Dear Readers,
As you may know, Green Wombat moved to Fortune Magazine some months ago. I have been mirroring the Fortune posts here on the old Business 2.0 site until Fortune added e-mail subscriptions and other features.
That now has all been done and I will no longer be updating this version of the blog, which will be shut down soon. So please bookmark the Fortune Green Wombat, where you'll find the entire Wombat archive.
cheers,
Green Wombat
For
longtime Australian Greenpeace activist Danny Kennedy, one of the
environmental group’s more memorable moves was when the Sydney crew
climbed the roof of the prime minister’s home and installed solar
panels to protest the government’s preference for Big Coal over
renewable energy. (Note: Do not try this on the White House.)
These days, there’s a new, greener PM in power and Kennedy is in California, running a solar startup that aims to minimize the time spent on rooftops by doing for the solar business what Dell did for personal computers: Digitizing the entire enterprise to cut costs and create a mass market.
Putting photovoltaic panels on residential rooftops remains largely a labor-intensive cottage business, often involving multiple visits to a client’s home to make the sales pitch, measure the roof, and design a custom system. Sungevity, which officially launches Tuesday on Earth Day, takes all that online.
Enter your address on its website, and satellite-imaging software zooms in on your home, and Sungevity’s proprietary algorithm calculates the roof’s dimensions — the pitch and azimuth — selects appropriately sized solar arrays, and shows what they will look like installed — while computing your return on investment. Once the order is placed, one of five off-the-shelf prepackaged solar arrays is shipped to the customer’s door, and an installation crew is dispatched. A database tracks local building and permit requirements, sending the necessary forms to the homeowner for their signature while beaming local regulations governing solar arrays to the installation crew.
“This changes the game,” says Kennedy, 37, who co-founded Sungevity last year after leaving Greenpeace and relocating to Berkeley. (Full disclosure: Kennedy’s kids and Green Wombat’s son attend the same elementary school.)
Kennedy and his partners have raised $2.7 million from investors that include German solar giant Solon and actress Cate Blanchett. “Our technology allows us to size up an entire city remotely and work out what the solar potential of the roof space is,” adds Kennedy, who will be speaking at Fortune’s Brainstorm Green conference on Monday. “This is the real secret sauce, the thing that rocks the house.”
Says Joe Kastner, an executive with solar financier MMA (MMA) Renewable Ventures: “If you do a lot of site visits, that can end up being a big portion of the cost. Anything that can make these projects more efficient and cut the costs on the front end is good.”
Rather than employ its own installers, Sungevity will work with unions to train electricians and other contractors so that it can tap pools of green-collar workers in local markets. “That’s probably long-term what’s most needed to achieve a million solar roofs,” says Kennedy, referring to California’s solar target. “[Solar panel] supply is not the big constraint. The real issue is labor — it’s the limiting factor in the growth of the industry.”
At the company’s Berkeley offices down the street from Chez Panisse, Kennedy and Andrew Birch, a board member and solar economics expert, run through a live demo of the Sungevity system. In about 15 minutes, a spokesmodel had walked a potential customer through the sales pitch and ordering process while on the backend a consultant is sizing up the roof with the software tools. Within a day or so an e-mail will be sent to the customer with different solar array options and the relative return on investment. “With a traditional solar installer, that would have been about a two week process,” says Kennedy.
The limits of the system become apparent when Birch types in my Berkeley address and the picture shows a large tree overhanging my house, which would have ruled out a solar array except the tree had been removed a year and a half earlier. Kennedy acknowledges that leafy cities like Berkeley with its mishmash of architectural styles and every-which-way rooflines are problematic. Instead, Sungevity’s target market is middle-American suburbia, with its vast tracts of cookie-cutter houses.
That’s just fine with potential rival SolarCity, the Foster City, Calif., solar installer backed by PayPal co-founder and Tesla Motors chairman Elon Musk. “Their technology works very well for track homes — that’s maybe 2% of our business,” says SolarCity CEO Lyndon Rive. “Our market is more retrofit homes, existing homes in well-established areas that are looking to go solar.”
“I like it when companies like Sungevity get into the market,” he adds. “They’re forcing innovation and the most important thing is the widespread adoption of solar.”
Sungevity’s launch comes as utilities like Southern California Edison (EIX) and PG&E (PCG) and tech giants like Google (GOOG) are pushing for a mass expansion of solar energy.
Nat Kreamer, president of San Francisco-based solar installer Sun Run, says Sungevity’s move to digitize the solar business is valuable but it will have to focus on the installation process to really get costs down. “Once you figure out how to size up someone’s system, the challenge is the speed you can get it built,” he says.
Installation costs account for roughly half of a solar system’s cost and solar installers like Akeena Solar have developed modular arrays containing wiring and other components to minimize the time spent on installation.
Sungevity will not focus on zeroing out customers’ electricity bills, but like Sun Run, will push the “hybrid home” - selling smaller, cheaper solar systems that will cover that portion of a home’s electricity use that is the most expensive to buy from a utility.
For instance, after rebates, a standardized Sungevity solar array for a four-bedroom home in Northern California will cost about $21,000 and deliver an estimated return on investment of 13% over the system’s 25-year life.
“We’re selling this as an economic asset,” says Kennedy, “not just as a way to go green.”
California
utility PG&E on Tuesday announced contracts to buy up to 900
megawatts of electricity generated by solar power plants to be built in
the Mojave Desert by BrightSource Energy. It’s one of the biggest solar
deals to date -- enough to power some 600,000 homes -- and is another sign that that the shift from
fossil fuels to carbon-free energy is well underway, at least in
California.
But is it too late? PG&E (PCG) first announced it was negotiating a power purchase agreement with BrightSource, then called Luz II, on Aug. 10, 2006. Around that time, the United States’ leading climate scientist, NASA’s James Hansen, warned that the world had only a decade to take drastic action to cut carbon emissions and avert a global catastrophe from global warming.
It took nearly two years alone to just hammer out the PG&E-BrightSource deal and the world now has eight years left to radically ramp up alternative energy sources. By the time the first BrightSource 100-megawatt solar power plant (image above) goes online it will be 2011 and the last one will begin generating electricity for PG&E just as the climate change alarm clock goes off. If you believe Hansen, hitting the snooze button will not be an option.
Of course, there’s no guarantee the BrightSource plants will actually be built — it will take billions to construct them and the investment climate is not exactly sunny these days, clouded by Wall Street’s meltdown and the looming expiration of a crucial solar investment tax credit. (Personally, Green Wombat is betting BrightSource pulls it off — though April Fool’s Day probably was not the best date to unveil such a deal. The Oakland, Calif.-based company was founded by solar pioneer Arnold Goldman, its CEO, John Woolard, hails from Silicon Valley and the startup is backed by Morgan Stanley (MS) and some savvy venture capitalists.)
Given the moral and regulatory imperative — California utilities must obtain 20 percent of their electricity from renewable sources by 2010 and a third by 2020 — why is large-scale solar proceeding at the pace of a Mojave Desert tortoise? (Almost three years ago, for instance, Southern California Edison (EIX) and San Diego Gas & Electric (SRE) unveiled agreements with Phoenix’s Stiring Energy Systems to buy up to 1,750 megawatts of solar electricity. Ground has yet to be broken on any of the planned power plants.)
