Cleantech investment looking strong - will it hold?

Interesting juxtaposition between the current stock market turmoil and recession concerns and the continued growth in renewable investment. Of course, most of these renewable numbers are backward looking (compared to the general forward-looking macroeconomic concerns), and even in recessions, one would expect to still some pockets of growth.

Ignoring the multiple challenges facing the U.S. economy (increasing unemployment, slowing business investment, decreasing consumer spending, credit contraction and contagion), there was a lot of positive domestic news the last couple days in the renewable sector, from many different angles.

Green-tech investment topped $5 billion in 2007: The Cleantech Group’s numbers are different than New Energy Finance, and Greentech Media (as each group measures different sources of financing), but the percentage growth trends for all are highly positive.

2007 venture investment in the alternative energy market in North America and Europe was $5.18 billion, compared with $3.6 billion the previous year [growth of 44% year-over-year]. The 2006 rise was also 44 percent.

The number of financing deals in the industry increased 15 percent last year to 268, and the average deal size rose 20 percent to $14.7 million.

Actual press release with more detail here, while another good overview is here.

Wind, Solar Power Gain Users: (subs. required) Meanwhile, strong numbers from both the wind and solar industries as well.

The U.S. wind-power industry grew in size by 45% last year, adding a record 5,244 megawatts of capacity that amounted to a third of all new generating capacity built in the U.S. in 2007, according to the American Wind Energy Association.

The solar industry grew at a similar clip, though from a much smaller base, adding more than 300 megawatts of capacity last year, according to the Solar Energy Industries Association. Additions are expected to roughly double this year. Large commercial solar installations now exceed home installations in California, reversing a long-term pattern and likely a bellwether for other states.

Much more detail on the wind numbers here.

Hot Carbon Market Signals New Interest: Even the carbon market got into the act, showing excellent year-over-year growth.

Trading of carbon-emission permits almost doubled in value last year to €40.3 billion ($59.1 billion), according to a new report...The market saw permits representing 2.7 billion metric tons traded last year, according to Point Carbon, a market-research firm based in Oslo. In 2006, permits representing 1.63 billion tons changed hands for a total value of €22.45 billion, the firm said.

Weekly cleantech deal tracking - eSolar gets Googled: In addition to Google’s investment in eSolar, there were a number of transportation related VC investments this week in a wide range of areas (14 total in this specific post).


Certainly, this was a great start to the new year for the renewable sector. Moving forward, it will be interesting to see how the industry responds to a slowing economy and any future stimulus efforts (fiscal and monetary). While the extension of production tax credits past 2008 will perhaps be the most important driver of near-term investment, the overall health of the U.S. (and global) economy could still play a role.

News and notes - electric cars, solar, CCS, ethanol, marketing and more

Charged up by electric cars: Tyler Hamilton's interesting new column on electrification of cars covers what large automakers and small entrepreneurs are doing in this space, and also speculates on the accompanying importance of load management software. More here on his blog. (he's a one person media conglomerate)

SunPower’s solar power plant building boom: details on SunPower's multiple new solar installation deals in Europe (especially Spain). Given that Spanish PV sector grew 500% in the last year, perhaps this is not surprising.

Solar-energy sector seems primed to grow. Nothing new, but some good P/E numbers on some very highly valued solar stocks - First Solar is at 130 time earnings, SunPower 60x, while others are lower (e.g. Trina at 18x).

Archer Daniels Midland to Bury Carbon From Ethanol Plant: ADM is working with a number of state and national government agencies to inject 1 million tons of carbon underground. Project is expected to cost $84 million, with almost $67 million coming from the Department of Energy.

Canon Unveils "Generation Green" Brand: at first, I was writing a snarky little post about this, until I remembered that Canon ranked number one on the Climate Counts scorecard, put together by Clean Air. Perhaps it was the company's environmental bona fides, that explained why a rather plain announcement got quite a bit of media attention.

Open Source Free Energy Tech: given my interest in leveraging successes from the Information Age, I thought this a wonderful example of energy technology development using the open-source method.

Deeya Energy Raises $15 Million Series B Financing for Energy Storage: yesterday, I linked to a great interview with two DFJ VC's. Deeya is one of their cleantech investments.

Switchgrass shows promise for ethanol production study: finally, some good news for pro-ethanol folks on the cellulosic ethanol front. Apparently, native North American prairie grass produces 540% more energy than energy consumed, compared to previous estimates 343% net. According to the article, this is due to higher yields from new breeds of switchgrass.

Could renewables supplant 100% of traditional electricity generation?

As I first wrote here, managing intermittency of renewable energy through geographic diversification could be a key driver of large, utility-scale adoption of renewable power beyond the 10%-15% threshold typically assumed. It also featured in my predictions for 2008.

Now, the Combined Power Plant in Germany is putting all of the theory into practice. (via The Sietch Blog, h/t Gristmill)

In an pilot experiment featuring 36 renewable energy power sources (11 wind, 4 biogas CHP units, 20 solar systems and a pumped storage power plant) all linked by a central control unit, the Combined Power Plant project demonstrates that most, if not all energy demand can be met exclusively by renewable energy. From the background paper:

Wind turbines and solar modules help generate electricity in accordance with how much wind and sun is available. Biogas and hydropower are used to make up the difference: they are converted into electricity as needed in order to balance out short-term fluctuations, or are temporarily stored….

