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Sunday, November 23, 2008

Electric airplanes--no joke

On this blog, I was earlier making fun of the idea of biofuel, hybrid or electric airplanes.

However, at the Dec. 8 meeting of the MIT Club of Northern California, that’s exactly the topic:
Did you know that Electric Flight it has an amazingly long, technologically fascinating, and successful history?

Learn more from Dr. Mort Grosser, keynote speaker at EAA AirVenture 2008, where 540,000 people and 10,000 airplanes convened in Oshkosh.

Electric flight has become a hot topic because of the widespread Green Initiative and ongoing revolution in the electric power industry, from generation to end user. A piloted electric airplane flew at Oshkosh 2008, and rapid battery development presages a practical general aviation airplane within three to five years
So apparently it‘s no joke. I’m not sure if I can make it, but perhaps others will

Tuesday, November 18, 2008

Abolishing point estimates

One of my major gripes in my classes is that students put too much reliance on point estimates. Of course, when they (or other business students) graduate, the error is propagated into business.

Saying the company will generate $3,422.13 in revenues for the first month of a new product is useless information. No one knows what will happen in the future: the economy, reception of a new product, the reaction of competitors. People make assumptions — which are only assumptions, i.e. a SWAG or maybe just a WAG. So when I see a point estimate — to four significant digits — then I know all subsequent calculations are GIGO.

Saying that we expect sales to be between $500 and $5000 is more useful. It would be nice to say there’s a 95% chance (two standard deviations) that the results will be in that range, but for most analyses, that’s GIGO.

A common solution is to offer three cases, e.g. when startups offer “best case,” “worst case” and the median or average case projections to VCs. This is certainly better than nothing, because it forces you (for example) to think about what the appropriate level of hiring or advertising spending for each one.

The formal answer to this problem is scenario planning. I was reminded of this in checking out Adam Hartung (who posted a recent comment to my blog). In a posting on his own blog last week, he discusses the importance of scenario planning. In particular, he points out that many businesses (or individuals) made assumptions about energy prices without considering other plausible scenarios:
Over the last year the price of energy was one such big theme that interested a lot of people. But most only explored one scenario ─ what if oil prices went to $200 or $250? Interesting, but not sufficient. While that scenario is worth investigating in great detail, it's also important to investigate other options ─ like oil at $150, or $100 or $65 or $35. All of those have different implications. What's important in scenario planning is to investigate them all.
I have sometimes taught scenario planning in MBA technology strategy class. Although the material doesn’t really fit with the other readings, managing high-tech companies is inherently about dealing with an uncertain future.

Since the existing materials are not very good, at some point I guess I’ll have to write my own. However, blogger/consultant Martin Börjesson has a starter list of scenario planning resources.

Interestingly, everyone (including Börjesson) who teaches scenario planning goes back to the use of scenario planning by Royal Dutch Shell. This does make some sense, beyond the fact that Shell is famous for its use of the technique. Oil companies face a highly uncertain future — in terms of the supply and demand for oil, as well as the degree of environmental regulation (or societal pressure to self-regulate). They also have to make capital investments that last for decades and are planned years in advance.

Perhaps we can interest some renewable energy firms in also doing scenario planning. When they’re going for grid parity, they need to consider what the existing energy prices will be — which might be oil at $50 a gallon or $200 a gallon.

Oddly, Shell CEO Jeroen van der Veer gave a speech in February where he made point predictions as to energy demand, the availability of conventional energy, and the cost of renewable sources. The scenario alternatives he presented (in February and earlier in January) were not about the economic or technical future, but about the policy choices made by energy-consuming nations.

Saturday, November 15, 2008

Riding the experience curve

In a VentureBeat article on CPV producer SolFocus, reporter Chris Morrison raises an interesting point: today’s relative position between concentrated PV and silicon-based PV is less important than the rate of change.
the newest generation of SolFocus panels average 25 percent efficiency at converting sunlight to electricity. That’s a significant jump over the company’s 18 percent first generation product, but an even larger advantage over the average PV panel, which gets about 15 percent.
While silicon PV is slowly improving, it doesn’t look like current products will hit 25 percent efficiency anytime soon, perhaps ever. And in the meantime, SolFocus is working to milk even more efficiency out of its own systems. Hartsoch says later generations are projected to top 30 percent efficiency, likely within three to five years.

