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Wednesday, December 23, 2009

Route 66 views are more important than clean energy

The NYT report Tuesday covered several angles I hadn’t seen on Sen. Diane Feinstein’s bill to block solar energy development in the Mojave Desert.

First, it said that Feinstein’s concerns is not protecting flora and fauna, but aesthetics — having solar panels out there would look ugly. Of course, to renewable energy advocates the prospect of large facilities satisfying the energy needs of entire cities is quite attractive — and this is certainly not something that has discouraged the Germans or Spaniards. (Perhaps the senator should travel more). But this is also the argument that is often made against windmills on ridgelines.

Secondly, the article noted that even the prospect of legislation has killed the idea of developing solar farms in that part of the Mojave. In the face of uncertainty — high political risk — solar entrepreneurs have stopped working on projects for the area. When we teach business, we normally think of political risk as something that happens in third world countries, but of course it’s a problem in any context where the government is heavily involved in the market.

The article summarized a visit by Feinstein and her entourage to prospective solar sites in the Mojave:
As conflicts over building solar farms in the Mojave escalated earlier this year, Mrs. Feinstein trekked to the desert in April. …

The presentation over, the entourage rolled on to the next solar project site to hear the developer’s pitch. Mrs. Feinstein gave the developers a hearing but was not moved by their arguments, according to five people present on the tour. The senator seemed concerned about the visual effect of huge solar farms on Route 66, the highway that runs through the Mojave, they said.
Third, while this is an awful idea — legacy-building by a US senator who will be 79 when her current term expires — few Californians (union, solar, environmentalists, government officials) are willing to say so for fear of political retaliation. (Again, another example of why governing based on political influence and whim rather than policy is a terrible idea.)

Fourth, despite what renewable energy advocates said about George W. Bush, a Bush-era effort pushed for more solar development in the Mojave and other Southwestern deserts to meet society’s energy needs with renewable energy. (I guess the common thread is that if there’s something private industry could build to provide more energy, the former oilman was in favor of it.) The NYT makes it clear that Obama and particularly Feinstein are placing much more emphasis on conservation than Bush did.

So in the end, the indictment of the Feinstein plan comes from one of the few people who’s powerful enough to stand up to the senator — the namesake of a martyred US senator and nephew of the most popular Democratic president of the past 50 years:
“This is arguably the best solar land in the world, and Senator Feinstein shouldn’t be allowed to take this land off the table without a proper and scientific environmental review,” said Robert F. Kennedy Jr., the environmentalist and a partner with a venture capital firm that invested in a solar developer called BrightSource Energy. In September, BrightSource canceled a large project in the monument area.
This proposal is among the worst examples of NIMBY-ism. Society wants and needs renewable energy, but various interests game the system to say “sure, but not in my back yard.” Laws are passed based on the intense opposition, overriding a more diffuse public need; hearings will be about saving the views and the flora and fauna, not the difficult it creates for meeting the state and country’s renewable energy goals.

As RFK Jr. notes, the Mojave is the best solar land in California and perhaps the world. There are many other scenic desert vistas in the United States — but further from large power-hungry metropolitan regions.

Perhaps Californians might have to drive to Utah or Arizona or New Mexico to see such vistas — or into one of the thousands of acres of existing monuments in California. But if it were put to a vote of California voters, I think the decision would be overwhelmingly in favor of using the desert for renewable energy rather than a monument to one senator’s political clout.

Monday, December 21, 2009

Feinstein strikes a blow against renewable energy

Setting up a fight with Governor Schwarzenegger, Senator Diane Feinstein (D-Calif.) today introduced legislation to restrict development on more than 1.3 million acres of the Mojave Desert. (WSJ says 1.7 million). The proposed legislation would create two new national monuments, national wilderness and extend two existing national parks.

Fights over the appropriate use of the California desert are as old as the modern environmental movement — at least 40 years. The fight has traditionally been to protect flora, fauna and their associated habitat from traditional enemies such as military tanks (at the sprawling Army’s Fort Irwin and the Marine’s Twentynine Palms bases) and off-road vehicles.

However, what’s new is that these proposed restrictions are aimed squarely at using the California desert for renewable energy generation. With few clouds, southerly latitudes (35°-36° North), and located 50-100 miles from downtown LA, the Mojave is ideally situated for providing solar power for the 13 million people in metropolitan Los Angeles, as well as the larger five-county Greater Los Angeles that holds half the state’s population.

It is thus not surprising that America’s first significant utility-scale solar energy plant — the Kramer Junction Solar Electric Generating System — was developed in the Mojave more than 20 years ago. In addition to this 165 MW solar thermal facility, a new 553 MW facility is planned by the same operators to sell renewable energy to PG&E.

Other parts of the Mojave are well suited for wind energy. The Tehachapis (at the west end of the Mojave) are one of California’s two major wind energy producing regions, along with the Altamont Pass east of Oakland.

Some might wonder whether renewable energy is an unintended victim of restrictions aimed at off-road vehicles, but public statements in the LA Times report make it clear that the damage is quite intentional:
During a tour of the area Sunday, David Myers, executive director of the Wildlands Conservancy, scrambled up a rocky hill at the base of a row of snaggletoothed mountains freckled with clumps of brittlebush.

"Heroic country, isn't it?" he said. "Just a few months ago, there were plans to cover this entire landscape with solar and wind farms. Instead, with this legislation, we are striking a balance with the insatiable demands of population growth."
Establishing a national monument or wilderness is one of the most bureaucratic approaches that could be imagined to restrict renewable energy development: it’s not “striking a balance,” but slamming on the brakes. With the Federal protections in place, environmentalists will be able to delay or block renewable energy development for years if not decades.

California has told utilities they need to buy one third of the state’s electricity from renewable power sources by 2020. Thus the state has the proper motivation to strike a balance between two competing environmental goals — carbon-free energy production and habitat protection — in the way the Feds never will.

It would have been nice if California could have created its own state park in this region to mediate such a balance. However, that approach might have suffered the same problem as the federalization of the Mojave. Last summer, the legislature passed SB 679 (vetoed by Gov. Schwarzenegger) which would have required any land taken for non-park use be replaced by additional land — also discouraging use of the land for renewable power generation. As the governor wrote in his veto message:
Under existing law, the Director of Parks … may sell, exchange, and acquire State Park property deemed necessary for the extension, improvement, or development of the State Park system. Whether it is roads, water and energy infrastructure, or areas necessary for the installation of renewable energy facilities, maintaining the flexibility of the current process is absolutely necessary as the state continues to strive to meet its infrastructure needs for a growing population.
Up until this point, the interests of wildlife environmentalists and global warming environmentalists have usually been aligned, with rare exceptions like birds dying in the Altamont Pass windmills. These two sets of competing values — habitat protection vs. renewable energy production — need to be reconciled through open debate and our public policy process. I think the proper place to do so is at the state level, not in Washington DC. California has a proud record of being at the forefront of the environmental movement for more than a century (think John Muir).

Utility scale solar power stations will be an essential part of any realistic effort to achieve the mandate of 33% Renewable Portfolio Standard energy by 2020. Such an effort — harnessing private industry to replace fossil fuels burned every day to support our society — is more concrete than all the hot air spewed by so-called “green” politicians over the past decade. Saying you support restrictions on greenhouse gasses and renewable energy but blocking renewable energy development is dissembling even by the low standards of career politicians.

Update 4:30pm: The actual map released by Sen. Feinstein today makes it clear that most of the area being restricted is on the Eastern edge of the state. (The exception is the proposed “Sand to Snow National Monument” (an odd name) west of Joshua Tree, which seems to include ridgeline land that could be a potentially valuable wind generation region just north of the existing Palm Springs wind farm.)