…Cutting edge technology is already able to forecast energy yields reliably. The Combined Renewable Energy Power Plant makes use of this technology and regulates electricity needs just as securely as conventional, largescale power stations…

...These power plants are intended to meet one ten-thousandth of Germany’s electricity needs – roughly equal to the electricity requirements of a small town with 12,000 households (such as Stade in Germany). The Combined Power Plant therefore shows in miniature what is also possible on a large scale: 100 per cent provision with renewable energy sources at all times.

The Technical Summary has more.

I recommend first starting with the 7 minute video which does a wonderful job explaining the program and underlying reasoning.

Certainly, a national roll-out of this project would require the development of several enabling and ancillary technologies, including the build-out of an extensive high voltage power transmission infrastructure, and sophisticated demand response technology and networks. But coupled with improved energy efficiency and individual power management initiatives, this could potentially represent a quantum leap in a renewable energy powered future.

Scientific American - solar grand plan

If you haven't seen it yet, you might want to read Scientific American's strategy for a massive solar roll-out that would take place over the next four decades.

On the following pages we present a grand plan that could provide 69 percent of the U.S.’s electricity and 35 percent of its total energy (which includes transportation) with solar power by 2050. We project that this energy could be sold to consumers at rates equivalent to today’s rates for conventional power sources, about five cents per kilowatt-hour (kWh)....

...The federal government would have to invest more than $400 billion over the next 40 years to complete the 2050 plan...The infrastructure would displace 300 large coal-fired power plants and 300 more large natural gas plants...The plan would effectively eliminate all imported oil...In 2050 U.S. carbon dioxide emissions would be 62 percent below 2005 levels, putting a major brake on global warming.

I appreciate the ambition and scale of investment and resources that this article is willing to contemplate and it is certainly a considered and well-researched piece. The strategy is laid out essentially as follows:

• CSP and PV are both brought to large-scale deployment by 2020, amounting to 84 GW (I assume actual installed capacity). This ramp-up stimulates manufacturer scale up, optimizing production, improving installation and reducing overall cost of solar drastically.

• Thin film cadmium telluride solar accounts for 80% of the solar energy, with module efficiency improvements to 14%, and $1.20/watt installation cost. Concentrated solar power with molten salt heat retention is further developed and accounts for 20% of solar power.

• In parallel, a new high-voltage, direct-current (HVDC) power transmission backbone is built from the US Southwest around the nation while compressed air storage facilities are installed around the country in abandoned underground facilities. Excess solar power would be sent over high-voltage DC transmission lines to compressed-air storage facilities throughout the country.

• Federal policy support through 2020 includes loan guarantees, guaranteed government PPA, and price subsidies. After 2020, the study assumes self-sustained industry growth.

• In addition, over the next 40 years, a total of 46,000 square miles of easily available and accessible land will be required for photovoltaic and concentrated solar power installations.

What I enjoy most about this study is the research tacked to each initiative. If you're feeling wonky, you can have fun exploring the underlying assumptions and projections for each primary strategic point.

Meanwhile, the total cost of this plan is sizable: $420 billion in federal government support over the next four decades, but the authors believe this to be a bargain:

Although $420 billion is substantial, the annual expense would be less than the current U.S. Farm Price Support program. It is also less than the tax subsidies that have been levied to build the country’s high-speed telecommunications infrastructure over the past 35 years. And it frees the U.S. from policy and budget issues driven by international energy conflicts.

Certainly there are a number of aggressive assumptions and challenges associated with this plan. In fact, I feel it actually best serves as a “thought exercise”, as the article itself concludes:

The greatest obstacle to implementing a renewable U.S. energy system is not technology or money, however. It is the lack of public awareness that solar power is a practical alternative—and one that can fuel transportation as well. Forward-looking thinkers should try to inspire U.S. citizens, and their political and scientific leaders, about solar power’s incredible potential. Once Americans realize that potential, we believe the desire for energy self-sufficiency and the need to reduce carbon dioxide emissions will prompt them to adopt a national solar plan.

UPDATE: There was one other thing I wanted to add to this post. The greatest benefit of this type of plan might not actually involve developments of solar energy per se but where that technology leads. While it's not the most efficient or cost-effective, $420 billion in federal expenditures can lead (indirectly) to a lot of R&D. I'm reminded of NASA's impact on technology transfer (e.g. fiberglass, breathing apparatus, GPS, computers, etc.) There's a great report on this here: "NASA’s Legacy of Technology Transfer and Prospects for Future Benefits"

Thoughts on 2008 - caution and optimism

Below is a collection of my own predictions for 2008 in cleantech and sustainable business, along with links to writing I've done in the past covering these topics. My post on the predictions from other bloggers, writers and experts is here.

1) Weak US and global economic conditions will have some negative impact on the “green movement” in the short term.

The weakening U.S. and global economies will dampen investor enthusiasm in all things green and cause national politicians to temporarily back off their environmental pledges. The frigid housing market will negatively impact PV solar installation in the US and the poor economic environment will cause some cleantech companies to fail or post poor results. These won’t be representative indicators, but the mainstream media, in a downcast mood, will jump on these outcomes anyway as signs the “green” boom is ending.

Due to this, many undecided Americans will take a step back to pause and reflect on the “green movement” (a term I dislike, but use to encompass “clean energy investment”, “corporate sustainability”, “climate change solutions”, etc). I think there are still many more skeptics than optimists regarding the potential future success of renewable energy and green business. These developments will give the skeptics ammunition to re-emerge and question if the hype is justified. While I think this backlash would have occurred naturally, the 2008 conditions described above will exacerbate it.

2) However existing concerns (energy prices, climate change etc.) will remain, lessening the impact of the developments described above, and allowing for the future long-term development of the “green movement”.

