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.

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.

Notes from a Green Brainstorm

Hundreds of leaders from business, policy and NGOs in the same room for two days, naturally some interesting things will emerge. Below is a quick sketch of trends and comments from the just wrapped Fortune Brainstorm Green that I thought of particular note:

  • The media “needs to get off cars and on to buildings” - Autodesk executive chairman Carol Bartz on the fact that the issue of buildings sucking energy, material and water is still not getting the attention it deserves. The numbers back her up. Conversely, it was noted by others in the green building space like Hycrete and Serious Materials that after a two decade hiatus, venture funding has found its way back to building in the past 2 years.
  • A new version of LEED is set for unveil at Greenbuild in Boston and will be a “quantum leap” - head of USGBC Rick Fedrizzi
  • Seems to be growing unease, and even skepticism, that cap and trade is going to be as easy at many thought. 2011 was heard repeatedly as a possible timeframe for legislation. Will a nascent business consensus fray into a mess? Are the economics fully understood to push forward aggressively? Is the Hill ready? Anecdotally at least, the answer is still clearly in the balance. One interesting alternative presented was Cap and Dividend.
  • Like building, energy efficiency is still struggling to get more than a lot of lip service. Is recession the catalyst for cracking that nut? It was mentioned as a possibility.
  • Hybrids and small cars are the fastest growing segment of US automotive market, according to Beth Lowery of GM. “The price of fuel is driving behavior,” she said.
  • “Living building” that taps into biomimicry is going mainstream. HOK - the giant architecture and design firm is starting to position itself as “bio-inspired”, according to Janine Benyus, the founder of the Biomimicry Guild. Benyus’ group is also looking to launch Asknature.org – a cool idea that allows anyone to query a database with questions about how nature addresses specific issues.
  • Coke’s environmental guru Jeff Seabright said look for something soon about consumer-facing information about “water used” in the company’s products. It may not be on-package information, but something is coming. This would be welcome, since embedded water in consumer products is still very opaque to the consumer (for example, according to Dow Chemicals’ Scott Noesen, it takes 2,000 liters of water to make a McDonald’s hamburger if you do the whole-cost analysis.) There is nutritional information, now carbon labeling information has appeared, and water is the logical next step. Let’s hope it happens.
  • Vinod Khosla was the most provocative in my opinion during a 1:1 with Fortune’s Adam Lashinsky. Highlights include:
    • Next generation batteries are not on a rapidly declining cost curve and require a quantum jump with a high probability of failure
    • The “Prius is more greenwash than green”
    • Technology for clean energy will only succeed if it passes the Chindia price test. If it’s affordable in China and India then it has a shot.
    • Carbon emissions from all-electric cars are 3x more than that of cars powered by cellulosic ethanol.
  • The highest correlation in the movement of solar stocks is the price of oil (not the price of natural gas as would be expected) - David Edwards, analyst at Morgan Stanley
  • Both Monsanto CEO Hugh Grant and Khosla cited the same statistics placing biofuel as the fourth leading cause for the spike in global grain prices. The top three – rise in oil prices, drought in Australia and change in eating habits in developing countries like China (to more meat). I found one paper on Khosla’s site about Fuel vs. Food, but it didn’t appear to include the above list. Anyone know where it comes from?
  • When Fortune’s Marc Gunther asked a panel of Xerox, GM, SC Johnson and Dupont executives what grade corporate America should get in addressing environmental challenges (10 being the best grade), all of them said “1″, with the exception of GM’s Lowery, who gave a “2″ because of innovation happening around new technologies. If you want to actually score a company, you can thanks to the CEO of Stonyfield Farm Gary Hirshberg, who has created an online corporate scorecard at Climatecounts.org

