Friday, August 22, 2008

Joined NRDC

Hello all - just a quick post to let you know I've started work at Natural Resources Defense Council in their new Center for Market Innovation.

I will be blogging at their impressive Switchboard blog, which features dozens of NRDC experts. My new blog address is here (

It was a pleasure blogging at IGH for the eight of you.

Thursday, March 13, 2008

More utility smart grid news

Glancing through the paper this morning, I came across an interesting article regarding Xcel Energy's new smart grid initiative:

Xcel Energy Inc. plans to roll out "smart grid" technology in Boulder, Colo., in coming months that will give residents a chance to test sophisticated equipment for monitoring and adjusting how much electricity they use, even from remote locations...

...The utility also intends to install equipment upstream of consumers, on its energy-delivery system, such as in substations, that will boost grid intelligence and reliability, squeezing out some of the inefficiencies that push up costs.
Some of the details are worth focusing on:
  • Xcel isn't waiting for regulator approval to recover costs, assuming that cost savings and benefits will prove its case
  • 25,000 installations up front over the next year, with an option for the other 25,000 homes in Boulder
  • The meters will allow for dynamic, time of use pricing and remote access
  • Project costs $100 million, with several partners participating
The project was originally reported back in January (one of the perks of not posting in two months is that I can easily find January news stories).

There was a great study on a Seattle smart grid project (found here) a couple months back that lays out a lot of the challenges and opportunities in these projects.

I anticipate posting a lot more of these smart-grid related stories throughout the year.

Wednesday, March 12, 2008

Environmental costs of solar or backlash?

If you saw this article on Sunday, it is definitely something to pay attention to. It is an investigative piece regarding the environmental damage that Chinese polysilicon manufacturers are inflicting upon citizens.

In China, a country buckling with the breakneck pace of its industrial growth, such stories of environmental pollution are not uncommon. But the Luoyang Zhonggui High-Technology Co., here in the central plains of Henan Province near the Yellow River, stands out for one reason: It's a green energy company, producing polysilicon destined for solar energy panels sold around the world. But the byproduct of polysilicon production -- silicon tetrachloride -- is a highly toxic substance that poses environmental hazards.
I’m in two minds about this piece. As far as investigative journalism goes, it’s incomplete and tries to draw very large conclusions from a very small sample. As an environmentalist and solar enthusiast, I am deeply troubled. After all, whether it is lead paint in toys or poison in pet food, China has a contentious past in this area.

The key is to point out (as the article hints at) is that this type of production method for polysilicon is not acceptable, nor is it necessary. Unlike oil sands, or coal extraction, there are environmentally-sound methods of making poly-silicon that need not drastically impact the price. (while the article points to the cost savings in producing poly-silicon in this fashion, it neglects to point out the very limited role this plays in the overall price of a solar system).

Beyond this however, I believe this article is part of the first wave of the inevitable solar backlash we will be seeing (which I wrote about in my 2008 predictions post). I imagine that the next six months will bring a number of articles about the high cost of solar relative to other technologies, environmental damage in its production, the over-valuation of key solar stocks, etc.

It will be important to answer these charges (all accurate to varying degrees) with honesty and transparency, and point to the considerable future value of solar - its expected large reduction in costs as we move down the experience curve, its potential benefits to utilities, consumers and the economy, and the immense future importance of building a national clean, distributed generation network.

Thursday, March 06, 2008

Apologies and first post in a while

The rather dramatic fall-off in production (ie zero) the last 6 weeks has been frustrating. Unfortunately, various responsibilities are pulling me away from this blog. In that many of those responsibilities actually pay however, small as the stipend may be, they are taking precedent.

Still, I enjoy the process of blogging immensely (and even the challenge of building an audience person by person), and hope that I can re-start the process now. Here goes...

Finding Where the Wind Blows: (subs. required) a very interesting short piece covering some of the next stage of challenges facing the wind industry. On the plus side, who would've thought be get here a few years ago. On the down, these issues will grow increasingly prevalent as more renewable energy is added to the grid:

An electrical emergency in Texas last week has grid officials and power companies re-examining how they manage wind energy, an increasingly popular but potentially fickle power source.

Wind turbines don't emit greenhouse gases, unlike conventional power plants. But wind power requires astute handling or it can affect reliability and power prices. Grid officials have fretted for some time that construction of enormous wind farms could jeopardize grid stability.

In response to its shortfall, Texas officials now are speeding up plans to improve wind forecasting. U.S. officials also are looking at other nations that manage far larger wind resources deftly. California's grid operator is seeking bids from wind consultants. It also is considering ways to tailor power consumption by big users so they could more closely match wind production, as well as ways to store wind energy for use later.
As always, where there are challenges, there are opportunities. A number of companies are developing innovative grid management technology, while others are seeking to get into the private weather monitoring game. Certainly weather derivatives could grow in prominence.

What happened?
A cold front blew through West Texas on Feb. 26, temporarily lifting wind production. When it subsided, wind speeds dropped, turbines slowed and productivity dropped by 80% to 300 megawatts from about 1,700.

The situation was exacerbated by greater-than-expected energy demand and by lower availability of some fossil-fuel units. To get the system back in balance, the grid operator declared an emergency and tapped big customers who had agreed to be cut in exchange for cash payments.
The specifics of the situation demonstrate that for the first few decades of adoption, renewable energy will be have a much smaller marginal utility the further up the penetration curve one goes.

And while scientists, utility executives, policy makers and some investors have been concerned about this phenomenon for a while, expect more focus as wind and solar become an increasingly prevalent phenomenon:
Nationally, grid operators have been notified that up to 147,000 megawatts of wind turbines may seek to connect to the grid in coming years, though a significant proportion won't get built. Currently, the U.S. has about 16,818 megawatts of wind capacity, enough to power 4.5 million homes, according to the American Wind Energy Association, a trade group. That amounts to less than 1% of U.S. power.

In California, there are plans to more than double wind capacity in the next few years once $1.8 billion in transmission upgrades are completed in the Tehachapi Mountains, which separate the northern and southern parts of the state.
One final note: Germany has a fascinating pilot program that seeks to solve this problem, which I blogged about here.

Monday, January 21, 2008

News and notes - wind, grids, lists and kite powered ships

News and notes from the past few days:

Acciona opens first wind turbine facility in U.S.: Acciona, the Spanish utility, has been making a strong U.S. push via Acciona Energy North America, especially in the solar, geothermal and wind segments. Given the current lack of turbines, it makes sense for Acciona to ensure stable supply for its own U.S. wind push, as well as offering turbines for other companies (given wind’s current growth rate of 45% annually).

Ensuring future reliability of the North-American power grid: The state of the U.S. electricity transmission grid could prove a significant deterrent to any domestic renewable energy strategy. The current grid is already stretched to the point of breaking, and the geographic remoteness of some power from solar, wind, ocean, etc. will require extensive new investment in grid upgrades and innovation. A sobering October study from the North American Electric Reliability Corporation points to a multitude of challenges in the future: limited long-term capacity, aging workforce, and lagging transmission build-out. Investors, executives and policy planners will all need to focus on this area in the future. The actual study is here. Meanwhile, you can get more on the investment perspective here at

Smart Grid Consortium to Develop Smart Grid City: More smart grid news. In this case, Xcel Energy is looking for a city of 100,000 residents to serve as a testbed for smart grid technologies. And, as Green Car Congress points out in the headline – plug-in vehicles with Vehicle to Grid technology (i.e. transferring energy from electric vehicles to the grid) as storage will be part of the proposed test project.

Do Something for the Glacial Good http: Apparently, I’m posting every list I come across now. Still, this list from Absolut Vodka of all things, is perhaps more noteworthy for the source than the actual contents. But the site itself is fun enough to play around in for a few minutes.

“Huh, it Works” says Captain of First Kite Powered Commercial Ship: If the post on new wind technologies a few days back interested you, here’s some additional information on the kite powered ship.

Friday, January 18, 2008

Cleantech investment looking strong - will it hold?

