Saturday, December 31, 2011

Clean energy 2011: Musk, Crane, Khosla and Jurvetson brighten gloom

This year ends on a downbeat note amid the gloom of the US debt and eurozone crises. In 2011, financial commitment to renewable energy stood at £2.5bn. Although the Department of Climate Change and Energy tried to spin this as a boost to the UK economy, it's a sharp fall from the £7.1bn invested in 2009. It is also a long way off from the £200bn required to stimulate the development of low carbon energy generation and tackle the perhaps more pressing energy capacity gap facing the UK.
This is also more than the entire global investment of $185.1bn in wind, solar and biomass according to Bloomberg New Energy Finance figures cited in Ernst & Youngcountry attractiveness indices (CAI) for national renewable energy markets.

Take a look at Ernst & Young's polls on pages nine and ten, which show where investor confidence has been undermined the most. It would seem that the $50trn budget deficit is small beer compared with the eurozone crisis.

The UK still holds it own at joint fifth (dubiously with Italy) in the top 10 all renewables index. E&Y report quarterly. I can't help but feel these rankings will change again come the next report for the UK and its European neighbours.
Figures soon to be published from the Cleantech Group show that $8.398bn was invested globally in cleantech VC last year. That's a drop from 2008's high point of $9.556bn but it's still an improvement on the past two years.
Most of that VC money is being spent in the US, with investment levels in Israel, India and China dwarfing those in Germany, Britain and France in the last quarter.
These are the kinds of figures I quote at people when I tell them that I report on clean energy - most of the time they exhale in sympathy, assuming the worst in the industry given the difficulties facing the renewables industry in the US, UK, Spain, Italy and Germany.
But such pessimism is not necessary - it's a bit like diagnosing terminal cancer in a patient with a broken leg. At some point, the broken economy will recover. We should be reassured that there is less capital in the industry - discipline and due diligence have to be more stringent than ever. The last thing the energy industry needs is a dotcom boom and bust cycle.
But venture capitalists such as Vinod Khosla and Alan Salzman are not about to give up on clean energy. Capital invested has a forcing effect on the rest of the industry - investment in innovations is where energy technology begins. For example, without Elon Musk and the success of Tesla, I'm pretty certain that the Volt and Ford's electric Focus would still be in the R&D lab.
But for Musk, the success of Tesla is a more earthly reward than his ambition of populating other planets with life which he dreamt about at college, before founding PayPal with Peter Thiel.
Musk's optimism is earned despite not quite turning a profit at Tesla, although its stock trades higher than the traditional automakers.
But Musk is not unique. He kicked off last year's west coast clean energy conference season at the Cleantech Summit. These conferences offer flashes of optimism that flare brightly amid the economic gloom.
If you'd like to cheer yourself up, spend some time listening to what these upbeat "thoughtleaders" have to say about their industries.
In this first one, Musk compares starting a company with "eating glass staring into the abyss of death…" but predicts that electric transport will be widespread - cars, trains and even planes.
In April, NRG Energy's David Crane explained how electric vehicles would take off in the US - and why as an electricity generator and retailer, it made sense for his company to stay ahead of the curve.
In August, Jesse Berst gave the best explanation I've seen so far as to why the US needs smart grid at the National Clean Energy Summit. Secretary Chu and Mabus are also worth listening to …

At the Going Green Conference in September, Vinod Khosla talked about his $1bn in profits so far from advanced biofuels, and Steve Jurvetson gave an almost evangelical exposition on synthetic biology.

However you end the year, hopefully these clean energy visionaries will be a source of inspiration for 2012.