Partly it’s because the years-long negotiations between utilities and solar power plant companies is something of a black box. Details of these power purchase agreements are kept confidential but are estimated to be worth billions — if a recent $4 billion dealstruck by utility Arizona Public Service with solar power plant builder Abengoa Solar is any indication. Regulated utilities are by their nature big and bureaucratic and can be expected to be extra-cautious when they’re placing bets on untried solar technology from companies like BrightSource and Ausra.
“Transactions of this magnitude require a fair amount of time to negotiate and due diligence must also be performed,” PG&E spokeswoman Jennifer Zerwer told Green Wombat in an e-mail. “The original [BrightSource agreement] announced in August 2006 was for 500 megawatts; the final agreement expanded on the original . . . and culminated in the execution of five separate power purchase agreements for up to 900 MW.”
Another factor is a regulatory structure that is an artifact of the fossil fuel age. California requires extensive environmental review of new power plant projects — be they clean and green or down and dirty — a process that can take a 18 months or more. And the best solar sites often are on federal land in the Mojave — securing a lease for that land is another 18-month-long process.
Still, when the United States faced a threat of a different kind in World War II, it retooled its factories in a matter of months to produce planes and tanks. The fight against global warming will require a similar agility.
The clock, after all, is ticking.
Southern
California Edison plans to install 250 megawatts’ worth of solar panels
on commercial rooftops, generating enough electricity to power 162,000
homes.
It’s a potentially game-changing move, one that could lower the cost of solar cells as manufacturers ramp up production to meet the utility’s schedule of installing a megawatt-a-week of arrays until it reaches the 250-megawatt target. That alone is more than United States’ entire production of solar cells in 2006 and will produce as much electricity as a small coal-fired power plant, albeit with no greenhouse gas emissions. “This project will turn two square miles of unused commercial rooftops into advanced solar generating stations,” said John Bryson, CEO of the utility’s parent company, Edison International (EIX), in a statement Wednesday night.
The $875 million initiative also marks the first big move into so-called distributed energy by a major utility. Instead of building a centralized power station and the expensive transmission system needed to transmit electricity to the power grid, Edison will connect clusters of solar arrays into existing neighborhood circuits. A significant hurdle for the massive megawatt solar power plants planned for California’s Mojave Desert is the need in some cases to build multi billion-dollar transmission systems through environmentally sensitive lands to bring the electricity to coastal metropolises.
Solar arrays of course only generate electricity when the sun is shining, but they produce the most power during the hottest part of the day when Southern Californians crank up their air conditioners. The arrays could help spare Edison from having to fire up a fossil-fuel power plant when demand peaks.
Edison spokesman Gil Alexander told Green Wombat that the utility expects the project’s scale to allow arrays to be placed on roofs at half the cost of a typical installation. Edison’s ambitions could prove a boon for solar cell makers like SunPower (SPWR) and Suntech (STP) as well as solar installation companies such as Akeena (AKNS). One unknown is whether the demand created by Edison will drive up costs in the short term, given ongoing shortages of polysilicon, the base material of solar cells. The Edison project could also help jump-start the market for thin-film solar panels, which typically use far less silicon than conventional solar cells.
Alexander says Edison is already negotiating with solar panel makers and installers. Needless to say, the project will be a boon for green collar workers.
Here’s how the solar roofs initiative will work: Edison will lease warehouse rooftop space from building owners. (The target area is the fast-growing “Inland Empire” of Riverside and San Bernardino counties.) The utility will contract for the installation of the arrays and will retain ownership of the solar systems. California regulators appear inclined to approve the project, which will be financed by a hike in utility rates.
“This will be a utility-scale solar power plant, if one thinks of the 100 or so buildings on which the two square miles of solar panels will be installed,” Alexander wrote in an e-mail. “One advantage of this project is that we will tap unused rooftop real estate directly in areas we serve where demand is growing rather than securing a major plat of land in a remote area and then building transmission lines to bring the power to those areas of rising demand.”
Anyone who has driven through Los Angeles can attest to the endless acres of big-box stores, warehouses and strip malls and the potential to generate green power from sun-baked suburban sprawl.
Edison’s solar roof ramp up is likely to put pressure on California’s other big utilities, PG&E (PCG) and San Diego Gas & Electric (SRE), to follow suit. Like Edison, they face a state mandate to obtain 20 percent of their electricity from renewable sources by 2010 and 33 percent by 2020. California’s global warming law requires the state’s greenhouse gas emissions to be rolled back to 1990 levels by 2020.
The Governator himself gave a not-so-subtle nudge to Edison’s competitors. “These are the kinds of big ideas we need to meet California’s long-term energy and climate change goals,” said Gov. Arnold Schwarzenegger in a statement. “I urge others to follow in their footsteps. If commercial buildings statewide partnered with utilities to put this solar technology on their rooftops, it would set off a huge wave of renewable energy growth.”
Utility giant FPL has filed plans with California regulators to build a $1 billion, 250-megawatt solar power plant in the Mojave Desert. The move marks the first time that a major player — in this case a Fortune 500 company — has jumped into the nascent Big Solar market.
Juno Beach, Fla.-based FPL’s renewable energy arm, FPL (FPL) Energy, will operate the Beacon Solar Energy Project, which will connect to the transmission system operated by Los Angeles’ municipal utility, the Los Angeles Department of Water and Power. FPL Energy spokesman Steve Stengel declined to say whether the company had struck a deal with LADWP to buy the electricity produced by the Beacon project. “We are currently in discussions with a potential customer on a power purchase agreement for this project,” he wrote in an e-mail. “However, due to confidentiality considerations, I cannot elaborate at this time.”
California law requires the state’s investor-owned utilities — PG&E (PCG), Southern California Edison (EIX) and San Diego Gas & Electric (SRE) — to obtain 20 percent of their electricity from renewable sources by 2010 and 33 percent by 2020. But public utilities like LADWP only have to set green energy targets, 13 percent by 2010 and 20 percent by 2017 in Los Angeles’ case. Under California’s global warming law, the state’s greenhouse gas emissions must be reduced to 1990 levels by 2020.
Those renewable energy mandates have been driving the market for large-scale solar power plants, but so far California’s Big Three utilities have placed their bets on startups like Ausra, BrightSource Energy and Stirling Energy Systems.
FPL Energy, however, is no stranger to the California solar market. It currently operates seven of nine “solar trough” power plants that were built by Israeli solar pioneer Luz International in the 1980s and early ’90s in the Mojave at Kramer Junction and Harper Dry Lake.
The plants use long rows of parabolic mirrors to focus the sun’s rays on tubes of synthetic oil suspended above the arrays. The hot oil is used to create steam which drives electricity-generating turbines. The company’s new power plant (artist rendering above) will built on 2,012 acres of former farmland near California City and will also use solar trough technology.
