know I have opinions on who is doing it right, and who is doing it wrong. So I thought it was about time to initiate the Cleantech Blog Power 10 Ranking of cleantech companies doing it right. Eligibility for inclusion in the ranking requires meeting a 6 point test. Suggestions for inclusions in future volumes are welcome. The 6 point test:

1. The company is energy or environmental technology related
2. I like their products
3. The market needs them
4. The company is smart about building their business
5. I’d like to own the company if I could (for the right price, of course!)
6. It is not already one of mine (my apologies to my friends Zenergy Power)

I have included cleantech companies big and small. Volume I surprisingly ended up with a lot more solar companies than I would have guessed, and no biofuels. Perhaps I really am a closet solar fanatic.

  1. Sharp Electronics – In solar, still the biggest, and still growing. Enough said.
  2. Det Norske Veritas – DNV is a massive 150 year old risk management firm. Their auditors underpin roughly half of the carbon markets. In carbon, audit and verification is everything. I could not leave them off.
  3. IBM (NYSE:IBM) – What IBM is doing in smart grid is very exciting. They are part of a large proportion of the smart grid implementations that are in process, and a huge proponent of open standards. Smart grid is to electricity what fiber is to telecom. It underpins everything.
  4. Applied Materials (NYSE:AMAT) – The future of photovoltaics lies in scaling thin film manufacturing process. Who better to do this than the dean of semiconductor capital equipment. I broke the story of Applied’s entry to solar in the blogosphere in 2006, and if anything underestimated how hard they were pushing. The whisper mill has been whirring that the installations of their plants are not on track. Not only do I have faith they will get there, I think it is critical to the industry that they do.
  5. Fuel Tech (NASDAQ:FTEK) – I wrote about them in 2007. The CEO John Norris is a long time friend and an excellent operator. Cleaning up coal is a huge business that needs to be done, and they do it well.
  6. Fat Spaniel – Distributed power, solar included, is a ticking time bomb without independent monitoring. Fat Spaniel does it the best.
  7. Smart Fuel Cells (XETRA:F3C.DE) – I wrote about them recently. I helped create a fuel cell business in 2002. This is the first fuel cell company in 5 years that has intrigued me. They actually ship product with solid gross margins. That is a start.
  8. First Solar (NASDAQ:FSLR) – Lowest cost producer in the photovoltaic business. Guaranteed to make the list until dethroned.
  9. Global Solar – I have been following this company for a long time. CIGS is very hard and has broken (or is currently breaking) hundreds of millions or billions of dollars worth of wannabes. This management team, led by Mike Gering, respects how hard it is. And since they have actually been running a pilot plant shipping product for 3 years, so we need to take note when they say they have cracked the manufacturing scale nut.
  10. Schott – Long a major player in crystalline silicon photovoltaics, amorphous silicon photovoltaics and concentrated solar thermal, where they are one of the top manufacturers of solar thermal receivers. That balance is unique, and exciting.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org, and a blogger for CNET’s Greentech blog.

Edison International Says Solar is the Great Untapped Resource

Cleantech Blog had a conversation last year with Stuart Hemphill, now the newly appointed Vice President for Renewables and Alternative Energy at Southern California Edison, a subsidiary of Edison International (NYSE:EIX), one of the largest purchasers of renewable power in the US. We caught up with him again today in a lively discussion around his predictions for the renewable sector.

Today they are announcing their sixth competitive solicitation for renewable energy. On peak delivery from the Tehachapi region is preferred, as they are currently building a massive transmission line to tap into the 4,500 MW of wind potential. But wind produces only 35% of the time. This major pipeline needs to be balanced. So they are looking for creative proposals from developers to fill up the rest of that transmission line with on peak power deliveries.

Renewable and alternative energy are still top goals for Edison. Stuart says his promotion is part a reflection of the business’ expanding interest in leadership in renewables in the US.

Prediction Number 1 – The next 10 years are going to be a wild, wild west in the solar industry. Companies around the globe are exploring new solar technologies of every variety. Stuart thinks it’s way too early to tell which ones are going to be successful. But he considers solar to be the great untapped resource in California and elsewhere.

So I asked him if by that he meant solar thermal or photovoltaics. The answer is “Yes”. Stuart responded that in the past couple of years we have seen incredible amounts of venture capital investment going into solar firms, and PV is only part of that equation.

