In Silicon Valley, Venture Capitalists Turn Cautious and Focus on the Short Term

from NYT...

CLEAN TECH GETS REALISTIC Venture capitalists are still chasing clean technology. Through September, $3 billion was invested in technologies that create alternative energy and conserve power, up from $1.9 billion the year before, according to the National Venture Capital Association. But big, expensive projects like building factories to manufacture solar panels or biofuels are falling out of favor.

“The economic arguments for those businesses literally went upside down in a year,” said Paul Holland, the general partner in charge of the clean tech practice at Foundation Capital.

Instead, some venture capitalists are looking at technologies that monitor energy demand, like software that tracks and regulates a building’s energy use.

http://www.nytimes.com/2009/01/05/technology/start-ups/05venture.html?_r=1

Wave power put to the test in Monterey Bay

Kurtis Alexander - Sentinel Staff Writer
Posted: 12/09/2008 01:30:56 AM PST

The 60-foot Velocity motored out of Santa Cruz harbor Monday afternoon under mostly sunny skies. On deck was an apprehensive crew -- scientists with research group SRI International of Menlo Park, observers from the Department of Energy and financiers with the Tokyo-based Hyper Drive Corp.

As the boat began to bob up and down after clearing the breakwater, and the stomachs of those with weaker constitutions began to churn, the day's mission became all the more clear: to see the wave motion go to work making electricity.

The 62-year-old SRI International, which counts the invention of the computer mouse among its discoveries, was at sea to test its new wave-powered generator, a floating device that awaited the Velocity about a mile offshore and holds the promise, its inventors said, of bringing energy to land.

"There's only so much you can do in the lab. At some point, you have to put it out in the water," said Philip Von Guggenberg, the group's business director.

The ocean has become the latest frontier for a power industry hungry for alternatives.

Waves, say energy experts, have many advantages. They're constant and reliable, close to the highly populated coasts where power needs are greatest, and, unlike other sources of electricity such as solar, can be harnessed with very basic technology.

Two countries, Portugal and Scotland, have begun to commercialize wave power and several others are working
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to catch up, including the United States, where several projects are in the pipeline.

"It's still a very open market," said Carolyn Elefant with the Ocean Renewable Energy Coalition, the young industry's even younger trade group. "Even companies that are on the leading edge now and currently feeding power to the grid, we don't know in 10 or 15 years if they're going to be the winners in this race."

For researchers at SRI International, the strategy in a marketplace with no defined standard is to go simple.

The group's wave generator is designed to let waves move a bendable slab of rubber-like material and, by doing so, act much like a turbine and produce electricity. Today, it might just be a few watts, tomorrow, a small city.

"We like to say we can make electricity with something as simple as a rubber band," said Roy Kornbluh, principal research engineer for SRI International. The technology, he adds, avoids the more costly and error-prone wave systems that rely on pumps to push air, water or oil to generate power.

And so, amid light winds on the Monterey Bay and relatively calm surf, the Velocity pulled up to the much anticipated wave machine. Kornbluh and others aboard set their sights seaward.

On a roughly 10-foot-tall buoy, two levers moved with the rise and fall of the ocean, pushing accordian-looking rubbery material up and down through plastic columns.

"It's responding to the choppy waves and the longer waves," Kornbluh said.

In other words, success. At least for now.

Mikio Waki, chief technology officer of Hyper Drive, says the technology, which produced a relatively scant 20 joules per second -- enough to power a small lightbulb -- during its four-day debut, is at least five years away from being scaled up and commercially viable. And how the power will be transmitted, either sending electricity through underground cables or producing hydrogen from the generator that would run through a pipe, is yet to be determined.

But in an industry that energy experts say could supply 6.5 percent of the nation's total energy needs, there is still time to figure things out.

"The best way to extract the resource is still unclear," said Alejandro Moreno, a manager of water programs for the Department of Energy, who joined the crew of the Velocity to preview the nascent system. "But any technology that can minimize moving parts and components that might break will be at an advantage."
Contact Kurtis Alexander at 706-3267 or kalexander@santacruzsentinel.com.

Momentum Slows for Alternative Energy

October 21, 2008

By CLIFFORD KRAUSS

HOUSTON — For all the support that the presidential candidates are expressing for renewable energy, alternative energies like wind and solar are facing big new challenges because of the credit freeze and the plunge in oil and natural gas prices.

Shares of alternative energy companies have fallen even more sharply than the rest of the stock market in recent months. The struggles of financial institutions are raising fears that investment capital for big renewable energy projects is likely to get tighter.