FPL tends to be tight-lipped about its plans but in a recent interview with Green Wombat, FPL Energy senior vice president Michael O’Sullivan acknowledged the company is bidding on contracts with utilities throughout the Southwest. “We do not develop through the issuance of press releases,” he says, “and there’s a lot of thinly capitalized solar developers trying to get attention by running around the Southwest announcing projects.” Unlike competitors developing new solar technology, FPL is sticking with the tried and true. “One reason we’re focused on solar trough technology like we have out at Kramer is that it’s a proven, financeable technology,” O’Sullivan says.
In a letter accompanying the Beacon Solar application to the California Energy Commission, O’Sullivan estimated the project would create 1,000 jobs during the two-year construction phase and 66 permanent positions once it goes online in 2011.
It is an article of faith these days that
any company worth its public relations budget must proclaim loudly and
frequently its good green intentions. So it was rather refreshing to
hear one of Richard Branson’s top lieutenants – Will Whitehorn, chief
of Virgin Galactic – cast his company’s enviro-friendly initiatives as
strictly business.
“We’re not doing this to be environmentally kosher,” declares Whitehorn, referring to Virgin’s efforts to develop greenhouse-gas free biofuels for its jets and forthcoming spaceship, “we’re doing this to ensure our company’s survival.”
The occasion for Whitehorn’s remarks was one of those “green salons” that have become popular in San Francisco of late. You know, gather a group of so-called thought-leaders – executives, environmentalists, venture capitalists, journalists – in a chi-chi restaurant and let the ideas and sauvignon blanc flow. Easy enough to skewer, particularly when the well-compensated are dining on ahi tuna skewers, but you never know where the conversation will go, and in this case it strayed interestingly off-topic. The subject du jour was a white paper on corporate greenwashing from Bite Communications, the public relations firm that organized the recent lunch. Among those on hand were Whitehorn and exes from Chinese solar panel maker Suntech (STP), fuel-cell maker Bloom Energy, utility PG&E (PCG), and VantagePoint Venture Partners, investor in electric car startup Tesla Motors and solar power plant builder BrightSource Energy.
Whitehorn held center court, tracing Virgin’s trip down the green path back a decade when the company forecasted a dramatic rise in oil prices and tried to gauge the impact on its airline and new railway business. As a result, he says, Virgin spent big bucks on energy-efficient locomotives to hedge against future fuel cost spikes.
“This is not really a question of being green,” says Whitehorn, who expresses annoyance that Branson’s pledge last year to invest $3 billion in biofuels research and development was portrayed in the media as a charitable deed. “We’re doing this to make money and we’re creating a more sustainable economy in the process.”
“We’ve got to get away from this idea of doing these things as good works,” he adds. “We’re doing what we’re doing to create a profitable business for the future.”
It’s a meme increasingly being advanced by some environmentalists, most notably by the black sheep of the movement, Ted Nordhaus and Michael Shellenberger, whose 2004 essay, “The Death of Environmentalism” riled the green elite. The Berkeley duo’s new book, Break Through: From the Death of Environmentalism to the Politics of Possibility, calls for reframing global warming from a doom-and-gloom scenario to an opportunity for unbridled economic prosperity by investing in green technologies. Their central argument: only when people and societies achieve a certain level of material wellbeing do they have the luxury of supporting environmental preservation. In other words, greed is green.
Whitehorn also took aim at companies that proclaim themselves carbon neutral, scorning the notion that corporate greenhouse gas emissions can be offset by merely buying carbon credits. “We’re not going to be carbon neutral – it’s impossible,” he says of Virgin. “You need to get out and do something other than buy someone else’s carbon problem.”
Still, Kristina Skierka, director of Bite’s cleantech practice, wanted to know just how green can Virgin Galactic be, given its business model of ferrying the rich into outer space for a couple hundred grand a pop. “If we use biofuels we will get the emissions down to near zero,” Whitehorn claims. “This is about a new type of launch system; the carbon impacts will be negligible.
He says space tourism is just the launching pad, as it were, for a host of space-based ventures. “If you look at space as an industrial place to conduct human activities, it has huge advantages.”
Virgin’s next frontier is the deep blue sea. According to Whitehorn, the company recently created a skunk works to develop a “radical” new submarine technology for a startup to be called, what else, Virgin Oceanic.
Abu Dhabi is not content to just sell you the oil that fuels your SUV; now its going to sell you sunshine to keep your lights on and power your electric car when the internal combustion engine goes the way of the buggy whip. Masdar, the oil-rich emirate’s $15 billion renewable energy venture, and Spanish technology company Sener on Wednesday announced a joint venture called Torresol Energy to build large-scale solar power plants in Australia, Europe, the Middle East, North Africa and the United States.
Torresol initially will invest $1.2 billion in three solar power plants to be built in Spain but the company is targeting the global “sunbelt” for future expansion. Masdar will take a 60 percent ownership stake in Torresol with Sener holding a 40 percent stake. A Torresol spokesman declined to reveal the dollar amount of the investment. A prime market for Torresol will be the U.S. desert Southwest, where companies like Ausra, BrightSource Energy, Solel and Abengoa Solar are competing for contracts with utilities PG&E (PCG), Arizona Public Service (PNW) and Southern California Edison (EIX). Torresol potentially could shake up that market, given its very deep pockets and ability to independently finance billion-dollar solar power plants.
The venture is just the latest move by Abu Dhabi to control what Masdar CEO Sultan Ahmed Al Jaber described to Green Wombat recently as “the whole value chain” of renewable energy, from research and development to manufacturing silicon for solar cells to the large-scale deployment of green technology.
The irony is too rich to leave unsaid: A leading oil producer invests billions in carbon-free energy while a leading consumer of fossil fuels - the United States - continues to subsidize Big Oil while while offering only tepid support for green technology. It is inevitable that climate change will foster the rise of renewable energy - the only question is which countries and companies will profit from the new energy economics. It is entirely possible that the U.S. will trade energy dependence of one kind - on Middle East oil - for another - on Middle East and European solar technology - in the era of global warming. It’s no coincidence that most of the solar energy companies with contracts to build utility-scale power plants in California and the Southwest have overseas roots - Ausra hails from Australia, BrightSource was founded by American-Israeli pioneer Arnold Goldman, Solel is based in Israel and Abengoa is headquartered in Spain.
Torresol plans to build solar power plants using a technology it calls a Central Tower Receiver system. It’s similar to technology used by competitors like BrightSource in that fields of mirrors called heliostats focus the sun’s rays on tower that contains a receiver. In this case the receiver is filled with salt which when heated vaporizes water to create steam that drives an electricity-generating turbine. The company says it intends to have 500 megawatts of solar electricity online by 2012.
General Electric has officially confirmed its $4 million investment in Norwegian electric carmaker Think Global, a development Green Wombat reported back in December. GE Energy Financial Services (GE) also has invested $20 million in Massachusetts lithium-ion battery maker A123Systems, which will supply batteries to Think. General Electric said its scientists will work with both Think and A123 to improve battery technology for electric cars to “enable global electrification of transportation.”
And as Green Wombat reported last week, Think, formerly owned by Ford (F),
unveiled its next model Wednesday at the Geneva Auto Show, a futuristic
five-seater called the Think Ox that will eventually be available as a
two-door coupe and possibly a taxi. The sleek five-door vehicle
resembles a low-slung crossover SUV but maintains the signature touches
of the Think City — an urban runabout now rolling off Think’s
production line in Norway — including the roof-to-bump glass rear
hatch. The concept car also sports a translucent roof with a solar
panel, presumably to run radios and other equipment.