Thursday, December 22, 2011

What industry thinks of the Electricity Market Reform's £200bn bill

Michael Lewis, managing director Europe, of EON Climate and Renewables, welcomed the government's white paper on Electricity Market Reform, in particular the contract for difference which will be set in 2013. But told delegates at the Countdown to 2020 conference in London that utilities could not front up the £200bn of investment required for new generation.  
He said: "Our balance sheet simply doesn't stretch far enough to deliver these targets. The collective balance sheets of the utility industry doesn't stretch far enough and with the planned or actual closure of the old nuclear plants and newer plants in Germany our balance sheets have been hit. We have to be very clear that the returns are at the right level. The contract for difference will provide that clarity long term. The sooner [it's introduced] the better."
He also welcomed the carbon floor price: "This is a very important piece of the overall Electricity Market Reform proposals. We've seen the carbon price sink to very low levels in the recent past - €7.40 a tonne - that isn't going to incentivise much at all in low carbon generation. The recession has reduced emissions.
"The EU cap has achieved the goal of reducing emission but not incentivised the new investment we need for the longer-term targets, which is why a floor on carbon is essential to provide those long term signals and long term incentives."
But Lewis pointed out concerns about the integration of renewables. Some of these concerns are part of the consultation launched in the technical update published by DECC last week which included plans for a market-based capacity mechanism and a decision that the system operator, the National Grid, should deliver the Feed-in Tariff with Contracts for Difference and the market - a model similar to that operated by California's Independent Systems Operator.
Lewis advocated two separate markets - one for capacity and one for energy: "If you have a very large proportion of intermittent capacity on the system - 30GW-40GW - there will be large periods where prices drop to very low levels. But if you don't have a capacity mechanism you will end up with a very volatile power price with long periods of low prices and short periods of very high prices when capacity has to earn its capital cost through the energy market for a very short period of time.
"By creating two separate markets, one for capacity, one for energy, you create more stable power price planning while ensuring that capacity runs fewer hours and gets the necessary returns."
"£200bn - that's what electricity market has to attract in terms of financing. That's a huge challenge. We're hoping that the figure won't be that high because we've made a commitment to reduce costs - including a 40% reduction in offshore wind by 2015."
Anders Søe-Jensen, president and founder of the offshore division at Vestas made no apologies for the high costs of offshore by saying that the industry was at the start of its innovation/technology cycle. But he warned that although the government target of £100/MWh by 2020 was ambitious, the industry had to bring down costs or it would kill itself.
He said: "Offshore wind is a higher cost energy because we are where we are in the learning curve. And we are all working to bring down the cost of energy. We are at risk but we all have to commit to bringing down costs otherwise we're going to kill our industry."
Vestas was working with Decc and the Crown Estate which issues the seabed permits to lower costs.
But he said the value to the UK economy would go beyond cheaper offshore electricity, pointing to a report from Oxford Economics which said that the industry could create 58,000 new jobs around the UK, many in deprived coastal areas.
Jensen said although Vestas had plans to build a plant at Sheerness that could only happen if the market was created through political and public support. "If the market is here, we will be here," he said. "With the wind resource in the UK, 169GW could be installed that would … make the UK a net exporter of electricity.
"In future, I can imagine a bond market for wind," he said in later comments.
Martin McAdam, chief executive officer of wave power start up, Aquamarine Power, said that creating the marine power industry would require a more fundamental shift back to more domestic manufacturing in the UK.
He said that although he attempted to keep as much of the investment in the Oyster local to the Orkney economy where a prototype was deployed - $4m of a total $20m - it was impossible to order the steel castings anywhere but China.
He said "We need to go way back in terms of where the UK has come from and where it's going. So we saw this huge change under Margaret Thatcher to move from a manufacturing economy to a service economy. There's nothing wrong with services. The financial services are an important part of the economy despite all the turmoil we've seen.
"But if you rely purely on services and you make nothing then you're wholly dependent on imports and that means you have quite an unstable economy. I firmly believe we have to get back to understanding that we can manufacture. A lot of this was driven by ideology at the time - we had a very high unit labour cost in the UK. We were over-unionised. So we talked ourselves out of having a manufacturing base. Siemens in Germany is expanding and they're not saying we're going to make this elsewhere in China. Germany has in the last 10 years increased production in the car industry."
He said there was no reason why the UK couldn't create and export market for marine power in the way it had for offshore oil and gas.
"A quarter of Europe's wave resource is in the UK. It makes a huge amount of sense for the UK to create an industry around these new technologies.
"But to move this industry to the next stage - we need the ecosystem. We need the supply chain to participate. I need other competitors, I need financing solutions. All of that benefit comes because we have an ecosystem that supports the new infrastructure.
So is the £200bn electricity bill worth it?
"£200bn might seem like a lot of money but in the context in the energy that this country requires today and will require in the future it's tiny. If we had to re-create the energy infrastructure in the UK its value is far greater than £200bn."
But, he admitted: "The early days are the hardest."
Hard days may become harder unless it becomes clearer where this £200bn is going to come from.