The proposed national wilderness and the Mojave Trails National Monument border the Mojave National Preserve and the east side of Fort Irwin, including plots of sunny land near major electric transmission lines. As the WSJ reports:
The Mojave is particularly attractive because it not only offers nearly uninterrupted days of bright sunshine in a sparsely populated area, but lies near a major electric-transmission corridor from California to Nevada.
In addition to the I-15 corridor to Nevada, the restrictions would overlap the I-40 and Route 66 corridors to Arizona. If, as the WSJ notes, a major environmental concern for large renewable energy plants is building new roads to access the plants, then the corridors along these three national highways should be a high priority for energy development.

We’ll see how “balanced” this proposal is when we hear from the governor and electric utilities. My guess that solar entrepreneurs will be too scared to openly oppose the Feds, in case the legislation passes and they have to beg the Feds for the right to develop in one of the national monuments.

Tuesday, December 15, 2009

Reality hits California high-speed rail

Today, the Merc reports more up-to-date figures on the California High-Speed Rail project, based on the 2009 “business plan” released Monday by the California High-Speed Rail Authority.

The price of the system has gone up from $33.6 to $34.9 billion in 2008 dollars. However, the stated price tag is now $42.9 billion: for the first time, the authority is reporting the cost in nominal rather than real dollars.

Rail activist (Chairman of Californians for High Speed Rail, author of the California High Speed Rail Blog) Robert Cruickshank writes that the nominal dollar figure is misleading because it’s based on inflation estimates, but the actual cost could still go up:
Inflation could be much higher. Or deflation could continue and the final cost could be much lower.

What we do know is that this cost estimate is a more credible estimate. Assuming key elements of the project don’t change, such as route, there’s no reason to assume the final cost would be higher than $42.9 billion. That is, unless the Peninsula NIMBYs get their way and a tunnel is built from South San Francisco to Mountain View, in which case the cost would soar.
There is certainly an irony that the most concerted NIMBY efforts against CHSR is here in the progressive Bay Area, although this Peninsula stretch is also the most expensive real estate on the entire route.

More serious are the fare increases for the system. Here is a summary of the 2008 fare plan, taken from p. 64 of the report:
At the very beginning, a preliminary operations plan was drawn up with stations in major cities and trains running as often as in overseas systems serving similarly sized cities. Train fares were assumed to be somewhere between the cost of driving and of taking an airplane or train. Parking costs at stations were set at prevailing levels, and transit services that could connect at the stations were identified. Running times between stations were calculated from the specifics of the rail line grades and curves, the power, weight of the train, and top speeds of 220 miles-per- hour where the track is straight enough.
The new plan changes the basis of fares from 50% of "air fares" to 83% of "air fares", increasing revenue per rider but decreasing the number of riders. This is more realistic (or conservative), but even this figure seems based on some questionable assumptions.

Below are the new fares as compared to the old formula:
MilesTrain (new)Train (old)AirAuto
The problem is, today a discounted Southwest ticket from LA to SF is $135 r/t, or about $68 one way. Southwest raised fares about 15% earlier this year, or the numbers would be even worse. Yes, these are advance purchase discounted fares, but these are the reference price for leisure travelers.

Yes, the bullet train wins riders in Japan — because plane tickets are so expensive. But in Europe, with easyJet and Ryanair, the bullet trains are not cost-effective for any route with discount airline competition.

Interestingly, the data on page 72 suggested that perhaps a major thrust is avoiding direct airline competition. Of the projected 2035 annual revenues of $2.9 billion (in 2009 dollars) only 44% of the revenues is between the four major metropolitan areas served by Southwest and other airlines: Sacramento, SF-SJ, LA and San Diego.

Proponents hope that the $43 billion system will begin revenue service by 2020. Still, high speed rail — like so many other infrastructure projects — has a huge financial burden: most or all of the whole system before realizing revenues. The bulk of the projected revenues (73%) are on the LA-SF corridor — including intermediate stops — which requires building 400+ miles of track before most of that business is available.

I’ve been a rail fan for 30+ years, but this is a lot of capital at risk when the state’s budget and economy are in the tank. It’s hard to see how the original (or revised) forecast will hold up unless California can quickly fix its budget deficit and unemployment problem. Given the unresolved mess in Sacramento, the state’s credit rating is going to get worse before it gets better.

Sunday, December 13, 2009

Akeena advances retail PV

Located in a former car Los Gatos dealership a few miles from my home, Akeena Solar has been after me to attend their solar panel sales pitch to find out why I want them on my roof. (They used to host their seminars at our local wine bar, and I regret not signing up for one of those). I had not realized the company is public, with a thinly traded stock and a net profit margin of nearly -60%.

Still, its announcement Thursday of a do-it-yourself solar panel is a revolutionary (if inevitable) breakthrough for the industry. (The stock got a nice one-day bump — I’ll be curious to hear if insiders dumped their shares.) Oddly, the home page and branding have not been update to reflect the do-it-yourself message.

The Akeena Andalay panels will be available from 21 California locations of the Lowe’s big box home improvement stores. No word on whether this will spread to other locations in the Southwest, where the insolation is similarly favorable.

The product is a clever design, with a built-in micro-inverter that simplifies system design and installation. If nothing else, for the homeowner it means less time on the roof to fall off. (My wife's cousin fell off a roof doing a repair, was paralyzed, and never recovered.)

A Seeking Alpha reader notes that the system is likely a Suntech panel with an added micro-inverter. Another reader notes that the decision of BP to sell through Home Depot caused installers to drop it like a stone.

At a retail price of $893, that’s $5.10 per peak watt — not great, not bad. But having this go from a custom-installed product to a mass market one is an essential step to making PV widely used across California if not the rest of the world.

The more serious limitation is that the installation cost breakthrough does nothing to solve the ugly permitting problems facing the industry — a confusing welter of local requirements and bureaucratic obstacles. While a DIY-er can install a toilet or do other minor home improvements without a permit (perhaps under the radar), utilities won’t allow grid connection without a permit, obviating much of the benefit of the DIY approach. SolarTech hopes to solve the permitting problem in California, but any solution is years away.

Perhaps the availability of the DIY panels will cause a wave of grass roots activism and even civil disobedience to force municipalities to clean up their act. I could see homeowner-activists in Berkeley, SF or Santa Cruz pushing city hall to stop being such an obstacle for those who want to do the right thing. (I specifically exclude Palo Alto, since most of them are more concerned with their property values than anything else.)

Even so, there’s little to suggest that Akeena will be the beneficiary of any eventual shift to easier installation, approval and grid connection. Pioneers, alas, rarely are.

Thursday, December 10, 2009

Rough days for venture-funded cleantech startups

Tonight’s event hosted by the SJSU-affiliated Environmental Business Cluster (EBC) was officially about Creative Financing for cleantech startups. And certainly the speakers talked about strategic investing (CVC) and government grants in addition to normal angel and VC funds.

One of the panelists was Brian Sager, a VP and co-founder of Nanosolar, which had A-list Silicon Valley tech zillionaires as its angels, then did a Series A and B with VCs, Series C with private equity and Series D with strategic investors impressed by a $4b backlog. By the time it was done, it raised almost a half-billion dollars.

Still, this is not a great time for cleantech investors. Moderator Eric Wesoff of Greentech Media noted an excessive number of VC-funded entires in a wide range of PV technologies, and Wesoff and several panelists alluded to the shakeout now underway.

The final comment of the evening, by NREL CIGS researcher turned VC Andrew Willamson, noted that valuations this year for most series B,C,D were off 40-60% (or even 80%). Dr. Williamson concluded: “I’m not doing anything this year that I can’t get for half off.”

Still, there were some thing missing from the session — great speakers but a little more coherence was needed. (Admittedly, the audience was a mix of people who attend two of these events every week versus those who were at their first or second.)

