Whenever I speak on renewable energy, I’m careful to leave my audience with a sense of the “tough realities.”  We all want simple answers to our questions, but in the case of clean energy, none exist.

There are dozens of different flavors of solar, wind, biomass, hydro, and geothermal, each improving in terms of cost and efficiency, but at different rates.  There are economic issues, as none of these flavors can compete with the dirtiest form of coal, if we don’t take into account the “externalities” like lung disease and environmental damage.  And Lord knows there are political issues, where we have serious candidates for president of the U.S. who, if elected, boldly pledge to dismantle our Environmental Protection Agency and Department of Energy.  If this occurs, it would effectively end the efforts of the largest economy on Earth to migrate away from fossil fuels and nuclear. 

Here’s another in a series of infographics that attempts to put all this into perspective. Hope you enjoy.

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For those of you who, like me, watch very little commercial news television, here’s a sample of reporting to consumers on the energy industry. This happens to concern Solyndra – a debacle that’s thrown a cold swimming pool of water on the already floundering US renewable energy industry.

Btw, I’d love to know how this happened in the first place. I talk to people in the private sector all the time who swear they saw this train-wreck coming far in advance. At a meeting I had with Kleiner Perkins managing partner Ray Lane earlier this year, he told me, “We knew that technology wouldn’t scale. We had been telling the DoE that for over a year, but no one would listen.”

So what are we to believe? That the public sector knew this too but made it happen for “political purposes?” Sorry, I think there’s more to the story than that. Yet God help me if I can add more clarity. I feel rather like those trying to figure out the JFK assassination; I know what didn’t happen, but not exactly what did.

I thought the DoE spokesperson did a good job in this piece in his handling the question: Shouldn’t the market, rather than government, pick the winners and losers in technology? This is a parallel question to: ought our government to support the development of technologies?

The spokesperson points out that it’s not a matter of “should” or “ought.” It’s a matter of fact. This is precisely what the governments of the large countries in Asia and Europe are, in fact, doing. The question is: Do we Americans want to do the same, or sit on the sidelines while we become irrelevant in the 21st Century global energy industry? Personally, I think he’s nailed this one.

But making this happen will be exceptionally difficult given the political climate, and voter expectation. Let’s examine those expectations for a second.

Except for the dwindling few of Americans who lived through the Great Depression, most of us have been exceptionally privileged with an outrageously high standard of living. And in the process, we’ve demonstrated a near-complete lack of attention to sustainability and an utter disregard for the consequences of over-consumption and under-preparation. So now we expect our elected leaders to bring us back from the precipice? We think someone’s going to win an election on an “austerity” platform, and force us to reduce the ridiculous levels of gluttony that all of us take for granted? Even if there were such a person, he couldn’t get elected dogcatcher.

Recall that cold swimming pool of water I mentioned? Get ready to be thrown into it.

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Victor Reis, Senior Advisor, Office of the Undersecretary of Energy for Science, spoke for 30 minutes this morning on the future of energy.  His principal message (actually his only message) was how appealing small modular nuclear reactors are: how safe, scalable, and relatively inexpensive.  He explained at great length how the DoE itself could be the first customer—going into elaborate detail about how they had been the first customer of massively parallel computing many decades ago—leaving the audience scratching its head to ferret out a meaning.  When he ended his talk half an hour later, in which he had projected the future of energy in the US out 40 – 45 years, we all realized in collective horror that he had done so without ever mentioning renewable energy once!  Not a world about solar, wind, geothermal – nothing.  Just a steady drone on SMRs.

After a smattering of polite applause, I asked another presenter how this was possible, and he just smiled, as if to say, “If you can’t figure out that this guy has an ax to grind, I’m afraid I can’t help you.”

Bizarre times.

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And indeed they are rushing ahead. From nowhere, they are now the third largest producer in the wind power market and one of the fastest-growing in domestic wind installations. For the fourth consecutive year, says the World Wind Energy Report 2009, China doubled its wind installations, which is no small feat. While the U.S. was number one in world total installed capacity with China number two, China had the most share of new capacity in 2009 (13,800 MW to America’s 9,922 MW). The following chart, courtesy the World Wind Energy Association (WWEA) illustrates new capacity in 2009.

By 2009, 82 countries were employing wind energy but China and the U.S. are by far the largest markets for new wind capacity. Offshore wind is another story. China installed its first major offshore wind farm near Shanghai and is 9^th in the world as far as total offshore capacity – the U.S. is not on the list.

As far as other clean tech, China is the current world leader in solar photovoltaic manufacturing and production, though they judged large-scale solar too expensive for their own domestic uses. China provides more than 40% of the world’s solar photovoltaics. They have the world’s largest market for solar hot water; more than 10 percent of Chinese households rely on the sun to heat their water. And they are number one in hydropower.

7.5 percent of China’s energy and 17 percent of its electricity comes from renewable energy, with targets for 15 percent and 21 percent of the same by 2020, says Worldwatch Institute. China has tremendous power needs, with a large and growing population. They estimate electricity consumption will increase by 15% per year. The standard of living is rising and so will demand for appliances and energy in the world’s most populous country.

