Hybrid of Public/Private Financing for Renewables

March 8, 2010

PhotobucketI wrote not too long ago about the huge, long-term role that the National Renewable Energy Laboratory (NREL), as part of the Department of Energy, plays in supporting the development of clean energy technologies.  Their work with solar energy leader Solyndra is a perfect example of a case in which this public support made it possible for a private company to raise critically important addition capital, by preventing their initial private investors from getting scared away.  At a certain point, new (very large) rounds of cash were required to get the company to its next level.   As I recall, NREL supported this effort to the tune of over $700 million — and this robust commitment showed investors that they weren’t alone in their belief that the company was on the right track. 

But not every company that asks for money receives any at all — let alone $700 million.  So exactly how does this process work?  How fair is it? What criteria are most important?  What types of companies are favored over others, and why?  Are more mature renewables technologies, like photovoltaics (in which Solyndra plays), favored over newer ideas?  (Solyndra has a very well proven breakthrough in deployment of CIGS (copper indium gallium (di) selenide), generating a significant leap in PV efficiencies and reduction in costs).

Unfortunately, it’s not clear.  I suppose it’s not supposed to be.  Take solar thermal/CSP (concentrated solar power) as an example of a new technology.  Technologies like PV and wind have a several-decade head-start over CSP.  When I interviewed industry leader Ausra’s founder Dr. David Mills for my book on renewables, he told me that Ausra had gotten to the second round in one of these mega-contests in which the DoE selects its favorites to back, but that they didn’t make the finals.  When I asked if he resented their decision, he — perhaps simply out of good sportsmanship and professional courtesy — said that he didn’t, and told me that he’ll simply try again another time.

I can’t count all the people who have asked us for our insights at 2GreenEnergy on this matter — and I regret that all I can turn up are anecdotal incidents like these.  I ask readers to share their own experiences with this process so that all my learn.  Thanks.

By Craig Shields | Posted in Renewables - Business | Tagged , , , , , , , , | Comments (4)

Hydrokinetics and the DoE

December 5, 2009

PhotobucketWe’ve seen a marked increase in the attention — and the funding — given to hydrokinetically-generated energy by the Obama Administration’s Department of Energy. Personally, I’m gratified by this; until recently, I had been concerned that this subject was being badly neglected; I’m glad to see this turnaround.

I happened to be working on my book on renewables yesterday, and had the good fortune to knock out the chapter on hydrokinetics, which is based on a talk with Dr. Brian Polagye at the University of Washington. Brian is part of the DoE’s Northwest National Marine Energy Research Center for Tidal Energy; I was referred to him by an expert on the subject at the Electric Power Research Institute (EPRI) who told me, “In my opinion, Dr. Polagye is the nation’s leading researcher on hydrokinetic energy.” Good enough for me!

A few highlights:

I think – or I guess I should say I thought – of hydrokinetic energy as being essentially constant. The sun doesn’t shine 24 hours a day, but rivers never stop flowing. Yet there are significant variations in the extractable power from flowing rivers. As I suppose I should have surmised, rivers, based on rainfall as they are, experience significant seasonal variations. And tidal currents, of course, have periods of relative calm in cycles during the day. So there is nothing unique about hydro as a renewable source from this perspective.

As I noted in the white paper I wrote on the subject last summer, those wishing to submerge power generating devices in the rivers or oceans — in the US, at least — face a considerable battle in terms of regulation. As an advocate for renewables, that rankles me — yet Brian helped me put this in perspective. According to what he told me, the DoE is far more involved in expediting approval for such projects now than they were when the original devices were developed — but it’s still not easy – nor should it be. “If both sides aren’t screaming, regulators probably aren’t doing their job,” he said. “Environmentalists should probably be concerned that regulators aren’t sufficiently aggressive in protecting aquatic ecosystems, and entrepreneurs in power companies should be yelling that regulators are too sheltering and too slow to grant approvals.”

When I asked for an example to illustrate the point, Brian replied, “Easy. I’m up here in Puget Sound. If I have a turbine in the water and an orca washes up with its belly cut open – even if that was really caused by a ship’s propeller, it would set this operation back a decade – if it wouldn’t kill it completely.”

For my money, the real issue with hydro is scale. The theoretical limit to the amount of hydrokinetic energy that can be generated in our rivers, for instance, is the potential energy of the water in the first place, i.e., the weight of that water times the vertical distance it will fall. That is, by reports I’ve seen, insufficient to generate more that a few percent of North America’s power needs. “That may be true on a continental basis,” Dr. Polagye agrees. “But on a regional basis, hydro can make an extremely significant contribution.”