Interesting juxtaposition between the current stock market turmoil and recession concerns and the continued growth in renewable investment. Of course, most of these renewable numbers are backward looking (compared to the general forward-looking macroeconomic concerns), and even in recessions, one would expect to still some pockets of growth.

Ignoring the multiple challenges facing the U.S. economy (increasing unemployment, slowing business investment, decreasing consumer spending, credit contraction and contagion), there was a lot of positive domestic news the last couple days in the renewable sector, from many different angles.

Green-tech investment topped $5 billion in 2007: The Cleantech Group’s numbers are different than New Energy Finance, and Greentech Media (as each group measures different sources of financing), but the percentage growth trends for all are highly positive.

2007 venture investment in the alternative energy market in North America and Europe was $5.18 billion, compared with $3.6 billion the previous year [growth of 44% year-over-year]. The 2006 rise was also 44 percent.

The number of financing deals in the industry increased 15 percent last year to 268, and the average deal size rose 20 percent to $14.7 million.
Actual press release with more detail here, while another good overview is here.

Wind, Solar Power Gain Users: (subs. required) Meanwhile, strong numbers from both the wind and solar industries as well.
The U.S. wind-power industry grew in size by 45% last year, adding a record 5,244 megawatts of capacity that amounted to a third of all new generating capacity built in the U.S. in 2007, according to the American Wind Energy Association.

The solar industry grew at a similar clip, though from a much smaller base, adding more than 300 megawatts of capacity last year, according to the Solar Energy Industries Association. Additions are expected to roughly double this year. Large commercial solar installations now exceed home installations in California, reversing a long-term pattern and likely a bellwether for other states.
Much more detail on the wind numbers here.

Hot Carbon Market Signals New Interest: Even the carbon market got into the act, showing excellent year-over-year growth.
Trading of carbon-emission permits almost doubled in value last year to €40.3 billion ($59.1 billion), according to a new report...The market saw permits representing 2.7 billion metric tons traded last year, according to Point Carbon, a market-research firm based in Oslo. In 2006, permits representing 1.63 billion tons changed hands for a total value of €22.45 billion, the firm said.
Weekly cleantech deal tracking - eSolar gets Googled: In addition to Google’s investment in eSolar, there were a number of transportation related VC investments this week in a wide range of areas (14 total in this specific post).

Certainly, this was a great start to the new year for the renewable sector. Moving forward, it will be interesting to see how the industry responds to a slowing economy and any future stimulus efforts (fiscal and monetary). While the extension of production tax credits past 2008 will perhaps be the most important driver of near-term investment, the overall health of the U.S. (and global) economy could still play a role.

Thursday, January 17, 2008

Green consumers - they want to, but...

Interesting study from the marketing agency EcoAlign on consumer perceptions of clean technology (1,000 online survey respondents):

A new report on consumer perceptions of clean technologies in residential areas finds that 54 percent of the respondents surveyed have not adopted some form of cleantech largely because they don't understand it…

…Asked to rate cleantech products, most non-adopters considered the products expensive (53 percent), difficult to understand (72 percent), and difficult to maintain (76 percent). Cleantech adopters surveyed agreed with these assessments, though their negative scores were 10 percentage points lower. 60 percent of adopters also said they found the technology reliable, but only 44 percent considered the products beautiful.
The survey itself (the second one conducted by the company) makes for a good read (a quick sign-up is required to download).
The second EcoPinion Survey provides further evidence of a green gap between willingness to adopt or purchase green products, services and technologies, and consumer value perceptions around those offerings. While concern for the environment is at an all time high, consumers think that many forms of green technology (renewable, energy efficient or recycled materials) are cost prohibitive, difficult to understand and maintain, and aesthetically unappealing…

…This green gap in consumer perceptions offers insight into the dichotomy of customers’ stated intentions, e.g., their desire to be more green or frugal with energy consumption, and their actual behavior….The second EcoPinion survey results point to the clear need for companies to work harder to connect their products and services with the customer’s value chain around convenience, comfort, cost and design.
This has long been a point of concern among the environmental community, and those selling “green” products or services. While polls tend to show consumer interest in environmentally conscious and/or energy saving products is rising, specific action has been muted at best (albeit with some successes also, such as Prius sales topping the Ford Explorer).

Joel Makower has long hammered this point home, with a great post last week:
This just in: pretty much every consumer is concerned about the environment and is thinking conscientiously about what they buy — how it's made, under what conditions, and by whom….sound too good to be true? It is, of course. But you wouldn't know it from the marketing studies I've been seeing — and the breathless headlines that result.
Other great posts from Joel on the same topic are here and here.

As I wrote in a post a couple weeks ago:
Perhaps the single most important aspect of marketing is "authenticity". Be it tweens, 18-34 men, housewives or NASCAR fans - know your audience and be real to them. The same of course applies for companies trying to reach consumers interested in the environmental practices, perhaps some of the toughest critics around.
No post on marketing to green consumers would be complete without the requisite “next steps”. And while that sounds snarky, I think EcoAlign does a good job with theirs, offering simple, concrete steps that may be marketing 101, but tend to be forgotten by people who should know better:
1. Invest the necessary money in market research. Market research is the skeleton of any successful marketing effort, and creating memorable, measurable campaigns that are grounded in core business, and customer expectations around the company’s brand and the value created.

2. Go deeper and articulate more compellingly the reasons why people should care and act in regard to the green tech offering. Energy tech companies are dominated by an engineering-centric, product-oriented view of the world, yet customers are more attuned to emotional appeals. This approach must be achieved through careful messaging segmentation and utilizing the full range of delivery channels, including new media.

3. Align design with functionality.
While customers are satisfied that most green technologies are “reliable,” meaning that they will work as advertised, more attention needs to be paid to how these technologies look and feel to the customer. Sustainability can be beautiful, and command a premium for that value.

Wednesday, January 16, 2008

News and notes - Green jobs, nuclear, demand response. wind, green investment and more

CSR Jobs Rank High for Newly Minted MBAs: I'm a little dubious about the methodology (two job posting sites?), but this study demonstrates the growing demand and supply for CSR-related jobs (especially environmentally-related). A link to the study and presentation of its findings is here. Definitely some interesting information and resources at the tail end of the presentation.

Seen an uptick in nuclear power-related news recently. I'm still staying out of the debate, but wanted to pass on some articles I've found interesting. So here are two positive articles: "Devil’s Advocate: 10 Green Arguments for Nuclear Power", "A chance for nuclear industry to clean up its act", and one negative: "Green advisers dismiss nuclear plans as 'megafix' solution"

Powerit: Cashing In On Making the Grid Smarter: energy demand management system from a new venture that I imagine will soon be (if not already) embarking on its Series B round.

Making Fuel Consumption Visible: I love the broader concept underlying this announcement, and have posted on it several times. I hope someone is conducting a study looking at fuel consumption rates based on this technology, as I imagine the results would be striking.

Wind Power and M&A: A Moveable Feast: article detailing some of the consolidation now happening in the wind power industry. Ireland's Airtricity starting developing wind projects four years ago, and was recently acquired for $1.4 billion. Nice.

Unlike GM, Chrysler touting all-electric cars: As CNET points out, the #3 automaker in the US needs to differentiate itself from the top 2 (as in any mature industry really), and thus Chrysler is looking beyond hybrids and alternative fuels to all-electric vehicles.

How Green are Your Earnings? AltEnergyStocks looks at the question: should GE be included in a green portfolio or index?

Vinod Khosla's commentary - UPDATED

I wanted to point out a great set of posts over at Grist by cleantech VC Vinod Khosla. The backstory: at a conference last month, he drew a lot of attention (and criticism) for this comment regarding plug-in vehicles:

"Forget plug-ins," he said during a keynote address at ThinkEquity Partners' ThinkGreen conference in San Francisco. "They are nice toys. But they will not be material to climate change."
This perspective was subsequently challenged by a number of individuals in the online cleantech space for a variety of reasons.

However, much kudos for his 3 part set of posts at Grist during the past few days ("Pragmatist vs. environmentalist") that outline his thoughts in much greater detail.