Wesoff tried but skimmed through his slides to avoid boring industry veterans. One thing that would have been interesting was the observations of GTM coworker Rob Day last month on cleantech VC “conventional wisdom”:
  1. Cleantech only happens in Silicon Valley and MIT. If you look at the dollars flowing into cleantech from venture capitalists, and read the sunday NYT, that's the natural conclusion you would draw.…
  2. Cleantech is really only solar, "smart grid", biofuels and electric vehicles.
  3. Cleantech is really only about capital intensive business models.
  4. Cleantech startups are only for whiz-bang PhD researchers who have earth-shattering innovations. Business models like energy efficiency services, and other implementation efforts, need not apply.
  5. The only good cleantech startups are those backed by VCs. The fact that only 1% of startups get their initial capital from VCs simply means that 99% of new businesses are bad ideas.
BTW, of $864m of Q3 VC investing in “industrial/energy”, 60% went to SV vs. less than 5% for Boston. Wesoff noted there were more deals being done for smaller amounts in 2009 than 2008.

Still, I think the anecdotes of a few individuals would have benefitted by adding the perspective of an academic or researcher, to address several other points:
  • Where is the VC money going within cleantech? If you’re not in those areas, are you toast?
  • What models require VC (that “capital intensive” story) versus ones that are unlikely to get VC?
  • How do you scale without outside investment?
  • What do we know in general about sources of funds for high-tech startups, particularly during these difficult economic times?
With the current economy, I have seen a lot of SV events around bootstrapping in the past year. Admittedly, no one can build a $100m factory by bootstrapping, and many of the businesses that most excite the audience (especially VCs) are the ones that are going to grow fast or die trying.

Still, some of the people in the room seemed keen to get their business of the ground — to make a difference somehow — and perhaps sell out early to a larger firm that has the resources to take it the rest of the way. Perhaps a separate event could focus on getting early stage companies off the ground — to proof of concept — a topic that would be eagerly embraced by many in the audience and of course fits the EBC’s mission.

Sunday, December 6, 2009

Don't write off diesels yet

In having my students research the green strategies auto companies a few years back, it was clear that Toyota bet heavily on hybrids, Honda on fuel cell cars, and the Germans on diesels. Since then, the Prius has been on a tear, with everyone else scrambling to catch up — but the race isn’t over yet.

On Thursday, the Audi A3 TDI was named “Green Car of the Year” at the LA Auto Show. The judges included Jay Leno and Carroll Shelby (as well as the head of the Sierra Club and Jacquest Cousteau’s son.)

The Audi has the same 2.0 diesel engine as last year’s winner, the Volkswagen Jetta TDI, but wrapped in a sportier package. The Audi gets 42mpg, 50% better than its gasoline equivalent.

For years, Volkswagen’s (and Daimler’s) big Euro-centric bet on turbodiesels seemed myopic as the rest of the world went a different way. Also, we couldn’t even buy them in California because of our own special emissions requirements.

However, with a nationwide shift to low-sulfur diesel in 2006, Volkswagen has been able to offer its “clean diesels” in the US. I think this is a great development, for three reasons.

First, as readers of my other blogs know, I’m a big believer in free markets and competition. Competition for the Prius and other hybrids will only make them better and more efficient, whether or not people choose them or something else.

Second, hybrids and particularly electric vehicles have some serious unresolved issues. They have a high up-front purchase cost — one the government cannot afford to subsidized forever. Their total lifecycle cost is unknown. There is the question of what to do with the battery when the car is junked.

Meanwhile, diesels are a proven 100-year-old technology and are known to last longer than the equivalent gasoline engine, with a lower purchase price than equivalent hybrids. Diesels also scale better to larger vehicles, something the hybrids really haven’t done (the GM “partial hybrid” SUVs notwithstanding).

Finally, if the question is reducing global CO2 emissions, the jury is still out as to what is the best way to do that. Diesel is certainly going to be the approach that Europe uses. Given their high fuel prices and interest in green policies, the penetration rate of high-efficency diesels suggests that they deserve a second look. (It could also indicate a nationalistic industrial policy. Sigh.)

Thursday, December 3, 2009

Picking a few EV winners

Economist Arnold Kling quotes a Wired article by Darryl Siry, which says
Of all of the Department of Energy programs intended to advance the green agenda while stimulating the economy, the Advanced Technology Vehicle Manufacturing incentive to spur the development of cleaner, greener automobiles is perhaps the most ambitious. But it has a downside.

The energy department has approved direct loans to Nissan, Ford, Tesla Motors and Fisker Automotive totaling about $8 billion out of a budget of $25 billion. The magnitude of this program dwarfs other DOE campaigns like the $2.4 billion given to battery and electric vehicle component manufacturers and the $4 billion disbursed for “smart grid” projects.

To the recipients the support is a vital and welcome boost. But this massive government intervention in private capital markets may have the unintended consequence of stifling innovation by reducing the flow of private capital into ventures that are not anointed by the DOE.
Kling complains that “The American people are being forced to participate in a venture capital fling in which they take most of the down side and none of the up side. And it is not being debated.”

Certainly the president campaigned on a plank that included aggressive government intervention to support green technologies, this is something that (under our system) was supported by a majority of Americans who voted. While voters endorsed a more interventionist economic policy, they didn’t vote for stupid deals: one way transference of risk — whether on Chrysler or Fannie Mae — would certainly count.

My gripe is more to Siry’s, on two fronts. First, the massive size of the grants distort the market — they are far in excess of the money available to private sources.

Secondly, most previous energy policy interventions have been more fairly distributed. Hundreds or thousands or millions of individuals/businesses get Federal/State tax credits for buying insulation or double pane windows or solar panels.

These tend to be non-discretionary, categorical payments that go to all class of applicants over an extended period of time. If the Westgate mall gets an energy conservation grant, the Eastgate mall can apply and get one on the same terms. (Let’s ignore the problem that around here, Westgate and Eastgate have the same owner). Of course, some of the stimulus money was pure pork, earmarked for pet projects by influential legislators — the opposite of a broad categorical grant.

Siry comments:
Startup companies that enjoy DOE support, most notably Tesla Motors and Fisker Automotive, have an extraordinary advantage over potential competitors since they have secured access to capital on very cheap terms. The magnitude of this advantage puts the DOE in the role of kingmaker with the power to vault a small startup with no product on the market -– as is the case with Fisker — into a potential global player on the back of government financial support.

As a result, the vibrant and competitive market for ideas chasing venture capital that has been the engine of innovation for decades in the United States is being subordinated to the judgments and political inclinations of a government bureaucracy that has never before wielded such market power.
After noting other innovative companies are dead in the water unless they get their DOE grants, he suggests an inherent conflict between casting a wide net to many firms and making bets on likely winners.

I’m not sure what should be done now. I’d like to think that a lesson has been learned and this mistake won’t be repeated, but as long as lawyers (elected by campaign contributions) are making economic policy, there’s no reason to be optimistic.

Wednesday, November 25, 2009

The political risk of RE

Renewable energy is about delivery of commodity electrons at a price competitive with other sources of electricity. As a replacement for grid power, RE is today is not cost competitive. Instead, it’s completely dependent on subsidies, RE quotas (like California’s Renewable Portfolio Standard), taxes on fossil fuels and other government interventions.

So today, the renewable energy manufacturers and operators toil on in a difficult intersection between businesspeople, social activists, and a special interest lobbying group. Meanwhile, many energy efficiency products offer payback periods as short as two years.

The RE execs face a threefold uncertainty. As executives, they are creating new technologies with considerable technology risk, at the same time that low cost offshore (mainly Chinese) producers seek to commoditize most of the business. As social activists, their cause is currently in ascendancy, but as with any political issue, public opinion can shift. And as lobbyists, asking for government subsidies at a time when the government is going broke (the Feds) or already broke (California) is a tenuous position at best.

The latest threat to public opinion is Climategate, the candid e-mails by British (and US) climate scientists suggesting efforts to exaggerate the global warming data and demonize opponents. Global warming skeptics have seized on these revelations in hopes of turning back efforts at counter-climate change controls.