When I pushed Stuart to predict a winner between conventional solar parabolic trough and other types of solar thermal technologies, Stuart refused, suggesting that it is still too early to tell which technologies will be the winners. That’s what makes it exciting to watch, in his opinion. As an example, he stated that we are now seeing renewed interest power tower technologies with pretty high efficiencies. The challenge is to see which ones get done.

When it comes to what’s important to SoCal Edison itself, it is really important that they sign PPA contracts with viable companies and viable technologies. He sees a wide spectrum of proposals in terms of viability, and is always looking for at least some sort of demonstration plant to prove it up and a significant level of backing for the companies before they can get involved.

Prediction Number 2 – I did ask him what his take on run of river hydro is. He responded that he hopes to be wrong, as he likes run of river hydro, but doesn’t see any major increases in the resource coming in California. Hydro in California in general has a very a limited resource potential left to be developed and lots of stakeholder concerns to be addressed in each case, so while he is hopeful, he is not predicting any great increases.

Prediction Number 3 – US Offshore Wind – We will not see much from offshore wind in California, as the limitations both from physical layout of shoreline as well as policy and consumer concerns.

We then switched to what the industry challenges are. Stuart nailed two big ones, transmission and interconnection.

He believes that transmission is getting even more challenging than last time we spoke. What’s interesting to Stuart is that most people agree and are in support of renewables in California, but very few people support the way that the goals need to be attained, ie, significantly increase transmission infrastructure. There tends to be lots of local opposition, or federal agencies that aren’t always in support of particular local goals. This makes sense, as transmission by its nature always touches a lot of different land and communities in its path, meaning lots of different stakeholders need to be involved.

Interconnection queue bottlenecks are the real next challenge in California and in the Midwest according to Stuart. This is a challenge that is addressable and there are proposals into FERC to do so. But currently it is a first come first serve system, and easy to get into the queue. Getting in the queue starts a study process based on FERC rules, including a feasibility study, then a system impact study and a facility study. The bottleneck arises because according to the current rules, if your facility is further back in the queue, your studies assume that the facilities ahead of you are up and running, but if at any point in time someone ahead of you drops out, your studies need to be effectively redone. Because it is relatively easy to get into the queue, nonviable projects that do not end up coming online as planned have been upsetting the applecart, causing all the projects behind them to go back to the drawing board as far as the study process is concerned. Since 2002, we’ve seen a steep ramp up to a level that is just unmanageable given that dynamic. CAL ISO has a proposal in with FERC to change this, so Stuart believes a solution is coming, just not here yet.

As usual, SoCal Edison is pushing forward aggressively on renewables, and we were excited to see the new solicitation and changes they are making. As we have said before, let’s just get it done.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org, and a blogger for CNET’s Cleantech blog.

Save the Suds and Water with Eco Touch Waterless Car Care

by Cristina Foung

My favorite green product of the week: Eco Touch Waterless Car Care

What is it?
Eco Touch Waterless Car Care is a waterless car wash made with water, plant-derived surfactants (coconut and soy), a water-based polymer, and a soy-based solvent.
It simply requires you to spray and wipe with a microfiber towel. One 22-oz. bottle should allow you to wash your car 4 to 8 times.

Why is it better?
I first came across Eco Touch at the San Francisco Green Festival in 2007.
The founders were there and they had just come out with a waterless car wash. I picked up a bottle and have been using it ever since. It works very well on the every day wear and tear.

According to Eco Touch, the typical driveway carwash uses 100 gallons of water. That means each bottle of Waterless Car Care could save up to 800 gallons of potable water. That’s a lot of water that doesn’t need to go down the drain. Beyond that, Eco Touch is non-toxic, biodegradable, and phosphate-free. In December 2007, Eco Touch was approved as a certified green business by Co-op America.

The company has just added three new products to its line for dashboard and trim care, carpet and upholstery care, and metal polishing.

Where can you find it?

You can buy Eco Touch products directly from the company website.
Each bottle costs $9.99.

Besides her green products column on Cleantech Blog, Cristina is a passionate advocate for green living at the Green Home Huddle at Huddler.com, which focuses on electric cars, energy efficient appliances, and other green products.