Advocates are concerned that if the prices for oil and gas keep falling, the incentive for utilities and consumers to buy expensive renewable energy will shrink. That is what happened in the 1980s when a decade of advances for alternative energy collapsed amid falling prices for conventional fuels.

“Everyone is in shock about what the new world is going to be,” said V. John White, executive director of the Center for Energy Efficiency and Renewable Technology, a California advocacy group. “Surely, renewable energy projects and new technologies are at risk because of their capital intensity.”

Senator Barack Obama and Senator John McCain both promise ambitious programs to develop various kinds of alternative energy to combat global warming and achieve energy independence.

Mr. Obama talks of creating five million new jobs in renewable energy and nearly tripling the percentage of the nation’s electricity supplied by renewables by 2025. Mr. McCain has run television advertisements showing wind turbines and has pledged to make the United States the “leader in a new international green economy.”

But after years of rapid growth, the sudden headwinds facing renewables point to slowing momentum and greater dependence on government subsidies, mandates and research financing, at a time when Washington is overloaded with economic problems.

John Woolard, chief executive officer of BrightSource Energy, a solar company, said he believed the long-term future for renewables remained promising, though “right now we are looking at tumultuous and unpredictable capital markets.”

Venture capital financing for some advanced solar projects and for experimental biofuels, like ethanol made from plant wastes, is drying up, according to analysts who track investment flows.

At least two wind energy companies have had to delay projects in recent days because of trouble raising capital. Several corn ethanol projects have been delayed for lack of financing in Iowa and Oklahoma since last month, and one plant operator in Ohio filed for bankruptcy protection last week.

Tesla Motors, the maker of battery-powered cars, recently announced it had been forced to delay production of its all-electric Model S sedan, close two offices and lay off workers.

Investment analysts say initial and secondary stock offerings by clean energy companies across global markets have slowed to a crawl since the spring, and for the full year could total less than half of the record $25.4 billion for 2007.

Worldwide project financings for new construction of wind, solar, biofuels and other alternative energy projects this year fell to $17.8 billion in the third quarter, from $23.2 billion in the second quarter, according to New Energy Finance, a research firm in London. The slide is expected to be sharper in the fourth quarter and next year.

In the United States, financing for new projects and venture capital and private equity investments in renewable energy this year might still top last year’s results because so much money was in the pipeline at the beginning of the year, but the pace has slowed sharply in the last month.

The next presidential administration, to make good on campaign rhetoric and continue supporting renewables, will have to choose alternative energy over other programs at a time of ballooning deficits. Analysts say that is no sure thing.

“Government funding for renewables is now going to have to compete with levels of government funding in other areas that were unimaginable six months ago,” Mark Flannery, an energy analyst for Credit Suisse, said.

The central questions facing renewables now, experts say, are how long credit will be tight and how low oil and natural gas prices will fall. Oil and gas are still relatively expensive by historical standards, but the prices have fallen by half since July. Some economists expect further declines as the economy weakens.

Wall Street analysts say most utilities and other builders can profitably choose big wind projects over gas-fired plants only when gas prices are $8 per thousand cubic feet or higher. Natural gas settled Monday at about $6.79 per thousand cubic feet, down from about $13.58 on July 3.

“Natural gas at $6 makes wind look like a questionable idea and solar power unfathomably expensive,” said Kevin Book, a senior vice president at FBR Capital Markets.

Government mandates already on the books, including state rules requiring renewable power generation and federal requirements for production of ethanol, ensure that to some degree, alternative energy markets will continue to exist no matter how low oil and gas prices go. But the credit crisis means some companies that would like to build facilities to meet that demand are going to have problems. “If you can’t borrow money, you can’t develop renewables,” Mr. Book said.

Renewable energy now meets 7 percent of the nation’s energy needs, and public subsidies have promoted a leap for several alternative energy sources in recent years.

Ethanol is sold nationwide as a gasoline additive, and federal legislation aims to replace a major share of the oil now imported into the United States with domestically produced biofuels in the next 15 years. Enough new wind power was installed in the United States to serve the equivalent of 4.5 million households in 2007, the third year in a row the country led all nations in new wind power.

Renewable energy has become a big business worldwide, with total investment increasing to $148.4 billion last year, from $33.4 billion in 2004, according to Ethan Zindler, head of North American research at New Energy Finance. Mr. Zindler said the upward momentum had halted, and that total investment this year was likely to be lower than last.

In the 1970s, just as in recent years, high prices for fossil fuels led to rising interest in renewables. But when oil prices collapsed in the 1980s, the nascent market for renewable energy fell apart, too. Congress eliminated tax credits for solar energy, ethanol could not compete with cheap gasoline and a wind farm boomlet in California failed to catch on in the rest of the country.