Fascinating stuff. My sincere thanks to Brian for his time, and for the dedication that he and so many others make to such a wonderful cause.

By Craig Shields | Posted in Hydrokinetics | Tagged , , , | Comments (0)

Just Got Fooled Again

November 14, 2009

PhotobucketThis week’s news in electric transportation calls to mind the auto companies’ deceit a decade ago with California’s Zero-Emission Vehicle mandate.   According to the Automotive News, Chrysler has disbanded the engineering team that was working to bring three electric models to market as a rush job. This program, of course, was the basis on which they got every man, woman and child in the United States to bail them out with $12.5 billion in taxpayer money. And I suppose we have to add in the $70 million in grants that Chrysler took from the U.S. DoE to develop a test fleet of 220 hybrid pickup trucks and minivans — vehicles that are now scrapped as well.

I was speaking with my friend Bill Moore (of EV World fame) just now about how cheesed off we should all be by this. I mentioned that $12.5 billion is quite a heist. “Isn’t that one of the biggest burglaries in history?” I asked. “Yes,” Bill said. “But they’re too big to arrest.” 

Jay Leno, move over.

By Craig Shields | Posted in Electric Vehicles | Tagged , , , , | Comments (0)

China — Helping to Bring in Wind Power

November 6, 2009

PhotobucketWhat’s not to like about a $1.5 billion wind project covering 36,000-acre and generating the power for 180,000 homes in western Texas? For one, it rubs our nose in the fact that China is one of many countries that out-invests the US when it comes to renewables. The project is a joint venture that includes China’s Shenyang Power Group, which points out how much China’s own wind industry has grown, and reminds us of what Energy Secretary Steven Chu told Congress earlier this week: The U.S. is falling behind China and others in alternative energy investment.

But how shocking is the idea that China should aspire to be a world player in wind? “This is a natural progression,” says Harvard-educated Lou Schwartz, president of Pittsburgh-based China Strategies. “We need to avoid looking at this narrowly and saying ‘China’s up and we’re down.’ We have to welcome each other.”

Thus the reality we all need to face: the source of the renewable energy may be local, but the equipment to harvest it most certainly is not. I’m reminded of what Ray Lane, partner in venture capital firm Kleiner Perkins, told the audience in the “Business of Plugging In” conference a few weeks ago: The United States needs to cut the rhetoric and make real investments if it is to be a real player on the world renewables stage.

By Craig Shields | Posted in Renewables - Business | Tagged , , , , , | Comments (3)

Solyndra – Renewable Energy Cinderella Story

September 16, 2009

PhotobucketDr. Kelly Truman was good enough to update me on what I have to call a textbook success of the business he started with his partner CEO Chris Gronot.  Solyndra, a venture-capitalized photo-voltaics company, is based in Fremont, CA — and seems to have done essentially everything right.  And that starts with the company’s proprietary PV technology, using cylindrically shaped elements coated with the semiconductor copper indium gallium (di)selenide (or CIGS), which is perfect for large, low-slope roofs, and is targeted mainly to commercial buildings.

There are several features of this technology and its implementation that have come together to form a highly differentiated product that is making a real name for itself around the world in a period of time that is, relative to other similar ventures, unbelievably short. First, because wind blowing through the elements tends to hold the installation on the roof (rather than blow it way) the system can be put in place very easily, quickly, and inexpensively with no penetration of the rooftop itself. Also, CIGS deployed in cylindrical elements results in 25% to 100% more power than conventional thin-film technology installed onto equivalent roofs.

As a business consultant, I’ve lived through dozens of stories of venture-capitalized start-ups, and I have to say that Kelly’s narration of the company’s history makes it sound – to me at least — like one of the smoothest in VC history. The company received its initial venture funding in 2005 and went about the business of building prototypes, working with the National Renewable Energy Laboratory (NREL) which provided the equipment and technology for deposition. Soon the technology was demonstrated, the technical milestones were reached, beta customer feedback was positive – and actually serendipitously helpful; customers would often provide constructive input that none of the principles had thought of — e.g., “Do you realize that this could be used for — (some new application)?”

But the good news goes on: Solyndra took over a facility that Seagate (the hard disk-drive manufacturer) had abandoned when they took their operations overseas, and smoothly completed its third-party testing, validating not only the energy efficiency of its products, but also their seismic and wind readiness. By mid-2008 the first volume customer shipments were coming off the loading docks, and the company has grown in revenue in every subsequent quarter.