The pause in interest in all things green will be short-term. No more than a year. High energy prices, energy security concerns, increasing scientific certainty around anthropogenic climate change and new weather phenomena (climate change-induced or not) will mitigate some of the media (and the public’s) skepticism and ensure continued interest in all things green. Climate change will not be a large campaign issue (too much issue clutter), but it will be discussed, especially if McCain gets the Republican nomination.

Longer-term, the steps taken to boost the economy (lower interest rates, tax cuts/credits, housing industry bailout) will have a beneficial longer-term impact on the “green movement” spurring consumer and business interest and institutional investment. U.S. politicians and business leaders will recognize the value (and currently wasted opportunity) in developing the variety of industries under the “green/clean” banner. But that will be a 2009-2010 development.

3) One new trend will capture public imagination, while solar will experience a backlash.

This stems from a conversation I had a few months back. To borrow from my own writing, it certainly seems as though the last few years, one specific technology has captured the imagination of the media, the business community and the public. There’s a love affair for about a year, followed by the inevitable falling out of love period, as various individuals question the economic, environmental and political realities underlying each technology. 2004 was the year of the hybrid (Prius); 2005 - wind; 2006 - biofuels; 2007 - solar. I see no reason why this pattern won't repeat itself. As to what 2008 would be, I think I'll stick with energy efficiency (although I'd broaden it to include #5 and #7 below).

4) Coal power plant cancellations will grow, sparking interest in a variety of energy alternatives

As I blogged here, I believe the pace of coal plant cancellations or postponements will quicken. I last counted 22 cancellations in the past 12 months. There’s a reason why a lead Citigroup analyst (and others) downgraded coal stocks in July. There are a number of financial ramifications as a result of this, but more importantly, that lost capacity must be made up somewhere. Utilities and power generators (and city and state governments) will need to choose between natural gas, lobbying for nuclear, or looking at other alternative technologies.

5) Some smart people will begin applying the lessons of the most recent technological revolution to the consumption of energy.

As I also blogged here, the concept of empowering and engaging the consumer, so that they are actively involved in the generation and consumption of their own power will be a dynamic trend in the coming year. Demand response technology, smart and net metering, last-mile smart grid efforts, incentivizing energy efficiency – each can and will play a role. Although as my caveat above stated, we should only be witnessing the start of this long-term trend, and maybe even just the first outliers.

6) Reducing the energy intensity of transportation will be the primary focus, but the solution is still to be determined.

Whether one considers the new Energy Act, the build-out of high speed trains, the focus on ethanol and infrastructure from “field to fuel pump”, or electric vehicles and battery storage, the bottom line is this. We need to get people from point A to point B using less energy, and with less environmental damage. I didn’t post as much on this topic as I would've liked this year, but it is one that will continue to hold the attention of investors, policy makers, corporate executives and individual consumers. 2008 will see a variety of solutions proposed, and while I don’t see one gaining more favor than any others, I do believe those solutions that keep #5 in mind may do well.

7) “Design” and aesthetic appeal will be a growing consideration and differentiator among renewable energy and other clean technologies.

My significant other has long appreciated the idea and concepts underlying renewable energy, but disliked the outwardly unappealing and awkward appearance of solar panels, wind turbines, CFLs, etc. I think it’s a valid criticism. Key to the resurgence of a number of companies (Apple, Mini Cooper) and has been the focus and integrating of style and design with technology. Everything from green buildings to urban environments to distributed generation could benefit from a similar philosophy and I think they will in 2008.

8) Labor shortages will be as big a constraint to the energy industry (traditional and alternative) as polysilicon and turbines are to solar and wind respectively.

Clean Break (linked above) has a good reference on this (although he has a different take), and I’ve posted about jobs in the green industry here and here. The US was already suffering from a dearth of engineers and scientists in most fields, but the shortage appears especially acute in energy. The lack of qualified technicians and installers for distributed generation mirrors a similar shortage (for different positions) in traditional oil, gas and power. While some “green jobs” legislation was included in the Energy Act, ultimately, much more support is necessary to meet the growing need for labor in this space.

9) People will focus on “managing intermittency” through diversification and other energy portfolio strategies, as well as a variety of energy storage solutions.

I’ve covered the geographic diversification and intermittency issue here for solar and wind in detail. Outside of cost per watt, this is the biggest challenge and drawback for renewable energy. It’s not a bold prediction to state the people will be working on ways to store energy where intermittency is a factor, but I do think more project financers, investors, energy executives and policy makers will focus on the potential value in diversification across regions for wind and blending solar (Thermal, CSP and PV) with other renewable and traditional energies.

****

So that’s it – my predictions for 2008. Before writing this post, I didn't expect that I would leave out predictions on carbon legislation and carbon markets, emission measurement technologies and global climate change policy. I could be wrong, but ultimately, given the economic challenges and US elections in 2008, I don’t think much will be happening in those areas.

I was somewhat surprised also by my pessimism, but as I worked through this post, I started to realize what had been bothering me about so many of the predictions and forecasts I had read. Many (especially the optimists) seemed to be looking to cram at least 5 years of development and success into 2008.

I personally believe the industries that are growing around cleantech, renewable energy and green business are strong enough to withstand a pause, and in fact could benefit from one. That’s not to say that I wouldn’t love to see growth that far exceeds the $117 billion invested this year and in fact I’m sure just that in 2008. But the rush to invest and overwhelming interest in all things clean and green is, yes, beginning to look a little frenzy-ish and bubble-ish. And I’d rather smooth that out of the system now, than go through a dot-com cycle lasting five years.