When Green Wombat caught up with CEO Jan-Olaf Willums in San Francisco last week he emphasized that although the Ox is being presented as a concept car, the technology is almost ready for prime time and the car that is expected to hit the market in 2011 will resemble the show version.
It was a year ago that venture capitalist and solar energy
entrepreneur Jan-Olaf Willums appeared at the Cleantech Forum in San
Francisco shortly after taking over Think Global, a Norwegian electric
car maker once owned by Ford (F).
Willums and his partners had just secured their first round of funding
and unveiled plans to revive Think and a zippy urban runabout called
the Think City. This week Willums made a return appearance at the 2008
Cleantech Forum and showed just how fast an automotive
startup can move amid the lumbering dinosaurs of Detroit.
Green Wombat caught up with the ever-cheerful Willums over coffee Wednesday (unlike his American counterparts he meets the press without the PR minders that seem to accompany every exec everywhere). A day earlier on a panel about alternative transportation he dropped something of a bombshell: At the Geneva Auto Show on Tuesday Think will unveil its next-generation car, a sleek five-seat sedan.
Willums, who has raised $93 million from U.S. and European investors, was keeping mum on the identity of its big-league partner until Tuesday but did say that new model was not just a concept car. "We have designed a five-seater show car but it really is much more than that," says Willums (photo above). "It is very much a car that can be produced and it looks like the car that will produced." The plan is to offer the next-gen Think in 2011 as an all-electric as well as well as a so-called series hybrid that uses a small engine to charge the battery and extend its range. (The current Think City has a range of 180 kilometers --112 miles.)
The drawing Willums briefly displayed on the panel showed an stylish aerodynamic four-door sedan. He says Think is planning to later produce a crossover SUV and coupe version of the car. Silicon Valley electric car startup Tesla's next car also is a five-seater sedan, code-named White Star. "We won't compete with Tesla," says Willums. "The Tesla will be more a BMW; we'll be more the Volkswagen."
In the meantime, the two-seater Think City is rolling off the production line at the company's factory outside Oslo and the first 500 cars are set for delivery to customers in March. (For the Think back story and my 2007 Business 2.0 magazine feature on the company and its innovative business model click here.) Production will be fully ramped up by the end of 2008 and Think aims to produce 10,000 cars a year.
Willums also tells Green Wombat that Think later this week will introduce the City to London and Paris. Think's strategy is to pursue urban markets that offer incentives for electric vehicles. For instance, for electric cars London waives the $15 congestion "congestion fee" charged for driving into the city and offers free parking. France gives EV buyers a $7,500 rebate. Think plans to begin selling the City in those markets in early 2009. Think has also established a subsidiary in Denmark
The company's North American plans are still in flux. "We hope to have a plant in the U.S. in 2009," he says. As with Europe, Think will target urban markets in the U.S., such as San Francisco and New York.
Think has markedly picked up the pace since I last met Willums in Oslo. That's due in part, he says, because of the big automakers' more aggressive moves to get into the electric car market, such as General Motors (GM) with its Chevy Volt electric hybrid.
It also seems increasingly clear that innovative startups like Think will survive by making strategic partnerships with bigger players and moving nimbly into select and potentially profitable markets. Whether Think will be a drive-away success remains to be seen but its clear Willums is hitting the accelerator.
While the United States Congress hems and haws over extending relatively modest tax incentives to encourage renewable energy development, Abu Dhabi is spending $15 billion in a drive to make the oil-rich emirate an epicenter of green technology. Called the Masdar Initiative, it’s best known for plans to build Masdar City, a “zero-carbon, zero-waste” urban center.
But Abu Dhabi’s ambitions extend far beyond making Masdar City a showcase for sustainable development, as Masdar Initiative CEO Sultan Ahmed Al Jaber made clear when Green Wombat sat down with him on Tuesday when he was in San Francisco to accept the “Cleantech Leader of the Year” award at the annual Cleantech Forum. “We have decided to establish the Silicon Valley of renewables in Abu Dhabi,” says Al Jaber. “We want to cover the whole value chain - from research to labs to manufacturing to the deployment of technologies.”
To that end, Masdar is collaborating with European and U.S. universities - including MIT and Columbia - to develop a research institute. The Masdar Clean Tech Fund has invested $250 million in renewable energy ventures and Al Jaber says a second fund is in the works. “We’ll invest wherever the opportunity goes,” he says. “We’re keen on developing renewable energy infrastructure in California; we’re just looking for the right opportunity.”
Masdar City will be a tax-free zone in a bid to lure makers of photovoltaic equipment and other green energy manufacturers. When Al Jaber says Abu Dhabi wants to own the whole supply chain, he means that literally, beginning with polysilicon, the basic building block of solar cells. “We’re looking at manufacturing polysilicon, thin-film for photovoltaics, wind energy components,” he says. “We’re no longer interested in only being a consumer of technology or an off-taker of specific equipment. We want to transform ourselves into a more knowledge-based economy. “
He expects the renewable energy and waste-reduction technologies developed to build Masdar City - its expected population is 50,000 - to be exported to help retrofit existing cities. “A city of this size would require 820 megawatts of power, but we will reduce energy requirements to 220 megawatts from integrating new designs from day one.”
“This city is going to literally re-engineer urban planning,” he claims.
Abu Dhabi’s ambitions will create opportunities for U.S., European and Asian green tech firms and Al Jaber acknowledges that forming the right partnerships will be the biggest challenge in fulfilling the emirate’s green dreams.
But he says he sees no irony in one of the world’s biggest oil-exporting nations going green. The bottom line: it’s all about power and markets.
“Abu Dhabi recognizes that the global energy markets are evolving and are evolving with substantial growth in alternative energy,” Al Jaber says. “It’s only going to go up. Does that make it a threat or an opportunity? It’s a great opportunity if we invest in it now.”
Arizona
Public Service, Arizona’s largest utility, announced plans Thursday for
a 280-megawatt solar power plant to be built 70 miles southwest of
Phoenix by Spanish company Abengoa Solar. What’s striking about the
deal is that it offers a rare glimpse inside the economics of Big
Solar. And as the renewable energy industry pushes Congress
to extend crucial green tax credits, the jobs that will be spawned by
the Solana Generating Station and the economic ripple effect of the
huge construction project is Exhibit A in why fighting global warming
can be a win-win when it comes to the economy and the environment.
All the previous contracts for 100+ megawatt solar power plants have been in California, where utilities PG&E (PCG), Southern California Edison (EIX) and San Diego Gas & Electric (SRE) have shrouded power purchase agreements in secrecy.
APS (PNW), on the other hand, has lifted the green veil a bit, giving some indication of the current cost of producing utility-scale solar electricity and the larger economic impact. According to APS, the utility will pay around $4 billion over 30 years for the greenhouse gas-free electricity generated by Solana that will light 70,000 homes. That comes to about $133 million a year for the life of the power purchase agreement.
