future clean tech

Thomas Weisel Partners is an investment banking firm based in San Francisco with offices here in New York, and I attended their annual energy conference this week. I skipped the natural resources presentations on the fourth floor of the New York Palace and headed straight to the fifth where the “alternative” energy presentations were taking place.

Around 40 public and private “alternative” energy companies presented – in three different rooms simultaneously, so I could only get to a few of them. I did notice that one or more of Thomas Weisel’s analysts are particularly interested in electric motors – they seemed to be disproportionately represented, with firms like UQM Technologies and Zenn Motor Company presenting.

Although I am particularly interested in energy generation – and especially geothermal which was also very well represented at the conference – I forced myself to attend presentations in other areas of cleantech. One area that I hadn’t spent much time focusing on was energy efficiency/management, and CPower, based here in New York, caught my attention.

The core of CPower’s business is demand response: basically, energy utilities are prepared to pay market rates for large energy consumers to be on standby to reduce their energy consumption when demand is high. Effectively, when grid capacity is strained, the utility remotely controls a company’s high-demand appliances and will shut them down after giving notice as short as half an hour or even 10 minutes. In exchange, the utility compensates the company for lost production time. This is cheaper – and more energy efficient – than the utility building out more energy production capacity.

CPower also provides other services for their clients, such as helping improve energy efficiency for clients, and peak load management. Peak load management is important because utilities will charge energy consumers a base rate based on the previous year’s peak load. So even if the company only averages 50% of its maximum power usage (”peak load”), they’ll still pay a premium for the privilege of drawing the peak load they drew last year. So CPower helps companies save money by reducing their peak load.

It was also great to see Petra Solar, whose utility pole solar project in New Jersey I’d written about previously.

Yesterday, I attended the New York Society of Security Analysts’ “Future of Energy Investing: Exploration, Production and Clean Technology Conference.” The email reminders advertised it as simply NYSSA’s “Energy Conference: Exploration and Production,” which was indicative of the fact that this is the first time NYSSA has included cleantech as part of its energy mix. To my knowledge, anyway.

After the oil and gas players presented in the morning, Sanjay Shrestha of Lazard Capital Markets gave the lunch presentation. He gave a basic overview of the history of the clean energy space to a crowd which mostly seemed to be composed of fossil fuel types. He noted that meaningful growth began when Germany passed its renewable energy law, and went through the growth of each sector, expressing doubt about the efficacy or clean-ness of “clean coal”, a position I identify strongly with and on which more in a post next week. Sanjay regards grid services opportunities as where the big growth will be in coming years. Overall, he says that he remains “bullish” on the prospects for the sector which he believes will be the “next industrial revolution.”

The three cleantech companies that presented were Juhl Wind (a community/distributed wind energy firm), PureSpectrum (lighting/energy efficiency), and Axion Power International (lead-acid batteries). Community wind seems to me to be more of a hassle than it’s worth – too many landowners to negotiate with, and for limited return. I am also unexcited about compact fluorescent lights (CFLs); PureSpectrum seems to be very excited about “a dimmable CFL that works” but, honestly, I can’t stand CFLs and I can’t imagine a scenario in which I’d install one that needed to be dimmed, short of the government forcing me.

On the other hand, energy storage seems to be a sector that will be increasingly important. I don’t know whether Axion’s technology is particularly special – something about eliminating lead from the negative electrode, which means about as much to me as it does to you – but its customer list is impressive. In the automotive market alone they have BMW, Fiat, Ford, Renault, Suzuki, Toyota and VW – and then there’s the industrial/motive power market, wind energy storage, utility grid support, PV storage, and other markets. It’s a huge area, and the growth in it will be explosive. The electric vehicle market is about to explode, and grid energy storage support will inevitably be one of the big winners in the growth in grid services opportunities that Sanjay Shrestha predicts. I can’t see any player in this sector losing.

It was interesting to see clean technologies dispassionately put in the context of the broader energy sector to which they belong. This was not a conference designed to drum up interest in some new snake oil industry; NYSSA has no reason to talk up cleantech for its own sake. If any further proof were needed that clean energy will remain a serious part of the energy mix, inclusion at a conference like this is it. But it was also clear that renewables are still a very small part of the sector, and that it will take some time to entrench them as serious rivals to oil and gas.

At least, that seemed to be the view of some of the attendees I spoke to when we broke for lunch. The oil and gas people were confident and brash, but I saw no real reason for them to be – if anything, the way oil and gas are explored for and dug up is a less attractive business proposition than the intermittency and other issues surrounding renewables. Oil and coal and gas are relatively cheap today because they’ve been around for so long and because the government subsidises them simply for being the incumbent technologies. But if fossil fuels were dispassionately compared with clean energy without the former having the advantage of incumbency, I see no reason, with today’s technology, why cleantech wouldn’t win an easy victory.