Wednesday, December 21, 2011

UK's £200bn electricity bill could be worth wholesale market access

£200bn is a lot of money for any country, even in good economic times. But £200bn is the electricity bill currently facing politicians, utilities, power generation companies and consumers just to keep the lights on. But as Europe's debt crisis demonstrates, this kind of money is not going to be easy to come by and the UK this week rejected calls to boost eurozone coffers with €30bn.
In July, the UK's Department for Energy and Climate Change released its much-anticipated white paper on Electricity Market Reform. Planning our electric future: a White Paper for secure, affordable and low-carbon electricity sets out the UK's particular problem: 19GW (a fifth) of existing capacity is expected to come off the system between now and 2020 (compared to around 6 GW of capacity coming off in the last decade), principally due to EU environmental regulation and ageing plants closing.
The UK is also the only country in the world to have legally binding targets on carbon reduction - even though the government has never been clear about what penalties it would impose against itself. Britain's target of an 80% carbon reduction by 2050 requires large-scale decarbonisation of the power sector. The UK's Coalition government is still committed to these targets - the Climate Change Act 2008 was Tory legislation, after all. 
Despite strained British political relations with France and Germany, relations between the UK and the European power companies is stronger than ever, with EDF Energy, RWE npower, E.ON and Centrica expected to find a way to bridge the capacity gap.
But that is the consequence of "liberalising" the power industry in the UK, beginning with Margaret Thatcher's programme of privatisation in the 1980s. The mere thought of foreign-owned utilities would have bureaucrats and Congressmen reaching for their metaphorical rifles in the US where the energy industry often bears the characteristics of a monopoly.
Instead of merely an investment opportunity in which UK consumers line the pockets of private German utilities or French state-owned companies, Coalition politicians must surely have thought through the benefits to the UK economy which faces long-term slow growth.
DECC claims that the cumulative benefits to the economy of Electricity Market Reform are expected to be over £9 billion higher than without policies over the period 2010-30.
And for those who have to pony up the real costs, DECC says that the average domestic consumer bills are expected to be 15% lower in the five-year period up to 2030 than they would be under current policies.
The white paper puts forward four key proposals to increase investor and consumer confidence: 
• a carbon price floor [which given its low price will be welcome and should boost investment in low carbon technologies];
• new long-term contracts (Feed-in Tariff with Contracts for Difference) to provide stable financial incentives to invest in all forms of low-carbon electricity generation. A contract for difference approach has been chosen over a less cost-effective premium feed-in tariff; [to be decided in 2013]
• an Emissions Performance Standard (EPS) set at 450g CO2/kWh to reinforce the requirement that no new coal-fired power stations are built without CCS, but also to ensure necessary short-term investment in gas can take place; and
• a Capacity Mechanism, including demand response as well as generation, which is needed to ensure future security of electricity supply.
Earlier this month, Charles Hendry, DECC energy minister, told delegates at the Countdown to 2020 conference in London:
"Securing the £200bn necessary is integral to keeping prices affordable. There is a price for energy security, but it's nothing like the price of energy insecurity. It is no longer a case of do we have energy security or low carbon? We can't have energy security without low carbon technologies and without a full role being played by renewables in that mix.
"The starting point for the changes that we've made over the last 18 months is admitting that business as usual is not an option if we're going to get investment in our energy infrastructure at two times the rate this decade as was achieved in the last decade. There has to be a fundamental change to the market structure to incentivise that."
The challenge in the UK was greater than in other European countries, he said.
"That £200bn over the next decade compares to about €1trn in all 27 member states. Over 1/5th of the energy investment in the EU needs to be here in the UK.
"As we try to make up for lost time, we do need to have additional measures such as the carbon floor price introducing it at a predictable level from 2013 - 2020. That will bring £30-£40bn of new investment to the low carbon sector."
Hinting at the importance of reductions in corporate tax from 28% to 25%, Hendry said: 
"The companies looking to invest in the UK are global companies looking at international opportunities and if they don't see something which is better in the UK - an easier way of doing business here - then they will look and invest elsewhere. We need to look at other issues which threaten or encourage investment."
Hendry focused on the importance of the development of the offshore wind industry in the UK, claiming that the country could kick start the global industry. The UK already has the most installed capacity for offshore, which could rise from 1.3 GW to 18 GW by 2020.
He said: "Between September 2011 - October 2011 we saw £940m of new investment decisions in the renewable energy sector coming forward in the UK and the promise of 1,300 jobs. There are some incredibly important investment decisions which will be coming forward in the next few months in terms of the supply chain opportunities. Any company which is serious about wanting to play in this area on a global basis must look at the UK if they want to be in the offshore wind sector. We want to be the best market for developing it we will have the biggest market in the world and we've also got tremendous enthusiasm to make it happen."
He said that the world's first Green Investment Bank would play an important role, but when it opens its doors to renewable financing, it will start with £3bn in 2013. But it is hoped that this relatively modest sum will leverage private investment "to get companies through the valley of death through the difficult period where they often struggle to get investment and where we can ensure that we can create a real vitality in this country".
But the road to 13GW offshore is not going to be cheap, he acknowledged. Republicans talk about "affordable power" when they mean cheap fossil fuel generated electricity. The difference is that Conservatives are not afraid to include the other costs associated with polluting sources of power in their calculations - check out the excellent 2050 Pathways calculator here.
But in language that would be difficult to imagine from many US right-wing mouths, Hendry explained his reasoning behind the recent reductions in feed in tariffs.
He said: "I found it impossible to justify why people on low incomes would be paying a surcharge on their electricity bills for people with 10-15,000 to invest to get a guaranteed rate of return for 12% tax free for 25 years. That is not the right way to create a sustainable industry. We're taking this back to the [original] principles … and that was an expected rate of return of 5% and as the cost of installations has gone down, the expectations has always been that the cost of the support would come down at the same time. 5% is still better than most investors can find anywhere else especially guaranteed and tax free."
But the FIT proposals have caused much disruption in the UK's solar industry which has managed to take its challenge to the high court, which resulted in the energy secretary Chris Huhne, being likened to Macbeth. The government now faces a judicial review after the high court ruled that slashing the small-scale feed in tariff rate from 43.3p to 21p per kWh was "legally flawed".
This is just one of many emerging signs that the Coalition government is placing more focus on wind at the expense of solar as it believes the potential is greater than say small-scale PV.
But without any wind turbine or supply chain manufacturing industry, where is the UK's economic gain? One thing the DECC white paper doesn't mention, nor does its subsequent technical update, is the Internal EU Electricity Market which is expected to be up and running by 2014. From March next year, member states must unbundle transmission systems and transmission system operators. This will of course massively expand wholesale electricity markets, but also gives greater credence to the UK's ambitious offshore targets.
The UK already has 3.5GW of interconnection with mainland Europe, around 5% of peak UK demand. Most of that electricity comes onto the UK grid from France's nuclear power stations. But there is scope for that to change and examples of trading excess electricity to other EU countries are growing, particularly in Spain. 
Designing policy and gearing renewable capacity for Europe's wholesale market could be the main driver behind the Coalition's commitment to offshore wind and part of its strategy for economic growth.  Although Huhne or Hendry wouldn't necessarily admit that.
But turning the UK from a net importer of energy to a net exporter might comes with a high price tag - a price possibly worth paying as the benefits of selling electricity to Europe will be worth more than £200bn.