PV solar data in 2006 and 2007 - (less than meets the eye?)

According to some reports, there has been some impressive 2006 and 2007 growth in the PV solar space. The actual report is here. Diving into the numbers however leads me to some more conservative conclusions.

• Annual PV production increased to 3,800 megawatts globally in 2007, up an estimated 50 percent over 2006. Cumulative global production is now at 12,400 MW. Since 2002, production growth has increased 48 percent each year.

The usual caveat is that the production capacity base has been so low for so long, that 12.4 GW (non-peak) is an infinitesimally small amount of energy capacity globally. While these are good numbers that the media and investor community can publicize, I’m more interested in installation than production. Unfortunately, annual installation numbers aren’t as impressive, except in the US.

• According to the 2007 estimates, annual worldwide installation increased to 2,287 megawatts, up 31% from 2006 when 1,740 megawatts installed.

Breaking down the numbers on a region-specific basis adds some additional color:

• In 2006, Germany added 1,050 megawatts, and another 1,260 megawatts in 2007 (estimate). There are now more than 300,000 buildings with PV systems in Germany.

• Japan, the United States, and Spain round out the top four markets with 350, 141, and 70 megawatts installed in 2006, respectively. Japan’s growth slowed considerably, while Spain tripled its PV installations in 2006.

• The growth in U.S. installations increased from 20% in 2005 to 31% in 2006, primarily driven by California and New Jersey. Initial estimates for the United States as a whole indicate that PV incentives helped to achieve an incredible 83% growth in installations in 2007.
  

In that Germany has accounted for at least half of all global installation since 2003, its phenomenal growth has pushed overall global growth rates higher. Removing Germany from worldwide numbers reduces previous annual growth rates in PV installation from 2003-2006, but increases this year’s growth to 48%.









[Click picture for larger image]

While these are positive numbers, I always keep in mind that consumer adoption rates have been much higher for other technologies. While perhaps a bit apples to oranges, consider the following:











Several years of 40%-50% annual growth are very positive, but given that PV solar is on less than 1% of all American roofs, there will need to be many more years of 75% growth (and higher) to reach 10% and 50% adoption.

The top five PV-producing countries are also interesting.

• Ranked in order, they are Japan, China, Germany, Taiwan, and the United States, with China expected to be number one by 2008. China almost tripled its PV production in 2006, and is estimated to have doubled it again in 2007.

Finally, unfortunately costs still don't appear to be coming down. While everyone is aware of the impact of the polysilicon shortage, looking at the past few years isn’t especially heartening. Although spun in this report as an overall decline, and 2007 numbers aren’t included, one can see the impact of supply constraints and strong demand.











Overall, the first set of numbers looking at the 2007 solar industry are positive. While these are good numbers (and if you’re a PV solar advocate, credit to the Earth Policy Institute for spinning them so strongly), 2007 and 2008 actual results may need to be much higher to justify the positive press and investor interest.

Nanosolar Update

As usual I'm late to the party, but I wanted to post a few thoughts about Nanosolar. On December 18, NanoSolar CEO posted the following on his company's blog (tangent: now that's message control):

After five years of product development – including aggressively pipelined science, research and development, manufacturing process development, product testing, manufacturing engineering and tool development, and factory construction – we now have shipped first product and received our first check of product revenue.

There was a great deal of press, both mainstream and non-traditional, around this announcement.

The thin-film technology and industry isn't particularly new (given the lightning fast evolutions in the solar segment), and a great overview of the industry is available from Earth2Tech. What is unique about Nanosolar is that it has figured out how to manufacture and mass produce this thin-film technology. Two strong overviews of the Nanosolar technology are available from Popular Science magazine (where it was Innovation of the Year) and Celsias:

Ultimately, the reason for this excitement is understandable:

[Nanosolar has] successfully created a solar coating that is the most cost-efficient solar energy source ever. Their PowerSheet cells contrast the current solar technology systems by reducing the cost of production from $3 a watt to a mere 30 cents per watt. This makes, for the first time in history, solar power cheaper than burning coal.

The one topic lacking from most of these articles, however, has been a discussion of the sunlight-to-energy efficiency concern. Traditional crystalline-silicon PV panels have an efficiency ratio of anywhere from 15%-17% (with some claiming up to 19%). Thin-film solar achieves half of that energy conversion. Thus while installation costs drop, the necessary installation size and area necessary (and thus overall system costs) rise significantly. Information from Nanosolar is difficult to find, but Celsias does some great research in this post:

Wikipedia has an updated snippet that adds to the mystery: "The company uses Copper Indium Gallium Diselenide—which can achieve up to 19.5% efficiency—to build their thin film solar cells."

Just because the material can achieve 19.5% efficiency, doesn’t necessarily mean that they are in practice. A little digging and I found a PDF in German... the document indicates they have an efficiency rating of 13.95%. This is pretty standard.

However, a commenter on the same post, Tom Rust, had an interesting follow-on, which I wanted to pass on:

Although I applaud Nanosolars efforts to bring low cost PV to market, users should be clear about modules cost vs installed cost vs long term power output cost. I read the same article mentioned, and the 13.95% is for a 0.5 square cm test cell - NOT production. They hint at 10% modules in production. Miasole has had trouble achieving production volumes in CIGS and has only a few 9% modules - most are 6% or less.

CIGS also has relatively poor lifetime - NREL reports of past efforts have shown 1-2% degradation per year, vs 0.1-0.4% per year for silicon. So modules will likely have only a ten year warranteed lifetime.