Press Release:

Feb 26, 2008
The First Comprehensive Green Car Care Line is Introduced by Eco Touch

Portsmouth, New Hampshire—Eco Touch, a Portsmouth, New Hampshire based manufacturer of environmentally friendly car cleaning products is pleased to announce the national release of its comprehensive line of green car care products including Waterless Car Wash, Dash + Trim Protectant, Metal + Chrome Polish and Carpet + Upholstery Cleaner. For the first time a car can be effectively cleaned and detailed without using harmful, petroleum-based products.

Eco Touch’s Waterless Car Wash features an all-natural water-based formula with high concentrations of organic soaps and plant-based surfactants which break down surface grime. Its naturally derived polymers leave a protective layer that acts similar to a carnauba wax and gives that new-car shine. The application is simple: spray on, wipe off. No water required. Eco Touch is safe for the user and the environment. And it takes less time and less effort than a traditional car wash.

“The real challenge is changing people’s mindset”, said Eco Touch Co-Founder and Director of Sales Anne Ruozzi. “From the first Ford ever driven, water was essential to cleaning a car. Once people see the Eco Touch results, it opens their eyes to a whole new experience. Eco Touch is more than just a great option to saving our natural resources, it’s an innovative way to clean and protect a car’s finish with outstanding results.”

GE: Doing Cleantech The Right Way

I have long had a respect for GE (NYSE:GE), and how it runs its business. In cleantech, I am very, very jealous. They have made themselves into the company to beat. Whether by plan, luck, or simply applying sound business discipline, GE has made itself into a top 3 global cleantech player no matter happens. And they did it for a fraction of the price, and a lot less risk than anyone in Silicon Valley or the energy sector. Venture capitalists beware, in cleantech, the behemoths have beat you to the punch, have done it cheaper, faster, and with more grit than you realize.

5 step Cleantech Program by GE

Wind – In 2002, GE bought Enron Wind out of Enron’s bankruptcy for about $300 mm, making GE one of the top 5 wind players overnight (it’s now well in excess of a billion in revenue). It was their first cleantech steal, right before the wind industry got amazingly tight (and huge).

Power – In 2003, GE acquired one of the leading gas engine manufacturers in Jenbacher, making GE an overnight leader in small, clean power systems, and powering their way into everything from distributed generation to landfill gas markets.

Solar – In 2004, just before the solar boom, GE acquired Astropower, one of the top 5 solar energy companies in the US, for less than $20 million out of bankrupcty, after the company was delisted following accounting irregularities. You cannot even build a single solar manufacturing line for $20 mm. Only the subsequent silicon supply shortages, and a lack of the needed investment in the business and next generation technology kept GE from making a homerun out of it. But despite that, there will never be another steal in solar quite like this.

Water – In 2005, GE acquired one of the largest water technology businesses in the US, Ionics, to complement its previous acqusitions in the water sector. Paying a full price of $1.1 Billion, it virtually guaranteed GE a top 5 position in the reverse osmosis, desalination, and water purification markets going forwrad, right after Ionics was shored up through a merger with Ecolochem.

Ecomagination Brand – Then on the back of these deals, in 2005 GE launched its Ecomagination initiative, and anchored the entire company’s image around its new cleantech empire.

That, my friends, is the way you make money in cleantech venture capital. I would venture to guess that GE has made 10x its money, no matter how you spin it. Or put another way, an IPO of the GE cleantech business would be the hottest thing in years.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org, and a blogger for CNET’s Cleantech blog.

Up in the Air With Biofuels

by Richard T. Stuebi

Over the weekend, Virgin Atlantic Airways flew a passenger-less Boeing 747-400 partially fueled by a biofuel mixture of coconut oil and babassu oil from London’s Heathrow Airport to Amsterdam’s Schiphol Airport. (Read USA Today story.)

The test flight, performed to evaluate comparative engine performance and emissions rates with standard jet fuel and biofuel mixtures, was conducted by Virgin along with partners Boeing (NYSE: BA), the engine-maker General Electric (NYSE: GE), and the biofuel company Imperium Renewables.

No matter how the results of the experiment pan out, and no matter your personal view on the fundmental utility of biofuels, this is yet another example of how a passionate entrepreneur — albeit one with billions of dollars on his personal balance sheet like Richard Branson — is exploring the cleantech frontiers of what is possible, what is economical, what is environmentally-beneficial.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

Can We Actually Reduce Energy Usage without Hurting GDP?