One such skeptic is author and Daily Telegraph blogger James Delingpole who predicted doom for RE companies:
If you own any shares in alternative energy companies I should start dumping them NOW. The conspiracy behind the Anthropogenic Global Warming myth (aka AGW; aka ManBearPig) has been suddenly, brutally and quite deliciously exposed after a hacker broke into the computers at the University of East Anglia’s Climate Research Unit (aka Hadley CRU) and released 61 megabites of confidential files onto the internet.
Delingpole’s argument (even under the most favorable circumstances) is vastly overstated. Even if the revelations caused a dramatic shift of public opinion against policy intervention — which I think highly unlikely — current policy initiatives would continue on their own inertia for a few years. Subsidies and mandates may not get renewed or expanded, but they aren’t going to be cancelled wholesale.

If solar power reaches grid parity by 2012 (as some claim), it would then be able to stand on its own two feet in various parts of the country with high-irradiation or high grid power costs. This certainly would be enough to keep driving costs down the experience curve, to give solar (or other RE) an eventual cost advantage.

The worst case scenario is that grid parity takes longer — and that in the meantime, bankrupt governments end subsidies in favor of other priorities (food, housing, public safety).

Even if that happens, unelected governments in totalitarian states face far fewer limitations on their power, and could continue subsidizing their domestic manufacturers until they dominate the market via superior costs. This wouldn’t be a very attractive outcome for US entrepreneurs and VCs, but it would prove their thesis that RE will inevitably supplant fossil fuels.

Thursday, November 5, 2009

The $1600 hybrid sports car

The NYT has an interesting post about a Portland engineer who built a $1600 hybrid out of a used Pontiac Fiero:
[Bryce] Nash, who works for Daimler Trucks North America, built his hybrid Fiero for just “$1,600 and change.” He started with a 1988 Fiero Formula with a dismantled engine, bought on Craigslist for $500. His real find, located in a Michigan junkyard for $800, was the electric motor and inverter from an electric Chevrolet S10 pickup [PDF]. The batteries came from several Toyota Priuses (about $250 a pack), and totaling at best guess around four kilowatt hours.
A major theme of this blog is the importance of cost-effective cleantech solutions. Obviously $1600 isn’t going to be the retail product for a new hybrid car (perhaps an electric scooter), but technology diffusion theory demonstrates how hybrids will remain a niche product until the prices become competitive with existing products.

Fortunately, Honda has decided that economy cars should be, well, economical, and is working on low-cost hybrid versions of the Fit and CR-Z, with both due next fall.

Sensing a challenge to its hybrid near-monopoly (and monopoly rents), Toyota’s working on a hybrid Yaris, presumably at priced below the $22k MSRP of the 3rd generation Prius, currently the lowest priced hybrid in the US (according to Edmunds).

To me the real question is: why isn’t Nash working on converting a Rambler (or perhaps an AMC Gremlin) rather than a GM car?

Wednesday, September 30, 2009

Warren Buffett helps make PHEV maker rich

The richest man in China is now 43-year-old Wang Chuanfu, founder of BYD (“Build Your Own Dream”). According to an annual ranking of Chinese billionaires, Chuanfu is worth 35 billion RMB or $5.1b.

Founded in 1995, BYD worked its way up to become the world’s leading maker of cellphone batteries. The Shenzen-based company (and Chuanfu’s holdings) gained tremendous legitimacy by selling a 10% stake last year to a subsidiary of Berkshire Hathaway, the investment vehicle of the Oracle of Omaha. The $232 million investment has appreciated fivefold since then.

Part of the attraction of the BVD investment was its foothold in China’s high-growth auto industry. Last December it got favorable publicity for its pathbreaking F6DM plug-in hybrid. However, earlier this month it revealed it had only sold 100 units since introduction, rather than the target of 3000+ units. It still hopes to sell the PHEV in Europe next year.

Friday, September 25, 2009

California’s latest $3b EE plan

California has been emphasizing energy efficiency since the first oil crisis 35 years ago. Still, the belief is that the $3 billion plan approved Thursday by the state’s Public Utilities Commission is a major turning point for the state.

(With the state’s characteristic hubris, supporters also see it as a model to be emulated by the rest of the country. Given that our state government is a laughing stock for its budgetary failures, I wouldn’t hold my breath.)

In the Friday papers, the SF Chronicle has a brief note on the approval, a follow up to a preliminary analysis of the plan last month. The San Diego Union has the most complete coverage with a front page story. (I didn’t see anything on the websites of the San Jose or LA papers).

Here’s a few highlights from the latter story:
State regulators yesterday committed more than $3 billion over the next three years for programs aimed at getting people to use less energy by retrofitting 130,000 homes, training 15,000 workers and using smarter appliances.

The programs will be coordinated by California's four investor-owned utilities and paid for through electric and gas bills.

The initiatives, which are an expansion of efficiency efforts long in place in the state, mark a change in direction by moving away from rebates for devices such as light bulbs and instead making buildings more efficient.

“The focus is to shift priorities away from rebates for widgets to sustained energy savings in the built environment,” said Dian Grueneich, a member of the California Public Utilities Commission, which approved the programs yesterday.

Overall, the program represents a 42 percent increase in spending on energy-efficiency programs statewide.

For its part, the Public Utilities Commission expects to introduce a set of home-efficiency programs statewide in January, targeting homeowners and renters.

One set will focus on getting homeowners, buyers and renovators to reduce overall power consumption through better energy management. A second will focus on getting consumer electronics to use less energy. A third will aim at transforming the lighting industry, eventually phasing out incandescent bulbs.
I am curious to see whether the $3 billion goes for carrots to enable investment in energy conservation or merely more sticks.

I’m also curious what this means for PUC’s future policy towards decentralized rooftop solar. California has high insolation (and high electricity costs) that make PV inherently more cost effective here than almost anywhere in the world, but the originally budgeted PV rebates are halfway towards their eventual phaseout.

Perhaps the assumption is that the gun held to the head of utilities (i.e. the 33% RPS standard) will be enough to stimulate enough RE capacity without more specific initiatives.

Tuesday, September 22, 2009

Serious RE money

On Monday, one of the Bay Area’s biggest (if not the biggest) energy efficiency companies announced that it had doubled its venture invested capital from $60 million to $120 million.

It certainly is a major development for Serious Materials. As one VC press release explains:
Navitas Capital, a venture capital firm investing in green technology solutions for the built environment, announced today that it participated in a $60 million Series C investment in Serious Materials. According to an Ernst & Young LLP analysis based on data from Dow Jones VentureSource, this transaction represents one of the largest U.S. venture capital deals year-to-date in 2009 and is the largest cleantech deal in the Energy Efficiency category. …

The new funding was led by Mesirow Financial Capital and included New Enterprise Associates, Foundation Capital, Rustic Canyon, Enertech Capital, Cheyenne, and Saints Capital. Navitas is a returning investor, its principals having led Serious Material's initial financing round in 2005.
The Mercury News reports that Serious was founded in 2002 and employs 250-300 people at its Sunnyvale headquarters and five plants around the country. (The company was prominently in the news last April when Vice President Biden visited its Chicago factory).

As it turns out, early this month I met the CEO, Kevin Surace, at a Menlo Park renewable energy event. I had a brief chance to talk with him about his business, although the seating arrangements didn’t allow a more detailed conversation (which I hope to have later).

From talking to Keven, what caught my attention is their efforts to transform the definition of energy efficient windows. Energy efficiency is normally thought of in terms of SHGC or U-value; instead, Serious is selling R-6 windows to save energy over the customary EnergyStar windows rated at R-2 or R-3. I know less about its drywall products, although an architect recommended its unique (and patented) QuietRock for remodeling a room that would be used for practicing music.

I can see why VCs are excited about Serious: it has achieved differentiation through innovation in two huge industry segments. As best as I can tell, the drywall industry in the US is $40+ billion in revenues every year, while the US window industry is about $12 billion/year.