My guess is when production finally stabilizes they will be around 6-8% efficiency.

Ultimately, this is a great year-end development for Nanosolar and the solar industry in general, justifying some of the tremendous excitement and run-up in solar company valuations, and demonstrating why solar experts and some renewable energy thought-leaders have been so bullish on the space in the past few years.

Links

Given time constraints, only passing on a few stories and links I've enjoyed recently:

Who has the oil? Picture = 1000 words

The success of solar depends on storage. Will the technology underlying various energy storage solutions become the new "latest, greatest" technology in 2008?

There are innumerable barriers preventing the large-scale implementation and adoption of renewable energy technology. Certainly the past few years have knocked down the obvious easy barriers, such as "no one will invest in unproven renewables", "grid parity of renewables will never match traditional energy", "supporting green policy is political suicide". [and by 'knocked down', I don't mean to imply discussion has ended. Just that the impossible has been made possible]

Now the more complicated barriers are next. One, the challenge of overcoming "intermittency", could become a bigger topic of debate in 2008. I covered it partially here, but developing efficient and cost-effective storage solutions is going to be a key. Which is a horrendously long-winded way of describing the relevancy of this article.

Questions about biofuels, for the records. Pay attention to #1 and #7.

Power revolution. Good overview of some key renewable technologies. You'll be seeing a lot of discussion and writing around each of these in 2008 and 2009.

UPDATE: Corrected a few typos and a sentence that was really bothering me.

Extension of incentives and tax credits

Having covered this topic recently, as well as the importance underlying these policies here, I'll only point out some recent discussion on the topic. First, from Reuters (h/t Gristmill):

Leaders in both the Senate and House of Representatives vow to revisit the tax incentives next year, but so far have advanced no definite plans. "We're going to be back and we're going to get that vote more quickly than you think," Senate Majority Leader Harry Reid said on Tuesday.

Meanwhile, the president of the solar lobby group (the Solar Energy Industries Association), Rhone Resch, gave an optimistic interview to Cleantech:

"Although this bill didn't include an extension of the tax credits, we're optimistic that we will see another tax title move early in 2008 that'll include a long-term extension and expansion of tax credits both for solar and for wind," Rhone Resch, president of the Solar Energy Industries Association, told Cleantech.com....

..."There's no opposition from the White House or Republicans to extending the tax credits for solar, it's just a matter of finding the best way to pay for it,"

Resch's counterparts at the American Wind Energy Association have created a link for you to contact your elected officials. A slightly more detailed article is here from a couple days ago.

Iberdrola update, groSolar funding, energy trends, green collar jobs and oil watch

A few items of note today:

EDP to decide on sale of renewables business: the Iberdrola Renovables IPO isn't making much noise (although it is a huge traffic draw to this site for some reason), but Portuguese power company EDP is considering a similar path:

EDP will decide on the sale of 20 to 25 percent of its renewables business in the first quarter of 2008, EDP's chief financial officer Nuno Alves was cited as saying. Alves said in an interview...that some banks had shown interest in carrying out the sale of its renewables business, which includes NEO in Europe and recently acquired U.S. wind-farm company Horizon Energy. He said EDP's renewables business could be worth around 10 billion euros.

EDP plans to invest 7.6 billion euros until 2010 in NEO, which has wind farms in Portugal, Spain, France and Belgium. Portugal's biggest industrial group recently bought U.S. wind-farm company Horizon Energy for $2.2 billion.

We should see continued consolidation in the wind power industry over the next few years, and those companies with the capacity to go public or raise private capital will do so soon. As onshore wind nears approximate grid parity with traditional energy sources, wind finance becomes as much a real estate, scale and turbine sourcing play as anything else. Those companies with available capital and market leadership should be best positioned to take advantage of this maturing sector.

Meanwhile, a quick update on Iberdrola Renovables (IBR) – it saw a second day bump of almost 7%, before falling back and is now trading about 5% higher than its first day opening price.


groSolar Raises $10 million in Growth Equity Financing:

groSolar, a national solar energy firm, announced today that it has secured $10 million in a Series B financing…NGP Energy Technology Partners…led the investment round. Each of the company’s original investors (SJF Ventures, Calvert Social Funds, and Allco Financial Group) also participated in this latest round of funding. groSolar closed its $2.25 million Series A financing in September 2006.

While usually I’d leave this up to various cleantech investment blogs, there are couple things I wanted to note. First, there are several positive signs for groSolar in this news: solid but not excessive second round valuations, follow-on investments from all original investors, quick close for new funding round. Second, groSolar isn’t a pure technology play in the solar space, so much as a distributor and installer, in both the commercial and residential sectors. This is one small example of the growing maturity of the solar industry – that traditional business models (grafted onto high-tech plays) are seeing significant interest, funding and growth.


The World of Energy in 2007: just wanted to highlight this excellent post, which discussed 11 highlights and trends in energy this year. It also serves as a good demonstration of the diversity and breadth of opportunity in this space, but also the challenges in keeping it all straight. To really play in renewable energy, the perceived expertise necessary can sometimes feel overwhelming. Fluency in innumerable unique technologies, mastery of global, regional and domestic policy, familiarity with entrepreneurship, capacity to understand a variety of finance and investment strategies (project finance, VC/PE, debt, public offerings). The list is endless. Or you could just be a blogger and opine ad naseum, no skill set necessary...