These numbers become more meaningful when you look at how quickly costs for each product will decline. Silicon PV is dropping in price about 5 percent a year. Hartsoch says that SolFocus will bring prices down 10 to 15 percent yearly.
I heard this same argument made by another CPV producer made last week. And half the argument seems pretty sound.

Scientists have been working on silicon-based PV for decades: we have enough of a trajectory to see where it’s going and how quickly it will get there.

The SolFocus use of III-V technology has a less predictable cost curve, with less investment and less of a track record. Many of the patents date to 1991-1992, but others are only a few years old. So today the predictions for its progress are extrapolating from much more limited data.

Still the basic point is sound — which technologies are mature, and which ones have the greatest potential for improvement for riding down the experience curve.

As with (digital) semiconductors, experience curve effects have already been important for PV. In fact, without them it would be hard to see how PV will ever reach grid parity.

Friday, November 14, 2008

RE needs to get bigger

Blogger Jim Fraser summarizes the stats on the use of renewable energy in the US:
in 2007 total solar (including solar thermal) represented less than 1% of the total of all renewable energy [including biomass (53%), hydroelectric (36%), geothermal (5%) and wind (5%)] which in turn represented just 7% of total energy consumption in the U.S.
His article today focuses on thin film solar (particularly First Solar)
Thin film solar is becoming an increasingly important segment of the solar industry. Thin-film solar cells consist of layers of active materials about 10 µm thick compared with 200- to 300-µm layers for crystalline-silicon cells. Some sixty companies have announced to start thin film production by 2010, and EuPD Research estimates that by then, the production output will amount to 3.5 GW. According to the EIA, in 2006 thin film represented a 30% share of the of the 337,268 Wp of photovoltaic cells shipped by the U.S. solar industry, as compared to 12% in 2004.
From my research for my PV teaching case, it’s clear that the solar power industry is highly fragmented. What’s not clear is that among the various solutions — e.g. crystalline solar, thin film solar, concentrated PV, or solar thermal — which of these will take the lead in terms of installed capacity and electricity output.

My hunch is that even once solar power rises to 10% of RE — say 1% of overall US energy consumption — it will still be a highly fragmented industry. Perhaps when the solar LCOE reaches parity, one technology will have a dramatic cost advantage and will take off.

Another scenario would be that even once grid parity becomes economically possible, we will still be facing production capital (and thus manufacturing capacity) shortages for a decade, keeping prices high and adoption relatively low. The market should auto-correct — with high demand bringing high investment — but if investors are cautious (or the IPO market remains closed) it would continue to be a seller’s market for PV equipment.

Perhaps also the recent drop in oil prices will stretch out demand for PV capacity, allowing a more gentle and realistic ramp-up. Such a stretch-out would not be a good thing for cleantech VCs. A lot obviously depends on how quickly the economy recovers.

Tuesday, November 11, 2008

Realism in the energy debate

Retired KPCB partner E. Floyd Kvamme wrote an op-ed in this morning’s Merc in which he contradicts some of the commonly bandied about energy “facts” from the recent campaign:
  1. We're sending $700 billion abroad to buy imported oil. Fact: Our net cost of imported oil this year will be about $400 billion due to the midyear price spike.
  2. We're dependent on the Middle East for our oil. Fact: We import oil from 60 countries; Canada and Mexico are our first and third largest suppliers. Persian Gulf suppliers provide less than 20 percent of imports; thus, we send about $5 billion a month to the gulf.
  3. We import 70 percent of our oil. Fact: Our import percentage peaked in 2005 at 60.3 percent and now runs at 56.5 percent.
  4. We have 3 percent of the world's oil reserves. Fact: There's no agreement on the size of global reserves with OPEC nations playing games to get more allocation; we continue to maintain up to a 10-year "backlog" of available oil.
  5. Turn off your lights to save imported oil. Fact: Oil plays virtually no role in electricity production, which nationally comes from coal (50 percent), nuclear power (20 percent), natural gas (18 percent), and hydro (7 percent). Wind and solar currently contribute less than 2 percent.
Alas, he seems to be a support of ethanol†. But at least he’s introducing sanity to other aspects of the energy debate.