NYTimes carried this story in its greeninc blog today: Solar Industry Takes on Coal and Oil Lobbies. Highlights:

A solar industry leader smacked down the oil and coal industries on Tuesday, calling for renewable energy proponents to open their wallets to level the playing field in Washington. [...]

Oil and coal interests “are spending millions of dollars on lobbying, P.R. and advertising, and much of it is financing a deliberate effort to discredit our industry,” Mr. Resch added. “At the end of the day in Washington, good intentions won’t stand a chance against millions of dollars and intense political pressure. We have relied on good will long enough, and if that’s the only arrow in our quiver, we will lose.” [emphasis added] [...]

But Mr. Resch said fossil fuel industries received $72 billion in federal subsidies between 2002 and 2008 while the solar industry scored less than $1 billion. “Taxpayers are forced to subsidize companies like ExxonMobil, companies that are the richest in the history of the world,” he said.

His solution: Start playing the influence game, raising big money for politicians and mobilizing constituents to pressure Congress to support the solar agenda. “In 2008, the oil industry contributed $22 million to political candidates, the utility industry $21 million,” said Mr. Resch. “The solar industry: $138,000. We cannot compete with the entrenched energy interests unless we step up our game.”

Having spent a great deal of time observing the campaign financing system that governs Washington DC, I tend to agree with this analysis. Why are supremely profitable fossil fuel companies receiving $72 billion in federal subsidies over a six-year period? The answer is not good public policy, of course, but the influence of money.

The public interest does not necessarily prevail in American politics. Well-financed “special interests” win. The only way the public interest can possibly win, alas, is if it is equally or even better-funded than narrow special interests. The public interest needs to clothe itself as a special interest.

While campaign finance reform remains a noble and necessary goal, even the powerful Senator and former presidential candidate John McCain has been unable to slow the burgeoning supremacy of money over good public policy.

I have observed and voluntarily assisted one particular Beltway lobby whose cause I believe strongly in, and I saw firsthand how, as the Green Inc article states, no amount of good intention could possibly achieve anywhere near the kinds of policy outcomes that are achievable through well-funded public affairs work.

19th-century industries like burning fossilized plant remains (that’s what coal is!) still receives billions in federal funding because the entrenched fossil fuel lobby knows how to do politics.

The cleantech industry needs to very quickly learn how to effectively fundraise and target that funding into appropriate, powerful, game-changing campaign financing.

In today’s America, the best ideas will not win unless they are better-funded than the very bad ideas. A viable, contemporary, professional, well-funded and politically-savvy cleantech lobby is urgently required in this country. The fossil fuel dinosaurs must be beaten at their own tawdry “special interests” game.

EDIT 11/11: This from the Center for Public Integrity:

If the public is unaware, more than 1,150 companies and advocacy groups are very tuned in, and they have deployed about 2,810 climate lobbyists to Capitol Hill, an increase of more than 400 percent from six years earlier, according to an analysis of disclosures filed with the Senate Office of Public Records. Spending on the lobbying this year so far in the United States is at least $47 million. Senate advocates aim to build support much as it was achieved in the legislation that narrowly passed the House this summer — by giving a boost to businesses that fear they’ll be hurt by measures raising the cost of the coal that supplies half the nation’s electricity. But the concessions have not won over opponents like Don Blankenship, chief executive of Massey Energy, the largest coal producer in central Appalachia, who forcefully disputes the science of global warming. Although that makes him an outlier in the public debate, his argument that the bill will cost jobs at the same time “it will increase global pollution by moving production to unregulated countries like China” causes worry on Capitol Hill.

Blankenship is just one of the business opponents who have worked to rally citizen ire — a campaign that has resulted in hundreds of alarmed phone calls to Senate offices. Given the power of industry lobbying in Washington, advocates see the best hope for the legislation’s passage as the competing U.S. businesses that support action, ranging from power companies that want predictable energy policy to high-tech firms that aim to market climate solutions.

More here.

This week’s Australian federal budget was nearly as short-sighted as ever. What we saw on Tuesday was mostly greenwash. Bob Brown was right: this was not a green budget.

Federal Treasurer, Wayne Swan

The government pandered to narrow dirty business interests and dressed its actions up with a poorly-disguised sop to the environmental movement.

It is true that we’ve committed serious money to a national broadband infrastructure. But that should have been done years ago. The info tech boom is now a fact of life. And now we’re left lagging in the next crucial tech boom: clean tech.

A welcome initiative is the government’s $1.5 billion over 4 years that will go into building serious centralised solar generation infrastructure.