Green Collar Jobs Could Fill Many Needs: I came across a similar report a year ago, when I read the Apollo Alliance’s New Energy for America report, detailing how U.S. clean energy investment could lead to 3 million ‘green collar” jobs, especially in inner-city neighborhoods, the manufacturing sector, and rural communities. The new report referenced above came out of the Ella Baker Center, and focuses on the Bay Area in particular, and how green business:

[has the] ability to provide green collar jobs to those lacking high school diplomas or work experience, or who were formerly incarcerated. These jobs -- which are blue collar jobs within the green economy -- can be found in non-profits, social enterprises and the public sector.

Oilwatch Monthly - December 2007:

1) Plateau production - Both the International Energy Agency (IEA) and Energy Information Administration (EIA) figures show that the plateau of global liquids production that began in 2005 recently ended due to a large production increase of 1.4 million b/d in September/October. This production increase has been sustained during October/November.

2) Total liquids - In November world production of total liquids increased by 55,000 barrels per day from October according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 86.55 million b/d, which is the all time maximum liquids production.

Where this gets interesting is in the actual report:

For the second consecutive month the International Energy Agency (IEA) has published figures showing a new all time high in world liquids production. As oil production increased from 85 million barrels per day in September to 86.5 million barrels per day in November, some breathing space has been created….

This new all time high brings to question whether those who called the peak in conventional crude in at may 2005 have been proven wrong. Called peak because that has so far been the month of all time high conventional crude production at 74.30 million b/d. If proven wrong by reality due to higher production, the case for a nearby peak in all liquids production is much less defensible.

Again, feel free to review the actual report here, for Oil Drum’s detailed monthly analysis of the present state of oil and other global fuels production.

Diversification in renewable energy

Most individuals operating in the renewable energy sector are aware of the challenge of “intermittency” found in wind, solar, and other renewable sources - i.e. wind/solar electricity output is variable by nature and thus cannot serve as a guaranteed, baseload power source.

Below, I discuss some of the concerns that scientists have raised regarding PV solar intermittency specifically, and then cover new studies indicating the broad potential of wind power to mitigate these concerns.

One issue with distributed photovoltaic solar involves the “waste” of solar PV-generated electricity, which theoretically occurs if PV reaches large US penetration levels. According to two studies from Paul Denholm and Robert Margolis out of NREL (unfortunately only one is available publicly):

The intermittency of solar PV...presents a set of critical challenges with respect to integrating PV on a very large scale into the electricity grid. Ultimately, this intermittency may limit the potential contribution of PV to the electricity sector.

Once PV provides 10%-15% of the overall electricity portfolio of a traditionally structured grid, the inflexibility of the current baseload system ensures that any additional PV generation will mostly be wasted.

This is due to the nature of the current U.S. electricity grid system and the difficulty for PV solar to match volatile demand due to its intermittency. Large baseload plants are limited in how far and fast they can drop or boost capacity to match demand (due to various costs, efficiency and timing reasons) According to these studies, past a certain level of penetration (10%-15%) PV solar can only augment existing capacity, and not replace it. On moderate or low demand days, PV electricity would be wasted in order to avoid interfering with baseload plant operations.

The two researchers found that under high penetration levels and existing grid-operation procedures and rules, the [utility] system had excess PV generation during certain periods of the year that increased PV costs—that is, the PV electricity had to be dumped. The limited flexibility of baseload generators, which cannot respond to rapid changes in load, produces more unusable PV generation when PV provides more than approximately 10%-20% of a system’s energy. [source]

However, two wonderful posts at The Energy Blog pointed me to new studies that may challenge this conventional wisdom.

The first study, out of Stanford, makes the claim that connecting multiple wind farms with some amount of geographic diversity creates a large and diversified wind power resource with enough reliability to serve as a baseload power source.

Interconnecting wind farms with a transmission grid reduces the power swings caused by wind variability and makes a significant portion of it just as consistent a power source as a coal power plant. This study implies that, if interconnected wind is used on a large scale, a third or more of its energy can be used for reliable electric power….

…The researchers used hourly wind data, collected and quality-controlled by the National Weather Service, for the entire year of 2000 from the 19 sites. They found that an average of 33 percent and a maximum of 47 percent of yearly-averaged wind power from interconnected farms can be used as reliable baseload electric power. These percentages would hold true for any array of 10 or more wind farms, provided it met the minimum wind speed and turbine height criteria used in the study.

I’m reminded of both diversification theories in finance, and aspects of the Central Limit Theorem, in looking at these explanation. Is there a statistical theory involving variance in systems, and being able to mitigate that variance with diversification of inputs? If so, could one of my much smarter readers please fill me in?

The Stanford study also discusses the concept of interconnecting wind farms to a common point, which improves efficiency and cost. Essentially, this strategy recreates the centralized power generation and distribution model which comprises much of the current U.S. electricity system. Those seeking to rebuild American electricity grid infrastructure around distributed power models may be disappointed. But power generators, utilities, and the various government entities that oversee/collaborate with these groups, may be more comfortable with centralized energy concepts. Equating a portfolio of interconnected wind farms to a large 1GW coal plant (in terms of T&D issues, etc.) could improve understanding and acceptance in these circles.

However, I was even more fascinated by a recent study from the Cambridge-MIT Institute (again h/t The Energy Blog), which focused on the potential outcomes for strategic energy security from developing a diversified electricity production system. This highly readable study posited some insightful results:

• in order to explore the potential for geographic diversity, the study reviewed the correlation between wind speed and distance, and found that “sites far apart exhibit very low cross-correlation”. At 600km distance, correlation (r) was about 0.30, while at 800km, it dropped to 0.20.