Abengoa spokesman Peter Kelley told Green Wombat that the exact kilowatt per hour rate the company is paying APS is confidential. No doubt though that the utility will pay a premium per kilowatt/hour for its first large-scale solar energy deal compared to electricity produced by a coal or natural-gas fired power plant. That cost disparity is likely to evaporate when the United States moves to price carbon — either through a carbon tax (unlikely) or a cap-and-trade system that requires fossil-fuel power plants to pay if they exceed limits on CO2 emissions. And the cost of financing carbon-spewing power plants will grow in coming years as Wall Street shies way from projects that carry climate change risks. And as solar power plant components and systems go from being one-off prototypes to mass-produced commodities, the cost of solar electricity is expected to drop even further.
Abengoa and APS are not revealing the construction cost of Solana but solar power plants of that size can run half a billion dollars or more. Of course, once built their operating costs are significantly lower than conventional power plants; the fuel — the sun — after all is free.
In the meantime, the Solana Generation Station is expected to inject about $1 billion into the Arizona economy as Abengoa hired 1,500 workers to build the power station and 85 others to operate it, according to APS. The utility estimates that the ripple affect will create another 11,000 to 15,000 jobs.
Abengoa is using a solar trough design for the plant. A tried and true technology, solar trough plants deploy long rows of parabolic mirrors to heat liquid-filled tubes to produce steam that drives electricity-generating turbines. The Solana plant will also store heat in silos of molten salt. The heat can be released when the sun is not shining to run the turbines. “The molten storage will extend the operating hours of the plant both during cloud cover and when sun goes down,” Kelley says. That means Solana can continue to generate electricty as long as six hours after sunset.
The big “if” for Solana is the 30 percent investment tax credit that expires at the end of 2008. If Congress fails to extend the credit, the cost of such solar power plants will jump, jeopardizing their economic viability
Solana is likely to be just the first big solar power plant in Arizona. Utilities there must obtain 15 percent of their electricity from renewable sources by 2025 and with little wind or geothermal available in Arizona, the state is likely to place a big bet on Big Solar.
It's all about the green economy, stupid.
The United States could lose more than 116,000 green collar jobs and forgo $19 billion in green tech investment in 2009 if Congress fails to extend two tax credits crucial to the renewable energy industry, according to a new study.
One red flag about this report: It was commissioned by the American Wind Energy Association and released by the Solar Energy Industries Association -- two trade groups pressing for extension of the investment tax credit and the production tax credit. Green Wombat tends to look askance at studies paid for by business and whose conclusions support the sponsors' political agenda. But a review of the research conducted by Navigant Consulting indicates that it is solid, based on federal labor data and employment models as well as Navigant's own market analysis.
Some background. The ITC provides a 30 percent tax credit for the installation of solar arrays and other equipment. Homeowners can claim a 30 percent tax credit for solar arrays up to a maximum of $2,000. There's no cap for commercial solar arrays and the tax credit has been a key to attracting financing for large solar installations that can cost millions of dollars. (Several states, most notably California, offer even more lucrative incentives, which should help prop up demand.) The production tax credit provides a subsidy for the generation of electricity by solar, wind, geothermal and other renewable energy systems and has driven the construction of massive megawatt wind farms.
Both credits expire at the end of 2008 and the renewable energy industry and their allies in Silicon Valley and on Wall Street are pressing Congress for a long-term extension -- five to eight years -- to provide a stable investment climate for green projects. (Last week, executives from Google (GOOG), Hewlett-Packard (HPQ), Applied Materials (AMAT) and Credit Suisse (CS) were among those that signed a letter urging Congress to take action by March 1.)
The Navigant study projects that without the investment tax credit installations of solar arrays will fall from a projected 790 megawatts to 325 megawatts in 2009, eliminating 39,400 potential new jobs.
A couple of points to consider about those numbers. Navigant only considered the impact on the photovoltaic industry that manufactures and installs rooftop solar arrays. It did not calculate the consequences for the solar thermal business, which builds large-scale solar power plants that use mirrors to focus the sun's rays on liquid-filled tubes or boilers to create steam to drive electricity-generating turbines. The solar thermal industry is in its infancy but utilities like PG&E (PCG), Southern California Edison (EIX) and San Diego Gas & Electric (SRE) have signed several contracts for solar power plants and negotiations for gigawatts more of solar electricity are ongoing.
The first solar power plants in California won't go online until around 2010 but the construction and operation of those projects are expected to create thousands of jobs. Like the PV industry, solar thermal companies are dependent on the investment tax credit to attract the big money it takes to finance the construction of billion-dollar power plants. The loss of the investment tax credit would hit California particularly hard.
While rooftop solar companies worry about losing business in the future if the investment tax credit is not renewed, the more immediate concern among solar execs Green Wombat has talked to recently is finding enough workers to keep up with demand, especially in California.
Navigant projects an even bigger crash for the wind industry should the production tax credit expire, with installations falling from 6,500 megawatts to 500 megawatts in 2009 with the lose of 76,800 jobs. The wind industry has been continuously buffeted in recent years as Congress has allowed the production tax credit to expire repeatedly only to resuscitate it. In the past, the expiration of the tax credit has resulted in a 73% to 93% drop in the wind market, according to Navigant.
Twice now the renewable energy industry has narrowly lost votes in Congress to extend an investment tax credit crucial to jump-starting the market for large-scale projects like solar power plants. In December, Big Oil outmaneuvered green energy advocates and their Congressional supporters by claiming that rescinding huge tax breaks for the fossil fuel industry to pay for renewables would cost consumers at the pump. A more recent attempt to revive the tax credit also failed.
Now the American Council on Renewable Energy is bringing out its big green guns. Representatives from Silicon Valley tech giants, Wall Street investment banks and utilities signed a letter sent to the congressional leadership late Wednesday urging the long-term extension of the 30 percent investment tax credit as well as the production tax credit for the electricity produced by solar, wind, geothermal and other renewable energy systems. Among the signers urging action by March 1 are executives from Google (GOOG), Hewlett-Packard (HPQ), Applied Materials (AMAT), Credit Suisse (CS), Wells Fargo (WFC), venture capitalists Kleiner Perkins Caufield & Byers and utility San Diego Gas & Electric, a subsidiary of energy giant Sempra (SRE).
Interestingly, the phrases “climate change” and “global warming” never appear in the letter. In a savvy move, the council has forsaken doom and gloom for a purely economic message: American jobs, competitiveness and innovation are at stake, the signers argue, and the tax incentive will spark a green tech boom at relatively little cost to the taxpayers. It’s a Silicon Valley mindset and its no surprise that while the signers represent companies from all over the United States, most hail from California.
The tax credits expire at the end of 2008 and proponents argue that a five-to-eight year extension is needed to create a stable investment climate, given that it can take three to five years for a large solar power plant to be permitted and built.
“The United States is in a historic position to lead in innovation and competitiveness in the renewable energy sector,” wrote the council’s three co-chairs, which include Dan Reicher, Google.org’s director of climate and energy initiatives. “As with all energy markets and in plans for growth in any businesses, certainty and continuity in public policy provides the confidence needed for stability in investments. We must ensure we are not creating an environment for boom and bust cycles in renewable energy and that we are not tying the hands of business owners in the sector looking to scale their technologies to meet demand and price points.”