Tuesday, November 29, 2011

Can policy keep cleantech innovation out of the valley of death?

The Breakthrough Institute recently published a series of reports on policy solutions to keeping cleantech innovation out of the valley of death:
"The energy sector as a whole is a roughly $5 trillion market, and it is expected to grow by more than 50 percent by 2035. Supplying this market with clean and affordable advanced energy technologies thus represents an enormous economic opportunity for American entrepreneurs and firms and the US economy as a whole."
"In the past, the United States has driven immense and far-reaching technological transformations. As the pioneering global innovator of the 20th century, the United States built the world’s largest economy because of the ingenuity and creative enterprise of its entrepreneurs and citizens. 
"Each step of the way, proactive public policy has played a crucial role in driving American innovations, from railroads and jet engines to microchips, biotechnology, and the Internet, unleashing long waves of economic growth and shared prosperity. New and advanced clean energy technologies afford the same opportunities to the United States today—if public policy is shaped in a way that allows American innovators to thrive once again."
In recognition of the fact that it takes more time, money and investor patience (see box) to bring innovations in the energy industry than say, internet startups, the Breakthrough Institute advocates:
The creation of the Clean Energy Deployment Administration (CEDA) "a flexible, independent government investment agency—effectively a bank—that aims to unlock the capital necessary to move innovative energy technologies across the Commercialization Valley of Death."
A National Clean Energy Testbeds (N-CET) programme to offer "a second response to the Commercialization Valley of Death".

Some of these ideas are already taking form in the UK, with the Green Investment Bank, and to some extent the Carbon Trust already fulfills some of the areas of weakness identified by the Breakthrough Institute.

But there is one Achilles heal in the UK which has yet to be addressed. As the world's second largest centre for VC funding — at $184m a distant second behind the US according to the Cleantech Group's Q3 2011 report — much of that investment ends up overseas, even if the innovation began in UK universities.

In the UK, there are some really good examples of spinouts from university labs, such as Cavendish Labs at the University of Cambridge and Imperial Innovations at Imperial College. 
This is progress, but the UK tech spinouts seem to face an additional valley of death — the gravitational pull of Silicon Valley and its vast amounts of capital. Enecsys, a successful cleantech spinout from the University of Cambridge backed by Wellington Partners in London, has now got the stage where it feels more comfortable with offices in California. But is this brain/economic drain? Or is it healthy cross-pollination of business opportunities that straddle technology development and policy and renewable energy targets?
Policy in the US has been a key driver in developing the entrepreneurial culture, with tech transfer legislation at the heart.
Paul Kedrosky, senior fellow at the Kauffmann Foundation warns that although Bayh-Dole has driven universities to think more seriously about what they’re doing with their research, its perverse affects have been "considerable and detrimental to innovation".
"By creating this incentive by universities to obtain title to inventions they could profit directly from the inventions even though the inventions were developed with government support.
"Economics 101 tells us that that’s going to create more incentives for them and do more things that have more of a profit incentive. So they’ll do more of those things. And that’s mostly true and universities have become much more aggressive patenters and aggressive exploiters of their own invention portfolio to the point that we’ve seen a large expansion of licensing revenues for larger US HE institutions.
"But it’s had a lot of perversity attached to it. For example, it’s one of the reasons why we’ve seen the emergence patent hold organizations because they are now perfectly happy to buy university portfolios of patents and send revenue back to the university and they stand there as ticker takers or toll takers for people who want to use that piece of technology. But increasingly rather than driving people to commercialise the technology, the universities are becoming gatekeepers and licensers of the technologies and licensing it to organisations that have no intent to commercialise the IP."