Without question, China is a powerhouse. The World Bank says China contributed one-third of global economic growth in 2004, and that they expect their economy to continue to be robust this year. Its economy expanded 8.7% in 2009, and it is on course to overtake Japan’s 2^nd spot, says BBC news (January 21, 2010). China was hit with the recession in 2008 but quickly rebounded, in part by a stimulus plan, including a focus on renewable energy. The chart below shows the top six economies from the BBC, sourced from the World Bank.

China’s renewable industries have provided 1.12 million jobs in 2008, and jobs are apparently rising by 100,000 per year, says the Chinese Renewable Energy Industries Association.

In his State of the Union address, President Obama gave notice that the U.S. is falling behind other countries on energy, especially China. “I do not accept a future where the jobs and industries of tomorrow take root beyond our borders,” he said. But many think China will prevail. The massive focus, deployment and development of clean energy is staggering.

Renewable Energy Law

China introduced their Renewable Energy Law (REL) of the PRC at the beginning of 2006, and results are already evident. It has proven to be very influential. The REL commits to provide special funding, financial incentives and discount lending to stimulate renewable energy development. Feed-in tariffs are part of the plan.

Joel Eisen at the University of Richmond reports, “A feed-in tariff says that if you generate renewable energy you get paid for it. You can get paid up front for the price of wholesale energy. The system focuses on paying the generator a specific price for the amount generated. It has nothing to do with demand.” (Joel Eisen, Professor of Law, University of Richmond. China’s Renewable Energy Law: the “Green” to China’s “Black”. January 29, 2010).

Eisen says that China has also set up direct subsidies to people who generate renewable energy, which had enormous impacts on increasing wind and solar manufacture since 2006.

Amendments were made to the Renewable Energy Law in December 2009 which are in effect April 1, 2010, showing China’s continued attention to the industry. The amendments involve better planning systems and access to transmissions and pricing for China’s utility companies.

Green and Black

China is apparently a quite polluted nation. 70% of electricity has been generated from coal. Large cities have serious air pollution problems and water is also polluted. While it is difficult to obtain specifics from a nontransparent insular country, it seems that China has recognized both the opportunity of employing green tech but also the necessity. And they are putting everything behind the effort.

The vice director of the National Energy Administration, Liu Qi, says, “No matter what happens with international climate change negotiations, reducing fossil fuel consumption and developing renewable energy will be the best way to ensure a secure energy supply. The target of reducing carbon intensity by 40 to 45 percent in 2020…will depend more on the development of renewable energy.” (UPI. “China plans renewable energy center”. February 10, 2010).

The Grid Problem

A serious challenge to the push, though, has been the grid system. The transmission grids are not ready as fast as the many wind farms are. And some wind farms are being set up in remote areas, where there is in fact more wind resources, but the transmission challenge deepens. China is spending $87 billion by 2020 on smart grid systems. Unlike many countries, they don’t worry about jurisdictions – they can relocate anyone in the way of transmission lines, much like the relocation that occurred for the large hydropower projects.

The government charges a renewable energy fee to all electricity users, which goes to the utility companies to run the grid. This helps make up the cost difference between renewables and cheaper coal.

National Renewable Energy Center

The country announced on February 10, 2010 that they plan to build a national renewable energy center to support the growing sector. It will be responsible for program management, policymaking, operations, database and information platforms as well as an international exchange program. (China Daily. “China draws up plans for national renewable energy center”, by W. Shihong and S. Xiaohua. February 10, 2010). This is another demonstration that green energy is a priority.

Energy is Energy

Interestingly, when it comes to fossil fuels, there does not seem to be the “bad guys vs. good guys” controversy. Ron Pernick and Clint Wilder traveled China a few years back while researching their book Clean Tech Revolution. They noticed that oil and coal folks didn’t disparage the renewable technology, and the renewable guys didn’t talk down fossil fuels. The Chinese mantra seems to be, as Clint Wilder summarized: it’s all energy and we need a lot of it. (Renewable Energy World, “State of the Clean-Tech Union: Troubled Waters Ahead?” by Clint Wilder. Jan 27, 2010).

Competitive Market Prices and Controversy

China’s economies of scale and rise to world leadership in renewable manufacturing help bring down prices. They can offer products at low competitive prices. And it doesn’t hurt that China’s state-owned banks can provide needed financing at incredibly low interest rates.

But the flip side is that some countries and companies are worried the lower price competition could hurt them. In response, the deputy managing director of China’s renewable energy association said, “Every country, including the United States and Europe, wants a low cost of renewable energy. Now China has reached that level, but it gets criticized by the rest of the world.” (New York Times. “China Leading Global Race to Make Clean Energy”, by Keith Bradsher. Jan 30, 2010).

China’s Century?

“It is quite possible that this new decade will decide whether the 21^st century will be China’s century, in the way that the 20^th century was America’s,” Lou Schwartz wrote on February 26, 2010 (Renewable Energy World Magazine, “China Policy”, February 26, 2010).

Clean tech is the economic future. China seems to understand this. Does the U.S.?

The Worldwatch Institute is an independent research organization recognized by opinion leaders around the world for its accessible, fact-based analysis of critical global issues. The Institute’s three main program areas include Climate & Energy, Food & Agriculture, and the Green Economy.

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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.

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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.

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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.

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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.

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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.

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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.

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