I was thinking today, in cleantech we often talk a lot about energy efficiency. Californians often cite that this state has grown its economy for the last 20 years without a significant increase in energy usage per capita, compared to the rest of the country, where GDP per capita goes up, and energy usage goes up just as much. But of course, California has lost much of its manufacturing sector over that same 20 year period, too. Perhaps no coincidence?

But if we wanted to actually do it, where could we actually save energy without impacting GDP growth, make a serious difference in our power bill, and do it in a big way – targeting say, 50% of our total power usage on a per capita basis?

  • CFLs & LEDs – We are already moving aggressively towards compact flourescent light bulbs, and the penetration rates are still low. As that trend continues, and LEDs come into the mix for more and more applications, our lighting bills should trend straight downward for the next decade. Now if we can just stop cringing at the thought of a $3 lightbulb!
  • Heating and Air Conditioning – I know whenever my power bill goes higher than I like, I just watch how often I turn the heater on, and adjust the thermoset a bit. The answer here has always been some combination of improved technology, smart metering and more transparency in billing and usage, and energy prices rising high enough for consumers to feel the pinch. Oh, and did I mention insulation, California?
  • Hotwater heaters – Can anybody say, “tankless”?
  • Power generation -If every power plant was upgraded to the latest generation of technology – in the power generation world – newer tends to equal more efficient all else being equal – the impact could be staggering. But bottom line, this means our regulators would have to approve the increase in utility capital expenditures and pass those costs on through to us in the short term. That’s about as likely as George W announcing a plan to tax every SUV Detroit makes and give the money to the poor to buy solar systems.
  • Solar – As for solar – which is typically sold on a “reduce your energy bill” pitch, not a chance. At $0.15 to $1.00/kwh (depending on who’s counting and how they count), if we actually reduced a significant amount of our building load with solar power we’d likely send our GDP plummeting. There are lots of reasons to love solar, but decreasing energy usage per unit of GDP is not one of them. At least, not yet.

These aren’t new ideas. But definitely worth repeating until we learn the lesson.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, and a blogger for CNET’s Cleantech blog.

In Search of A Better Story

by Richard T. Stuebi

One of the best things I’ve read recently is an oped in The Washington Post entitled “Going Green? Easy Doesn’t Do It” by Michael Maniates, a professor of political science and environmental science at Allegheny College.

Prof. Maniates gets right to the heart of one of the things that bothers me about what I hear from some of the more ardent proponents of the cleantech movement: the unexpressed sense that saving the world can be easily accomplished with a few minor changes in behavior, and that technological advancements will be coming to save the day at little incremental cost to all of us.

His punchline: “Never has so little been asked of so many at such a critical moment.”

I hope we’re wrong, but Prof. Maniates and I both believe that, if we’re going to seriously address our energy and environmental challenges, we’re going to be exposed to major economic and behavioral sacrifice, relative to our current standards of living. I don’t see how we can reduce greenhouse gas emissions by 80% from present levels without a fundamental shift in how we do things at every level of existence.

This takes courage and determination. As Prof. Maniates exposes, what we get instead from politicians, the media and (yes) many advocates is a mixture of hyperbole and half-truths that serve to relax the masses.

In a conversation I had about a year ago with David Orr, one of the true pioneers in environmental thinking at Oberlin College, I said to him that we all needed to create and broadcast a story about energy and environment in the U.S. that clearly induces urgency to action without inspiring panic and depression. I know that I haven’t been able to craft such a well-balanced story. Has anyone out there?

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

Climate Legislation: Who Gains? Who Loses?

Most Americans now agree that something needs to be done to reduce our greenhouse gas emissions. Hopefully most Americans now appreciate that this is not a small, but even more so, not a simple problem. I am a big believer that the playing field for our low carbon future should start level, and the market should be structured to allow our major power and energy companies a chance to lead the way, instead of simply dishing out punishment for our combined historical choices. Carrots and sticks work well together, but sticks alone are not going to solve our global carbon problem. I think it is also important to ensure that our carbon legislation does not result in a higher cost to consumers in middle America, just because the MidWest happens to have been historically coal fired, than the cost to those of us living on the coasts. Jim Rogers of Duke Energy puts this much more eloquently than I do.