Monday, November 28, 2011

Britain and US bank on entrepreneurs on road to economic recovery

The road to economic recovery has been bumpy so far and looks endless at times. Unemployment in the US has historically averaged around 5.7% and jobless rates haven't been this high since the 1980s, a generation-long record that won't make the trophy cabinet. Although the UK's jobless total is slightly less, at 8.3%, putting pay cheques into the hands of the 1.6m people without work is a pressing concern.
Although Spain trumps both, with an unemployment rate of 22%.
As George Osborne announces an additional £5bn towards the £30bn National Infrastructure Plan and extra funds to electrify the Manchester to Leeds railway line, the inability of US Congress to cut the budget deficit is another example of the dysfunction of federal politics, along with opposition to public works such as High Speed Rail and Barack Obama's proposals for $60bn for essential infrastructure.
But both sides of the Atlantic, hopes are harboured that encouraging entreprenuers and new businesses to flourish will come to the aid of the flagging American and British economies.
At a recent breakfast with the Philip Barton, deputy head of the British mission in Washington DC said that developing and maintaining trade relations with the US was more important than ever, even though global economic focus has shifted to China.
The UK's coalition government wants to slash its 26% corporation tax still further, even though it is lower than the US, to make Britain an even more compelling place for businesses to locate.
That's one way to encourage business. But when you're talking about job creation, it's better to encourage entrepreneurs, according to the National Venture Capital Association.
The NVCA claims that US-based venture-backed startup companies created more than 37,000 new jobs up until October this year in a variety of industries including software, IT, and clean tech/energy.
But the Kauffmann Foundation, which does a lot to train VCs and advocate for their economic impact, goes further and argues that entrepreneurs are the drivers of the economy. New firms create around 3m new jobs a year in the US, it says.
That would be a rate of growth from entrepreneurship that would delight David Cameron, the UK's prime minister. But other than slashing taxes, how does a country like the UK encourage startups?
It's time to go back to college for some pointers from the US. The symbiotic relationship between the venture capitalists on Sand Hill Road and the bright minds at Stanford University is difficult to emulate.
While researching a story on the state of VC funding today, I spoke to Paul Kedrosky senior fellow at the Kauffmann Foundation. He said: "Young companies are the largest net creator of jobs in the United States and have been that way for a long time. There’s no other way it can work – young companies can hardly destroy jobs because they don’t have any! By definition they are walking away from a wall of zero. Companies that have 1000 employees can go either way. It’s a mathematical fact rather than deep economics."
But Silicon Valley's ecosystem is a unique blend of capital, historical accident & design, policy & legislation… and a state of mind.
Kedrosky also took the time to tell me about the coalescence of investment hubs around US universities to create the special ecosystem we see today in Silicon Valley.
The Morrill Land-Grant Act of 1862 created the colleges that were critical in driving the creation of some of these entrepreneurially minded higher learning institutes, such as Stanford University which opened in 1891.
Leland Stanford wanted to create an upscale trade school that would be of use beyond purely academic learning as a counterpoint to the classical learning in Britain, he said.
"Stanford was trying to create something that would teach the practical arts. And that was in response to what he saw going on in the UK and elsewhere: 'This sort of esoteric learning would have been no use to me I’m a practical monopolist and I want something that would have been of use to me'."
This attitude didn't really change until years later, he says.
"People forget that it wasn't meant to be a classical higher education institution because of what happened in the 50 and 60s when it became a recipient of Department of Defense largesse from the semiconductor industry. The reason why Stanford was almost biologically speaking was so receptive to that relationship with industry and had such a permeable barrier with industry which led to so much entrepreneurship is because by design it was a very practically minded institution.
"The institution has become more metastasized within the Silicon Valley ecosystem to the point that now it’s inextricable. There’s a constant flow back and forth and many of the largest and successful companies have links in a meaningful way whether it’s graduates or IP at the back of the institution."
Kedrosky is one of the many who identifies academic contributions in industry and the easy two-way cross-pollination as the factor that encourages Phd alumni to try their luck by spinning out their innovation. While a warm welcome awaits them if they choose to return to academia.
"Stanford has deep in its DNA a consistent ongoing relationship with industry and a path to [academic] tenure could credibly include trips back and forth to the dark side of the private sector and back into the institution. And not only that was that not seen as a bad thing it was seen as something that would add to your capacity to get tenure.
"It’s very rare at HE institutions that you attract the best faculty and create the permeable barrier. You never get the synergies except at places like Stanford in the US."
But is that "permeable barrier" the missing link in encouraging more entrepreneurship from UK universities? No, targeting universities in this way is the wrong approach, says Kedrosky.
"Universities aren’t particularly important in terms of driving entrepreneurship in the US there’s a whole lot of mythology that’s attached to it at certain times. But it kind of becomes a public works project when you say well we want to have an entrepreneurial cluster in cities so we need to put more money into our universities. That’s very much the drunks at the lamppost problem: I get why that’s appealing to policymakers because it’s better than looking for your keys out in the field. It’s much brighter under the lamppost but it’s not directly addressing the problem. It's the classic policy problem – we’d much rather put money into our universities because entrepreneurs are objectionable people."
Read tomorrow's blog for more on policy approaches to entrepreneurship…

