Cleantech: Bright Spot In U.S.-China Cooperation

Despite heated rhetoric from protectionist corners that China and the United States must compete over the massive dollars associated with the clean energy industry, some signs are actually emerging that we’re entering a phase of mutual benefit and collaboration.

It’s a natural fit: the U.S. is an innovation engine short of capital and customers, and China is a commercialization hotspot with lots of money and a major environmental problem. Thanks to interesting new deal structures that allow for commercialization to happen while addressing U.S. intellectual property concerns, cooperation finally appears to be a reality.

In April, Zhongding Group announced a $200 million investment to scale the production of U.S. company EcoMotor’s ultra-efficient motor technology. A new manufacturing facility will be built in China to commercialize a technology that would have otherwise taken years to come to market (if ever) in the United States. Similar deals have started to add up. Wanxiang Holdings acquired faltering U.S. battery company A123 Systems (now renamed B456 – can you say rebrand fail?) for $250 million and also invested $420 million in GreatPoint Energy, a company that turns coal into natural gas. Coal-to-butanol company IGP Energy similarly formed a joint venture with Chinese coal giant Yankuang Group for five facilities. Shanghai steel giant Baosteel also invested in waste-to-fuel company LanzaTech, funding a demonstration plant that is expected to result soon in a fully commercial facility.

All of these deals, and many others, have meant rapid acceleration of technology that may not have otherwise happened. But the benefit isn’t just flowing to U.S. cleantech companies starved for cash. China also desperately needs the technologies to address mounting environmental concerns – air pollution, severe water shortages, food safety and the list goes on and on.

According to Cleantech investor Greg Manuel, there is a 5-plus year “innovation delta” between the clean technologies being developed in the United States and those in development in China (with China lagging behind). Similarly, Manuel says, there will be a $4.5 billion shortfall in capital for U.S.-developed clean technology start-ups in the next three years. “This emerging pattern of cooperation is still in its early stages. But there is a tremendous vector of opportunity when you look at the innovation delta, capital gap and severe environmental and energy challenges facing large Chinese enterprises with large pools of cash,” said Manuel, formerly a special advisor for energy affairs to U.S. Secretary of State Condoleezza Rice and senior vice president for corporate development and strategy at Amyris.

This post originally appeared on Forbes.com

Clean Energy: Too Many Interests, Not Enough Group

There is a lot of interest in clean energy. Here’s just a partial list of the US groups out there: American Business for Clean Energy,  Business Council for Sustainable EnergyEnvironmental EntrepreneursInvestor Network on Climate RiskBiomass Power AssociationRenewable Fuels AssociationClean Economy NetworkUS Climate Action PartnershipClean Energy WorksUS Clean Heat and Power AssociationSolar AllianceWe Can LeadAmerican Wind Energy AssociationAmerican Coalition for EthanolAdvanced Biofuels CoalitionWind CoalitionBusiness for Innovative Climate and Energy Policy,  Growth Energy,National Hydropower AssociationGeothermal Energy AssociationSolar Energy Industry AssociationSolar Electric Power AssociationCeresAmerican Council on Renewable EnergyAmerican Biogas Council,Carbon War RoomAlgal Biomass AssociationFuel Cell and Hydrogen Energy AssociationElectrification CoalitionAmerican Council for Energy Efficient EconomyGridwise AllianceDemand Response and Smart Grid CoalitionAmerican Energy Innovation CouncilBlueGreen Alliance, Water Innovations Alliance.

Remember, that is a partial list. And that doesn’t even include state and regional groups, of which there are dozens more.

Get the picture? A jumble of letters: “C” for council (five) and coalition (five); “A” for association (11) and alliance (four) and “S” for solar (three); plus at least four groups directly and indirectly touching “B” (for biofuels) and more than half a dozen groups broadly positioned around “E” for energy. What does that spell? Trouble with a “T”. At a time when the clean energy industry needs one powerful voice to drive policy and get federal and state lawmakers to actually do something visionary, what we are getting is a 100-part disharmony of sometimes clashing, sometimes overlapping agendas. With the recent shift in political winds in DC and many state houses signaling a tougher road ahead for a clean energy agenda, the need for that unified voice is even greater.

In fairness, an examination of the missions for the various groups often shows material differences in their focus, but how important are those differences in the broader picture? That is a question that we need to be asking ourselves.