Let‘s hope that the heat of the political season over, we will hear an accurate and consistent set of numbers (from a credible source) upon which the politicians and the public will make energy policy decisions.

† A farm subsidy program designed to increase food prices and produce a lower-energy fuel that may (or may not) cost more energy to produce than it delivers.

Saturday, November 8, 2008

Transmitting clean power

California has a state goal of increasing the share of renewable energy used in the state. Of course, as with elsewhere in the country, the supply of such energy isn’t always where the demand is.

In particular, any large-scale solar energy plants will be built in Imperial, Riverside and San Bernadino counties, where it’s sunny and dry and land is cheap. (You won’t ever find solar plants on Palm Canyon Drive). For example, the big Kramer Junction power plant is in the Mohave Desert in San Bernadino County.

In the southwest corner of the continental US, San Diego is a geographically isolated metropolitan market without the hydro of the Sierra Nevadas or the windmill farms of the Tehachapis or the Altamont Pass. Instead, for years San Diego Gas & Electric has been pushing to build a new 123 mile power transmission line called the Sunrise Powerlink, to connect to a planned 900 MW power plant in Imperial Valley. In response to opposition by environmental groups, the environmental impact report runs 11,000 pages.

Now, Fortune reports that the power line has been rejected by Jean Vieth, an (Obama supporting) administrative law judge for the state Public Utilities Commission. The PUC uses law judges to develop the legal record, although the final decision is made by PUC commissioners. Oral arguments before the commissioners were held yesterday in San Francisco, towards a possible Dec. 4 decision.

The core arguments seem to be energy vs. the environment: the irony is that this energy would enable a shift by SDG&E from fossil fuels to renewable energy. Critics have claimed that San Diego doesn’t need the line to import the power, an argument that has been repeatedly rebutted by the state’s own power transmission bureaucracy, the Independent System Operator.

Perhaps this is the wrong project and there really are viable alternatives; I have no direct knowledge. However, rejecting efforts to increase the production and supply of clean energy will eventually either result in brownouts (as in the Gray Davis era) or the state failing to meet its goal of 33% renewable energy supply that’s 11.1 years off.

A belief in small is beautiful is not going going to eliminate the fundamental economic laws related to scale economies. Right now, solar thermal is the best option for California to gain the capacity necessary to replace fossil fuels.

Wednesday, November 5, 2008

A Sunny New Day

It’s a sunny new day here in Silicon Valley. The weekend rain is gone, replaced with nearly blue skies. And our local renewable energy companies are waking up to a new presidential regime that will be very different than the current one. Although both candidates emphasized renewable energy more than the incumbent, this is clearly the best possible outcome for the industry.

Doyle McManus, Washington bureau chief for the LA Times, asked the question that is on the minds of many business executives: “Which Barack Obama will govern?” As with many politicians, there is the tension between pragmatism and ideology, and between primary and general election positions.

Even if Obama the president is more cautious than Obama the candidate, spending on infrastructure and renewable energy seem a sure thing:
"We'll create 2 million new jobs by rebuilding our crumbling roads and bridges and schools," Obama said in his "closing argument" campaign speech last week. "And I will invest $15 billion a year in renewable sources of energy to create 5 million new energy jobs over the next decade -- jobs that pay well and can't be outsourced."

All that spending will create a budget problem for a president who has promised to reduce the ballooning federal deficit, and it will mean a debate in Congress between big spenders and deficit hawks, including in the Democratic Party.
McManus speculated that spending on renewable energy seemed the most likely part of his energy agenda:
The president-elect's ambitious energy proposals may also be tackled piecemeal, advisors said. Some elements, such as the job-creating investments in alternative energy that Obama emphasized last week, are broadly popular.