Monday, November 21, 2011

San Francisco's green credentials don't measure up on CO2 emissions

When San Francisco scored top marks as the "greenest city" in the US in a survey sponsored by Siemens and conducted by the Economist Intelligence Unit, it came as no surprise, but I had my doubts.
San Francisco has high rates of recycling, around 75%. Go Giants! But California's incentive to recycle - 5c-10c redemption per can or bottle - acts as a de facto social safety net which either supports low-income households, or the local liquor store or drug dealer, depending on how you catch that particular prism of the issue of "scavenging".
Every City hall worker is proud to tell you that SF's trolley buses are zero emission. But never mind that they flooded the valley next to Yosemite to create the Hetch Hetchy hydropower station, which by all accounts was as beautiful as its more famous neighbour.
Electric vehicle charging points are available outside City Hall, while employees are encouraged to drive their C02 belching machines work by providing preferential parking places. City Hall itself hosts conferences where cold drinks, including water, only come from an aluminum can or plastic bottle. Perhaps it's the mayor's way of "giving something back" when the trash gets taken out for the transients to sift through…
The $20m from hard-strapped federal funds spent on an SF Park scheme * (which encourages motorists to drive into the city) while the SF Muni struggles with an $80m budget deficit and could really use the fares, is an irony of policy misalignment almost worth weeping over.
San Francisco's list of contradictions seem endless. And the fact that the city "won" this accolade from Siemens appeared to sit uneasily … even with those on the City Hall payroll.
Last month, Mayor Edwin Lee announced that SF's greenhouse gas emissions are nearly 12% below 1990 levels…
But the original target set by the Climate Action Plan 2008 requires an extra eight percentage points before the end of next year. At this rate it will miss the 20% reductions below 1990 levels by the end of 2012, and 80% by 2050.
In fact, in terms of CO2 emissions the Siemens report ranked San Francisco 8th out of 27 cities, behind Los Angeles and New York. Although according to the report, SF's GDP emissions are half that of the US average, possibly because "service industries" are favoured over manufacturing:
San Francisco emits 181 metric tons of CO2 for every $1 million of GDP, versus an Index average of 296. And on a per capita basis the city emits 11.4 metric tons of CO2 compared with an overall average of 14.5 metric tons. San Francisco has made further greenhouse gas emissions reductions a top priority. The city has made impressive headway in reducing municipal greenhouse gas emissions … and has outlined a range of carbon-reduction initiatives aimed at non-municipal sources, particularly in the areas of buildings, energy and transport.
Speaking at the Renewable Energy Markets conference in San Francisco last week, the city's green chief, Melanie Nutter, acknowledged that aggressive action would be needed to meet the 12% emissions reduction by 2020. A taskforce would report in January on its strategy, she added.
"We're very proud of what we've done, but we do recognise that we've a long way to go."
But she might have further to go than she and Mayor Lee are prepared to admit.
A Bay Citizen article reprinted in the New York Times at the weekend suggests that the "real decrease in carbon emissions may be only one-fourth the percentage cited by the city".

Mr. Lee and his environmental advisers say the main driver of San Francisco’s carbon emission reductions was the closing of inefficient fossil-fuel power plants at Hunters Point in 2006 and in the Potrero neighborhood in 2010.
We reduced our emissions because we stopped getting so much of our power from local dirty power plants,” said Melanie Nutter, director of the San Francisco Environment Department, which established the city’s carbon accounting system in 2004.
According to Environment Department records, the city’s reduction in carbon emissions from electricity use was so substantial after the plant closings that even with a rise in electricity use and greenhouse gas emissions from private vehicles over the past 20 years, the city, by 2010, had cut overall greenhouse gas emissions by 11.6 percent.
But as the article points out, these power plants were owned by PG&E and Nutter's calculations assume that the electricity produced by the two power plants was used inside the city, an assumption that is wrong.
“The grid is like a giant lake,” said Stephanie McCorkle, the spokeswoman for the California Independent System Operator, which oversees PG&E’s grid. “You can’t tell one electron from another, once they jump on the grid.”
But the article rightly questions the city's methodology. The Bay Citizen analysed San Francisco's carbon footprint using measurement tools developed by Christopher Jones at the CoolClimate Network of the University of California, Berkeley. It found that SF's reductions in emissions could be as low as carbon emissions by 2.7% from 1990 to 2010.
It was a fine piece of journalism and the city's green chief would do well to apply more rigour to its metrics. There should be nothing stopping Ms Nutter from adopting methodologies employed in other world class cities such as London or publishing its inventory and celebrating successes like New York.
I spoke with Nutter before she addressed the REM 2011 conference and said that I had a question for her about policy alignment on transport (see above*). I'm still waiting almost week later for an answer I don't think I'll ever get.
But perhaps Nutter and her new mayor are concerned that the measurements don't add up… and the illusion of San Francisco as a green city will be rightly re-appraised. When it comes to cutting emissions, targets without proper metrics that are a matter of public record amount to mere greenwashing…

Monday, October 31, 2011

Cleantech VCs wait for fog to lift after 'chilling effect' of Solyndra

The National Venture Capital Association and Thomson Reuters this month reported that the last quarter marked the lowest amount of venture capital raised in the US since Q3 of 2003.