Looking for some plot twist or at least some conflict to make this story more interesting, I asked if investors getting antsy for a liquidity event, like an IPO on an acquisition by a publicly traded company. “No,” Kelly says, “They’re wonderfully patient. They know we’re in this to make a real difference against the reality of global warming, and that will require some time for growth. To give you an idea of their patience, we received a nine-figure from the DoE which required us to put up 27%. Even in this financial climate, our investors made sure this happened.”

Kelly Truman and I don’t know one another outside of this one-time encounter, and so I didn’t feel it was my place to ask anything else. When the interview was over, I politely thanked him and hung up. But I have to admit that I was wondering: Do his kids have naturally straight teeth? Are they headed for Ivy League colleges on full academic scholarships? I somehow feel that I want to hang out with Kelly, as he’s obviously doing a great number of things right.

I’m kidding here, of course. What I really mean is this: congratulations.

By Craig Shields | Posted in Photo-voltaics | Tagged , , , , , | Comments (5)

Renewable Energy and The World Resources Institute

September 11, 2009

Clean Energy Robin Murphy, Vice President for External Relations at the World Resources Institute (WRI) was kind enough to spend a few minutes with me yesterday. He explained one of the key missions of this 27 year-old organization: to provide policy-makers and business leaders with objective, high-quality research and advice on environmental issues. What I found most interesting in our talk was his belief that the world – at the top levels of both the public and private sectors – is awakening to a new day of environmental stewardship. As readers know, I waver on this issue, and I may have shocked my guest with my initial skepticism.

Yet, as we talked, I began to see this from his perspective; I was able to gain a position of appreciation for the work that is being done, and develop a reasonable hope that we are, in fact, on the right track.  Robin brought me through WRI’s approach over the last decade, which, in a sentence or two, goes like this: After a variety of projects in the 80s and 90s, the organization spent the years of the Bush Administration patiently waiting, not wasting its manpower, focusing mainly on the state governments and business communities during this dormant period at the federal level. Robin told me, “We let good ideas incubate,” while developing a sense for how the world of energy might go forward under more progressive national leadership.

And now the time has come. “I see a new awakening,” says Murphy. “The USCAP (Climate Action Partnership) is a great example of this. Here you have huge, diverse corporations working hard and with total sincerity. This isn’t easy, but they’re doing it. There are tough decisions that have to be made, and there is an abiding sense that the environment is an issue that is here to stay.” 

I asked Robin for signs by which we can differentiate between real change from lip service.

“Oh, I’ve seen a great deal of candor – for instance, Duke Energy and Alstom both quit the American Coalition for Clean Coal because they didn’t see this as legitimate.  There is huge, tangible change,” he explained. “Business decisions are being delayed and rerouted, as CEOs see legislation and regulation affecting the way they do business.”

“But what do you see driving this?” I asked.

“Is the change altruistic, you mean? Not now; it’s capitalistic. But I also see the worlds of sustainability and commerce converging, as companies find cost-effective ways to change their business practices in the direction of sustainability.”

I told Robin that I’d love to believe this, though I am challenged to take it at face value.

“All I can tell you is that it’s very gratifying to see CAP holding together,” he explained. “It gives me a very good feeling.”

You can ask me what I think on this tomorrow, and I may give you a different answer. But today, I believe that, regardless of the motive, we are all on a rocket-ride toward environmental sensitivity. There are too many people paying attention now for this to go in the wrong direction.  And, as Robin pointed out, the costs of renewables are coming down, and the enormous costs of not shifting are becoming more clear.  Soon, even those who see this purely as a business issue will be on board.

By Craig Shields | Posted in Renewables - Politics | Tagged , , , | Comments (0)

DoE Backs Hydrokinetics

August 28, 2009

I’m always glad when readers write in to alert me to news items in renewables that I may have overlooked. Scott Ledgerwood writes:

Craig — enjoyed your hydrokinetics write-up. In case you missed this, see DOE notice on upcoming projects for Advanced Water Power Technologies; it specifically mentions hydrokinetics.

Thanks, Scott. I heard that the DoE received 3500 requests for grant money – obviously an order of magnitude or so more than they had anticipated. My partner with the HyPEG invention is busily applying for grant money to develop his idea, and I know he’ll be glad to see this. In particular, I note that that the Oak Ridge National Laboratory in Tennessee is evaluating turbine designs for fish-friendliness. As I’m sure you recall, that is one of the key features/benefits of the HyPEG.

Thanks again.

By Craig Shields | Posted in Hydrokinetics | Tagged , , | Comment (1)