Prius: Green or greenwash?
Hybrid emissions: Facts and numbers
Hybrids and biofuels: The road ahead

At the risk of simplification, it seems his argument focus essentially on two points: cost economics and emissions reductions.

According to Khosla, it is simply much cheaper for the consumer to go with biofuel powered vehicles. Plug-in electric vehicles and hybrids require thousands of dollars in additional up-front costs, while flex-fuel vehicles would have essentially the same cost as a "regular" vehicle. Further the predictability of long-term cost reductions in cellulosic ethanol on a dollar per gallon production cost are much greater compared to the limits on change in cost per kwh of battery capacity.

In addition, in comparing carbon emission reductions among the technologies, he concludes that exclusively cellulosic powered vehicles would have 75% lower emissions than a 2010 GM Volt.

Even though Vinod acknowledges that hybrids and biofuels are “complementary strategies”, he is first and foremost a venture capitalist, seeking investments with the least (knowable) risk and greatest (potential) profitability. Thus, the crux of his argument:
From my perspective, if I have to pick between a 5-10 times lower cost/performance battery and a cleaned-up electrical grid in the next 5-10 years (or even 20-25 years), or pick cellulosic fuels in 50 percent more efficient ICE engines, I consider the latter lower risk and significantly more probable.

I am confident that cellulosic biofuels without significant land-use impact or biodiversity impact can achieve costs of $1.25/gallon in less than five years and below $1.00 per gallon in 10 years (more details on that, especially on land use / biodiversity and sources of biomass, in a upcoming paper). At this price point, the technology will be adopted broadly and rapidly worldwide, even if oil prices decline substantially.
While I could raise several points to debate this perspective, I actually think many of the commenters on each post do a more effective job in challenging this argument. (just a sampling):
  • Are the full life-cycle costs for the vehicle and fuel incorporated into the analysis?
  • Is the comparison of current hybrid vehicles with futuristic cellulosic powered vehicles (nowhere close to commercialization) fair?
  • How much does the build-out of a new ethanol distribution infrastructure costs?
  • What about the life-cycle environmental impact of biofuels compared to electricity generation?
Still, I applaud Vinod for moving his argument forward, and his critics for responding in cordial and intelligent fashion (well most of them). But this is certainly not a debate that will end quickly. As AutoblogGreen pointed out, a lot is at stake here:
Flex-fuel plug-in hybrids are not impossible but these two technologies [battery and ethanol] are basically competing to be the green car solution of choice for government, industry and venture capital investment.
UPDATE: Great commentary on this subject from Marianne Lavelle who writes US News' energy blog - Beyond the Barrel. She also points to a prescient US News article she wrote back in 2006 that is a fun read.

Tuesday, January 15, 2008

News and notes - wind, carbon policy, marketing, investment and more hybrids

Alternative Wind Power Experiments - SkySails and Airborne Wind Turbines: The Oil Drum takes an in-depth look at two new wind technologies: attaching kite sales to ships and airborne wind turbines. Each technology looks to solve different challenges – the kite sale would reduce fuel consumption for shipping, while airborne wind turbine proponents believe they could limit the intermittency challenge and gain from the increased wind speed in the upper atmosphere.

Carbon Caps: Devil in the Details: The WSJ’s energy blog points to an interesting EIA study concerning the Bingaman-Specter climate bill. Both the post and the study draw some disappointing but realistic conclusions. To me, it seems that in trying to find a middle ground between mitigating economic impact and meeting environmental needs, the B-S climate bill achieves neither. It offers little actual climate impact, centers most of the onus on the electricity sector, and assumes much of the future emissions reductions will come from technologies that have yet to be fully developed or commercialized.

Given the assumed inevitability of climate change legislation (although likely not in 2008), this type of analysis is important in reminding that the compromise and negotiation process can sometimes produce mediocrity that pleases no one.

Clorox Aims to Show that 'Green Works'. The always-interesting Joel Makower has an insightful post concerning Clorox’ new green initiative, which is being co-branded with the Sierra Club. The press release can be found here. These types of deals can play havoc on the internal operations and politics of the non-profit. It took three years of internal deliberation before Oxfam agreed to work with Starbucks (to unfortunately mixed results).

Makower apparently spent some time in 2006 working with the Clorox/Green Works team, and has the inside scoop. I find fascinating that the roots of this project are only 3 years old. As Wal-Mart and GE have demonstrated, given a significant amount of material and human resources and high-profile executive support, most any company can become a member of the “green business” community. Rather than a strategic push, it seems Clorox essentially stumbled onto this effort, and only recently realized that it in fact possesses a number of valuable, if under-leveraged, attributes, resources and initiatives that could be utilized in a green campaign.

Is Environmentalism Compatible with Capitalism? I say yes. Richard Stuebi agrees, and writes a very interesting post explaining why.

GE Energy Financial Services Raises its 2010 Renewable Energy Investing Target to $6 Billion: This increases GE’s previously announced renewable target by 50%. The press release has some good detail on GE’s current wind portfolio.

Green Guide to the Detroit Auto Show: Earth2Tech does its usual fabulous job outlining a number of developments at 2008 Auto Show. As the post points out, most of the key green developments involve plug-in vehicles - could this be the big trend of 2008? (see #3)

The New CAFE Standards: MIT Tech Review raises the point that fuel standards aren’t necessarily likely to encourage innovation, in part because the technology is already there to reach the 35 mpg standard. Instead, they believe that tax credits, R&D grants and loan guarantees will spur more development.

Adding New Fuel Standards, Solar Incentives: Greentech Media covers a number of important foreign renewable energy policy developments, in China, the EU, Brazil, India and Japan.

Japan’s goals (30% of all households with PV installation by 2030) may seem aggressive, but their past success over the past 15 years in incentivizing and mandating solar installation in the commercial and residential sectors shows otherwise. Having studied the Japanese model specifically, it represents, in my opinion, one of the best demonstrations of strategic, sustainable and intelligent renewable energy policy design that has accomplished real results.

12 Tips for Green Living: I’m developing an unhealthy interest in the variety of lists that purport to help others live a cleaner, greener lifestyle. You might notice this is the third such list I’ve posted in the past week. This one shares a similar kitchen sink approach, and it might be useful to provide some basis of comparison – for example, how much money and energy would be saved in switching to CFLs compared to washing clothes in cold water and line drying. But it’s a nice list nonetheless.

Using the PPA model to spur renewables

One of the more interesting developments during this latest wave of renewable energy interest and development has been the decision by governments and businesses to go to market with the technology they have, as opposed to waiting for the next (and the next) revolution in renewable technology. This new strategy has accordingly shifted the focus from R&D investment to sourcing funds for installation, developing new business models, and improving pricing and cost economics.

Along these lines, Greentech Media has a very interesting article up, concerning the migration of the SunEdison business model across other renewable energy technologies.

A utility service model pioneered by SunEdison, which lets cash-strapped municipalities and building owners purchase solar power with no upfront capital, is beginning to generate more than just kilowatts.

It's also producing copycats in energy efficiency, heating and cooling. Companies such as Mondial Energy and GeoXperts have adapted the utility approach to solar-thermal and geothermal heat-pump systems, allowing customers to dramatically offset their use of natural gas or electricity without weighing down their balance sheets.
The “Power Purchase Agreement” (PPA) is by no means a new model, but SunEdison has taken the lead in facilitating its use in the solar space.

Essentially, in a solar PPA, a company, organization, municipality, etc. enters into a long-term agreement to purchase power from a solar generator. The solar generator is responsible for sourcing funds and building and maintaining the solar energy system on-site, and assumes all risks of ownership. The customer hedges in a certain electricity cost, practically eliminating its exposure to increasingly volatile (and increasing) energy prices. In addition, the customer reaps the public benefits of being a “green” company, without necessarily denting their balance sheet with energy-related capex.

The article also points out a new development – modifying and adapting PPAs to sell conservation and energy efficiency services:
[H20 Applied Technologies] goes into hospitals, colleges and universities and installs energy-efficient equipment at its own expense, in exchange for an 80-percent cut of savings, usually over a six-year contract period. After the contract expires, the customer can purchase the equipment from H2O at "fair market value" -- typically 6 to 8 cents on the dollar.