The environmental NGOs – EDF, NRDC, WRI, etc – failed to influence national policy in a significant way during the first half of Obama’s current (and possibly only) term. But the truth is that, when it comes to getting more aggressive adoption of clean energy policies, the same can be said for the business interest groups listed above. A rationalization and consolidation of these groups is a reasonable expectation, and even if that fails to materialize, there is a strong need for an all-encompassing umbrella “organization of organizations” that rises above the petty jealousies and turf wars that often make the trade association, non-profit world ineffectual and scattered. Just as a consolidation of the cleantech industry itself is overdue, so too is one for the organizations that represent it.

Ironically, my involvement in the Clean Economy Network (CEN) was motivated by a desire for an industry defined by “distributed energy” to become more centralized in its approach to policy. Whether its CEN or some other group that occupies a higher, more unified plane, one thing is certain: faced with a torrent of cash-infused lobbying from big oil and coal companies, a drip campaign from dozens of groups representing a fractured clean energy industry won’t have the desired impact – rapid and decisive action from policymakers.

I plan on being in Washington, D.C. on January 24-25, 2011 to attend the first CEN business leaders summit, with the hope that at least part of the proceedings will be a serious dialogue on organizational strategy for the clean energy industry. It would be great if the representatives of all the groups owning patches of the industry can be there too to create a more cohesive quilt.

Roundup: Cleantech Predictions for 2010

Based on the rash of predictions for cleantech in 2010 from investors, consultants and media (see the full list at the end of this post), I’ve pulled together a “trend of trends” list below that attempts to synthesis the broader, over-arching themes. As always, I’m amazed that water isn’t on the top of every list, every year, although there are some positive signs on that front. So here are the 12 things that filtered to the top:

  • Energy efficiency will have a big year, with buildings and information and communications technology (ICT) front and center (nice to see the “wow” factor over technologies like solar being tempered by the realization that there are a lot of cheaper ways to meet immediate goals for reducing emissions)
  • Private investment will revive (with one prediction for a record-breaking year), but fears persist that the pending end of stimulus dollars will cast a long shadow over the market
  • Differentiation – i.e. marketing – will increase in importance as we move from a technology-heavy phase to a commercialization-focused phase (something I’ve called attention to in the past).
  • Consolidation and industry shake-out will accelerate, as will increased involvement of major corporates. Many VC-backed firms need an exit (especially in smart grid, solar and biofuels), so expect a few IPOs, but mostly M&A or failure as scale becomes more important and winners and losers emerge. And as the market grows and the issues being addressed become more complex, big multinationals with vested interests will try to play a larger role
  • Smarter transportation – especially electrified – continues to gain traction, while next generation liquid fuels (cellulosic in particular) takes baby steps
  • It’s more than energy, stupid. Land, water, rare earth metals, etc take more mind share as understanding grows  that the issues we face go beyond energy and carbon
  • Importance of carbon measurement and management will increase, but folks seems pretty skeptical that even if climate legislation/treaties get enacted that they will be aggressive enough (some expect sector specific carbon regulation – i.e. aviation and shipping – instead of economy-wide measure
  • Distributed solutions continue to erode the power of centralized systems (in energy generation, building, transportation, etc)
  • Some technologies expected to garner attention: Waste to energy, waste biomass, power storage, geothermal, aquaculture, ultracapacitors, desalinization, building materials, large-scale solar
  • There is a lot of expectation around advancements and interest in upgrading the electric grid; although there was a warning to expect at least one major failure of a smart grid rollout (not to mention that people have been predicting an intelligent grid for many years)
  • Standards gain a higher profile – whether building codes, water or carbon labeling, unified standards for the smart grid, etc, creating a clear marked playing field grows in importance, including communicating the rules to consumers as needed
  • International competition to be the cleantech leader intensifies (again this is something I’ve written about in the past, so not really news in my opinion)

If you want to read for yourself, the various predictions I’ve pulled from are here: Energy stocks to watch from Seeking Alpha; Overall industry outlook from the Cleantech Group; Clean energy predictions from Deloitte; Two different VC perspectives, one from Lightspeed Venture Partners  and the other from Rob Day at Black Coral;  5 biggest hurdles from Earth2Tech; IT and corporate green from Greenmonk’s Tom Raftery; Green building trends from Earth2Tech;  Top 10 promises from cleantech companies from Cleantech Group; Smart grid from Earth2Tech.

