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.

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

This week I had the opportunity to join 200+ business leaders from 35+ states in Washington, DC to present the business case for comprehensive climate and energy policy for the US. The We Can Lead group met with senior Obama administration officials and members of the Senate. It was a great first step in kicking off an effort to provide an institutional counter-point to the fossil fuel lobby, but my conclusion from the event was that we face a major uphill struggle. Specifically:

·         the current Administration is still measuring itself against the inaction of the Bush years, and needs to measure itself against the action of China and other governments that are accelerating their steps toward a clean economy while we appear to be stuck in 2nd gear.

·         the US Senate is still nowhere near enacting any climate or energy policy. 2009 is definitely out because of healthcare (I heard last week at REFF that the market has already discounted anything for 2009 as well). And there is even the possibility (albeit remote) that immigration reform could be up for deliberation before climate.

·         There are doubts on the key Senate finance committee about imposing a cap on carbon. The complexity of the issue has people searching for band-aids, and I fear stepping away from what’s really needed – reconstructive surgery.

On the positive side, it’s about time that the business sector representing the clean economy finally has an influential voice on Capitol Hill, and money to put behind it and against the fossil fuel lobby. I am a founder and on the steering committee of the Clean Economy Network, which was one of the co-organizers of the DC event (along with CERES).

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

Because of my work with PetroAlgae, SkyFuel, EarthTronics 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.

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 Materials, CalStar 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.

I know this POV will upset some folks, but here goes: coal isn’t going anywhere anytime soon. It’s cheap, plentiful and easy to access, so we better start figuring out how to use it in a cleaner way. Of course there is no such thing as “clean coal” (as I’ve noted on my blog several times in the past). For that matter, there is no such thing as 100% clean solar or clean batteries (someone is out there right now extracting silicon, cadmium and lithium from the ground). But there is something as “cleaner” coal. Don’t get me wrong – I think it’s important that people like Al Gore, Bill McKibben and the folks at Power Shift are out there demanding that the dirtiest coal-fired power generation facilities be dealt with. I agree that we need voices to be demanding an accelerated roadmap to coal alternatives in a loud and unequivocal way (including the tongue-in-cheek voice of the Coen brothers). And apparently, according to this map, Coal Power Death Watch, these voices appear to be gaining traction in the US.

But guess what – there’s an elephant in the room called China. Around 70% of China’s primary energy consumption comes from coal today, and that number, even with the most aggressive forecasts for replacing it with renewables, is going to remain around 35-40% by 2050. And coal replacement has no doubt been prolonged by the current economy, which is keeping alternatives at a higher price point relative to fossil fuels. And don’t blame China. The US is just as much to blame on the coal front, if not more so (according to new analysis, one third of China’s GHGs come from export-oriented industries. Guess who’s to blame for that Wal-Mart shoppers?). Not to mention that China’s government is going gangbusters trying to replace fossil fuels. It’s in its interest to do so – from a public health, economic development, political stability and national security perspective.

But let’s face reality. Beijing is not going to create a domestic economic and political meltdown by shutting the country’s coal plants tomorrow. Nor will it risk that in 2020, or 2030. In fact, the government has already been aggressively shutting down dozens of smaller, dirtier coal-fired plants in recent years, but China’s need for more energy also means it continues to open new plants. So a couple of things are needed: 1. a clear and aggressive mechanism for cooperation between the US and China on reducing the impact of burning coal and an immediate removal of all tech transfer restrictions for dual-use technologies that have the ability to abate coal emissions and 2. a willingness on the part of the replace-coal community, myself included, to work with what we’ve got and make sure that we do everything possible to promote cleaner coal as we transition to more renewable forms or energy.

If you want to get arrested for protesting in front of coal plants that’s all fine and good, but once you’re released from custody, start working to help coal plants in China figure out a way to deal with their emissions in as clean a way as possible. They need all the help they can get and time is precious. Whether its sequestering flue gas in building materials, using underground coal gasification, IGCC or something else, it doesn’t matter to me. It just needs to happen.  

By the way, I’m more than happy to be convinced otherwise, so if you want to state a different case, I’m all ears.