The epicenter of investment and development moved to Europe, with its strong government support for renewables, and began shifting back only when heating oil and natural gas prices shot up again in recent years.

There are some differences this time. Coal, another major competitor of renewables, remains expensive and is facing increasing scrutiny over environmental concerns.

Most important, renewable energy entrepreneurs and experts say, is the growing government and public backing for renewable energy in the United States.

“What is driving the market this time is that we’re at war and this is a security issue,” said Arnold R. Klann, chief executive of BlueFire Ethanol, a California company that is planning to make ethanol out of garbage with the help of $40 million in financing from the Energy Department.

In its recent financial rescue package, Congress provided $17 billion in tax credits to promote various forms of clean power, for everything from plug-in electric vehicles to projects that will capture and store carbon dioxide from coal-burning power plants. Production and investment tax credits were extended for wind energy for one year, geothermal energy for two years and for solar energy for a full eight years.

Meanwhile more than 30 states have enacted standards demanding that utilities generate a minimum proportion — typically 10 to 20 percent — of their power from renewable sources in the next 5 to 10 years.

But some analysts say the government supports may not be enough to propel continued growth for renewables, noting that several states have already relaxed their goals.

“When they can’t meet their targets,” Mr. Book said, “they change them.”

Two Large Solar Plants Planned in California

August 15, 2008
By MATTHEW L. WALD, NYT

Companies will build two solar power plants in California that together will put out more than 12 times as much electricity as the largest such plant today, the latest indication that solar energy is starting to achieve significant scale.

continued at the NYT...

Shipping Costs Start to Crimp Globalization

posted by Dustin

This trend could be promising for every issue from domestic job creation to supply chain auditing.

August 3, 2008

Shipping Costs Start to Crimp Globalization

By LARRY ROHTER NYT
When Tesla Motors, a pioneer in electric-powered cars, set out to make a luxury roadster for the American market, it had the global supply chain in mind. Tesla planned to manufacture 1,000-pound battery packs in Thailand, ship them to Britain for installation, then bring the mostly assembled cars back to the United States.

But when it began production this spring, the company decided to make the batteries and assemble the cars near its home base in California, cutting more than 5,000 miles from the shipping bill for each vehicle.

continued here...

Gassing up with garbage

July 24, 2008

The Energy Challenge, NYTIMES

Gassing Up With Garbage

By MATTHEW L. WALD

After years of false starts, a new industry selling motor fuel made from waste is getting a big push in the United States, with the first commercial sales possible within months.

Many companies have announced plans to build plants that would take in material like wood chips, garbage or crop waste and turn out motor fuels. About 28 small plants are in advanced planning, under construction or, in a handful of cases, already up and running in test mode.

For decades scientists have known it was possible to convert waste to fuel, but in an era of cheap oil, it made little sense. With oil now trading around $125 a barrel and gasoline above $4 a gallon, the potential economics of a waste-to-fuel industry have shifted radically, setting off a frenzy to be first to market.

“I think American innovation is going to come up with the solution,” said Prabhakar Nair, research chief for UOP, a company working on the problem.

Success is far from assured, however. Some of the latest announcements come from small companies whose dreams may be bigger than their bank accounts. They are counting on billions in taxpayer subsidies. Big technological hurdles remain, and even if they can be solved, no one is sure what unintended consequences will emerge or what it will really cost to produce this type of fuel.

“We desperately need it, and I personally think it’s not there yet,” said Steven Chu, director of the Lawrence Berkeley National Laboratory and a Nobel Prize-winning physicist. “You have to look at starts with a grain of salt, especially starts where they say, ‘It’s around the corner, and by the way, can you pay half the bill?’ ”

Still, the incentive to make fuel from something, anything, besides oil and food is greater than ever. Moreover, the federal government is offering grants to help plants get off the ground and subsidies for one type of fuel of $1.01 a gallon, twice the subsidy it historically offered to ethanol made from corn.

Potential controls on global warming gases would heighten the appeal of these fuels, since many of them would add little new carbon dioxide to the atmosphere.

Tellingly, the type of companies placing bets on the field has started to expand. The earliest were small start-ups founded by people with more technological vision than business experience. Now some of the giants of global business, including Honeywell, Dupont, General Motors, Shell and BP, are taking stakes in the nascent industry.

The dream of making fuel from plants is almost as old as the internal combustion engine. Henry Ford himself was fascinated by the idea, and it re-emerges in periods of fuel scarcity and high prices. These days, advancing technology has made the notion more plausible.

Virtually any material containing hydrogen, carbon and oxygen could potentially be turned into motor fuel. That includes plastics, construction debris, forest and lawn trimmings, wood chips, wheat straw and many other types of agricultural waste.