Capitol Hill Update: Cleantech Finding a Voice

The Clean Technology and Sustainable Industries Organization (CTSI) organized a “DC Policy Tour for Clean Technology” this month, taking 50 cleantech industry players (representing cleaner coal, solar, wind, nuclear, hydrogen, demand response, water, biomass and fuel cells, plus investors) on a Congressional walk-about. I spoke with Patti Glaza, executive director and CEO, to get her take on the day and the outcomes. After a total of 45 meetings with elected officials from more than 20 states, Ms. Glaza reported that renewable energy tax credit extensions will happen, but only for one year (longer term extensions will most likely come in the next administration) and that climate change legislation will be considered in June, although again it would be surprising to see anything being signed into law prior to the next administration. She also said that both the House and Senate have requested a significant increase in the Dept. of Energy (DOE) budget from what was in the department’s original request, and that more funding should be available than last year. Ms. Glaza added, however, that it was unlikely that the Advance Research Projects Energy (ARPA-E) program that was approved in the America Competes Act last year will get off the ground.  More details from the day can be gleaned from the Q&A below, including tips from Ms. Glaza for how companies, even start-ups, can work with their elected officials to make a bigger difference at the Federal level.

Q: Any humorous moments from the tour?

A: We learned to never let a tour member tell a Republican official that we should pay for the renewable energy tax extensions with funding for the Iraq war.

Q: Who did you visit and get traction with?

A: The primary focus of the meetings was with members of the Appropriations and Ways & Means Committees as Congress is currently finalizing agency budgets and funding programs slated for this fiscal year. We also targeted the Science & Technology, Small Business, Energy Independence & Global Warming, and Energy & Commerce committees and subcommittees, in addition to several executive-level meetings at the DOE. The highlight was Sen. Byron Dorgan (ND) who leads the Democratic Policy Committee and sits on key committees including Appropriations; Commerce, Science & Transportation, and Committee on Energy & Natural Resources. Sen. Dorgan and his staff took a significant amount of time with our group and showed real interest and knowledge of the challenges the sector faces.    There are a lot of champions on the Hill and we need help in reaching out to all of them. Congressmen that took the time to meet with the tour directly included: Tom UdallVito FossellaDale KildeePhil EnglishJay Inslee, and Dorgan. Additional offices showing high-level support included: Cantwell, Clinton, McNerney, Barrow, Capuano, and Candace Miller.

Q: It seems there is a scarcity of coordinated government relations work being done on the part of the cleantech industry. Is that an accurate read on the situation?

A: My initial assessment is that as an industry or sector, clean technology has not had strong representation in Washington DC. Inslee made the comment that he has been waiting for a group like CTSI and is glad we have started our efforts. That being said, there is strong government relations work being done for specific clean technology segments, solar, wind, and biofuels being examples. The role CTSI is trying to fill is to advocate for policies and programs that address the complexity and interrelated issues of energy, water, and the environment. Renewable energy needs smart grid needs cleaner base load generation needs distributed generation support needs water management/reduction, etc.

It was obvious from our meetings that the Hill is extremely receptive to a sector they see as providing new jobs, energy security/independence, and increasing the US global competitiveness. Regardless of the group organizing, a broad technology platform is essential. Industry has to be seen as working together on solving the bigger issues (growing energy demand, climate change, etc.) and not just advocating for specific industry segments in isolation.

Q: How can companies make a difference on the national level?

A: I see three immediate ways that organizations can make a difference:

- Companies need to take the time to educate their local representatives on their companies, technologies, and how they are working to solve the larger issues.

- Executives need to participate in Washington DC based meetings to emphasize the important role policy and regulation play in developing the clean technology sector. Nothing grabs attention like a company telling their representative that they expect to start laying off workers in June/July because the renewable tax credits haven’t been extended.

- Overall, companies need to recognize that policy isn’t just for the big players. Policy and regulations have and will have a significant impact on the rate of development and adoption of clean technologies, and growing technology companies need to be at the table when those policies and regulations are being created. Yes, resources are limited. Yes, policy is complicated and difficult to understand. Thus the role of policy and trade organizations.