China’s amazing surge as an economic power started with the creation of special economic zones (SEZs) nearly 30 years ago, as did my “it’s complicated” love affair with the country. The zones provided a blueprint for the rest of the country toward accelerated wealth creation. They also marked the beginning of a catastrophic decline in environmental capital. Now the country may be dusting off the SEZ concept and considering the creation of Low Carbon Zones (LCZs). My involvement in the US-China Clean Energy Forum and JUCCCE has put China front of mind, as has my front-row seat in the international race to see who becomes the superpower of cleantech. In the resource-constrained world of the future, the economies that are most efficient (i.e. best at innovating and adopting clean technologies) will win. First proposed in 2007, the idea of Low Carbon Zones was an outcome of interaction between EU and Chinese think tanks, with the support of the UK Foreign Ministry and China’s National Development and Reform Commission (NDRC). The concept, thumbnailed here and here with even greater detail here, states:

LCZs would aim to stimulate transformational regional political leadership, endorsed at the national level, to create an enabling environment for large-scale innovative low carbon private and public investment. Just as SEZs provided China with a laboratory to shape its participation in the global market economy, the LCZs could pioneer approaches to decarbonisation compatible with Chinese institutions and development approaches.  

It appears an initial pilot of the LCZ concept is planned for China’s heavy industrial province of Jilin. I hope the idea flies, as it’s clearly in the global long-term interest. But no doubt questions of IP, tech transfer and ultimately money could create concerns within the industrialized democracies that the West is once again funding China’s development, only to be left holding the bag.  

Another seemingly similar initiative in China has recently emerged from the Climate Group, outlined in a new report, which also focuses on developing low carbon cities. According to the Climate Group, the program aims to recruit, motivate, and engage 20 Chinese cities in a five-year campaign to transform and accelerate the local market for energy efficiency and renewable energy technologies. MOUs have already been signed with the cities of Guiyang and Dezhou.  It’s unclear from the materials I’ve read what the specific funding mechanism for either of these concepts will be, although with the backing of groups like the NDRC at the central government level, it’s certainly within the realm of the possible. As I’ve written about before, China’s scale offers the greatest potential for any country (except for maybe India) to drive down costs of cleantech and make clean solutions truly commercially viable.   

But that doesn’t mean other countries aren’t trying to compete. Less developed ideas seem to be emerging in the US and Europe. Cities like Seattle and Boston have been floating the idea of cleantech innovation hubs. Various states are also vying to attract cleantech investment and economic stimulus money, including Colorado, Pennsylvania, New Mexico and Michigan. In Europe, efforts are also under way to create the region’s first cleantech incubator, which if successful, might be followed by others. And of course, there is the Oz-like effort in MASDAR in Abu Dhabi (“pay no attention to that man behind the curtain”), where the Wizard is oil money.  

It’s great to see a growing understanding that low carbon leadership will mean future political and economic leadership in the world. I just hope that those in the emerging Cleantech Great Game keep in mind the lessons of the original Great Game – that the fight for supremacy over a largely unmapped, strategic territory often leads to unnecessary pain and suffering at the expense of the common good. Let’s hope that the newly announced International Renewable Energy Agency (IRENA) can play a role in fostering the needed collaboration and help us put aside the myopia often caused by financial gain.

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.

Back on September 9, John Podesta's Center for American Progress released a study called Green Recovery, which promised two million new jobs from a $100 billion investment over two years. That day was also my birthday, so my attention was elsewhere. But nearly two months later in the wake of the financial meltdown, taking a second look at the report seems worthwhile, since now more than ever, a road to recovery for the United States and the world could very well be paved with green bricks. Conversely, it could also be a story of "low carbon prosperity" that sounds good, but ends up dead on arrival. The landscape has changed greatly since September 9. To use one last Wizard of Oz allusion – we are no longer in Kansas. Credit has dried up, global stock markets are in chaos, unemployment is spiking and consumer confidence is at record lows. As a result, does this now put the basic assumptions in the Podesta report in question? ($50 billion in tax credits, or half of the proposed $100 billion, for example, would seem a non-starter today). More importantly, even if the assumptions are unchanged, will the perceived cost of carbon policy at a time of economic instability suck the political will out of Capitol Hill, a place over the last three decades renowned for monumental cowardice in the face of monumental challenge. The stakes couldn't be higher, especially on the eve of an Obama presidency and Podesta heading the transition team. It would be great for the Center to produce an update to their report, taking these new factors into account. But until that happens, some prominent voices in October continued to build a case for this notion of a Green Recovery as a message/vision worth rallying around.  