Without an extension of the tax credits, the council warns that renewable energy projects in the pipeline that would produce 42 gigawatts of greenhouse-gas free electricity — enough to power tens of millions of homes — could grind to a halt, giving competitors in Europe and Asia the upper hand when it comes to green tech innovation.
For a state steeped in the mythology of Big Oil, Big Coal (plants) and well, big everything, Texas does not necessarily come to mind when you think of Big Green.
It’s a reputation somewhat undeserved, given the Texas-sized wind farms sprawling across the hundreds of thousands of acres of the state’s ranch lands. Now there are signs that California’s solar boom is spreading eastward. One leading indicator: Silicon Valley solar power plant startup Ausra is opening an outpost in the Lone Star State and hiring an executive to “lead the development of stand-alone solar thermal power projects in Texas using Ausra’s proprietary Compact Linear Fresnel reflector technology and the sale of solar field to utility scale customers,” according to a job description posted last week at the Berkeley Institute of the Environment at the University of California, Berkeley.
Like a growing number of states, Texas has a so-called renewable energy portfolio standard that mandates a certain portion of its electricity supply come from green sources. (Unlike most other states that require utilities to obtain a set percentage of electricity from renewable sources, Texas sets a total green energy target and ups the ante every two years. For instance, the 2009 target of 3,272 megawatts rises to 5,880 megawatts in 2011. Texas utilities are allocated a share of those megawatts based on their sales.)
But if you want to sell solar to Texans you have to be in Texas. That’s because when it comes to electricity, Texas is literally a country onto itself: the Texas power grid is not connected to the rest of the country (except for some outbound transmission lines) and all renewable energy must be generated within the state. (Unlike, say, California, which can buy electricity produced by solar power plants in neighboring Nevada or Arizona.)
“Texas is another California-sized market that’s growing rapidly and seeking clean options in the portfolio,” Ausra executive vice president John O’Donnell tells Green Wombat. “While solar resources are somewhat lower than the Mojave, west Texas is a very good solar region and we see major opportunities going forward.”
O’Donnell wouldn’t reveal details about Ausra’s Texas plans (though the job posting says Ausra aims to build 1-to-2 gigawatts worth of solar power plants a year). But Texas clearly is in the market for green energy. Utility TXU’s (TXU) cancellation of several massive megawatt coal-fired plants (and Wall Street’s growing aversion to such projects) along with the ratcheting up of renewable energy mandates means the state will increasingly be looking to solar and wind to fill the void.
Utility El Paso (EE) is accepting bids to supply for 300-megawatts of green energy while Austin Energy is committed to obtaining at least 100 megawatts of solar energy under the city’s goal of going carbon neutral by 2020.
With wide open spaces and plenty of sunshine and flat land, look for other solar power plant players to beat a path to Texas in the coming months.
A passel of high-profile tech investors -- including Khosla
Ventures, Paul Allen’s Vulcan Capital and Bill Gross' Idealab -- are backing yet
another new player in the increasingly hot market for large-scale solar
power, pumping $50 million into Infinia, a Kennewick, Wash., company
manufacturing a Stirling solar dish.
The Stirling dish has a storied — if unfulfilled - history in the annals of solar energy. It marries a Stirling heat engine, 17th-century invention, with a mirrored dish that looks like a super-sized version of a home satellite receiver. The solar dish focuses the sun’s rays on the Stirling engine, heating a gas inside that drives pistons to generate electricity. Stirling dishes are much more efficient at converting sunlight into electricity than solar thermal technologies that use mirrors to heat liquid-filled tubes to create steam to drive electricity-generating turbines. But while solar thermal plants exist today, the Stirling solar dish has never been deployed on a large scale since work on the technology began in earnest following the oil shocks of the 1970s.
Stirling Energy Systems of Phoenix in 2005 signed contracts with utilities Southern California Edison (EIX) and San Diego Gas & Electric (SRE) to build up to build tens of thousands of Stirling dishes to produce up to 1.75 gigawatts of greenhouse gas-free electricity. Though the company operates a six dishes in a prototype power plant at Sandia National Laboratories New Mexico, it is still working to get production costs down and rivals have questioned whether Stirling Energy Systems will be able to fulfill its deals. (See Green Wombat’s 2007 Business 2.0 magazine article on Stirling Energy Systems here. )
But
Infinia CEO J.D. Sitton tells Green Wombat that his company has
perfected the Stirling dish to make it competitive with large-scale
solar thermal as well as new photovoltaic technologies like thin-film
solar. Infinia aims to deploy its Stirling dishes in smaller
configurations so that solar power plants can be located near cities
and at other sites that don’t require vast stretches of desert land
where solar thermal plants are typically built. Each 21-foot-high,
15-foot-wide solar dish can generate 3-kilowatts (compared to 25
kilowatts for Stirling Energy Systems’ dish).
Infinia won’t itself become a solar developer but will provide its dishes to for power plants that range in size from 1 megawatt to 150 megawatts or more. In contrast, most solar thermal power plants now being planned are in the 400-500 megawatt range.
“We fly in the face of what has been the conventional wisdom in the solar thermal field that to be competitive you have to have a very large system,” says Sitton. “We can be deployed within city limits and be connected to existing transmission systems. No additional transmission capacity is required.”
“Our approach is that the winning solutions will be those that generate for most kilowatts for the least cost,” he adds. “This is a game about capital efficiency.”
That, of course, has been the mantra of leading green tech investor Vinod Khosla, who has disparaged photovolatic solar systems as too expensive to displace fossil-fuel generated power. Khosla also is backing Palo Alto solar thermal startup Ausra, which last year signed a deal to supply solar electricity to California’s largest utility, PG&E (PCG). Serial entrepreneur Bill Gross’ Idealab is funding solar thermal startup eSolar, which also is being backed by Google (GOOG).
Infinia contends the design of its Stirling dish system makes it competitive with solar thermal technologies. First, the Stirling engine uses helium rather than hydrogen, which typically must be periodically replenished. “We have no lubrication inside the machine and it needs no maintenance,” Sitton says. “We use helium in a hermetically sealed system.”
Second, he says the Infinia dish is made of six panels of glass rather than the 76 panels on the Stirling Energy Systems dish. “That gives us lower production costs and lower capital costs,” says Sitton. “We brought in large-scale manufacturer from the beginning. It’s not like we built a prototype and now have to reduce the cost to produce it.”
The first prototype went online last October and Sitton says Infinia is building a second at Sandia. Field tests will be conducted later this year in California and Nevada. He says Infinia is currently negotiating with solar developers and full-scale production is set to begin in November. Infinia has been in business since the 198os, building Stirling engines for other applications. But the green tech boom and demands from utilities for renewable energy led the company to focus on solar.
Whether Infinia beats Stirling Energy Systems to market remains to be seen but look for the deals it signs with solar developers for a good indication of just how viable its technology is likely to be.
Three major
Wall Street investment banks have pledged to adhere to a set of “Carbon
Principles” to assess the risk — ecological and economic — of investing
in planet-warming fossil fuel power plants. But does this signal that
Wall Street’s ardor for Big Coal is cooling, or are we seeing a rather
sophisticated greenwash that will allow further investment in dirty
power to carry a green seal of approval?