Cleantech and life sciences lost out to a surge of investments in the software sector, which enjoyed its strongest quarter in almost 10 years, according to the MoneyTree report. The software industry received $2bn while the cleantech sector saw a 13% drop in dollars to $891m in Q3 from the second quarter when $1bn was invested. The number of deals completed in the third quarter also declined.

Another 13 of the 17 sectors monitored by MoneyTree have all been affected by market volatility: telecommunications; semiconductors; media and entertainment all suffered. But cleantech is likely to take a further hit as seed stage funding – critical in maintaining the momentum in R&D — also fell 56%, with $179 million invested across 89 deals in Q3.

More established cleantech companies fared better, with thin film solar manufacturer Heliovolt, based in Austin, Texas, raising $85m - the 4th largest US VC investment in Q3. And a shift of focus to energy storage benefited fuel cell manufacturer ClearEdge Power with $73.5m in later stage funding from Kohlberg Ventures and other undisclosed investors.

Stephan Dolezalek from VantagePoint said that although Q3 2011 was an improvement on last year, there were three macro factors driving the slowdown in cleantech investments: closure of the IPO window, solar panel prices and the "chilling effect" of Solyndra's collapse.

"On a broader view there are really three macro factors that are affecting cleantech investors. The first would be the closing of the IPO window and some concern that that window might not reopen before 2012 elections depending on what happens to budget issues in Europe and the US. So that window opening or not is of significant concern to investors.

"Number two, we’ve had a very obvious and ongoing drop in panel prices that’s based in large part on the strong levels of support that the Chinese government is giving their solar and wind industries. But obviously that wreaks some havoc with the trading multiples of companies both here in the US and Europe.

"Finally, we’ve had the chilling effect of the political battle over Solyndra. When you take all of those combined into account, I would argue that if you put enough fog on the road investors in cleantech have largely slowed down to try to see what happens when the fog lifts."

He suggested that the current political climate in the US was not helping either, with industries in China and the EU better able to whether the economic storms because of long-term national and regional targets.

"Despite the European financial crisis, clean tech everywhere but the US seems to be strong. In Europe it is supported by both the liberal and conservative parties it doesn’t have quite the same Republican/Democratic split that we see here in the US. And from China’s 12th five-year plan, we obviously see that they are supporting clean tech in an extraordinary way and we’re also seeing strong support in Brazil, Australia and India. So the US is probably the one market in which we have a fair amount of pull back."