NW Needs a Cleaner Vision

In the same way the Northwest has imagined and innovated its way to success with endeavors now synonymous with the region – be it coffeesoftwareoutdoor gearaerospace or microchips – our region can help write the operating instructions for what might be the most important opportunity for the next two generations – cleantech.   The time is now, not to walk but to fly. The land grab has started as different regions – inside the US and out – move to stake their claim as the leaders of the cleantech revolution. The companies and people of the Northwest are uniquely positioned to be among the leaders. The intellectual capital is here. The political will is here. The consumer culture and public sentiment needed to support a cleantech economy are also here.  Tech heavyweights like the San Francisco Bay Area are already way ahead, investing heavily in starting clean technology companies and churning out patents from their universities.   Yet here in the Northwest, local venture-capital money is still trickling into cleantech - Chrysalix and Yaletown in BC are the notable exceptions. Entrepreneurial enthusiasm has been relatively muted. Where is the Bill Gates, the Jeff Bezos, the Paul Allen, the Howard Schultz of cleantech? Cleantech is ripe for great, local visionaries. It is also ripe for another key component of success: a clearly identifiable brand. What does the Northwest stand for? Where does it have a competitive advantage in cleantech that is sustainable over the long haul? What can we get excited about as a community and rally around? The jury is still out, but here is an attempt to crystallize the focus of our region and my candidates for where the Northwest has a real chance to stake a claim, not as “the” world leader, but as “a” legitimate leader with the proof to back it up: The Frontrunners

The Maybes

  • Consumer Cleantech – We have some of the best consumer brands in the world, and there is no reason to believe that we cannot create more in cleantech, whether it’s a consumer-facing biofuels brand (SeQuential or Propel), a family-friendly home energy saving software or a venture capital firm like Maveron that takes its consumer knowledge and puts it to work in the cleantech space. But top talent is being drawn to the Bay, so we need to incubate locally and aggressively.
  • Smart Grid – The Northwest appeared to have an edge here several years ago, with relatively progressive utilities and Itron dominating the metering market, but does it anymore? Not so sure. Other regions have caught up and probably passed us.
  • Renewable Energy Gateway to China – Senator Maria Cantwell certainly would like to see that happen, and efforts are underway to organize a bilateral forum in Seattle of top business leaders to advise the US-China inter-government Strategic Economic Dialogue. The Northwest also exports a lot of engineering knowledge, environmental consulting, green building and design toChina.
  • Power Storage – Between fuel cells in British Columbia and a national lab in Idaho that knows power storage, there is some critical mass here, but can we recover from the disappointment of Ballard?

Fuel cells rebound; consolidation coming?

After 2002, investment in cleantech took a nose dive. That can be attributed to the pre-2002 rush to get in on fuel cells, and then the fuel cell industry’s penchant to over promise and under deliver, most notably Ballard Power Systems. No more. With the resurgence of cleantech investment in the past four years, fuel cells have also benefited, in large part because the focus has shifted from larger-scale applications like commercial vehicles to smaller-scale applications. Stationary applications have also made a serious dent in what had traditionally been seen as a mobility-driven business. As my client Horizon Fuel Cell likes to say: “Think big, start small”.  Instead of commercial-grade vehicle applications, they started with a stroke of marketing genius – an on-board PEM and hydrogen tank…  for a toy car, the H-racer. They have since convinced the toy industry that fuel cells are a viable alternative to battery-operated. It’s always inspiring to see young companies go out on a limb to prove a concept and have industry behemoths, like the world’s third largest toy manufacturer Wah Shing and others, fall into line. Because of the H-racer, Horizon has probably shipped more fuel cell units (measured by volume) than any other company in the world and turned a profit. Other sectors beyond toys will follow suit for Horizon (they recently announced a deal with Millennium Cell to go after small apps like emergency gear and construction tools and already have a prototype). That type of collaboration seems sorely needed, given the plethora of other fuel cell companies out there, many of whom have started to carve out other niches of the power storage market, such as Bloom Energy, which plans to use solid-oxide fuel cells to allow homes to generate their own electricity. But at some point a consolidation is going to have to happen, since the number of fuel cell companies, including those traded on public markets, is what Igor of Young Frankenstein fame would call “Abby Normal”. The list of IPOs already includes Millennium, ActaSFC Smart Fuel CellCeresProtonexCeramic Fuel Cells,CMR Fuel CellsIdaTech to name but a few, but find me one that’s actually making some serious money on a sustained basis.