Duke Energy (NYSE:DUK), one of the largest power companies in the US, has been a long supporter of energy efficiency, and known for being forward looking when it comes to a low carbon future, smart metering, and advanced energy technologies, despite having a generation fleet that is 70% coal fired. Cleantech Blog is delighted to welcome Jim Rogers, CEO of Duke Energy, to give us his thoughts on the devil in the details from their perspective. It is heartening to see a major power company take on the carbon issue full force, and like Duke has done, push energy efficiency in a big way.

– Neal Dikeman, Cleantechblog.com

By Jim Rogers
Chairman, President and CEO of Duke Energy

As we debate our differences on how to address the challenge of global climate change, surely we can agree on the end-goal – a secure, sustainable and affordable supply of energy now, and for future generations.

Most Americans also agree that we must act now – and begin building a bridge to an energy-efficient, low-carbon economy.

As the third-largest coal consumer in the United States, and one of the largest greenhouse-gas emitters, Duke Energy has a responsibility to be part of the solution. That means looking at not only how climate change affects our business today, but also the implications for the future.

We support federal legislation to address global climate change by putting a cap-and-trade system in place. The U.S. Senate is in the process of vetting a cap-and-trade bill introduced by Senators Lieberman and Warner in October. This bill is well-intended, contains some good points and appears to have bipartisan support.

But on closer examination, questions arise. Who really stands to gain, and who stands to lose? What are the real costs to average Americans?

You would expect the bridge to a low-carbon economy to have a cost, just as you might pay a toll to cross any bridge. But should some of us have to pay twice? With the Lieberman/Warner approach, that’s exactly what would happen.

Lieberman/Warner proposes to auction a large number of emissions allowances to the highest bidder. In effect, an auction becomes a carbon tax, levied on consumers in the 25 states that depend on coal for electric power – primarily the Midwest, the Great Plains and the Southeast.

Electric power customers in those regions would have to pay for the auctioned allowances up front, and then pay again later to upgrade power plants, or build new ones, as carbon-control technologies become available.

A better approach is to allocate allowances at no cost to generators who emit greenhouse gases – and reduce the number of allowances over time, while new carbon-control technologies are being developed and put in place.

Some say that an auction is the only way to take action to reduce emissions, but history tells us otherwise. Allowances were not auctioned under the 1990 Clean Air Act Amendments; nearly 97 percent of them were allocated at no cost. Since then, new technologies to reduce sulfur dioxide and nitrogen oxide emissions have been developed and implemented. Those environmental controls have reduced emissions by more than 40 percent since 1990, and they continue to decrease, without dramatic rate hikes. In fact, the nation’s average electric rates have declined.

In contrast, some estimates put the Lieberman/Warner bill’s cost to the average family at more than $1,000 per year, while emissions traders would stand to profit greatly from a volatile market for carbon allowances. According to Bloomberg, the Lieberman/Warner bill would create a potential $300 billion annual carbon-trading market by 2020.

So the question comes down to this – are we interested in protecting consumers or enriching emissions traders?

Customers who live in the Midwest, the Great Plains and the Southeast did not choose to get a large portion of their electricity from coal – it was a matter of economics, geography and geology. They should not be punished for decisions made decades ago, in good faith, using the best and lowest-cost technology of the time, with regulatory approval – and long before anyone knew about the impact of carbon emissions on climate change.

And before we dismiss coal as a viable energy source for the future, consider this: The U.S. is sitting on more than 250 years of coal reserves, more than any other nation in the world. This rich natural resource has untapped potential for ensuring our country’s energy security. The challenge is primarily technological – to find smarter and cleaner ways to use it, such as carbon capture and storage. Until those technologies are available, we must continue to use our existing coal resources and protect the interests of consumers who rely on coal.

The goal for carbon legislation should not be to punish utilities for building coal plants to keep the lights on in the past. It should be to create the incentives to put new clean technologies in place for the future – not just clean coal, but also nuclear and renewable energy, natural gas and the “fifth fuel” – energy efficiency.