• in exploring “the percentage of UK sites that have simultaneously experienced calm conditions for one hour” from 1982-2000, it found that “there has not been a single hour in the last 15-20 years when conditions of total calm were experienced right across the UK”. Meanwhile, calm conditions lasting one day, “affect less than 2% of the UK with the remaining 98% of the UK experiencing wind at these times.”

Thus:

By taking a planned approach to the development of wind power, the impact of distance on correlated output can be fully exploited within the UK, improving the reliability of wind power and minimising the additional backup capacity required due to the presence of wind power on the network. The additional backup required to support 20% electricity generation from wind is estimated at around 4GW.

However, perhaps most interesting to me was the attempt by the study to model the impact of various climate policy scenarios on electricity diversity.

Where no emissions target is imposed, there is a decline in diversity in all three scenarios. This decline is driven by an increase in the proportion of generation accounted for by natural gas. The implication of this fall in diversity is an increase in insecurity, as the electricity system becomes more exposed to one fuel source. By contrast, under an emission target of 60% there is a substantial increase in diversity under all three scenarios as the dominance of natural gas goes into decline.

These basic results prompt two observations. First, low carbon scenarios appear to be associated with higher diversity. Second, these results are largely driven by changes in the share of generation accounted for by gas.

Ensuring smart and strategic policy, and incentivizing markets appropriately can aid in the pursuit of energy independence and large levels of penetration for renewable energy.

Denholm and Margolis’ solutions for the PV solar penetration challenge include increasing the “flexibility” of the conventional system, meaning that base load plants can cycle down to lower levels, “dispatching” load more efficiently with smarter appliances or developing more effective energy storage system.

The Cambridge/MIT study suggests a “concentration charge” which could either “levy a surcharge on [energy supply companies] in proportion to the diversity index of their overall portfolio” or levy the charge “source by source to reflect the concentration of each source to the system.

So is the intermittency issue no longer a problem if you diversify your renewable energy “portfolio” across a geographically broad enough environment? Great news if so...

Solar news and notes

I've been tracking the PV solar sector for a while, and have a report coming out on it sometime in the near future (the date keeps getting pushed back). After decades of false promises and missed opportunities, we are definitely witnessing a re-emergence of distributed solar technology, with astounding growth rates in demand and production capacity, innovative R&D, billions in capital investment, sizable annual cost reductions, and a changed political landscape.

I find it interesting that until this year, much of this progress appeared to be occurring under the radar. Now of course, you can't stop reading about solar (too many articles to link), or how to make money investing in it and the inevitable backlash has already begun.

"Why" this is happening is a complicated tale. Too much for this post. The recent McKinsey report had some very interesting things to say on the potential future for PV solar:

By 2030 the US could have somewhere between 28 gigawatts (low-range case) and 148 gigawatts (high-range case) of solar PV capacity [ed. note: this is actual capacity, not peak] depending largely on the degree of cost compression and learning rates achieved from production and installation. Solar PV could achieve growth akin to that of the semiconductor industry, if conditions are favorable.

And ultimately how does that happen according to McK? Grid parity - ie solar cost per watt being equivalent to traditional gas and coal generating sources without subsidies. I'll be writing a lot more on this, but for now, I just wanted to highlight some recent stories I've come across, which highlight some of the key themes in the solar space: policy, investment, and market economics.

• Solar Showdown in Congress: Green Wombat highlights something I'd discussed a few days ago, the fear that vital renewable energy tax credits won't be extended by Congress. This would severely damage the near-term prospects for solar - both on the large utility-scale segment, and in the residential market. Long-term extensions of these incentives would help to create stability in investment and manufacturing, moving away from the damaging volatility of past years. Everyone expects the subsidies to end at some point in the future, but their presence is vital now while the solar industry builds capacity, improves technology and reduces costs. On average, manufacturing costs come down 20% for each doubling of capacity. As highlighted above, eventually you reach the important level of grid parity. This article is a week(ish) old, so extension of these credits has been included in the House energy bill. But it is uncertain if they will remain in the final version of the bill sent to the President (if one gets sent at all).

• First Solar Buys Ted Turner's Green Energy Company: One issue I highlight in my to-be published report is the value and importance of marketplace consolidation horizontally and vertical integration up and down the supply chain. This is an example of the latter. It will be interesting to watch if the pace of this activity increases. Also, Ted Turner exited this investment after 10 months. I wonder if it was the return multiple or the industry itself.
  

• Chinese Solar May Trade Margins for Market Share: Two years ago, analysts and experts began forecasting that silicon pricing would return to normal in a few years. Recently, the timeline for this "decrease in price" continues to get extended. Over the past year, I've seen it move from 2007 to 2008 to 2009, and now some say silicon prices won't drop until 2010. Too much demand, too little supply, coupled with poor policy and manufacturing planning decisions. As this article states, nothing has changed to date with silicon prices and they continue to stay high. Those solar panel manufacturers best positioned are the ones signing long-term contracts. More importantly, you can expect consolidation among those companies least able to weather the shrinking margins. More on the silicon shortage here.
  

• German Subsidies Could Decline 9% in 2009: The boom in German solar interest caught everyone by surprise (manufacturers, politicians, investors, etc.). But I sometimes wonder what people expected, after giving feed-in tariffs for solar that were 55 eurocents per kilowatt hour generated - this was ten times the level of other renewable subsidies. The German proposal still needs to be voted into law, but given past statements from environmental ministers and politicians, I expect this to occur. Meanwhile, California is now contemplating a feed-in tariff. Feed-in tariffs concern me somewhat - they are wonderful at spurring demand, but can cause severe market disruptions, if they push demand too high too quickly. Germany is a prime example of this phenomenon.
  