But proposals for tough limits on greenhouse gas emissions from energy-generating plants and other facilities, a program known as "cap and trade," will be harder to pass because they impose new costs on energy producers.

"This is going to be a tremendously heavy lift to get passed," acknowledged Heather Higginbottom, Obama's chief domestic policy advisor in the campaign.
Every indication is that national and state voters were concerned with the economy above all other issues — which will make certain forms of fiscal stimulus popular, but higher taxes and other spending more risky.

In California, Obama won with 61% of the vote, and voters approved $10 billion in bonds as the down payment on a planned $45 billion high speed rail system. However, two ballot measures (nominally) promoting renewable energy were soundly defeated.

The less surprising was Proposition 7, which would have mandated (to simplify greatly) state electric utilities increasing their use of renewable power from about 13% to 20% by the end of 2010. However, the measure was highly controversial in that it only counted large plants — those of 30 MW or more — which would have wiped out the small providers that today provide the majority of the state’s solar power.

Eliminating the incentive to use small suppliers of electricity would have also hurt those who install such small systems. Gary Gerber, president of Sun Light and Power — and 2008 president of the — became the face of these small contractors. Thanks to TV advertising money from the two big electric utilities, Gerber’s face became a familiar one to California voters. The controversial approach to a popular end won widespread criticism, including from leading newspapers such as the LA Times.

Update 10pm: The LA Times breakdown shows that Prop 7 won in only one county — Imperial County — where such large-scale solar farms would be located.

More surprising was the failure of Proposition 10, a $5 billion bond measure to fund various hybrid or natural gas vehicles, as well as incentives for RE production and R&D. There were lots of TV ads promoting the measure and (AFAIK) not a penny to oppose it.

Why did it fail? Was it the cost? (Beyond high speed rail, the only other spending measure to pass was a $1 billion veterans’ bond). Was it the ballot argument that emphasized the role of T. Boone Pickens in paying the cost of putting it on the ballot? The PickensPlan assumes that heavy trucks will switch to natural gas, which is slightly cleaner than gasoline, and Pickens provided most of the $22 million to promote the measure.

Given these voter reservations, I think the new administration will have to pick and choose its battles. Since solar is only a few years (a decade at most) away from grid parity, the Feds may be able to provide a short-term stimulus and then declare victory when, grid parity achieved, the industry meets explosive demand without further subsidy.

Monday, November 3, 2008

Leveraging solar GIS services

The Merc has an interesting article this morning about how free satellite data services are changing the process of siting and installing solar energy systems. The article interviews two of California’s biggest solar panel installers: venture-funded SolarCity of Foster City (Bay Area) and Borrego Solar of El Cajon (San Diego)

The article shows various GIS (Geographic Information Systems) solutions help solar siting. One is Google Earth or Google Maps (the article blurs the difference), to look at satellite imagery from Google Earh or Google Maps: the article blurs the difference, and also doesn't explain why Google is better than Yahoo. Photos from space could suggest the optimal location on a site for solar panels, free from building or tree shading.

The article also says that SolarCity uses Google Earth to measure roof size.

Finally, there is a new solar map of the Western Hemisphere from 3Tier of Seattle. The FirstLook map, browsable online by latitude/longitude or zipcode, uses 11 years of NOAA satellite data to estimate average incident solar radiation at a given address. The map presents the data as a color-coded overlay onto the Google Maps service.

The map is free to browse. From it, I concluded that the average daily incipient radiation at my San Jose home is about 5 kWh per square meter — above average for the US but typical for the Western US.

3Tier is giving away aggregate data useful for consumers, but wants to sell more sophisticated data to solar professionals. It provides free to consumers global horizontal irradiance, which includes both direct and diffuse incident light. It sells the direct normal irradiation, which is most useful for commercial, sun-tracking systems. Among the data it sells is the breakdown of radiation by month and time of day.

Both the analysis and installation companies right now are enjoying a boom period that looks to continue for many years. Solar hot water installers enjoyed a boom in the 1970s and 1980s, but then it went bust after tax credits expired and all the most likely customers had been serviced. Right now, I can’t see how to predict whether the residential installation boom in the US will last 2 years or 20.