But this is a mere sideshow – it’s the sop to the greens. It is a smokescreen for the government’s real agenda: protecting carbon-intensive industries.

Out of total budget expenditures of roughly $340 billion, $4.5 billion is going into “clean energy”. That’s just over 1% of the budget. The lion’s share of this money is going into that oxymoron, “clean coal”.

“Clean coal”, or carbon capture and storage (CCS), is a largely unproven technology. Certainly more unproven than established renewable alternatives like wind and solar. It’s 10 years away from industrial-scale deployment. And it’s not “clean”.

But since coal-fired power and coal exports are entrenched Australian industries, it is easy for the government to fund relatively unproven CCS technology and get away with greenwashing it by calling it “clean” technology.

This, after last week’s delay in the emissions trading scheme, casts serious doubt on the government’s commitment to the environment and to green business.

What happened? The government should be investing many billions into true, proven clean technology. Where is the serious funding for wind, solar, smart grids, electric vehicles, and other clean technology infrastructure and R&D?

Our government doesn’t get it. While our most promising future jobs engine – clean energy and clean tech – is left to fend for itself, the government’s priorities are clearly reflected in, for instance, its increases in defence expenditures, its clear commitment to subsidising the fossil fuel industries (partly by greenwashed stealth), and its refusal to include petrol-induced emissions in the ETS.

Serious money needs to be pumped into this sector. Instead, the government has doled out $20 billion in frivolous cash giveaways (a vote-buying ploy spun as “fiscal stimulus”) and delivered an unnecessarily reckless and short-sighted budget.

Will we ever learn?

Regarding the global financial crisis (GFC): the Chinese word for “crisis” consists of two characters, which make up the compound word “problem-opportunity”.

While it is true that credit markets have seized up, and that there are undoubtedly rough economic times ahead, it must also be true that the GFC presents a tremendous “problem-opportunity” for those in the cleantech space.

This would in some sense be true even if governments didn’t provide regulatory and other stimuli for the industry. Good technologies and good business will bring the market to them because they will be appealing to the consumer (think Prius), and/or cheaper than legacy technologies and methods (think LPG).

The bonus for the cleantech industry is that governments around the world are banking (so to speak) on cleantech as the new economic driver. As I’ve mentioned previously, the Obama Administration has put its money where its mouth is. Barack is fair dinkum about cleantech. The Australian government is lagging behind, but in the event that the Rudd Government’s Carbon Pollution Reducation Scheme (CPRS) is passed, and some of the other regulatory elements make it through (such as the new renewable energy production target of 20% by 2020), the cleantech sector will probably boom.

We’re still waiting for the first big cleantech success story in Australia, but it will come. In the meantime, I will mention some of the overseas success stories and local hopes in the next couple of posts. Forget the Global Financial Crisis; think of it as a Global Financial Opportunity.

CleanTechnica posted a story yesterday about an MIT professor who argues that, even in the best case scenario, we will still be unable to meet our energy needs by 2050 using the centralised model of today. His solution, according to CleanTechnica:

Nocera said that MIT will announce its patent next week of a cheap, efficient, manufacturable electrolyzer made from cobalt and potassium phosphate. This technology, powered by a 6 meter by 5 meter photovoltaic array on the roof, is capable of powering an entire house’s power needs plus a fuel cell good for 500 km of travel, with just 5 liters of water.

The new electrolyzer works at room temperature (”It would work in this water glass right here”) to efficiently produce hydrogen and oxygen gases from water in a simple manner, which will enable a return to using sunlight for our primary energy source.

These sorts of technologies offer the hope for a kind of radical decentralisation of the power supply. It is also the sort of opportunity that is ripe for venture capitalist involvement (hence MIT’s patent announcement) because it does not require large-scale government funding and won’t face the kinds of bureaucracy that, say, building a new wind farm entails (development consent, NIMBY opposition, and so forth).

Urban wind power

Everybody is thinking about what the energy infrastructure of the future is going to look like. In the medium-term, we are going to see a partial decentralisation of the power supply alongside a significant increase in traditional, centralised renewable energy generation. While in the long-term (10-20 years from now) we will be aiming for fully renewable baseload power generation, in the medium-term baseload power will continue to be generated primarily, in Australia, by dirty coal. Nevertheless, while the broader transition to renewables gathers pace (a trend that I expect will result in not merely exponential but explosive displacement of fossil fuels with clean energy sources), it is entirely possible for peak power generation to be subsumed by, say, local councils using, say, urban wind turbines on main traffic arteries.

This week’s cleantech forum in Melbourne will be a welcome opportunity to hear where Australia’s cleantech industry sees the local energy sector going over the next few years. Watch this space.