• 2008 Cleantech Predictions: Solar. Interesting predictions from a solar VC: I think he's too aggressive in his forecast for the alleviation of the poly-silicon supply crunch (he says late 2008, I see this going well into 2009...excluding the possibility of a global recession of course). Completely agree and welcome his prediction that entrepreneurs will move outside cell and module production into various downstream aspects of distribution, installation, financing, etc. Squeezing costs out of distribution and installation could drop overall solar costs 20% and more. Compare Japanese costs to California for evidence. (about $6/watt versus $9/watt, with most of the difference coming on the distribution and installation side). Also, I understand his interest in focusing on China and India, but as the solar sector grew 500% in Spain in 2006, and Italy and Greece are making a lot of noise, I wouldn't stray too far from Europe (or the U.S.) next year.

UPDATE: One other article I forgot to add which I thought tied together several of the themes from above:

Solar Installers: Cutting Costs to Compete: As per the CEO of SunPower - 50% of the cost of solar is in its installation. This sounds high, but I'm not the CEO of a large solar power installer. So go with him on this one. Couple good insights from the panelists this article references, especially that solar installation on the residential level is just like any other consumer product: a lot of it comes down to trust and marketing.

We love solar

She's back after summer break, having lost 50 pounds and gotten a nose job.

Higher demand for solar energy, triggered by concerns about global warming, will drive a fourfold increase in the annual revenues of the global solar equipment industry from $20bn last year to $90bn in 2010, according to projections published today.

The only caveat - the group behind this - Photon Consulting - isn't exactly impartial.

Google Solar Initiative

Just a few thinks to point out in this article that describes Google's attempt to use solar power:

- "Google will earn its investment back in 7.5 years"

- "It was only doable thanks to subsidies from local utility PG&E and a generous federal tax credit"

- It took "9,212 Sharp photovoltaic modules", each of which pushes 208W for a total of 1.6MW.

- "The solar modules are wired in series, 14 to each circuit, and their output is sent to 10 SatCon inverters."

- "The system is set up for net-metering"

Ultimately - an innovative and exciting development. However, one industrial grade wind turbine can push out at least a MW, depending upon wind speed, location, etc. I would speculate that there were more cost-effective ways for Google to go green in its power supply, and am curious about both its demand-side and co-generation efforts. But this is a highly newsworthy and ground-breaking renewable project nonetheless.

I remember you

Been a while, eh? Anything happened? Nah, I didn't think so...

That said...sigh...three months can go by so quickly. Anyways, I've got a backlog of things to post, although half of the links have probably been moved.

In any event, I wanted to draw attention to the recent NY Review of Books article, covering several recent books discussing global warming.

The books covered:
1. The Revenge of Gaia: Earth's Climate in Crisis and the Fate of Humanity (James Lovelock)
2. China Shifts Gears: Automakers, Oil, Pollution, and Development (Kelly Sims Gallagher)
3. Solar Revolution: The Economic Transformation of the Global Energy Industry (Travis Bradford)
4. WorldChanging:A User's Guide for the 21st Century (Alex Steffen)
5. Design Like You Give a Damn: Architectural Responses to Humanitarian Crises (edited by Architecture for Humanity)

Among the most interesting points to me:
1. Lovelock's tipping point relies on the same mechanisms as most other climate scientists, but as with most, his prediction of the results varies in both impact and time. Shorter Mr. Lovelock: we're screwed.
2. The Gaia hypothesis is alive and well
3. The science of climate behind climate change is moving faster than any literature can keep up. Apparently already An Inconvenient Truth is outdated.
4. Lovelock doesn't want wind power because it disturbs his beloved countryside.
5. Travis Bradford is an I-banker who believes solar will grow annually 20% to 30% for decades (similar growth rate in the computer chip industry). He discusses at length the success of Japan and Germany in increasing solar investment through government subsidies that are now no longer necessary.
6. "In retrospect, historians are likely to conclude that the biggest environmental failure of the Bush administration was not that it did nothing to reduce the use of fossil fuels in America, but that it did nothing to help or pressure China to transform its own economy at a time when such intervention might have been decisive."
7. Check out World Changing's website. Incredible resource for impacting our environment with simple technology at hand. Tremendous example of "the Wisdom of the Masses".
8. Where the hell is that carbon tax already?

10 Technologies to Save Us

Expect to see a lot more of these...Popular Science has an interesting special section geared around various alternative energy technologies. The piece details how many different options we can explore:

1.) Wind - the price of wind energy has dropped 85% in the past twenty years. Imagine if this administration actually tried to help out.

2.) Enhance the energy grid's efficiency (ie, move smaller power generation closer to a source)

3.) Hybrid cars - if all American cars were switched to plug-in Hybrids, oil consumption would drop 70-90% overnight

4.) Ethanol - only this country could look to a process (corn) that makes things worse. Sugar, cellulosic, that's where we need to go

5.) Solar - two things need to happen - improve energy efficiency (currently only 15-30%) and make it portable (no, not watches)

6.) Hydrogen power - already twice as efficient as gas combustion engines

7.) Ocean - this was awesome. Portugal will soon start powering 15,000 homes; tidal currents are 10 to 40 times as energy dense as wind

8.) Geothermal - tap the earth's internal heat...although knowing us, we'll find a way to turn it off

9.) Biomass (waste) - 1500 cows can produce 1.8 million KW of energy

10.) Negawatts - turn out the lights when you leave the room dammit!!!