Under the Lieberman/Warner approach, electric power customers in half of our states will carry a disproportionate share of the burden. We need to pass climate legislation that is fair to all consumers and protects the economic interests of all states and regions. Our climate is at stake, and so is our economy. By allocating most allowances, following the precedent set by the successful Clean Air Act, we believe both can be protected.

Jim Rogers is the CEO of Duke Energy, writing as a guest columnist on Cleantech Blog.

Blogroll Review: Dam, Leadership, and Lime

by Frank Ling

Red Sea Power

A recent study shows that damming the Red Sea could provide 50 GW of emissions free hydroelectric power. This would be the largest power plant in the world. However, tens of thousands of people would have to be displaced, not to mention untold ecological damage.

Hank Green at EcoGeek writes about how this would politically impact the Middle East:

“The project would provide enough power to switch off oil-burning power plants throughout the Middle East. Political scientists are already estimating the stability such a project would bring to the region.”

Sustainable Leadership

Sustainability is now becoming a buzzword just like eco and environmental. But what does it take at the corporate level to promote sustainable practices?

A recent report from Avastone Consulting examined what types of leadership and organization structure was needed to carry out such changes.

Joel Makower says:

“Their study found that it isn’t a lack of systems and activities that limit a company’s success, but rather the scarcity of what it calls “higher capacity leaders” and the direct relationship between leader mindset development and the realization of complex sustainability outcomes.”

Baking Soda Solution

Jim Fraser at the Energy Blog writes about this simple but promising process:

“Sodium hydroxide, which is produced on site as a part of the SkyMine™ process is used to react with the CO2 to produce the sodium carbonate. The heat to drive the process is captured from the heat in the flue gas.”

For a 500 MW power plant, that amounts to 642,000 tons of emissions reduced each year.

Frank Ling is a postdoctoral fellow at the Renewable and Appropriate Energy Laboratory (RAEL) at UC Berkeley. He is also a producer of the Berkeley Groks Science Show.

All Electric ATV – No myth to bust on this one

I had a chance to visit with the founders of a new San Francisco Bay Area cleantech startup called barefoot motors, which is building an all electric ATV. I think is a great idea for an untapped electric vehicle product. Think about it, of all the potential electric vehicles out there ? ATVs suck down a comparably large amount gasoline a lot of gasoline per mile and are used primarily for short range transport (range is a longtime achilles heel of electric vehicles). And riders have a serious problem with the noise and the noxious exhaust fumes. Add to that the fact that ATV riders want a combination between acceleration and power that electric drive systems are particularly good at doing, and you should be able to get a really great product from an electric all terrain vehicle. According to barefoot, Jamie Hyneman of Mythbusters fame agrees. He had a big hand in the prototype.

I have followed the barefoot story for some time, but this week one of the cofounders, Melissa Brandao who was formerly with the electric vehicle company Zap, spared a few minutes on the record to give Cleantech Blog the rundown.

So Melissa, give us the story.

barefoot motors is proud to be the first company to offer Earth Utility Vehicles. Our first vehicle is called the Model One, it’s an all electric, heavy duty ATV for primarily agricultural and industrial applications. It has all the power and speed of a conventional heavy duty ATV with the added benefits of being eco-friendly lower cost of ownership driven by fuel savings, quieter and more comfortable to ride, along with those expected perks like rebates and other incentives that are likely to be instituted in the coming years to help reduce air quality issues faster. As far as air quality goes, replacing ONE conventional ATV with the Model One is like taking FOUR cars off the road. There are 1.6 million of these ATVs running around California. But because they are not in plain site they are often overlooked and forgotten by all of those that do not encounter them regularly. ATVs, unlike cars, are not highly regulated, and it will take years to change that.

Why Electric ATVs? What is better about them than electric cars?

Electric ATVs are not better than EVs they’re just different, as off-road vehicles are different than on-road vehicles. The premise at barefoot was to build a comparable vehicle to the heavy duty ATVs that were currently available knowing that the one area that we would have to address is range. What we discovered is that the principal application for our vehicle did not require an 80 mile range to fit their needs. They simply need a good, reliable, heavy duty work horse that will work around their property throughout the day. That is the Model One’s sweet spot.

What exactly is your Electric ATV going to look like?

That is under discussion as we speak but fundamentally it will look like an ATV with some design changes based on innovation as well as the distribution of weight and space, in essence there’s less stuff on the Model One so there is more space to work with.