ACORE offers dour view on bioenergy

The American Council on Renewable Energy (ACORE) had this to say about the current state of affairs on bioenergy. Nice to see some realism out there:

“The prospects for a successful green energy revolution  appear problematic with the diffused applications of the American Recovery and Reinvestment Act (ARRA) of 2009, the seemingly faltering relevance of carbon regulation, the lack of policy coordination  on environmental/ renewable energy issues in the Federal Government between departments and agencies with broad natural resource jurisdiction, and the controversy surrounding green  energy uses  of bioenergy sources  such as co-firing by electric utilities and other companies. The significance of these issues will be escalated if the scheduled reduction in Federal grant, tax and loan assistance programs to renewables occur in 2011.”

If you want to learn more ACORE on this subject take a look at Sustaining National Stimulus: The Bioenergy Case

Notes from Renewable Energy Finance Forum

Some of the trends, information I found interesting at REFF-West (rather than Tweet all of them, I’ve just listed them here):

 

  • Compared to REFF-West last year, the mood was considerably more positive. Especially important, project finance appears to be recovering (the “community as a whole is looking to migrate back to development projects”) and tax equity is attracting more players than just JP Morgan. Jonathan Yellen of Deutsche Bank said “the projects market… is very strong for what we just went through”. He attributed this in part to the tightening of the bond market, which was pushing institutions more aggressively into funding solar, wind and geothermal projects.
  • Some skepticism exists – Dan Reicher of Google said that without more policy support “we’re staring at the biggest cliff” for renewables when stimulus funding runs out in 18 months. Many at the meeting said DOE needs to be replaced by a CEDA (or the Green Bank), with Matt Cheney of Fotowatio less upbeat on the prospects for solar projects, and saying that “banks were not open for business” as claimed and calling for more innovation from the banking community on financing models.
  • VCs are also seeing more action – Anup Jacob of Virgin Green Fund said he’s now seeing 6 deals a day, up from 6 a week half a year ago. He lamented, however, that the quality of the deals was too low.
  • The forecast for M&A activity in 2010 is to expect “a lot of upside”, according to Jim Metcalfe of UBS Securities. IPO outlook “is improved, but there is still some way to go” to get back to the sweet spot of 2006/2007, according to Kevin Genieser of Morgan Stanley. There are 24 IPOs on file in various markets, but they will be smaller in scale, so likely to get good reception,
  • Not new, but good quote from Mike Eckhart of ACORE: “If you’re interested in clean energy, the government is your partner”. Like it or not, in the highly regulated energy space, you better get your government groove on.
  • Coal-to-liquid – I was unaware that the US CTL program began in 1944. Give it up already, or in the words of John Geesman, “after 65 years, the audacity of hope should yield to the audacity of nope”.
  • Parker Weil of BofA Merrill Lynch said the “markets doesn’t believe that the best companies are getting the government funding”. 250 reviewers in DOE building every day since May reviewing ARRA projects, Matt Rogers of DOE said. But oddly, there is little transparency in how the decisions to fund are made – the credit committee for DOE loan program is confidential. That was troubling to many.
  • Renewable energy technology entrepreneurs should not see utilities as competitors who will try to go it alone and scale their own technology, according to Weil, who said the utilities do not have as strong of a capital position as many believe.
  • Former US Rep. Vic Fazio thinks the Senate can find 60 votes for climate and energy bill in the January-March 2010 timeframe. On a similar note, Tim Newell, advisor to U.S. Renewables Group, said that the capital markets have already discounted the possibility of climate legislation happening in 2009,
  • China – good intelligence from Ryan Wiser of LBNL
    • Good chance it will surpass the US in wind installations for 2009.
    • Solar PV feed-in tariff could come this year, but more probable next year (already feed-ins for biomass and wind).
    • Expecting government to significantly increase their targets for wind and solar generation by end of 2009
  • “Biofuels is a 4-letter word in most investment shops right now” – Jacob
  • Hottest sectors in next 12 months:
    • PV, CSP – Yellen
    • “Big Wind and Small (i.e. distributed) Solar” – Weil
    • Wind for developers, smart grid for private equity – Jim McDermott
    • Smart grid and solar – Jacob
    • Smart grid (including demand response, meters and data management) – Geneiser

Interesting events mentioned that are worth sharing: US Partnership on Renewable Energy Finance and The Networked Grid

New Energy + Mature Energy = Scale

Because of my work with PetroAlgaeSkyFuelEarthTronics and other cleantech companies, it has become clear to me that the degree of success achieved by “new energy” technologies (wind, solar, biofuels, electric vehicles, etc) will in large part be the result of their ability to integrate into and leverage the existing, “mature energy” infrastructure. Whether it’s plug-in, drop-in, co-fire, bolt-on or some other term, it is these types of technology – which DO NOT require significant retooling of refineries, transmission, storage, etc – that will have the best chance to scale, and thereby win in the long-term. Exxon’s recent announcement to invest $600 million in algae is a good indicator of this trend. Similar to the discussion of gigaton scale in my last post, cleantech companies need to be thinking about this issue when developing their positioning and go-to-market strategy.