H2O's trick is to keep the entire agreement off the institution's balance sheet so it doesn't tie up scarce capital that's desperately needed in other areas. It does this by investing in new equipment, or modifications to equipment, rather than changes to a building, which are subject to different accounting rules.
Other examples in the article include an RFP by the city of Toronto to install 20 solar rooftop systems on various municipal buildings via a PPA, and GeoXperts, which is trying to leverage the PPA model to install geothermal heating and cooling systems.

Monday, January 14, 2008

High-speed trains in Europe

A while back, I wrote a post on the potential for high-speed trains in the U.S., covering some of the challenges but also the considerable productivity benefits to train transport.

According to this new BusinessWeek article (h/t Spiegel), Europe's high-speed rail networks are doing exceptionally well and are in the process of completing a number of important new projects. Eurostar, the train network connecting the UK with Europe, reported revenues increases of 15% while carrying over 8 million passengers.

A trip from Heathrow to Paris, including check-in, security and travel time, can still take several hours. By contrast travel from London to Paris via Eurostar takes only 2 hours 15 minutes, and can cost as little as $120 roundtrip (perhaps explaining why Eurostar carries 70% of all passenger traffic between the two cities).

However, potentially more exciting is the new Railteam, which promises to improve train connections via countries (currently a difficult and time-consuming concern) via a strategy similar to Europe's airline carriers:

Last July seven operators banded together to form Railteam, an alliance that is working to create a seamless, high-speed network across a large swath of Western Europe. Functioning much like an airline alliance, Railteam is setting up a common reservation system that's set to begin operations in 2009. It is also helping member railways coordinate their schedules to reduce layover times. A frequent-traveler program will even be offered -- another page from the airlines' playbook.
Additional information on Railteam can be found at After Gutenberg.

Given current environmental, energy and national security concerns, improving the high-speed rail model could be extremely lucrative, and offer a valuable example for future U.S. transportation initiatives.

Plug-in Buzz

A number of items to note in the electric vehicle space. Carmakers are falling all over themselves in demonstrating their newfound appreciation for all things clean and green. At least with the U.S. auto companies, I sense a faint whiff of desperation in some of the pieces, as GM and Ford try to reassure the investor community that “they get it”, and that while they missed the boat with ever larger SUVs throughout the late 90’s and early 00’s, they’re now firmly on board with electric vehicles and alternative fuel technologies.

The Detroit auto show is of course partly responsible for the sudden explosion of interest towards plug-in autos, and I’m just going to link to a few articles. For my previous recent posts on this topic, go here, and here.

Electric-Car Firms Get Star Investors: discusses Kleiner Perkins’ investment (with an assist from Al Gore) in Fisker Automotive, which is releasing an ’09 luxury plug-in hybrid which has all the requisite performance attributes (50 miles before charging, 125 mph, 0-60 in 5.8 seconds). The article also mentions a couple other bigger names in this space including Tesla, and Shai Agassi’s start-up

Closing the Power Gap Between a Hybrid’s Supply and Demand: highlights AFS Trinity Power which has developed a prototype for a plug-in hybrid with pre-existing lithium-ion batteries and ultracapacitors which gets 150 miles/gallon.

Toyota Will Offer a Plug-In Hybrid by 2010: in an effort to outdo GM’s Chevy Volt and Saturn Vue efforts, Toyota will be offering an entire fleet of plug-in hybrids, and extend the initiative to the Lexus line. Another take on these competing efforts is here.

A PHEV - EV Demand Curve: Meanwhile, AltEnergyStocks takes a look at the demand curve for mileage range by household, and comes to some interesting conclusions about PHEVs (plug-in hybrid electric vehicles) vs. EVs (electric vehicles).

Six Major Pre-Production Electric Vehicles Compared: and through the previous link at AltEnergyStocks, I found DIY Electric Car’s very helpful grid comparison of electric vehicles. Although a couple months old, key similarities and points of difference are already beginning to appear.

And finally, there’s been a lot of attention given GM’s investment in Coskata, a cellulosic ethanol company still in pilot stage. As always, Earth2Tech was on the scene months ago, and has a great first-hand account of the technology and company.

Friday, January 11, 2008

Morning links - wind, PEVs, green business, transportation and smart-grids

Various items I've come across this morning that I thought I'd share.

Size Matters: Good round-up on wind development and investment in the U.S. from the WSJ's free blog "Energy Roundup". Several new developments are noted in this post, including the first-time use of 3MW turbines in the U.S., competitor collaboration among Enel and GE, and increasing industry consolidation.

Race to Make Electric Cars Stalled by Battery Problems: Long front-page story on the challenges plug-in hybrid and electric vehicle makers face in sourcing batteries that are safe and reliable. Very good overview, and adds some necessary context to my post yesterday on PEVs.

Wal-Mart faces hurdles in green electronics: Wal-Mart's sustainability push, and the sizable impact of that decision on manufacturers, other retailers, supply chains, and ultimately consumers, has been reported and debated ad naseum. This article discusses some of the challenges electronics manufacturers (and Wal-Mart) are facing in meeting Wal-Mart's objectives. Depending on the outcome of next year's elections, we may finally see some kind of federal legislation that consolidates the wide-ranging standards for energy efficiency, sustainability and recycling.

27 electric cars companies ready to take over the road (h/t Earth2Tech): An interesting list of electric car manufacturers. There are enough cars here for every taste and desire imaginable.

Moving Billions of People on a Still-Green Planet?: Rather fascinating piece from the NYT's blog on environment, focusing on broad trends and scenarios in transportation. A lot of links and research here to digest.

News Flash: 110% of Consumers Shop Green!: Joel Makower is one of my favorite thought-leaders in this space, and his new post on the environmental consumer and greenwashing has far-reaching implications. I covered a similar topic (sparked by an earlier Makower post) here.

What's so smart about smart metering?: Its a couple weeks old, but an informative interview with the CEO of smart-grid-focused company. I thought it wrapped up a lot of what I've been discussing recently here, here and here.

Thursday, January 10, 2008

News and notes - Cleantech Investment, Green business and Oil issues

Few other quick links from today:

2007 energy tech VC totals - First look: Rob Day at Cleantech Investing takes us through a breakdown of cleantech VC investments in 2007. A lot of insightful commentary.

The Cleantech Revolution: a number of interesting articles in Goodwin Procter's custom publication entitled "Big Ideas in Technology". Cover story from pg. 8 - 14 is a good overview and has a number of interesting sidebars and there are various cleantech related stories sprinkled throughout.

Global Oil Supply Challenges Will Drive Crude Prices to US$150: (h/t The Oil Drum). Very bullish look at the oil markets from CIBC World Markets, focusing on supply issues. The actual research is here. Just one opinion, but a very pessimistic one.

Consumer electronics go green

About a month ago, the WSJ had an interesting article (subs. req'd) about the immense impact of a new generation of consumer entertainment electronics:

Consider that a 42-inch plasma set can consume more electricity than a full-size refrigerator -- even when that TV is used only a few hours a day. Powering a fancy TV and full-on entertainment system -- with set-top boxes, game consoles, speakers, DVDs and digital video recorders -- can add nearly $200 to a family's annual energy bill.