The potential fuels include ethanol, which can be blended with gasoline, or other liquids that could displace gasoline or diesel entirely. Government studies suggest the country could potentially replace half its gasoline supply in this way — even more if cars became more efficient.

The government is pushing to get the industry off the ground. Legislation passed last year mandates the use of 36 billion gallons of biofuels a year by 2022, less than half of it from corn ethanol. Almost all the rest is supposed to come from nonfood sources, though the requirement could be waived if the industry faltered.

“One has to say upfront that what Congress has done is remarkable in its bravery,” said David Morris, vice president of the Institute for Local Self Reliance, a group in Minneapolis that advocates biofuels.

Much of the new money flowing into the field is coming from Silicon Valley, where the venture capitalists who gave the world the Internet revolution see an opportunity to do something similar with the fuel supply.

At Solazyme, a start-up in South San Francisco that hopes to commercialize a process for making fuel from algae, President Harrison F. Dillon said, “When we founded the company in 2003, we couldn’t find a venture capital firm that had heard of the concept of a biofuel.” Now he is backed by two such firms.

Venture capital investment in the first half of this year hit $612 million, up from $375 million in all of 2007, according to a survey by Thomson Reuters. Every few days brings another announcement. PFC Energy, a Washington consulting firm, counts projects worth perhaps $1.5 billion that will total more than 300 million gallons of capacity by 2011, if they all get built.

That is small in the scheme of American fuel demand, but it would presumably set the stage for substantial growth if those first projects prove that the economics can work.

One of the first companies to bring a plant online is KL Process Design Group, in Wyoming. With experience making corn ethanol plants, it has built a small plant meant to use pine wastes from a nearby national forest. The company is still testing its production line but hopes to begin commercial sales of ethanol late this year.

“We’re still learning and tweaking, and hoping for a little bit of capital infusion,” said Tom Slunecka, a vice president of the company.

Range Fuels, of Denver, is building a commercial-scale plant in Soperton, Ga., with help from the Energy Department. That plant will take pine chips and turn them into ethanol, with commercial sales expected by late 2009 or 2010.

Some companies want to use garbage. On Friday, a company called Fulcrum BioEnergy said it would start construction later this year on a $120 million plant at the Tahoe-Reno Industrial Center, in Storey County, Nev., to make 10.5 million gallons of ethanol a year from 90,000 tons of garbage. Operation would begin in early 2010.

In Montreal, another firm, Enerkem, plans to use arsenic-contaminated utility poles from the provincial electric company. On Wednesday, the Los Angeles County Regional Planning
Commission approved a plan by BlueFire Ethanol to build a $30 million garbage-to-ethanol plant on 10 acres next to a landfill in Lancaster, Calif.; construction will start soon, the company said.

A handful of small companies has long made a diesel replacement from waste oil, or sold kits to individuals to do the same. One company in Carthage, Mo., even turns turkey guts into fuel. The goal of the emerging waste-to-fuel industry is more elaborate, however: to take bulky, solid feedstocks and transform them into high-grade motor fuel.

History provides plenty of warning that it will not be easy. A company called Verenium in Lafayette, La., has cut ribbons three times in one locale since 1998 on plants that would supposedly make fuel from sugar cane waste, and has yet to sell a drop because of problems converting laboratory success into smooth, commercial-scale operation.

A bigger operation, Iogen, has been running a demonstration plant in Ottawa since 2004 that can turn wheat straw into ethanol. It was expected to build a plant in Idaho but has suspended work to focus attention on a plant in Saskatchewan. “It would be our view that there are substantial challenges in scaling up a big new biochemical process,” said Brian Foody, the president.

The Energy Department early last year picked six projects as most likely to succeed, and offered each of them tens of millions of dollars. Iogen’s Idaho project was among them; so was a plant in Kansas proposed by a Florida company, Alico, that has also been abandoned. Still, increasing interest from big companies — ones with a track record of solving technical problems — suggests that a waste-to-fuel industry may not remain out of reach forever.

General Motors has invested an undisclosed sum in two companies, Coskata, of Warrenville, Ill., and Macoma, of Lebanon, N.H., that aim to turn crop wastes into ethanol.

DuPont, one of the world’s largest chemical companies, has joined forces with a company called Genencor, announcing plans to commercialize a process for making ethanol from the nonedible parts of corn and sugar cane. They plan to invest $140 million over three years.

In making their announcement, the companies estimated the worldwide market for fuels made by methods like theirs would eventually reach $75 billion, dwarfing the scale of today’s biofuels produced from food crops like corn and sugar cane.