Melissa, you told me Jamie Hyneman of Mythbusters fame had a big hand in the prototype?

Yes, I met him at Maker Faire two years back and we have stayed in touch since then. When I introduced him to the idea of collaborating with barefoot motors, a green utility vehicle company, he was keenly interested for two reasons. One, he has been an advocate of alternative fueled vehicles for a long time. He even rides an electric bicycle back and forth to work. Two, Jamie was raised on a farm and he rode his grandfather’s 3 wheel ATV on the property, so he understands the importance of a good utility vehicle for agriculture. In essence, this project hit home. As a prototype builder Jamie can create elegant solutions that are simple and functional, he is the holder of several patents and he has a deep knowledge of electronics, robotics and rapid development. In building the Model One, Jamie has been the driver behind the choice of technologies and packaging. He has kept us focused on that same principle of simple but elegant design. The proof of concept, Model One, achieves our initial performance requirements, in fact, it has exceeded expectations and it’s so fun to ride, as you can see from the video of Jamie riding it. When are we going to get you on it?? (Soon Melissa, very soon).

Will it have more or less pulling power than a conventional one?

In towing capacity we can handle 1,000 lbs. That is our baseline performance which is on par with a conventional heavy duty ATV.

What about range?

Our prototype is getting about 30 to 40 miles on a charge. The BIG difference when you talk range is that an ATV encounters many variations in the off road terrain, mud, sand, gravel, dirt, steeper slopes which can skew the range figures more than it would on a standard car that drives almost entirely on asphalt.

Is there a list I can get on to buy one?

First, check out the video clip. Then yes, please contact melissab@barefootmotors.com if you are interested in purchasing one, we are building about 150 next year. We are asking for deposits of roughly 10 percent which we will apply to the price of the vehicle. It is fully refundable at any time.

Are your battery needs much different than from cars?

Our choice is lithium ion batteries we feel the density and efficiency you gain is significant enough that it only makes sense in this application.

Are we going to have a naming contest for your Electric ATV? Do we need a new acronym? EATV sounds dull. How about Electric Warthog?

Sorry, we got the name already, but I like the idea of customer interaction so you will see some clever ideas from barefoot in the coming months!

Thanks Melissa, great story. And we will put them video clip of the electric ATV up on the blog as well.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.

Blogroll Review: Campaigns, Hype, and Linux

by Frank Ling

Getting Presidential

With global warming and rising prices of energy on the minds of Americans, the presidential candidates have undoubtedly begun to think about energy policy for their platforms.

Jim Fraser at The Energy Blog writes that:

“The League of Conservation Voters (LCV) has published a comparison of the energy policy positions of the 2008 presidential candidates, which range from environmentally responsible to business-as-usual.”

Pacific Ethanol Stumbles

Ethanol may be hot but there have been and continue to be many reasons why it is overblown.

When Pacific Ethanol became public, there was widespread interest because Bill Gates had invested in it. Lately, stock prices for the company have hit a new low.

Robert Rapier says in TR Squared Energy Blog:

“Ethanol prices have fallen as supplies expanded faster than demand. At the same time, prices for ethanol’s main feedstock, corn, rose dramatically, further hurting profit margins.”

He also adds why ethanol in California is fundamentally flawed:

“There is a reason that California is not a hotbed of ethanol activity, despite the fact that Californians consume ethanol. It’s too far from the corn, so it is more cost effective to ship in finished ethanol.”

What were they drinking? 🙂

Green Penguin

The debate among mainstream computer users is usually Mac or PC, but the time for Linux to gain consumer acceptance may be on the horizon.

Walmart is now offering $200 computer systems based on Unix.

Hank Green at Eco Geek writes that:

“The Everex machine, which runs on a power-sipping Via 1.5 Ghz processor, is the first Ubuntu machine to be sold by any major retailer. It’s strange that Wal-Mart was the pioneer here, but their constant search for lower prices meshes well with the freeness of Linux.”

Apparently the lower end version of the system is ultra efficient because it does not hog all the resources.

Has anyone seen a green penguin? 🙂

Frank Ling is a postdoctoral fellow at the Renewable and Appropriate Energy Laboratory (RAEL) at UC Berkeley. He is also a producer of the Berkeley Groks Science Show.