Probably a bit of both.
Citi (C), JPMorgan Chase (JPM) and Morgan Stanley (MS) collaborated with with such coal-dependent utilities as American Electric Power (AEP), NRG Energy (NRG) and Southern Company (SO) along with national green groups Environmental Defense and the Natural Resources Defense Council to draft the Carbon Principles.
In short, the banks — all of which have come under fire from environmentalists for financing power projects that are a major contributor to climate change — have agreed to evaluate the economic viability of coal-fired plants in light of a widely expected national cap on greenhouse gas emissions. Such a cap would force utilities to reduce their carbon spew or pay a price per ton of carbon dioxide emitted over the limit.
But there’s some caveats here. According to the Carbon Principles, the financing criteria “does not establish specific performance criteria that companies or their projects must meet nor does it lay out specific types of transactions that the financial institutions will avoid.”
In other words, absent a hard target for power plant emissions, the banks can continue financing those projects, principles or not. (The Sierra Club lists proposed coal-fired power plants and their financiers here.) “There was resistance on part of the financial institutions to set specific targets or reductions,” Mark Brownstein, Environmental Defense’s managing director of business partnerships, told Green Wombat. “Banks do not see themselves as regulators but they are responsible to shareholders and investors with regard to risk.”
Still, says Brownstein, “I think that if the principles are honestly implemented, if companies honestly wrestle with data they collect and do honest due diligence, it will make a difference in the direction of investment in the utility space. We’ll see much less conventional coal, and more investment in renewable energy and low-carbon coal technologies.”
“I think we’ve been surprised, frankly,” adds Brownstein, “for whom these principles and this due diligence is in fact new.” Brownstein previously was an executive with New Jersey-based utility Public Service Enterprise Group (PEG), which was one of the utilities that worked on the Carbon Principles.
Whether the Carbon Principles result in any canceled coal projects remains to be seen, but Brownstein says that one consequence might be a higher cost of capital for those plants that do obtain financing.
JPMorgan spokesman Brian Marchiony told Green Wombat in an e-mail that, “We are certainly going to take a harder look at those projects and encourage other alternative energy options.”
Citi and Morgan Stanley did not respond to requests for comment.
Marchiony says that JPMorgan already had been using some environmental criteria to screen fossil fuel power plants. “We’ve added additional questions to our checklist and strengthened those that we were already asking in order to incorporate the carbon issue more formally into the financing discussion,” he says.
Given growing opposition to new coal-fired power plants from local communities and regulators, the big investment banks had already been reconsidering coal-related investments.
Brownstein says Environmental Defense will continue to push for Wall Street’s disengagement from Big Coal. “We very much look at these principles as a floor and not a ceiling,” he says. “We feel as an organization it would be both environmentally irresponsible and financially irresponsible for them to move ahead and invest in conventional coal.”
Solel last July signed the world's largest solar power deal when it agreed to supply California utility PG&E (PCG) with 553 megawatts of green electricity to be produced by a massive solar thermal power plant to be built in the Mojave Desert. The company's solar trough technology is also used in nine solar power plants (photo above) that were built in the Southern California desert in the 1980s. (In a solar trough power plant, long rows of parabolic mirrors focus the sun's rays on tubes of liquid suspended over the arrays to create steam that drives an electricity-generating turbine.)
Raising $105 million is impressive and it's certainly a big number. But given that a 500-megawatt solar power plant can easily cost $1 billion or more to build, it's a relative drop in the bucket. However, it will allow Solel to move forward with the project and line up project financing for the PG&E plant while it negotiates more deals with other utilities -- it won't say which, but likely candidates are Southern California Edison (EIX) and San Diego Gas & Electric (SRE).
Competitors BrightSource Energy and Ausra have solar power plant applications before the California Energy Commission and have signed or are negotiating power purchase agreements with PG&E.
"Everyone is realizing that the market is there for thousands of megawatts of peaking power," Solel CEO Avi Brenmiller recently told Green Wombat. "As time goes by we see energy prices rising and utilities are focusing their efforts to get solar thermal power because this is the right solution in the southwest United States."
The Ecofin investment in Solel is notable also given the uncertainty surrounding solar power at the moment due to Congress' failure to extend the solar investment tax credit in the recently enacted energy bill. The 30 percent credit is considered crucial to help solar energy companies secure financing for power plants and achieve economies of scale. The tax credit expires at the end of 2008 but solar energy proponents and their allies on Wall Street say they're confident that Congress will take up legislation this session to extend it for as long as eight years.
When President Bushed signed the energy bill into law last month, much was made of the legislation’s mandate that automakers dramatically boost the fuel efficiency of their fleets. Less noticed was that the bill dropped a provision that would have extended the solar investment tax credit — a measure viewed as essential to transforming solar energy from a niche business into a multi billion-dollar industry that can generate gigawatts of greenhouse gas-free electricity.
The timing couldn’t be worse. With the current solar credit set to sunset, as it were, at the end of 2008, Big Solar is at at a tipping point: Utilities and renewable energy companies are in the midst of negotiating massive megawatt power purchase deals whose financing depends on the 30 percent investment tax credit, or ITC.
“I think there is a major concern that this will stall all the beneficiaries of the ITC,” said Joshua Bar-Lev, vice president for regulatory affairs for solar power plant developer BrightSource Energy. The Oakland, Calif.-based startup is negotiating a 500-megawatt agreement with California utility PG&E and is proceeding with plans to build a 400-megawatt solar thermal power station on the Nevada border (artist rendering above).
Solar energy companies, utilities like PG&E (PCG) and Edison International (EIX) as well as financiers such as Morgan Stanley (MS) and GE Energy Financial Services (GE), had pushed for an eight-year extension of the investment tax credit to give Big Solar projects enough time to get off the ground and start to achieve economies of scale. The provision also would have allowed utilities to claim the credit for solar projects they build. The measure drew support from both sides of the aisle in Congress but died — by one vote in the Senate — when Bush threatened to veto the energy bill because the solar tax credit would be financed by repealing previous tax breaks given to Big Oil.
“The Congressional leadership is very strong in their support of the ITC; they will put this on the table In 2008,” said Chris O’Brien, a Sharp Solar executive and chairman of the Solar Energy Industries Association, in an e-mail. “The solar industry will continue to contact legislators in key states.”
House Speaker Nancy Pelosi and the Democratic leadership in the Senate have pledged to re-introduce renewable energy tax credit legislation this session. “Speaker Pelosi has said repeatedly that she hopes to address that this year,” Drew Hammill, a spokesman for Pelosi, told Green Wombat. “We’re just getting started but there’s bipartisan support for the tax credit.”
Publicly, at least, no one in the solar industry will say that the uncertainty over the tax credit is affecting planned projects. “Our expectation is that there will be another tax bill that will address this issue,” said Kevin Walsh, managing director of the renewable energy group at GE Energy Financial Services. “We’re working on a number of [solar thermal] deals but it’s too early to disclose them.”
In recent months, PG&E has signed deals for more than a gigawatt of electricity — enough to light more than 750,000 homes — with solar power plant developers. Such power purchase agreements can take more than a year to hammer out and the permitting and construction of a solar power station can take another three to five years.