Looking to history, a sudden desire to increase energy efficiency — whether through regulation or market forces — provides a sizable market for both new construction and retrofit applications.

From my childhood, I remember my parents trying to retrofit their 1950s-era designer home with ceiling insulation, which was basically limited to those places that could be covered with blown-in cellulose. Decades later, my girlfriend (now my wife) and I scampered through the rafters of the brick home where I lived, laying down batts of fiberglass insulation to make the summer heat tolerable.

One could argue, in fact, that Owens Corning was the biggest winner of the (limited) US push for energy efficiency in the 1970s. Its pink fiberglass batts (with the Pink Panther branding) have become both a company trademark and the country’s ubiquitous solution for bringing walls and ceilings up to R-19 or R-30 efficiency standards. The ease of installation, low cost and quick payback means that (even without government intervention) that buying yards and yards of pink fiberglass is a no-brainer when building any new home. Today Owens Corning is a $6 billion/year company.

For cold weather locales, SeriousWindows™ offers a similar value proposition. In the Merc story, its CEO emphasizes the bottom line benefits of energy conservation investments that pay for themselves:
The company says its SeriousWindows line reduces heating and cooling energy costs by up to 50 percent, enabling users to recover the additional costs within two years in many climates.

Its EcoRock drywall alternative required 80 percent less energy in its core production than conventional gypsum drywall "and has the potential to save billions of pound of CO2 annually," the company says.

But, Surace added: "We're not out there selling green. We're selling that we can give you your money back."

While Serious Materials supports proposed policy reforms to promote a low-carbon economy, the company doesn't require such reforms to succeed, he said.
An IPO is always a CEO’s first choice, but Serious will also be well positioned for acquisition. Given the most recent valuations, I’m guessing that the acquirer would have to have at least $3 billion in revenues (perhaps more, given Serious will have a high growth multiple). Today, there are a few public building materials companies that big — names like Georgia Pacific, Masco, Mohawk — or Owens Corning.

However, if Serious grows for another few years, it will be too big for an acquisition, and thus a favorable IPO market would be the only option. This would require the IPO market improving from the doldrums it’s been in for more than a year.

Saturday, September 19, 2009

California's proposed plasma TV ban

The California Energy Commission Friday proposed to phase in regulations banning TVs from sale in California that don’t meet minimum efficiency standards — calculated in terms of watts per square inch. According to the Merc, about 20% of current TVs would be banned in 2011, while 80% would be rejected in 2013.

The effect of the regulation appears to be to ban plasma screens, and to force use of OLED or other technologies that are less mature and more expensive.

Retailers and manufacturers that would lose sales naturally opposed the proposal, as did the industry’s main trade association:
“We share the goal of energy efficiency and have worked with the CEC to develop alternatives that will achieve the same or better energy efficiency goals without killing jobs or thwarting innovation. The CEC has chosen to ignore alternatives and input, and small businesses and consumers in California will pay the price.”
Meanwhile, makers of the more efficient technologies praised the proposed regulation that would shift demand in their favor. As the LA Times reported
"The average Californian should not see a cost premium," Bruce Berkoff, chairman of the LCD TV Assn., said in a letter to the Energy Commission. "They will, however, benefit from dozens to hundreds of dollars in energy cost savings over their TV's lifetime, thus making the proposed standard extremely cost-effective for the state of California."
By regulating TV energy consumption the CEC is venturing into politically tenuous territory — unlike, say, Title 24, which impacts only home builders (who are invisible) and rich people who build their own homes. Large screen HDTVs are seen as a god-given right by American consumers — both rich and poor. A poll conducted by opponents claims that 57% of Californians oppose the move. I predict that enterprising state politicians, spotting an opportunity, will campaign in 2010 for repeal of the ban.

According to the LAT, the governator supports the CEC action, suggesting his tenure as a business-friendly environmentalist was short-lived — or that the business opponents of the planned RE regulation are more politically influential than are opponents of the TV EE regulation.

Whether or not this is a good idea in principle, the timing seems terrible. In August, California unemployment hit a postwar record 12.2%. More convincingly, the CEC has not made a compelling argument that this is a state issue. The design and manufacture of televisions have high economies of scale, so cutting the state off from the global market will inevitably increase costs to consumers.

Also, this is not the Bush-era federal government. The Obama Administration and Energy Secretary Chu have made clear that energy efficiency is a major national priority, and additional federal action here during the president’s first term is a virtual certainty.

Earlier this month, the EPA already raised the efficiency expectations 40% for Energy Star-certified televisions, to be phased in in May 2010 and May 2012. While the industry has opposed many aspects of those changes — in part, because they seem to favor small TVs over large TVs — the Energy Star choices are voluntary ones. Consumers can still buy brighter, cheaper TVs that are not Energy Star qualified if that’s what they prefer, even though they’ll pay more for energy over the life of the TV.

The CEC argues that energy use by consumer televisions is increasing, and that at some point it will require an additional power plant to serve all these big screen TVs. Apparently the unelected CEC seems to think that ordinary consumers will make “bad” decisions if left to their own devices, and so that it’s their responsibility to take away those “bad” choices.

However, the CEC could use market mechanisms to achieve the same goal. A free market uses the price system to give feedback between various alternatives, so that (for example) it’s up to consumers to trade off up front purchase price (or features or quality) against long-term energy consumption.

If consumers don’t make “good” up front decisions, then the CEC should try to better inform voluntary choices. One way would be to work with the EPA to create energy usage stickers for TVs like those that are already common for refrigerators. Those stickers have done more than Energy Star to help consumers make intelligent long-term decisions on their appliance purchases, since they disclose the actual consumption differences rather than merely bifurcating products into “good” and “bad.”

Perhaps the problem is that the impact on society of new electricity capacity is not being fully paid by consumers making these decisions. If so, the answer is simple: raise energy prices (whether on average, or for usage above a baseline amount). Some consumers will buy more efficient appliances, some will cut energy usage elsewhere, and some will pay the additional cost. Higher energy prices would also increase the market value of renewable energy.

The CEC now enters a 45 day comment period prior to its planned Oct. 13 hearing. Comments can be submitted via the pending decisions web page, by emailing the commission with the relevant docket number (09-AAER-1C).

Thursday, September 17, 2009

Friedman touts feed-in tariffs

In his column this week, NYT pundit Thomas Friedman is calling for more aggressive US spending to promote solar energy, to provide predictable support for solar entrepreneurs.

Noting the location of Applied Materials factories in Germany, China and elsewhere, Friedman concludes:
The reason that all these other countries are building solar-panel industries today is because most of their governments have put in place the three prerequisites for growing a renewable energy industry:
1) any business or homeowner can generate solar energy;
2) if they decide to do so, the power utility has to connect them to the grid; and
3) the utility has to buy the power for a predictable period at a price that is a no-brainer good deal for the family or business putting the solar panels on their rooftop.
The latter appears to be a reference to feed-in tariffs. Apparently Friedman seems not to have noticed the disaster of the Spanish feed-in tariffs (as reported by Paul Voosen of Greenwire on the NYTimes.com website).

Some might argue that the Spaniards had the right idea, but they just set the price wrong — using the same rate as for cloudy Germany. But that’s the point: when you set a price via government fiat rather than through supply and demand, you don’t know whether the price is right or wrong. The advantage of a direct government purchase subsidy is that at least you know how much you’re distorting the price system (10%, 20%, 30% etc.).

I think the Friedman article is also silly in implying there’s no US solar industry. There’s a thriving industry, with particularly high concentration of such firms here in the Bay Area. If Friedman is concerned about US manufacturing, perhaps he should read the recent Greentech Media report on US PV manufacturing.

Of course, that’s part of the problem with pundits: Friedman is a best-selling author and a very smart guy who thinks that makes him an expert in everything. I’m only slightly less guilty here, but at least I’ve made an ongoing effort to meet and understand real PV experts.