Go “Gig” or Go Home

At the launch of the Gigaton Throwdown in DC last week, entrepreneurs and investors adopted a new metric for cleantech businesses other than internal rate of return – something called gigaton scale. The herd mentality that has characterized cleantech over the past three years continues today. In 2007 it was biofuels, in 2008 it was solar, and this year it appears to be smart grid and efficiency (which is ironic because for the longest time investors swore up and down that energy efficiency didn’t fit the VC model). What is so captivating about the Gigaton Throwdown is that it challenges businesses, investors and policymakers alike to focus on the technological pathways that have the potential to abate one gigaton of carbon or GHG equivalent per pathway per year by 2020. And executives with vision appear to be buying in. The CEO of Novozymes, Steen Riisgaard, for example told me during a recent conversation: “Thinking at gigaton scale is helping us identify our ultimate potential. Novozymes has the aim to help our customers achieve a 75 million tons reduction in greenhouse gases by 2015. But we actually believe the potential is much, much higher if you look at the entire industrial biotech space, where we think can reach gigaton scale within 10-20 years.” Similarly, Marty Lagod of Firelake Capital referenced one company, EOS Climate, in his investment portfolio that he bet on precisely because it has the potential to reach gigaton scale. Marc Porat, who has founded three cleantech building companies (Serious MaterialsCalStar and ZETA Communities) has focused on building materials and building efficiency for the same reason. In his typical candor, he said that a lot of cleantech businesses in Silicon Valley are “vanities, which will not make a difference”. He’s absolutely right. And while businesses and entrepreneurs seem to be getting it, according to Cathy Zoi, the newly confirmed assistant secretary of energy for energy efficiency and renewable energy, policymakers in DC “don’t fully understand the potential scale of clean energy”. If the Gigaton Throwdown is successful it will change that, and bring all parties involved in the clean economy to the common realization that gigaton scale – besides meaning the possibility of climate stabilization within the necessary timeframe – also means gigadollar scale.

Cleantech Media Survey: 2009 is Policy, Blog Year

Media covering cleantech expect to pay significant attention to policy in 2009 and they also have declared it the year of blogging and video, according to results of my first Annual Cleantech Media Survey released today. With an Obama administration set to take office and the next president’s commitment to end oil dependence and address climate change, 77% of those surveyed said they expect media to place “significant” emphasis on policy-related cleantech coverage, with the remainder saying policy coverage would be “moderate”. In addition, the survey of more than 100 media – leading blogs as well as mainstream newspapers, magazines and broadcasters – revealed that roughly three-quarters expect to see growing demand for cleantech sector news (from both readers and editors) this year compared to 2008.

Solar will remain king of the renewables. Two-thirds of those surveyed named solar as the renewable energy source to be most covered in 2009, with wind and next generation biofuels coming in a distant tie for second at 15% each. And of note, media expect energy efficiency – long a tough sell to editors and readers – to be the top non-renewables cleantech story for 2009, with 40% naming it their top choice. Carbon market and related technologies was second at 25%, with EVs and industry consolidation coming in at 17% and 15%, respectively.

As far as delivery of cleantech news, a majority of survey participants – nearly 60% – said blogs would be the key tool to tell the cleantech story in 2009, with video garnering one-fifth of the vote (Twitter, podcasts and slideshows also received mention). Concerning to the overall state of cleantech media, a total of 62% of those surveyed expect new media to continue to grow and traditional media to continue to shrink, or for new media to take market share from traditional media. A quarter had a balanced POV, expecting both new and traditional media to look for mutually beneficial distribution relationships.

Among the respondents, there is little consensus on the major untold story for 2009. Categories that received multiple votes included efficiency (including smart grid, building energy use and demand response), coal, power storage and cleantech as the engine for economic recovery. Others receiving votes included CleanNano, bioplastics, the Mideast as solar mecca, urban windmills and water as the next “peak” story, Several media also expect the main untold story to be a negative one – examples included: realization of how long it will take for renewables to become more than a rounding error in the energy diet; new forms of greenwash as companies scramble for Obama dollars, and how solar PV and hybrid cars will contribute nothing significant to cutting GHG.

