Green Project

What's Next for Clean Energy

This past weekend, I attended the Aspen Institute's Clean Energy Roundtable, an annual gathering of business, political and policy leaders working in clean energy. Inspired by the many insights and ideas presented, here are my thoughts on the state of clean energy today and what lies ahead. 

First the good news.  Prices of key clean energy technologies are plummeting, bringing many technologies such as distributed solar and energy storage closer and closer to mass deployment.  The cost of solar panels today is about 20% below that of a year ago.  And it should continue dropping for the forseeable future. In other words, the performance/price ratio is improving exponentially, like computer chips if not quite as fast and for different reasons, cost economies for the most part as opposed to breakthrough technologies.  The main driver of the plummeting costs is volume and successful efforts by the Chinese government to vertically integrate the Chinese solar industry--that now supplies over half of the world's solar panels.  (In advanced thin films, costs per watt are also coming down.)  Even more dramatic price drops are occurring in battery storage across a range of chemistries with prices halving in the the last year.  Plummeting prices that translate to rising performance are good news for developers, electric car-makers and the global industry at large.

The story is more complicated, however, in the United States where we are in what might be described as the best and worst of times.  This past year saw torrid growth in solar deployment in the US with solar capacity doubling; Wind installations also grew and wind is now a very competitive source of power.  Solar--already competitive with subsidies and in some markets--will be very competitive in several years.  That is the good news.  The bad news is that solar generation still supplies only .2% of US electricity and, what's more, growth has been driven by the 1603 provision in the tax law that allows tax credits to be redeemed for cash.  This provision expires on December 31 this year. Since the financial crisis, tax credits deals to build everything from affordable housing to energy have exceeded the pool of capital from investors seeking to shelter profits.  That means tax credits absent the 1603 provision can be worthless.  With extension of Section 1603 uncertain , the solar industry may face significant challenges beginning this winter.

Similarly, on the wind side, the end of the 1603 credit would take a toll and the production tax credit for wind, itself, expires at the end of next year. While companies are scrambling to start projects before these deadlines pass, afterwards activity may fall of the proverbial cliff.  In short, while global fundamentals for clean energy remain strong, the sector remains quite sensitive to government subsidy.  In the US with subsidy likely to to change and-especially with gas prices likely to stay low as more shale gas comes onstream, we may see more clean energy activity shift overseas.  (One potential fix to this problem: moving clean energy off "subsidies" and giving them equal access to the master limited partnership tax break that extractive industries like oil and gas enjoy.)  Cheap American shale gas could nicely complement intermittent, renewable energy, but effortst to bring the technologies together have lagged.

Indeed, despite intense focus by Silicon Valley and the support of the US government, the US is not catching up with Europe or China on clean energy and in many measures, we are falling further behind.  A few years ago, Germany adopted an export promotion plan that included factories as exports.  It exported gas turbine and solar panel factories to China which is how China has so rapidly come to dominate many areas of clean manufacturing.  The Germans have done well selling machine tools to the Chinese while creating demand (and green power) at home through an aggressive feed in tariff  The US, however, except for a few bright spots like Applied Materials that makes equipment to manufacture panels, First Solar, a thin film manufacturer, here and there innovators like Sun Edison and Tesla--and a few large companies such as GE and IBM, has yet to find its way.

Why?  Unlike Germany that has deep credentials in improving manufacturing incrementally, we have excelled through innovating and creating new industries. For example, France Telecom deployed the minitel years  before America  went online but US companies ultimately came to dominate online technology once we created the open Internet platform that allowed yankee entreprenurship to flourish.  Yet despite developing scores of breakthrough energy technologies in our national labs and robust funding of clean energy companies, as I have written before, clean tech innovators have run up against the brick wall of a regulatory system that funnels purchasing decisions to regulated utilities.  The latter are dis-incented by law to invest in new technologies.  Meanwhile, in many states, the consumer remains locked out of the action entirely behind the Iron Curtain of the electricity meter. The sector is still attracting capital but time is running out to upgrade the regulatory structure to what I have described as Electricity 2.0 to create large, gatekeeper-free platforms that reward innovation and investment.

If there is one strong positive on the clean energy front, it is that the consumer has been given a small seat at the table, notably through the introduction this year of the first two electric cars, the Chevy Volt and Nissan Leaf, and in the form of the proliferation of direct generation of electricity, primarily from solar.  The electric car is a technology that can engage the consumer on the ultimate playing field of new, more,  better.  However, if the the cars fail to thrill, clean tech will experience a potentially huge setback.  For that reason making electric cars and charging infrastructure work has to be a key priority for the industry.

More broadly, the once almighty American Consumer who has not only driven domestic growth in recent decades by controlling a huge chunk of GDP but also funded the development of the Pacific rim, has been the missing force in the clean energy sector.  Consumers are prohibited from directly buying clean energy by law in many states in contrast to communications or the Internet where consumer demand drives rapid product life cycles and profits at a speed in synch with venture capital.

Indeed, the write once, make money everywhere, model of the Internet is providing stiff competition for capital to clean tech where local regulations and the gate-keeping role of utilities can sap the energies of even the best funded, most visionary entrepreneurs.