It appears electronics manufacturers are listening:

Philips' Eco TV sips power, saves rainforest

Electronics makers vie to make machines green

GridWise Study: saving energy through smart grid management

A wonderful new study out of the Pacific Northwest National Laboratory on smart grid management demonstrates very effectively what this blog has discussed in detail here and here:

A yearlong study by the Department of Energy has concluded that when consumers are given the means to closely track and adjust their energy usage, power use declines by an average of 10 percent. In addition, the study found that households' electricity usage during peak times fell by up to 15 percent.
Additional reporting on this study provides more detail:
The demonstration project was as much a test of consumer behavior as it was of new technology. Scientists wanted to find out if the ability to monitor consumption constantly would cause people to save energy…

...112 homes were equipped with digital thermostats, and computer controllers were attached to water heaters and clothes dryers. These controls were connected to the Internet. The homeowners could go to a Web site to set their ideal home temperature and how many degrees they were willing to have that temperature move above or below the target. They also indicated their level of tolerance for fluctuating electricity prices...
The households, it turned out, soon became active participants in managing the load on the utility grid and their own bills.
As I wrote here in my predictions for 2008: "Some smart people will begin applying the lessons of the most recent technological revolution to the consumption of energy". Key to the success of this study was Internet-enabled technology such as two-way, real-time communication and online banking:
Participants received constantly updated pricing information via the Internet. The ability to connect the homes with energy providers as well as the grid was made possible through IBM technology known as a service oriented architecture (SOA). A "virtual" bank account was established for each household and money saved by adjusting home energy consumption in collaboration with needs of the grid was converted into real money kept by the homeowners. With the help of these tools, consumers easily and automatically changed how and when they used electricity, for their own financial benefit and the benefit of the grid.
Another study conducted in parallel looked at allowing appliances to automatically adjust their power use based on elevated or reduced demand stresses on the grid, thus serving as a “shock absorber” for the grid:
The Grid Friendly appliance project fitted 150 homes in Oregon and Washington with "smart" dryers and water heaters equipped with circuit boards to detect when the power grid is stressed. When that happens, the appliances curtail power use for a minute or two.

Grid friendly" circuit boards could be put in refrigerators, and other big appliances...If every big household appliance in the country were so fitted, the U.S. could cut electricity use by 20 percent.
The study further predicts that in five years, GridWise-type smart system for appliances will be available in 10 to 15 percent of U.S. homes. Currently the cost of installation is $500 and falling.

More information on the study is available directly at the PNNL GridWise website. A good recap of the study is here, while those with extra time on their hands can read through the two 150 page reports that accompany this study. They are dense reads, but the conclusions and additional readings sections are definitely worth a look.

Still, there are many challenges to overcome before this type of participatory strategy can be put into practice:
Many utilities are experimenting with this so-called smart-grid technology, but most are using it to upgrade their own networks, not to let households manage consumption. One big hurdle is that in most states, utilities are still granted rates of return that depend mainly on the power plants and equipment they own and operate instead of how much energy they save.
What’s also incredibly interesting in this study is that rather than focus on subsidies and mandates (yesterday's WSJ article on PG&E $117 million program to subsidize CFL purchases) this project relied on real-time market information and direct price signaling to encourage natural human behavior.

Further, this study adds to the growing body of evidence, such as this IBM report, this SmartPower study, and this So. Cal Edision experiment, that all demonstrate a key principle: The individual energy consumer will actively participate in their energy use with appropriate incentives, tools and information. The question then becomes, are we willing to make them a direct and engaged part of the solution?

UPDATE: couple of great additional readings from the PNNL report Part 1:

Energy efficiency: Super savers: Meters to manage the future
The Path to Perfect Power: Galvin Electricity Initiative

UPDATE II: this post is a definite must-read, offering several different perspectives as to the potential of the concepts outlined above:

Want to Manage Your Energy Usage? How Badly?

Wednesday, January 09, 2008

Other links from today - market transformation, cleantech investing, and global risk

A few other items of note today:

Utilities amp up push to slash energy use: Great article in the Journal today (subs. required) about the California "carrot/stick" approach to incentivize utilities to push energy efficiency, mandating a reduction of equivalent to three power plants...or else:

The state has designated $2 billion in utility customers' payments to be spent over three years on conservation programs. The utilities need to spend that money to find ways to avoid another $2.7 billion in energy costs, by reducing demand enough that they can buy less power or build fewer plants. If they come close enough to the target, regulators award them a cut of the savings; if not, they pay a penalty...
As one would expect, PG&E (California's biggest utility) is emphasizing the easiest and cheapest method to reduce energy consumption: compact fluorescent lightbulbs. So far the utility has spent $116 million on rebates and subsidies, which has helped contribute to CFLs selling for $0.25 to $0.50 (10 to 20 times less than in 1999). All told PG&E subsidized the sale of 7.6 million CFLs last year, and up to 20 million this year.

No doubt the outcome of this experiment in market transformation will be extensively studied. If it proves successful in generating long-term, sustainable energy reductions, while allowing CFLs to finally supplant incandescents, this is a good example for other market-based renewable efforts to follow.

F.T.C. Asks if Carbon-Offset Money Is Well Spent: following up on Monday's post about the FTC hearings on green marketing, the carbon-offset portion received a good deal of press. Some good examples of green business within the article.

Cleantech funding rising, may overvalue sector: I always enjoy the articles that rely exclusively on anecdotal evidence to prove a headline. I definitely believe certain sectors are over-valued, but I'm not ready to call it a "bubble" just yet.

WEF warns 2008 uncertainties may hurt climate fight: I mentioned this here, and its something I'm looking at closely. What happens to the momentum around climate change, renewable energy development, green business, if a particularly nasty recession hits? The report itself has a scary list of risks for 2008 focused on four areas: financial security, food security, supply chains and energy.

Plug-in Electric Vehicles

For whatever reason, I came across a number of developments today in the plug-in electric vehicle space. In that PEVs are another example of technology that empowers the individual energy user, (and I just posted on a similar theme), I thought I'd highlight them here. Apologies for the lack of structure or continuity in this post.

"Smart charging" plug-ins

Some estimates place the number of plug-in vehicles by 2015 at 500K to 1.5 million. Unfortunately, for utilities, if plug-in electric cars achieve anywhere near this level of penetration, the electricity usage could be enormous.

For example, in an ACEEE study last year, a typical electric-only car might have an efficiency of 4 miles per kWh. If you assume an average 1,000 miles per month driving (and possibly more with the anticipated reduction in fuel prices) one car could “consume” 250 kWh per month. According to the EIA, the average household used about 900 kWh back in 2001 (their most recent data). Thus, acknowledging the multiple caveats associated with back of the envelope calculations such as this, switching from a gasoline-powered car to a pure electric would increase household energy usage by over 25%.

Therefore, while the actual fuel savings (and accompanying emissions reductions) would be significant, plug-in electric cars would need large amounts to draw large amounts of electricity from already over-stretched utilities and infrastructure.

This is where companies such as V2Green come in. V2Green is an early-stage venture focused on developing both the hardware and software necessary for utilities to efficiently manage the rate, pace and timing for charging plug-in vehicle. Its technology would allow thousands of vehicles to wirelessly communicate with utilities in order to determine the optimal charge time. The company faces a number of challenges (need for outside capital, partnering with both utilities and vehicle manufacturers, small current market size), but believes it is poised as the leader in a new market opportunity. Today, it announced a transition to a new CEO who will focus on V2Green’s growing business responsibilities (a typical process for most new technology ventures).

Over the past few months, Earth2Tech has written a number of smart posts focused on the company, and the broader challenges and opportunities in managing the electricity needs of plug-in vehicles and the potential for this new technology. Recommended if you're interested in learning more, and also here (h/t Earth2Tech).

Rapid charging of plug-in electric vehicles

Along a similar vein comes this commentary from Leonardo Energy today.

When screening the data sheets of prototypes electric vehicles and electric vehicle batteries, you often come across some spectacular recharging speeds…What the data sheets don’t say is that the electric connection must be capable of supplying sufficient power for this rapid recharging....Consequently, rapid charging would be impossible at home. Moreover, it would create a serious challenge for any grid connections for electric recharging stations located along the road…

…That is why some experts, like Andrew Burke, an electric vehicle engineering pioneer at the University of California, see the rapid charging of plug-ins as a technological dead end. Others, like Alan Gotcher, CEO of Altair Nanotechnologies, see those barriers merely as challenges that need to be overcome. Watch this space to see which of these two visions prove right.

The articles and study within the post add context, and are an informative read if this is of interest.

Boosting batteries

Finally, I wanted to close on a couple of developments that involve the actual batteries with the vehicles. While this should be a much longer post, I am including these two links here to highlight the fact that many technological advances that could impact PEV's are coming from parallel industries. This article (from several months back) helps explain the value of the two potential advances below:

Nanowire battery can hold 10 times the charge of existing lithium-ion battery
Stanford researchers have found a way to use silicon nanowires to reinvent the rechargeable lithium-ion batteries that power laptops, iPods, video cameras, cell phones, and countless other devices.