Deutsche Bank, in its Investing in Climate Change 2009: Necessity and Opportunity in Turbulent Times, argued that the economic turmoil of the past month sets the stage for a one-time windfall:

We believe that, when combined with energy security, climate change policies will play a role in government efforts to stimulate their economies in 2009. Governments now have an historic opportunity to define long-term regulatory frameworks to encourage private investment in climate change initiatives. Additional opportunity exists for governments to boost their economies by funding infrastructure projects that will serve to foster energy independence and climate-proof their economies.

As a result, the debate around climate change has started to shift away from issues of cost and risk toward the question of how to capitalize on investment strategies that span a vast array of asset classes and industries.

Similarly, Goldman Sachs GS Sustain weighed in, citing a "warming investment climate" for sustainability, and an increasingly clear rationale for corporations to view low carbon action as a key business driver: 

Going forward, we expect the importance of climate-change performance to rise further and extend to an increasing number of sectors where the direct costs and benefits of companies’ different strategies may currently be less quantifiable but will, in our view, become increasingly important aspects of their ability to achieve and sustain industry leadership. 

Finally, economist Nicholas Stern has also provided a valuable perspective, noting that the right policies will offer a globally sustainable model for growth:

Let us grow out of this recession in a way that both reduces risks for our planet and sparks off a wave of new investment which will create a more secure, cleaner and more attractive economy for all of us. And in so doing, we shall demonstrate for all, particularly the developing world, that low-carbon growth is not only possible, but that it can also be a productive and efficient route to overcome world poverty.

It all sounds good. Public works programs, a la the New Deal, to make smart upgrades to the outdated grid and public transportation infrastructure, jobs that can't be exported coming from installation of solar panels and other clean energy solutions, cost curves from McKinsey that provide a roadmap of affordable carbon abatement measures including significant savings from energy efficiency, etc.  

But there will also be those that counter with a picture of inefficacy and a price tag that's too high, as we caught a glimpse of during Senate infighting in June over possible climate policy. Already, new messaging against aggressive climate policy is emerging. A recent letter to a Florida paper offered a glimpse of the opposing camp and its messaging, criticizing Gov. Crist's recent recommendations on climate, and warning of a "carbon police state". 

What's so exciting right now from a positioning and messaging point of view, is that the global economic crisis provides the first real opportunity for the clean energy industry to fundamentally pivot away from the politically and emotionally charged topics of "global warming" and "green" (and their polarizing, Al Gore/treehugger affiliation, which turns off a large part of the population) and own outright the promise of growth, recovery and prosperity, issues that everyone can relate to and support.  

The rubber is about to hit the road. The next three to six months offer a chance in the United States for elected officials to be heroes or hucksters. It is no secret that the oil and coal industries have outspent the renewables industry by tens of millions of dollars in the past two years in campaign contributions, so it won't be surprising to see some of our politicians fold. What's needed is a concerted effort on the part of the broader clean energy community – the Apollo Alliance, Cleantech and Green Business for Obama, Environmental Entrepreneurs, Change to Win, USCAP, Evangelical Climate Initiative, ClimateWorks Foundation, US Conference of Mayors, etc – to unite and make sure that the message that is delivered in Washington, D.C. and state capitals is this – climate change notwithstanding, the clean energy economy is a legitimate and feasible road to recovery. It appears that two additional stimulus packages are set to emerge from DC in the near term, one lame duck and one post inauguration. The industry achieved its biggest win so far in the $700 billion stimulus package, with an 8-year extension of the investment tax credit for solar, and it is possible clean energy will benefit from the two upcoming packages as well. But that is just a start, and our thinking needs to be more expansive and inclusive. It's the Recovery, stupid.