Some reporters and organizations have done their own stand-alone predictions for the new year. Kerry Dolan of Forbes, for example, predicts that the grid will be big in 2009, and that solar will continue to soar. American Wind Energy Association also did their predictions for wind in 2009, Jetson Green offered up seven trends to expect in 2009 and Greener Buildings offered up their forecast as well.

If you’ve seen other media forecasts for 2009, please add them to the Comments section of this post.

60,000 Green Jobs Projected for NW

newly released report says Washington and Oregon states can assume leadership in five cleantech sectors with the potential to generate up to 63,000 direct jobs by 2025 (up from 11,000 today), and outlines what it says is a plan to be the first US region to achieve 75% of its electricity from carbon-free sources by 2025. By the report’s own admission, there is nothing particularly new about the five presumptive areas of strength (PV manufacturing, wind power development, green building design, smart grid and bioenergy), and the 75% figure is somewhat misleading, given that the two states already get 62% of their electricity from clean hydro and renewable sources (The hydro, of course, has nothing to do with anything we’ve done, but merely the luck of living in a place with lots of mountains and rivers). That said, the report is a very helpful first step for a region that has struggled mightily to get its act together and to find a clear identity and focus amid the clean technology boom in the Bay Area and Boston. It points to a number of signals that point to the potential for future leadership – home to big PV plants from REC and Solar World, home to big wind developments, etc. The report, produced by Climate Solutions and CleanEdge, also proposes a top-level series of 10 actions for the Northwest to achieve its role as a cleantech leader. The top 10 list: 1. put a price on carbon, 2. increase Washington RPS to 25 percent by 2025, 3. implement low carbon fuel standards, 4. pass aggressive green building codes, 5. foster regional cooperation, 6. ensure public funding for clean technology via PERS investments and through targeted clean-tech funds, 7. implement effective tax credits for renewables development, 8. deploy cleantech workforce development programs, 9. establish government procurement policies for cleantech products and services and 10. build out regional smart grids and 21st century transmission backbone.

Oh, is that all? Not to mention that how we achieve all of that in 17 years is still unclear. But it is clear from the report that the proof of Northwest leadership is building in drips rather than torrents. It points out several major weaknesses, including some that make the top 10 actions look easy:

  • Absence of a leading university technology incubator like MIT or Stanford
  • Technology investment climate that pales in comparison to Silicon Valley and Boston
  • Small size of public clean-energy support funds compared to other state leaders
  • Aging electric utility grid system challenged to carry increasing distributed and variable energy sources such as wind, wave and solar
  • Small regional market served by cheap hydro, compared to densely populated markets with high-power prices in other cleantech centers

Another issue that is particularly troubling to me: the lack of synergy between Oregon and Washington. They are working very much in silos, despite the best efforts of Climate Solutions. The one bright spot is the Western Climate Initiative, so that’s hopefully something to build on. And the absence so far of any attempt by Oregon and

Washington’s Fortune 500 companies to be advocates for the region and to work together to bring their influence to bare.

Nevertheless, the report is rather optimistic in its job creation forecasts, with an acclerated forecast of 63,000. The less aggressive target is 40,000. Nearly two thirds of the growth is expected to come from the PV and bioenergy sectors.

Disclosure: I was one of the 50+ people interviewed for the report and I’m a member of the Climate Solutions Business Leaders for Climate Action group. I’ve written about many of these obstacles and opportunities here in the past.

NW RE Events Picking Up

Nice to see Seattle and Portland starting to attract and create some quality cleantech, clean energy events. It starts next week with Oregon’s Green Advantage: Opportunities for Entrepreneurs, which will showcase local companies such asPV PoweredPlas2FuelGreenlite MotorsPowermandShorepower and UV Cleaning (as well as some leading NW multinationals and investors). In addition, there is ACORE’s Renewable Energy Finance Forum (REFF) – West, scheduled for Seattle in October, which promises to be a highlight of the year and already has a solid lineup of speakers. Also, because of the work being done in the region around algal biodiesel by such firms at Bionavitas and Bioalgene, the 2008 Algal Biomass Summit will also be taking place in Seattle in October. Stay tuned as well for the kick-off of the Pacific Northwest chapter of the Renewable Energy Business Network (REBN) in September (you can click on Chapters to find the PNW link and sign up for updates).