The new technology, developed through research led by Yi Cui, assistant professor of materials science and engineering, produces 10 times the amount of electricity of existing lithium-ion, known as Li-ion, batteries.

Cui said that a patent application has been filed. He is considering formation of a company or an agreement with a battery manufacturer. Manufacturing the nanowire batteries would require "one or two different steps, but the process can certainly be scaled up," he added. "It's a well understood process."
A Better Battery for Laptops

Boston-Power says that it's poised to enter the market for portable power, with a notebook battery the company claims is safer, lasts longer, and can be charged faster. The Westborough, MA, startup recently announced that it is more than tripling production of its high-performance battery, called the Sonata, after receiving $45 million in a third round of venture financing. The move puts the company in a position to mass-produce and commercialize its next-generation lithium-ion battery within months…
While focused on laptop computer batteries, there are hybrid-electric vehicle applications as well:
The unmatched safety benefits available from Boston-Power's technology apply in …other applications such as hybrid electric vehicles (HEVs). With existing notebook computer batteries containing roughly the same power as hand grenades -- and HEV batteries representing far greater than that -- Boston-Power's proactive, preventative safety features overcome the issues challenging current Lithium-ion batteries.

Encouraging the Individual

One of the primary themes of this blog involves the meta-trend of individuals actively participating in their energy consumption, generation and management. I recently came across an interesting post outlining some potential consumer-based activities that could save energy and help the environment. While I applaud the intentions behind this post, I thought I might comment on a different strategy here, which is based on my personal perspective of explicitly engaging the individual.

Environmental Defense - Eight Earth-Friendly New Year’s Resolutions:

1. Replace my conventional light bulbs with energy-efficient ones.
2. Calculate my carbon footprint and see what I can do to reduce it.
3. Make small changes at home.
4. Drive like the Earth depends on it.
5. Buy carbon offsets to help offset my emissions even further.
6. Choose seafood that’s good for me and the ocean.
7. Write my members of Congress demanding a strong global warming law.
8. Pass this list on to my friends and family.
Certainly the first three – changing to CFLs, calculating carbon footprint and making other small changes at home – are immensely important and relatively easy to do.

Where I challenge are the remaining five. Each is very much a relevant and useful environmental action, but I’m not sure if this is the best audience for these activities, or if these are the best tactics for that audience. And as the goal is ultimately to inspire and elicit action, I thought this a relevant critique.

Telling people (especially Americans) to change how they drive has never been very successful, unless it occurs through regulations (speed limits) or some form of incentives (or disincentive) such as peak congestion charges, car pool lanes, taxing gasoline, etc. Buying carbon offsets seems to conflict with the entire premise of the piece (which is reducing energy consumption). I’m not sure where # 6 comes from, and the last two are innocuous but sadly futile.

Instead, were I to make this list, I would have focused on empowerment and incentives. The individual consumer can do a great deal to encourage "right behavior" by leveraging one thing they have control over: his/her purchasing power. So, for example, rewarding environmentally friendly companies with spending and penalizing those that are the opposite.

Also, I might also think about areas where the consumer could take control in their home. Give the consumer tools to monitor the actual energy usage of their applicances. Encourage them to sign up for smart-metering (if available) or green power, or have them lobby their city to use companies such as RecycleBank.

Along those lines, I thought this, ("Green Plug looks to cut energy waste and cable clutter") both a cool little innovation and a wonderful technology to promote. Lou Grinzo seems less enthralled, but even if this isn't the exact right type of technology, it is a good example related to the above.

Tuesday, January 08, 2008

News and notes - electric cars, solar, CCS, ethanol, marketing and more

Charged up by electric cars: Tyler Hamilton's interesting new column on electrification of cars covers what large automakers and small entrepreneurs are doing in this space, and also speculates on the accompanying importance of load management software. More here on his blog. (he's a one person media conglomerate)

SunPower’s solar power plant building boom: details on SunPower's multiple new solar installation deals in Europe (especially Spain). Given that Spanish PV sector grew 500% in the last year, perhaps this is not surprising.

Solar-energy sector seems primed to grow. Nothing new, but some good P/E numbers on some very highly valued solar stocks - First Solar is at 130 time earnings, SunPower 60x, while others are lower (e.g. Trina at 18x).

Archer Daniels Midland to Bury Carbon From Ethanol Plant: ADM is working with a number of state and national government agencies to inject 1 million tons of carbon underground. Project is expected to cost $84 million, with almost $67 million coming from the Department of Energy.

Canon Unveils "Generation Green" Brand: at first, I was writing a snarky little post about this, until I remembered that Canon ranked number one on the Climate Counts scorecard, put together by Clean Air. Perhaps it was the company's environmental bona fides, that explained why a rather plain announcement got quite a bit of media attention.

Open Source Free Energy Tech: given my interest in leveraging successes from the Information Age, I thought this a wonderful example of energy technology development using the open-source method.

Deeya Energy Raises $15 Million Series B Financing for Energy Storage: yesterday, I linked to a great interview with two DFJ VC's. Deeya is one of their cleantech investments.

Switchgrass shows promise for ethanol production study
: finally, some good news for pro-ethanol folks on the cellulosic ethanol front. Apparently, native North American prairie grass produces 540% more energy than energy consumed, compared to previous estimates 343% net. According to the article, this is due to higher yields from new breeds of switchgrass.

Could renewables supplant 100% of traditional electricity generation?

As I first wrote here, managing intermittency of renewable energy through geographic diversification could be a key driver of large, utility-scale adoption of renewable power beyond the 10%-15% threshold typically assumed. It also featured in my predictions for 2008.

Now, the Combined Power Plant in Germany is putting all of the theory into practice. (via The Sietch Blog, h/t Gristmill)

In an pilot experiment featuring 36 renewable energy power sources (11 wind, 4 biogas CHP units, 20 solar systems and a pumped storage power plant) all linked by a central control unit, the Combined Power Plant project demonstrates that most, if not all energy demand can be met exclusively by renewable energy. From the background paper:

Wind turbines and solar modules help generate electricity in accordance with how much wind and sun is available. Biogas and hydropower are used to make up the difference: they are converted into electricity as needed in order to balance out short-term fluctuations, or are temporarily stored….

…Cutting edge technology is already able to forecast energy yields reliably. The Combined Renewable Energy Power Plant makes use of this technology and regulates electricity needs just as securely as conventional, largescale power stations…

...These power plants are intended to meet one ten-thousandth of Germany’s electricity needs – roughly equal to the electricity requirements of a small town with 12,000 households (such as Stade in Germany). The Combined Power Plant therefore shows in miniature what is also possible on a large scale: 100 per cent provision with renewable energy sources at all times.
The Technical Summary has more.

I recommend first starting with the 7 minute video which does a wonderful job explaining the program and underlying reasoning.

Certainly, a national roll-out of this project would require the development of several enabling and ancillary technologies, including the build-out of an extensive high voltage power transmission infrastructure, and sophisticated demand response technology and networks. But coupled with improved energy efficiency and individual power management initiatives, this could potentially represent a quantum leap in a renewable energy powered future.

Sunday, January 06, 2008

News and notes - Cleantech VC conversation, wind M&A, marketing

Few things I came across this weekend.

Earth2Tech Video: Cleantech Investing With Draper Fisher Jurvetson: Informative and insightful interview with two prominent cleantech VCs. Their thoughts on the cleantech "bubble" (about the 9 minute mark) are especially interesting, and they spend a good deal of time in the latter half of the interview talking about specific companies.

Scottish and Southern Energy to Acquire Airtricity for EUR 1 Billion: a couple weeks ago, I wrote the following in this post:

We should see continued consolidation in the wind power industry over the next few years, and those companies with the capacity to go public or raise private capital will do so soon....Those companies with available capital and market leadership should be best positioned to take advantage of this maturing sector.
I will be keeping track of this deals for future reference, as I expect we'll be seeing many more, especially if several planned wind IPOs come to fruition.