Which brings me to last week’s meeting of the Silicon Valley Photovoltaic Society. The speech by SunPower’s Doug Rose was written up by Greentech Media, and Rose’s slides are on the SVPVS website.

It was Rose’s response to a question that made me first aware of the Spanish fiasco. Speaking for Sunpower, Rose said “We are not in favor of ridiculous things that distort the market.” His suggestion was that the feed-in tariff rate should have been set by a reverse auction. He also implied that Spain should have phased in its program, rather than going from 0 Gw to 2.5 Gw in a single year.

I would note that apparently it's easier to get permits to build utility-scale solar facilities in Spain than anywhere in California. Perhaps Friedman should be arguing for a policy to reduce government barriers to building solar plants (PV and thermal) and the necessary transmission lines.

Another question noted how IC production went offshore and asked whether PV will do the same. Rose noted a number of key differences (I wish there was video) in the value creation between IC and PV semiconductors, including the high value of IC wafers that make it cost-effective to ship via air express.

Rose noted PV systems are bulky and heavy, and less valuable for pound than integrated circuits. Of necessity, final assembly will be done in the continent of use, and Rose said that some upstream manufacturing may eventually come back to the US.

Update, Friday 8:30am: After taking his own tour of the Applied Materials factory, Eric Wesoff of Greentech Media is also critical of Friedman — noting that much of the vaunted German feed-in tariff is shipped to China for the purchase of those solar panels.

Tuesday, September 15, 2009

Business-friendly RE mandates

Today Governor Schwarzenegger again demonstrated what a business-friendly green activist politician looks like. It’s a pretty rare species, and this is one case where it looks like a viable one.

Tuesday, the governor signed an executive order increasing California’s Renewable Portfolio Standard from 20% of 2010 energy consumption to 33% in 2020. At the same time, he has vowed to veto more complex legislation (SB14) that imposes the same standard and more.

The governor’s main objection to SB14 is that the legislature doesn’t want imported renewable power to count. The nominal reason for this restriction is is a promise by key legislators to create “green jobs” are created in California. However, building any power plant (renewable or otherwise) in California is notoriously expensive and time consuming.

The other key issue of SB14 was that it would make it harder to get approval in California to build concentrating solar power plants — one of the most feasible technologies today for utility-scale renewable power production. Thus, the veto won praise from the Independent Energy Producers, a trade association representing the state’s smaller alternative energy producers.

Even with the governor’s flexibility, this new targets outstrip the projected availability of renewable power in the US, currently projected to comprise 8% (excluding hydro) of US energy consumption in 2030. However, as the NYT reports:
Establishing a requirement, however, is far different from meeting it, as California is already finding out. The state’s interim mandate of 20 percent of electricity from renewable sources and energy efficiency by 2010 looks likely to fall short. The San Diego Gas and Electric Company, the furthest behind of the state’s three big utilities, says it currently gets 10 percent of its electricity from such sources.
SDG&E has a particular problem in that its service area (and thus the coverage of its transmission lines) is largely limited to two of the state’s 58 counties: urbanized (or mountainous) San Diego County, and the deserts of Imperial County. CSP plants in the desert could meet some of these needs, assuming SDG&E is ever allowed to build a transmission line from Imperial County.

Under the governor’s more flexible plan, utilities will be able to buy RPS power wherever it is available, at the lowest possible price. This will reduce (but not eliminate) the impact of the price increases on California consumers and businesses; many believe that in the long run renewable power will be cheaper than fossil fuels, but that’s not true today. Of course, imported RPS power will reduce CO2 emissions as much as that produced in California.

While the unmet 2010 goals are a problem, the decade-long lead time will also give more time for utilities, businesses and consumers to plan for the increase. This also gives residential and commercial PV production another decade of slow adoption, and for utility and end-user PV investments to drive down the technologies down the experience curve.

The one substantive criticism of Schwarzenegger’s approach is that (as the Mercury News notes), it can be reversed by a future governor. It makes sense for the governator to negotiate with the legislature to pass a clean bill that enacts his goals into law, allowing both sides to claim victory.

Thursday, September 10, 2009

Will RE ever be a regular business?

Wednesday I went to the wonderful SVPVS meeting, one of the best of the many Silicon Valley resources available for local cleantech industry employees, job-seekers and pundits.

One of the things that struck me was that the speaker, a senior manager of a publicly traded solar power company, at several points made appeals to ideological arguments rather than business ones. Decades ago, renewable energy was a cause not a business, but for some reason I was under the delusion that the industry had matured past that. (Here I’m not referring to the presentation of different industry futures based on different policy regimes — certainly something that any strategy analyst would do.)

While ideological arguments have their place in political campaigns or in lobbying for favorable government policies, I don’t see their place for justifying the business of renewable energy. In fact, emotional appeals seem a sign that the economics won’t stand on their own.

In the end, photovoltaic and other renewable energy power generation is about producing commodity photons using an expensive new capital-intensive technology. No matter how wide the evangelism, there will always be price-sensitive buyers who buy the cheapest photons.

Yes, the government can distort the market to make some sources of photons more (or less) attractive than others. In some cases, the arguments for pump priming are economically defensible, if a temporary subsidy accelerates the learning curve efficiencies of a technology that will eventually be cost effective on its own. (This is in contrast to permanently subsidizing a politically favored technology that will never be cost-competitive).

Various aspects of energy efficiency are already a regular business — with or without tax credits, there are energy efficiency solutions where the payback period makes investment a no-brainer. Yes, LED illumination may still need pump priming, but there are dozens of technologies (such as insulation for new construction) which are already economically viable on their own: adoption is widespread among true believers and non-believers alike.

So we can hope that RE will eventually become a regular business, like nearly all other products purchased by businesses and consumers. Perhaps that will happen sooner, due to economic recovery that means an end to unexpectedly cheap fossil fuels. Perhaps that will happen later, as the result of cumulative experience curve effects over years or decades. But if RE is to become a viable business — that survives cycles of rich powerful governments and poor bankrupt ones — it eventually needs to stand on its own two feet.

Update 9/11/9 9:11am: After attending another cleantech event Thursday, I realize that cleantech businesspeople are working at a difficult intersection between business, policy and politics. It will be decades (if ever) that PV is like IT; more in a future post.

Thursday, August 20, 2009

FT discovers energy efficiency

The Financial Times has finally discovered energy efficiency:
This year, McKinsey calculated that in the US alone an investment of $520bn would cut non-transportation energy in the country by 23 per cent of projected energy demand – which would save the US economy more than $1,200bn.

Japan and western Europe are more efficient, but still have hundreds of billions of potential savings, while fast-emerging economies such as China and India have typically grown without much regard for efficiency until now.…

Little wonder, then, that energy efficiency stocks have been outperforming not just the market, but other clean technology stocks, according to recent research from HSBC.

Energy efficiency and energy management specialists enjoyed the strongest sectorial return in clean tech, up 16 per cent on the first half of the year, according to HSBC.
The story seems like a realistic overview, but a little bit stale.

HSBC report (on the HSBC Energy Efficiency & Energy Management Index) came out in June. It was then covered by Reuters and Energy Efficiency News.

I can’t find any 2009 updates on the EEEMI on the HSBC website, perhaps because it’s trapped behind a paywall. Greentech Media (unlike all the other sites) is kind enough to link to the report, ironically located on the NYT website.

Maybe it’s just me, but isn’t there something annoying about blogs and other online news sources that don’t link the original data — because they’re afraid you’ll go to the original site (or circulate the link to the original site)? Shouldn’t the blogger/reporter have confidence in creating enough value that people will want to link his/er site?

Tuesday, August 18, 2009

Don't get fooled again

Despite a promise less than a year ago to build a new factory in San Jose, and false hopes raised in April that the plant was back on, Tesla will be moving its HQ and factory to an abandoned Agilent (i.e. HP) factory in Palo Alto.