Friday, October 28, 2011

US military on frontline of energy strategy to save money and lives

President Barack Obama may be losing his argument for clean energy in Congress, but he has already won hearts and minds in the US military which is rapidly reducing its carbon bootprint from the barracks to the battlefield.
Major General Anthony Jackson spoke earlier this month of the importance of removing "the vice-like grip of oil from our necks" at a Pew Charitable Trusts forum to promote its new report on energy security at Stanford University.
The Department of Defense is the world's largest single consumer of energy, guzzling 300,000 barrels of oil a day. The US military consumed as much energy as Nigeria, according to this Post-Carbon Institute Energy Bulletin from 2007.
But in the past four years, DoD clean energy investments in biofuels, solar technology and advanced batteries have increased 200%, from $400m to $1.2bn. And the military is likely to clean up its operations even further.
Last year the DoD launched Energy for the Warfighter: Operational Energy Strategy "to ensure that the armed forces will have the energy resources they require to meet 21st century challenges". 
“Lightening the load” for those with boots on the ground, reducing energy demand and dependence on foreign oil are they key goals.
Batteries account for around 20% of the weight of a soldier's pack and a typical infantry battalion uses $150,000 worth of batteries a year, says the Warfighter report.
On the podium at Stanford, Maj Gen Jackson unfolded a sheet of PV panels that packs down to the size of a slim laptop case and can be used to recharge equipment.
Meanwhile, reducing energy costs are critical. In 2010, the DoD consumed nearly 5 billion gallons of petroleum in military operations, at a cost of $13.2bn an increase of 255% over 1997 prices.
But more importantly was the cost to lives at the frontline, said Maj Gen Jackson
In 2007 in Iraq and Afghanistan, a total of more than 3,000 Army personnel and contractors were wounded or killed in action from attacks on fuel and water resupply convoys.
He said: "I know the cost of [oil]. I know it up close and personal if you have never seen the mixture of blood and sand it's a harsh purple on the desert floor.
"There is an urgent need for our nation to lead the world in renewables and conservation and getting a grip on the strategic vice that one three letter word has around our neck. For every 50 trucks we put on the road someone is killed or loses a limb."
US Navy secretary Ray Mabus said something similar at the National Clean Energy Conference in August.
"We buy too much fossil fuel energy from potentially or already volatile places on earth. We give those countries a say on whether those aircraft fly or ships sail or round vehicle operate. There are great strategic reasons for moving away from fossil fuels.
"Every time the cost of a barrel of oil goes up by a dollar it costs the US navy $31m in extra fuel costs. When the Libya crisis began the navy faced a fuel bill increase of over $1.5bn.
"We import gas and water into Afghanistan more than anything. For every 50 convoys of gas we lose one marine – that is too high a price to pay for fuel."
He said that the Navy aimed to cut its dependence on oil for its aircraft and seacraft by 50% by investing in advanced biofuels, of the sort that cleantech startups like Solazyme produce. The US Navy's fleet of aircraft now all been tested with biofuels dropped in.
Despite the military's plans to develop "greener" tanks with BAE Systems, Jackson admitted that he would still drive his Corvette, because "compared to an Abrams tank which does .8mpg, I don't feel too bad."
Jackson, who commands marine installations on the western United States, said energy demand had already been cut by 37% in response to a 50% target by 2030. "We'll be there by 2015. It's not going to be anything for us," he said.
A metering pilot showed soldiers on base how much electricity they were using - if they used more than their neighbours, they'd get a bill, if they used less they'd get a cheque. This reduced energy demand by 30-40%, he said.
He also mentioned that one civilian employee had started to sell tin, aluminim cardboard on a commodities exchange - the proceeds of which now covers the costs of libraries and other facilities.
The Wounded Warrior Barracks at Camp Pendleton in California was the first LEED Platinum Certified building.
The Marine Corps had also installed solar panels and a 1.5MW wind turbine that provides 40% - 50% of the electricity at a barracks in Barstow, southern California, said Jackson. He wants to put another 1.5MW wind turbine at Barstow, but Southern California Edison hadn't worked out a way to "absorb" excess electricity into the grid.
"The utility companies have not yet learned to absorb what we're doing in renewables so I have to hold off until Southern California Edison figures [it]. It will not only cover the needs of the base but it will put back into the grid. We're ready to make this base net zero so we're negotiating."
Maybe Jackson would like to join the battle with the California Public Utilities Commission and utilities over decent feed in tariffs. Reading this UC Berkeley study on the economic (energy security?) benefits, should get Jackson off to a good start.
Jackson and Mabus may be acting on orders from their commander in chief, but they have certainly taken up this mission with great enthusiasm. Jackson said that when he once testified in front of the California Senate select committee for energy and security he was asked how he got people to meet the clean energy targets. "It's pretty easy senator I just tell them," he said. "Everyone in my command knows my intent."
If only Congress were that easy to command and control for the president. But the president's military powers are impossible to replicate politically. But it's one of the smarter differences between the UK and US political systems.
While Republicans bicker between themselves and with Democrats over spending cuts and the budget deficit, real progress continues by stealth where it can. Aside from Republican assaults on the EPA, powerful binding regulations on CAFE standards were agreed with automakers earlier this year. And in California, the Air Resources Board has exemplified stakeholder rule making and participatory democracy at its best with the development of the state's cap and trade regulations.
Jackson's clean energy mission seems to sit well with him. He said: "We like it when the president comes in and lays it out. We know this is important to the current administration.
But the ripple effect goes beyond what the Obama administration wants. Jackson's wife was not under orders when she insisted on buying a Prius and installing solar PV at home.
There may be an even more powerful effect of the military's campaign to reduce energy demand and dependence on foreign imports.
The impact of the DoD procurement clout on the growth of the semiconductor industry is well documented, and the internet was developed from the military's Arpanet funded by Defense Advanced Research Projects Agency (DARPA) in the late 1960s.
Today, the DoD's Environmental Security Technology Certification Program aims to demonstrate innovative energy technology and the military appears to be partially filling the void in the absence of policy or direct subsidies such as European-style feed in tariffs to create a sustainable renewable energy industry.

Solazyme already has large contracts with the US military worth $8bn to deliver algal biofuels. Bob Florence, VP of marketing and business development at Solazyme said: "The Navy's investment has been very helpful in scaling us. Thanks to these investments we're moving from an R&D company to a commercial entity. What we're making for the Navy is diesel fuel [like] you'd buy at a commercial pump. The good news is [they] don't see any difference when they run their ships on our fuel. We want to drop in to the existing structure, we don't want to reinvent the whole entire global fuel supply."
Skyline Solar from Mountain View, California, has a $1.58m contract with the DoD to demonstrate its high-gain solar plants at military bases in the south-west.
Lee Burrows, managing director at VantagePoint venture capital fund national energy policy was essential aligning policy with technology goals: "What the military can do is look at a timeframe for tech that is 10 or 15 years out. Elected officials typically have two to four years and corporations have the next earnings call as their timeframe. The critical part here for DoD and DOE is that they are enabling the technology of the future to help the country gain its long-term goals. We need to have a goal set that we can aim at."
While the US military fights a clean energy war, the question remains whether civilians in Congress can deploy an effective strategy to ensure energy security into the future - and to unshackle the "vice" of oil imports from the necks of US consumers and American soldiers on the frontline.