Truth in Advertising: more "something to watch" at this stage, but the FTC's decision to move up the review of its Green Guide (last updated in 1998) doesn't come a moment too soon. Many of the year-end posts that I linked to here focused on the trend of corporate environmental initiatives, and greenwashing. Perhaps the single most important aspect of marketing is "authenticity". Be it tweens, 18-34 men, housewives or NASCAR fans - know your audience and be real to them. The same of course applies for companies trying to reach consumers interested in the environmental practices, perhaps some of the toughest critics around.

Thoughts on the energy question at last night's debate - UPDATED

Watching the debates on Saturday night, I was especially interested in the Republican answers given to the question of $100 oil, and what to do about it. I’m focusing on the Republicans here in part because the Democratic candidates are loudly on the record as being pro-renewable energy, pro-climate change legislation etc, and in part because any far-reaching, paradigm-shifting new energy and climate policy will require significant Republican support (no matter which team wins the 2008 elections).

You can find the text of the entire debate here, the energy question is close to the bottom. I was struck by several things.

  • The focus on energy independence and energy security. Every candidate framed the argument in terms of energy independence, mostly in terms of national security. Moreover, every candidate (with the exception of Fred Thompson) spoke passionately and persuasively on these terms. John McCain was the only candidate to broach the topic of climate change, and no one else dared touch it. I’ve linked several times to reports focused on the national security implications of global warming and I wonder if the overlap between the two could be leveraged. If "saving the planet" doesn't work on some people, then maybe "protecting America" would. Second, for the renewable energy enthusiast, I think it also points to the value in reframing the debate when reaching out to different groups. Of course when doing so, one needs to first make sure that renewable fuels and power capacity is of a large-enough scale that it can actually make a significant dent in meeting our oil demand.
  • The multiple mentions of “solar”, “wind”, “fuel efficiency”. As an anecdotal statement of progress in these industries, would you have expected these technologies to feature as solutions in a question on oil four years ago at a Republican debate? Certainly I would expect mentions of clean coal, more oil refineries and drilling, natural gas exploration, etc. But this took me by surprise.
  • The focus on nuclear power. Looking at the debate transcript, almost every candidate emphasized the value of a nuclear solution. Perhaps it’s the easiest way to support climate change and alternative energy technologies without coming off as “too green”. A way of maintaining a certain political leaning if you will – “Sure I believe in climate change – but I’m a nuclear advocate, so I’m not an environmentalist or anything.” Just a thought that really needs further development.
  • The interest on broad, large-scale national programs. Practically every candidate spoke of the need for and value of a strategic, massive, long-term energy plan. While there may be some political cognitive dissonance for the small-government proponents, all candidates were in favor of significant increases in investment in new energy technologies.
While politics is politics and those running for office have a tendency to write checks they can’t actually cash, the tone, tenor and specificity of these answers were a strong positive to me, and, I believe, bode extremely well for the coming years.

UPDATE: you can find more perspectives here, here and here. (h/t Gristmill). I think the difference in perspective between these account and my own can in some part be explained by the fact that I've given up on winning over many climate change skeptics. At this stage, I'm not sure what other evidence can be brought to the table to convince them, and I'm not interested in waiting 10 years for even more concrete evidence. Contrarians and iconoclasts enjoy that title and typically stand firmer in their positions when pushed. It's how they became contrarians and iconoclasts in the first place. So for me, I'm focusing on reframing the debate to reach the end goal (reducing carbon emissions and "traditional" energy usage).

UPDATE II: thought this a relevant (if old) article germane to my thoughts above.

Friday, January 04, 2008

Welcome The Cost of Energy Readers

Lou Grinzo had some nice words to say about a recent post here. This is the link to the actual post he references. Not to get to obsequious, but The Cost of Energy is a great resource, and Lou's insights are always appreciated. Welcome!

New climate study explores national security and social change

Fascinating new study out of the entitled "The Age of Consequences: The Foreign Policy and National Security Implications of Global Climate Change."

Using a scenario planning method, the study explores what's "plausible" as it relates to climate change as opposed to what can be established with scientific certainty.

For each of the three plausible climate scenarios, we asked a national security expert to consider the projected environmental effects of global warming and map out the possible consequences for peace and stability. Further, we enlisted a historian of science to consider whether there was anything to learn from the experience of earlier civilizations confronted with rampant disease, flooding, or other forms of natural disaster.
Real Climate has a much better breakdown, so I'm just sending you there. The potential outcomes are downright catastrophic (on practically a biblical scale):
The “expected” scenario calls for 1.3 °C of warming globally, by the year 2040. Changes in precipitation and sea level prompt migration at a scale sufficient to challenge the cohesion of nations...

...In the “severe” scenario, the globe warms by 2.6 °C by 2040 and sea level rises about a half a meter. Scientists in 2040 conclude that the eventual collapse of Greenland and the West Antarctic ice sheets has become inevitable in the centuries that follow. Agricultural production declines in the arid subtropics and in increasingly flooded river deltas. Again to pick a random example from the report: the river systems in the American Southwest collapse, leading to impoverishment of Northern Mexico and increased migration pressure in the U.S. Resource stress in Latin American leads to a tendency toward populist, Chavez-type governments, and more extensive regions of de facto anarchy such as found today in parts of Colombia.
I won't even bother posting the "catastrophic scenario" as I'm sure you get the hint. A compelling study and read.

Scientific American - solar grand plan

If you haven't seen it yet, you might want to read Scientific American's strategy for a massive solar roll-out that would take place over the next four decades.

On the following pages we present a grand plan that could provide 69 percent of the U.S.’s electricity and 35 percent of its total energy (which includes transportation) with solar power by 2050. We project that this energy could be sold to consumers at rates equivalent to today’s rates for conventional power sources, about five cents per kilowatt-hour (kWh)....

...The federal government would have to invest more than $400 billion over the next 40 years to complete the 2050 plan...The infrastructure would displace 300 large coal-fired power plants and 300 more large natural gas plants...The plan would effectively eliminate all imported oil...In 2050 U.S. carbon dioxide emissions would be 62 percent below 2005 levels, putting a major brake on global warming.
I appreciate the ambition and scale of investment and resources that this article is willing to contemplate and it is certainly a considered and well-researched piece. The strategy is laid out essentially as follows:
  • CSP and PV are both brought to large-scale deployment by 2020, amounting to 84 GW (I assume actual installed capacity). This ramp-up stimulates manufacturer scale up, optimizing production, improving installation and reducing overall cost of solar drastically.
  • Thin film cadmium telluride solar accounts for 80% of the solar energy, with module efficiency improvements to 14%, and $1.20/watt installation cost. Concentrated solar power with molten salt heat retention is further developed and accounts for 20% of solar power.
  • In parallel, a new high-voltage, direct-current (HVDC) power transmission backbone is built from the US Southwest around the nation while compressed air storage facilities are installed around the country in abandoned underground facilities. Excess solar power would be sent over high-voltage DC transmission lines to compressed-air storage facilities throughout the country.
  • Federal policy support through 2020 includes loan guarantees, guaranteed government PPA, and price subsidies. After 2020, the study assumes self-sustained industry growth.

  • In addition, over the next 40 years, a total of 46,000 square miles of easily available and accessible land will be required for photovoltaic and concentrated solar power installations.
What I enjoy most about this study is the research tacked to each initiative. If you're feeling wonky, you can have fun exploring the underlying assumptions and projections for each primary strategic point.