Tesla got the federal money it needed to build its sedan, which San Jose politicians thought was going to be built at the north end of the city, but was put on hold less than a month later and cancelled in January. The April promise from CEO Elon Musk was only
"I can say, definitively, the power-train engineering will remain in the Bay Area," Musk said. "Silicon Valley has the best electrical engineers in the world, and I'm a big believer in keeping some of the production here in the Bay Area."
If you’re going to pay the high Bay Area housing costs, you might as well have the high status address almost on campus at Stanford. (The San Jose location in Aliso was a long way from anywhere).

Still, I have to wonder whether the San José politicians were either premature in their big announcement or wrote bad contracts.. They won’t make that mistake again, and hopefully thier PV manufacturing bets will turn out better.

It certainly seems that my skepticism 11 months ago was justified:
The idea that the Bay Area will become a hub of manufacturing high-tech cars is just laughable. Because of labor, land, taxes and all the other costs, by the end of the year Intel won’t even have make semiconductors here — and they have a much higher technology content and value per pound.

Most of the parts for an electric car are shared in common with fossil fuel cars, and so if EVs catch on, nearly all of the electric cars in North America will be made in factories owned by the major world automakers (in Michigan, Ohio, Kentucky or wherever). Perhaps the Prius will someday be made at NUMMI in Fremont — and even the 2010 plug-in version — but today NUMMI is the only remaining auto plant in North America west of Texas.
As it turns out, Monday’s Tesla announcement came on the same day that the NUMMI plant produced its last GM car after 40+ years of production. Rumor has it that Toyota also plans to leave — ending more than 4,000 jobs.

Tesla is a highly visible symbol of the next generation of passenger vehicles. Whether it will ever be a major employer — or in a century of open innovation, just a supplier of key subsystems — remains to be seen.

Monday, August 17, 2009

Solar future not as bright as hoped

Last November, the future of solar power in the US looked bright. Yes, there were some economic problems on the horizon, and the economic contraction pushed down the price of fossil fuels. But still, PV technology has gotten a lot of free publicity and plays nicely to a new social consciousness associated with the new administration, global warming, etc. etc.

On Friday, the snarky “Lex” column of the Financial TImes took a rather dark view of the current situation:
What looked only last year like a shining future for the solar industry has flared into a supernova, incinerating profits and share prices. Demand for photovoltaic panels had been growing at 45 per cent annually from 2000 to 2008, but the industry underwent an aggressive expansion at the wrong time. Finished panel capacity is at about 9,000 megawatts while demand has contracted from about 6,000MW last year to 4,500 in 2009, according to Barclays

The recession is partly to blame, but so is Spain. Accounting for nearly half of global installations last year, Spanish demand is expected to fall from 2,500MW to about 300MW after subsidies were slashed.
WIth a glut of panel production due to last until 2012, Lex predicts a brutal price war that wipes out the less efficient producers.

Lex concluded:
The solar industry’s gold rush mentality and its unhealthy dependence on subsidies are to blame for its travails. The only positive is that private over-investment will make panels cheaper, giving taxpayers who sustain solar power worldwide a better deal.
Whether or not industry officials agree with Lex on the subsidies, “he” is exactly right on the investment. The entire industry’s success will be determined by its ability to drive down the learning curve, both to get manufacturing yields up and production costs down.

The existing firms need to utilize the funding that they already have — from customers, government and investors — to focus on efficiently serving existing pockets of customers that are managing to buy during this economic slowdown.

Wednesday, August 12, 2009

Not quite 230 MPG

There were a lot of headlines Tuesday about the Chevy Volt claim of best case EPA mileage of 230 mpg. Kathleen Pender of the SF Chronicle (which is still alive) does a good job of dissecting the nonsense behind the calculation. Since the “mpg” figure doesn’t count electricity use:
In real life, the cost of driving a plug-in hybrid like the Volt would depend entirely on how far you drive it between charges and how much you pay for gasoline and electricity.

If you drive 20 miles on electricity alone, technically your mpg is infinite. If you drive 20 miles on gasoline alone, you might get 30 mpg or more.
This is a little more scientific than the explanation developed by comedy writers for Conan O’Brian, who noted that the mpg required going downhill, with a sail, etc etc.

Clearly the EPA guidelines need to be revised to give more realistic numbers for plug-in hybrids. But I imagine GM (aka Government Motors) got what they wanted: free publicity for their new (still vaporware) car.

Tuesday, August 4, 2009

Bioavgas two years away?

Business Green quotes an aircraft exec as saying that commercial jet biofuels should be available by 2011:
Dr Alan H Epstein, vice president technology and environment at Pratt & Witney, told Businessgreen.com that the company was confident that the industry's efforts to develop biofuels were on track to attain the official certification new fuels require to be used commercially during 2011.

"We want to certify a biofuel by 2011 and we have an agreement to share results with GE and Boeing," he said. "Between us we make 98 per cent of the engine market and we genuinely are working as a team on this to get the engines certified for using biofuel. We think that is a realistic timescale."
Of course, agreeing on a formulation says nothing about commercial scale production, price competitiveness (for a commodity fuel) or global distribution, each of which could take years to achieve.

Still, I will be the first to admit that perhaps I have been too skeptical of jet biofuels — as long as they’re made from jatropha or algae or some other scalable crop, rather than coconut oil as used in the earliest PR stunt.

Thursday, July 30, 2009

Cost/benefit analysis for cool roofs

We're doing a remodeling project which includes installing a new roof. Here in California, we get a lot of sun, so the impact of solar irradiance on solar heat gain is a major concern — either for A/C costs (and thus peak summer energy loads) or on comfort (for those of us who don’t have A/C).

Thus, I’ve been looking into solar reflectivity and what has been called the “cool roofs“ movement. There is the Cool Roof Rating Council, “created in 1998 to develop accurate and credible methods for evaluating and labeling the solar reflectance and thermal emittance (radiative properties) of roofing products and to disseminate the information to all interested parties.”

There are also cool roof pages from the California Energy Commission (both consumer and business oriented pages) and at the EPA. (Unlike my smug friends praising German solar initiatives, cool roofs seems to be one place where the Europeans are copying the US).

A March 2009 presentation by Sheila Blake of the City of Houston summarizes the issues and their public policy implications — demonstrating how important a factor this is for energy efficiency, especially in the Southwest and Southeast. There’s also a March 2009 article at the McGraw-Hill continuing education site for the construction industry.

Normally one would assume that it‘s just a matter of lighter colors, but it’s not that simple.

Standard roofing materials have been developed to last a decade or more, and many of these materials (e.g. slate) are natural materials that come in specific colors. Lighter colored dyes, coatings and other treatments will fade or weather over time, reducing or eliminating the benefits of such treatment. (Apparently 19th century tin roofs provided durability and superior reflectivity.)

Another issue is that reflection isn’t enough. A roof also needs to emit heat (via infrared radiation) or it will raise the temperature of the roof and thus the house. The Metal Building Manufacturers Association has explains why this is important.

The solution to combined solar reflectance and emissivity is the SRI. Here is a succinct explanation from Astec Paints of Australia:
Total Solar Reflectance (T.S.R.) figures are expressed as a percentage falling between 0% and 100% dependant on a product’s Total Solar Reflectance as tested to ASTM C-1549 or ASTM E-903.

Emissivity or (Infrared emittance), is a measure of the ability of a surface to shed some of it’s heat in the form of infrared radiation away from the surface. The results from tests conducted to ASTM C-1371, express the emittance value as a percentage falling between 0% and 100% depending on the product’s performance.

Solar reflectance index (SRI), combines both the T.S.R.% reflectivity value and emittance value as a measure of a coating’s overall ability to reject solar heat.
The SRI is normalized to be in the range of [0,100] based on nominal “black” and “white” values. Lawrence Berkeley National Laboratory has an Excel spreadsheet that turns TSR and IE values into an SRI value, while Oakridge National Laboratory has a calculator to convert the ratings into energy savings. (These are among several calculators listed on the CCRC website).