"We’re continuing to move forward with negotiations and with contracts that have already been signed, but certainly the absence of the ITC could potentially impact future projects,” said PG&E spokesman Keely Wachs. “Without the credit, it does increase the cost of that energy and of course it also sends a very clear market signal as to our country’s energy priorities.”
Silicon Valley solar startup Ausra is building a 177-megawatt solar power plant on the Central California coast to supply electricity to PG&E and is pursuing deals with Florida’s FPL (FPL) and other utilities.
“Just like any business, the solar industry prefers a predictable system for the future,” wrote Holly Gordon, Ausra’s director of regulatory and legislative affairs, in an e-mail. “It will be more difficult to plan for our projects while the situation remains uncertain. While we are currently seeing excellent demand for solar energy at market prices, we need a long term extension of the renewable energy tax credits to ensure market stability and investor confidence as the market continues to grow.”
Silicon Valley green tech investor Vinod Khosla caused a stir recently when he dissed plug-in electric hybrid cars as “toys” that would not contribute much in the way of fighting global warming. The blogs were buzzing from red-faced EV enthusiasts taking umbrage at Khosla, who has made big bets on biofuels and is never shy at expressing his opinions on all matters green.
But an investment Khosla Ventures announced this week in EcoMotors, a Detroit startup developing a high-efficiency diesel engines, shows that the legendary venture capitalist is more eclectic when it comes to electrics than his public pronouncements might make him seem.
EcoMotors founders Peter Hofbrauer and John Coletti, veterans of Volkswagen and Ford (F) respectively, are engineering engines that they hope will achieve 100 miles per gallon, run on gasoline, diesel or biofuels and be used to power — wait for it — plug-in hybrid electric cars.
What drove Khosla to change his mind on hybrids? He didn’t, really. To understand why, we need to look under the hybrid hood. There are two types of hybrids. A parallel” hybrid contains two drive trains — an electric motor to power the car at low speeds for short periods of time, and a conventional gasoline engine for higher speeds. The Toyota (TM) Prius and Honda (HMC) Civic hybrid and most other hybrids on the road today are parallel hybrids. (A plug-in version would allow for a more powerful battery pack that could be recharged from a standard electrical outlet.)
In contrast, a series hybrid takes some of the complexity — and presumably the cost — out of the design by using only an electric drive train to propel the car while relying on a small internal combustion engine to power a generator that charges the battery and provides power to the electric motor when needed. The Chevrolet Volt, General Motor’s (GM) plug-in electric hybrid under development, is a series plug-in hybrid. And the EcoMotors’ engine will be designed for use in a series hybrid.
“He was referring to parallel hybrids,” says Khosla Partner’s Ford Tamer of his boss’s anti-hybrid comments made in a speech at an investor conference. “We do believe a series hybrid is the way to go. He was also referring to the fact that the hybrid platform is inherently an expensive platform.”
So is a series platform at this point, but Khosla’s vision is to drive that cost down by creating high-efficiency engines and batteries. Hence the investment in EcoMotors. And hence the hiring last September of Tamer, a former top executive at chipmaker Broadcom and a co-founder of another chip company, Agere (later acquired by Lucent). “I’ve been focused on the efficiency side of Khosla — engines, motors, turbines, even solar and batteries,” says Tamer, Khosla Ventures’ operating partner.
Khosla is the sole funder of EcoMotors – and no, Tamer won’t reveal the size of the investment – which officially launched this month and remains so stealthy it doesn’t even have a website yet.
Tamer says EcoMotors CEO Hofbrauer developed a high-efficiency engine under contract with the Defense Advanced Research Projects Agency, of DARPA, for use in military vehicles. EcoMotors has now licensed the technology for commercial use.
Here’s how it works, as explained by Tamer: the EcoMotors engine is built of 2-cylindar “modules” that can be stacked depending on the need for power – one or two modules for a car, three or four for a big truck. “If you have two modules, you can shut down one module for city driving,” says Tamer. “But when you need to need to go uphill or need power for highway driving, you engage the second module. That gives you better fuel efficiency and reduces emissions.” (EcoMotors’ renderings of the engine’s design are above.)
With the recently enacted energy bill mandating automakers raise the average fuel efficiency of their fleets to 35 miles per gallon by 2020, EcoMotors aims to demo its first engine to potential customers by early 2009.
A plug-in electric hybrid drive train will be further down the road but Khosla Ventures already has made investments in companies developing components for such a system. One such startup is Seeo, a Berkeley, Calif.-based company whose website cryptically says it is “developing advanced materials to revolutionize electricity storage and delivery.”
“Our belief is that we have to get a fuel-efficient, emissions-conscious diesel engine on its own,” Tamer says. “Then going to a hybrid becomes a bonus.”
One of Vinod Khosla’s mantras is that green technology must become cheap and scalable enough to be adopted in China and India, countries whose impact on climate change is monumental. In other words, a $25,000 plug-in hybrid doesn’t stand a chance against a Tata Nano, the Indian people’s car unveiled last week.
Remarks Tamer: “$2,500 will buy a Tata – that’s a DVD upgrade on a Lexus.”
Big
Solar has been about Big Dreams - fields of mirrors carpeting the
desert to produce clean, greenhouse-gas free electricity. In another
step toward making that vision a concrete-and-glass reality, Schott
Solar announced Monday that it is building a factory in Albuquerque,
N.M., to manufacture components for large-scale solar thermal power
plants as well as photovoltaic modules for commercial rooftop arrays.
The German company’s news follows Silicon Valley solar startup Ausra’s announcement last month that it’s building a solar thermal factory in Nevada — the first in North America.
That solar companies are now investing capital to break ground on manufacturing plants represents the creation of a Big Solar infrastructure and, of course, a move to get on the ground floor of what is expected to be a solar building boom in the sun-drenched Southwest of the United States. Utilities throughout the region are facing mandates to dramatically increase their use of renewable energy. In California, for instance, PG&E (PCG), Southern California Edison (EIX) and San Diego Gas & Electric (SRE) are all negotiating big megawatt contracts for utility-scale solar power thermal power plants. A consortium of Southwest utilities meanwhile has put out to bid a 250-megawatt solar station.
“We certainly see the opportunity for growth in the solar thermal market,” Mark Finocchario, CEO of Shott’s North American operations, told Green Wombat. “The concentration of solar thermal plants will be in the Southwest and we see that’s where the rest of the supply market will develop as well. But we would have the ability to ship product to anywhere in the world.”
The $100 million Albuquerque factory will manufacture solar thermal receivers — long tubes that hang over curved mirrors called solar troughs. The mirrors focus the sun’s rays on the receivers and liquid inside becomes superheated to produce steam that drives electricity-generating turbines.
Finocchario says the the plant, which will employ 350 people, is set to go online by the end of the first quarter of 2009. Future plans call for another $400 million investment to expand the factory’s workforce to 1,500.
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Apple 2.0: Mac, iPod, iPhone
Dawn Patrol: Venture Capital
Green Wombat: Environment
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Small Change: Small-Cap Tech Stocks
The Startup Game: New Companies
Third Screen: Wireless
The Utility Belt: Gadgets