Meanwhile, the total cost of this plan is sizable: $420 billion in federal government support over the next four decades, but the authors believe this to be a bargain:
Although $420 billion is substantial, the annual expense would be less than the current U.S. Farm Price Support program. It is also less than the tax subsidies that have been levied to build the country’s high-speed telecommunications infrastructure over the past 35 years. And it frees the U.S. from policy and budget issues driven by international energy conflicts.
Certainly there are a number of aggressive assumptions and challenges associated with this plan. In fact, I feel it actually best serves as a “thought exercise”, as the article itself concludes:
The greatest obstacle to implementing a renewable U.S. energy system is not technology or money, however. It is the lack of public awareness that solar power is a practical alternative—and one that can fuel transportation as well. Forward-looking thinkers should try to inspire U.S. citizens, and their political and scientific leaders, about solar power’s incredible potential. Once Americans realize that potential, we believe the desire for energy self-sufficiency and the need to reduce carbon dioxide emissions will prompt them to adopt a national solar plan.
UPDATE: There was one other thing I wanted to add to this post. The greatest benefit of this type of plan might not actually involve developments of solar energy per se but where that technology leads. While it's not the most efficient or cost-effective, $420 billion in federal expenditures can lead (indirectly) to a lot of R&D. I'm reminded of NASA's impact on technology transfer (e.g. fiberglass, breathing apparatus, GPS, computers, etc.) There's a great report on this here: "NASA’s Legacy of Technology Transfer and Prospects for Future Benefits"

The difficulty in predicting oil prices

I’m going to stray a bit outside my comfort zone to offer some thoughts on oil prices.

Excluding renewable fuels and transportation, evidence demonstrating a correlation between the price of oil and either renewable energy investment or renewable energy stocks and is somewhat anecdotal. Research demonstrates a link, but others disagree. I imagine it’s a difficult relationship to tease out, given the numerous variables underlying price movement, many unrelated to each other.

[of course, the boom in ethanol, biodiesel and other renewable fuels, as well as the new CAFÉ standards and interest in plug-in and gas/electric hybrid vehicles are all directly tied to the high price of oil. But that’s a different post.]

I’m more interested in the prevalent assumption among the media and general public, that oil prices directly impact interest and/or investment in all renewable energy (for a variety of economic, behavioral and political reasons). I find it an interesting potential paradox that while a long stretch of $100 bbl/oil might have a psychological and economic influence that could ultimately boost renewable energy finance and R&D, there would be considerable negative macro-economic impact in the short-term (which would damage those renewable energy opportunities).

As one of my assumptions for 2008 is that there will be a short-term pause in the “green movement”, I’m specifically interested in the prospect of higher oil prices in 2008 and more importantly, if the outcome can predicted with any certainty.

If the price and volatility of oil drives renewable energy decision-making (as an investor or financier, politician or typical consumer) then having some confidence and clarity about the price of oil would be immensely valuable for a variety of stakeholders.

Thus I found the multiple articles on oil prices in Thursday’s Wall Street Journal to be especially interesting as much for what they said about the staggering impact of high oil prices as for our inability to determine what we might see occurring in the oil industry.

Interestingly the Journal already ran this article two months ago before an oil summit. Back then, I wrote:

If you view $95 oil as the result of speculation, a deflating dollar and a war/risk premium (as opposed to simple supply/demand issues), you can now, according to this article, also add as drivers of high oil prices:
  • Resource nationalism
  • Limits on oil field access
  • Billions of dollars in infrastructure underinvestment
  • Declining production levels in existing fields
  • Oil field damage due to over-depletion
  • Revenue surplus which limits extraction investment
  • Labor, construction and equipment bottlenecks
  • Booming commodity markets
  • Overestimation of near-term potential in alternative supplies
Yesterday’s article took more of a longer-term view, but still offered the same perspective:
Economists, Wall Street commodity traders and even seasoned energy executives were caught flat-footed by oil's dizzying rise. Looking back, several factors came together at the same time to help oil shoot up roughly tenfold in less than a decade and briefly touch $100. Those factors are likely to stick around -- and perhaps push prices up further.
Reading through the article, I was able to add the following to my list of drivers for higher oil prices (responses edited):
  • Unexpected surging oil demand in China, the Middle East and other developing countries
  • Chronic underinvestment in oil fields in the past decade
  • Wall Street penalizing risky extraction efforts
  • Insensitivity of U.S. and global oil demand to rising oil prices
  • Price volatility sparked by 24 hour NYMEX trading, hedge funds and financial traders
In addition, via an email exchange with Lou Grinzo from The Cost of Energy, I confirmed several of these trends and added two other price drivers:
  • Rise of national oil companies (NOCs)
  • Inability/unwillingness of some exporters to keep pace with demand.
Accordingly, in the process of gathering this information for this post, I ultimately wound up collecting almost two dozen reasons why oil prices are as high as they are today. Which, for me, then begs the question: why has $100 bbl/oil been so hard to predict? And should recent developments really be all that shocking? And in future, can we say with any confidence if these trends and drivers will continue indefinitely?

I feel there is a relatively simple reason why so many investors and analysts have been (and continue to be) caught by surprise with the oil price increases over the past five years. In predicting oil prices over the past twenty years, there hasn’t been much need for innovation in either modeling or research. Oil fluctuated gradually between $20 and $30 (occasionally drifting to $10-15), demand grew consistently and steadily, except in times of recession or the occasional war, and supply was essentially infinite. [as this great chart demonstrates]

To this end, most oil experts and analysts I’ve met tend to be old-school traditional guys, with solid relationships in the Middle-East and a belief that oil supply would forever top demand, and the US would always find a way to smooth pricing through invasion, regime change, sanctions, etc. I have a number of examples which I’m prudently withholding.

Meanwhile, those who predicted peak oil, or that demand could eventually outpace supply have been consistently marginalized, and (for about 20 years) wrong. I would imagine most left the industry. And I would further assume that few young or contrarian individuals ever entered oil trading or analysis, perhaps due to the lack of excitement or change (given the absence of volatility in pricing and need for “physical trading”).

And thus now, as we face a suddenly new and volatile era, we are left with experts who possess a great deal of expertise and experience, only in doing the same basic thing and never really needing to innovate. While I have no doubt as to their economic and mathematical brilliance, we unfortunately need experimentation and non-linear thinking. I imagine it must be paradigm-shattering for some old-timers to have to consider current developments while imagining a world of finite supply and a U.S. unable to “encourage” increasing production. To this end I would expect most oil analysts and investors to have little clue about what to do next, and to continue to be surprised by an oil market that they’ve never really had to consider or model before.

Take for example one senior energy analyst at a large investment bank, who I enjoyed meeting recently. Unlike many of his peers, he's been bullish on oil for several years now. And yet, while he expected high oil prices for 2008, by 2010, he assumes supply constraints will ease considerably, leading to a significant decline of oil prices past 2009.

What struck me in discussing this with him was his reasoning. He ignores most of the 20+ reasons I listed above as to why prices have sparked so high in the past few years and focuses mostly on supply and demand. Moreover, in terms of supply, he thinks OPEC has the capacity to grow up to 3.0 mmbpd, which he believes will easily match average global demand growth of 1.5 mmbpd for the near future.

Beyond this, he has aggressive projections for alternative and non-conventional fuels. He expects ethanol and biodiesel to see incremental growth to almost 0.7 mmbpd by 2010, while Gas to Liquids/Coal to Liquids, oil sands and condensate splitting will add another 1.2 mmbpd by then. This, coupled with additional refinery capacity coming online and an assumption of calming political issues, means that while he expects $80 oil through 2008, after that, he is fairly bearish, and assumes prices will fall significantly.

Unfortunately, to me, this analysis ignores the myriad price drivers described above. And should the OPEC supply growth prove optimistic, the increase in capacity is heavily reliant on the scale up of the alternative fuels mentioned above to match growing oil demand. Meanwhile, forecasting the price of oil, already an immensely difficult exercise given the aforementioned variables in this post, becomes yet more complicated by 2009 if additional oil capacity doesn’t come on line.

In pricing oil, an analyst today needs to consider all of the above challenges and then include a host of new variables associated with the production of alternative fuels (price of corn, tar sand oil extraction, etc). So oil, already incorporating political risk premiums, economic risk and at least two dozen other new variables referenced above, now must factor in variables around the capacity, expense, production and pricing for at least five different unproven fuels, which are necessary to meet growing oil demand.

All of which explains why oil price forecasting is so difficult to get right. And why many "experts" continue to be surprised. And so where does this leave me? Apparently throwing darts and making a blind guess about the average cost of oil in 2008 and beyond.

UPDATE: I only touched on this above, but check out this piece today linking the rising price of oil to a weak dollar, and then some in-depth analysis here.