Not everyone wants a white roof, particularly for a peaked roof (as is common here) seen by all your neighbors. The Cool Colors Project of LBNL and ORNL is trying to address this question. (It is also raising questions about the revising measurement standards for reflectivity, but let’s set that aside for now).

Starting in 2005, California’s Title 24 began requiring Cool Roofs for business buildings — perhaps because of their impact on daytime A/C and peak energy consumption — but I’d bet money that residential buildings will be covered in the next go-round. The California standards are being copied by other states.

What strikes me is how little of this is filtering down to the homeowner, perhaps because it’s not (yet) mandated. I’m painfully familiar with the state’s energy conservation regulations — Title 24 — that are either praised as the ultimate either in environmental leadership or bureaucratic micromanagement

However, I’ve heard nothing about roofing colors from my builder or roofing contractor. The only reason I investigated this is due to a stupid decision 20 years ago on re-roofing my home — replacing a light gray asphalt shingle with a medium gray — that raised the summer temperature 20°F until I added roof vents.

All the roofing bidders recommended a specific brand of 4.5mm thick APP modified bitumen membrane as the roofing material. After reading about it, it appears this material (guaranteed for 20 years) is now the preferred solution for low-slope roofs, replacing asphalt, hot mop and other solutions.

I couldn’t find the suggested roofing material in the CCRC database or the LBNL database. The manufacturer (Johns Manville) doesn’t provide data online, but a phone call provided numbers for the four lightest colors. In addition, a competitor (CertainTeed) has created a “CoolStar” variant of its competing APP product which is designed for Cool Roof initiatives. Clearly the latter has much better performance

Mfr.ProductSolar ReflectivityThermal EmissivitySRI
JMDesert Blend
† SRI estimated using LBNL calculator

I ran the numbers using the ORNL calculator, with several California locations. Given some reasonable assumptions, the lightest color roof provided huge savings for hot inland locations (Bakersfield, Fresno, Sacramento), while coastal locations in Central and Northern California (Santa Maria, San Francisco, Arcata) with low cooling needs actually increased costs due to reduced winter sun. Southern California locations (San Diego, Long Beach, Los Angeles) showed more modest gains. (The results were magnified or attenuated based on the thermal resistance of the roofing assembly).

Even in the Southernmost clime, the difference between the white roof and the medium colored roof was about $40/year in air conditioning. Since we won’t have air conditioning, I need to figure out what this means for the interior temperature on hot days, but the data suggests that rooftop temperature will be at least 20°F cooler with the white roof.

Thursday, July 9, 2009

Pickens Plan peters out

The New York Times, Wall Street Journal and others have reported that T. Boone Pickens has given up (at least for now) on his plans to to build a four-gigawatt wind farm in the Texas panhandle.

The stated (and undoubtedly important) reason was that his remote wind farm needed transmission lines. At one point he hoped to borrow $2 billion to build his own transmission line, but financing in today’s credit crisis made that impossible. A line is expected to be completed in 2013.

Of course, another reason is that wind power is less competitive due to declining fossil fuel prices — in this case natural gas, which produces about 21% of US electricity.

The 81-year-old oilman was so confident (or aggressive) of his plan that he ordered 687 (some say 667) wind turbines from GE for the first phase, and now has to find something to do with them — either place them in other wind farms or “put ’em in the garage.” With $2 billion tied up in these turbines, it’s quite possible that he’ll never see the turbines used.

Of course, this is a stark reminder of the dependence of wind and solar on transmission capacity, and also (as if we needed it) their vulnerability to shifts in the prices of substitute fuels. But more generally, this is an example of the Achilles heel of both technologies — their low operating costs come due to massive up front capital costs, magnifying the risk to private sector investors who might otherwise eagerly embrace these technologies.

California’s renewable power mandate is one way to reduce that risk, by providing a relatively predictable demand for those building plants and thus committing utility cash flow to keeping such plants open. However, as with all government interventions in the marketplace, there is the risk (in this case, with ratepayer dollars) that such mandates prove to be foolishly bone-headed distortions of the market (something we can’t know until we try).

California’s 33% mandate by 2020 seems particularly risky; a figure of 20-25% after the first decade would be more realistic, giving economists and policymakers a chance to access program success. Instead, the Sacramento politicians (including our governator) want to brag about their legacy to the voters, who will forget (a decade later) about who was responsible if it all turns out badly.

Still, this demonstrates the benefit of the US system of federalism and local policy initiatives: California can try its experiments while others watch. If it’s a great idea, California ratepayers benefit and all the other states will copy it. If it’s a terrible idea — or needs fine-tuning — other states can try something different and only Californians pay the price.

Wednesday, June 24, 2009

More good news for Tesla

Tesla has landed $465m in a federal loans for its electric car development; the other winners with Ford ($5.9b) and Nissan ($1.6b). The award was prominently played in the FT — curious whether it will become a trade issue (as French and German subsidies for Airbus have become).

It’s been part of a string of good news for Tesla and CEO Elon Musk recently, which includes favorable reviews for the Roadster in the FT. Tesla says it’s getting production costs for its $109k roadster down to $80k, from the former $140k (losing money on every unit, making it up on volume).

It still has an ongoing lawsuit with founder Martin Eberhard. The WSJ (blog) said
Eberhard unfurls a long list of grievances against Tesla and Musk in the complaint, accusing Musk of trying to “appropriate control of Tesla…and Eberhard’s legacy as the company’s founder and visionary” from the moment he became involved in the company as a first-round investor in 2004.

He claims that Musk caused the delay of the launch of the Roadster, Tesla’s two-seater, luxury sports car, compromised the company’s finances and engineered his ousting in November 2007. The lawsuit also lists a number of occasions in which Musk is portrayed publicly in the media as the founder of the company and doesn’t try to rectify that, and another number of instances when Musk says that Eberhard was to blame for the Roadster’s delay and the company’s financial difficulties.
Musk counters on his blog. The WSJ summarized it as
Much of the dispute with Eberhard centers on delays in getting Tesla’s cars on the road. Eberhard blames Musk’s ambitions, while Musk cites Eberhard’s unrealistic business plan (which he said foresaw a $65,000 price tag for the Roadster after 25 units produced) and ill-chosen suppliers.

The reason the Roadster cost so much to develop is that Tesla had to spend development money twice, Musk said. After Eberhard was asked to leave two years ago, the company had to redesign or retool many of the cars’ vital parts, including the body and power electronics, he said.
As always, Musk is not lacking in confidence:
"We don't need to raise more money; we may choose to, but we're not out there beating the bushes to find other investors." And he predicted "the entire automotive market will eventually become fully electric, mark my word. It's just a question of how long."

Asked why he was so sure, Musk offered Tesla's recent sales as proof. "We sold 1,000 cars in a month and a half without having the money secured from the DOE, in the worst economy since the Great Depression, and with no advertising. What more do you need?"
At the time of Daimler’s ≈10% investment in Tesla last month, one estimate placed a post-money valuation of Tesla at $550m. With $700m in VC funding, the VCs will still want another 10x-20x increase in the market cap before they sell Tesla to Daimler (or another car company).

Despite the good news, the Merc quoted one analyst as remaining skeptical about Tesla’s ability to reach adequate scale.
Automobile analyst Philip Gott with IHS Global Insight welcomed Tuesday's announcement, but he wondered whether a niche company like Tesla, despite its innovative prowess, was the best place to put government money. …

"This will be a very tough global race for technological superiority over the next decade," he said. "It's about time we got started. But with all due respect to Tesla, and I admire their entrepreneurial zeal and perseverance, my view is their business model works only in a very specialized premium market. And I wonder if our tax money would be better spent on a more mainstream player."