Nonetheless, my final takeaway was that while challenges abound, clean energy remains one of the largest, most important and potentially, most transformative projects of the 21st Century.   Our job is to engage the consumer, sweep away barriers and play to America's strengths in innovation, entrepreneurship and out-of-the box thinking  in the face of obstacles.

Tapping the Strategic Petroleum Reserve

Yesterday, the United States announced it will release 30 million barrels of oil from the Strategic Petroleum Reserve as part of a coordinated effort by the International Energy Agency to place an additional 60 million barrels on the market to reduce oil prices.

The move comes at a crticial point in the global economic recovery: While oil prices have been trending downward, uncertainty over energy combined with problems in the Eurozone and the US housing market are threatening the global recovery.  The Federal Reserve acknowleded as much earlier this week when it lowered its growth forecasts.  The optimism of the fourth quarter of last year has given rise to pessimism as the recovery enters an unprecedented second soft patch and some have even raised fears of a double dip recession. 

In this context, the release of oil--though it equals only about 15 days consumption by the US--is timely.  It made sense to jump proactively on a downward drift already underway.  The announcement has already succeeded in taking a bite out of oil prices which dropped 7% yesterday. 

When intervening in markets there are normally several steps that governments employ.  First they talk.  A statement from the Secretary of the Treasury that the US favors a strong dollar for example, is usually sufficient to quiet fluctuations in the dollar.  The IEA did the equivalent of this when it said in May it would release oil if OPEC failed to raise production.  If mild talk doesn't workthe next step is to speak more forcefully.  Because financial markets can be unforgiving once they smell weakness, this may not work and can even have the opposite effect.  The next step for those with the resources is actual intervention in markets.  When intervening, the element of surprise is useful as it catches speculators off guard--ideally stemming their appetite for risk.  Yesterday's intervention seems to have been a success insofar as it has brought prices down but they are still above $100 per barrel. 

While I do not quarrel with yesterday's action, I think the Administration and the oil consuming nations need to go far beyond countering OPEC--or in this case making up for its failure to raise production to offset Libyan disruptions.  They need to end the oil cartel.

The IEA, created in 1974 in the wake of the first oil shock within the OECD framework to counter OPEC, has done a good job in its history of fostering cooperation on energy matters among consuming nations.  It requires its members to maintain large stockpiles of oil as a counterweight to OPEC.  However, just as the IEA has evolved, so too, has the world geopolitical situation.  The Western powers are now involved militarily in the Middle East--the geographic heart of the OPEC cartel--to a larger degree than at any time since colonial mandates wound down after World War II.  The convulsions in the region that have placed the West in the role of supporting some OPEC governments such as Saudi Arabia and Iraq while championing rebellion in others such as Libya gives us more leverage than we have employed to date to break up OPEC.

Specifically, as I argued earlier this month, the US and NATO should make as a condition of military aid that receiving governments agree to a timetable to withdraw from OPEC.

Second, the US has other tools.  The Justice Department has broken up hundreds of international cartels over the last two decades.  All it needs to take on OPEC is clarification of the Foreign Sovereign Immunity Act act, legislation both houses of Congress have at one time passed.

Third, eight OPEC countries are also WTO members or observers and the WTO forbids cartels.  As argued compellingly by Senator Frank Lautenberg, the oil consuming nations, led by the US should file trade actions in the WTO against OPEC.

Over a century of economic thought and case examples have shown that cartels are bad.  When the cartel deals with something as vital as oil, it is not only bad but dangerous.  OPEC--an organization that has done nothing good for the world and much ill--is vulnerable right now.  The global economy may be even more vulnerable.  The US and, indeed, all the oil consuming nations, should use every tool at their disposal to end the OPEC oligopoly.

The White House Framework for Grid Modernization

Yesterday, the White House released its keenly anticipated policy blueprint "A Policy Framework for the 21st Century Grid: Enabling Our Secure Energy Future", at an event at the White House.  As one of those whose input the report's authors solicited and someone who has argued that modernizing our electricity architecture is vital to the entire clean energy project, I am pleased that the document is now public.

Perhaps the greatest value of the Administration's Framework for the future of the grid is that it addresses the many topics related to the grid and commits the Administration to a path forward on all of them, a path based on considerable stakeholder input.  As NEC senior advisor Phil Weiser put it at yesterday's event, the framework is certainly not the beginning of the end of modernizing our electricity architecture, in Churchill's phrase, but it may be the end of the beginning.

The Framework sets forth a number of important priorities and pathways, all of them topics that our Electricity 2.0 project has addressed as well.  These include "Unlocking Innovation in the Electricity Sector" through open standards, demand management and perhaps most critically, preventing anti-competitive behavior.  In the words of the framework: "Ensuring options for consumers can catalyze innovation and help to empower them."

The report also has an entire chapter on a key priority of Electricity 2.0, "Empowering Consumers and Enabling Informed Decisionmaking".  As I have long argued, there is a strong pent up desire on the part of the American people to play a role in transitioning to clean energy but they have lacked the tools to do so.   The framework very explicitly endorses the idea of empowering consumers with information and the opportunity to exercise choice.

The framework also properly focuses on security.  Modernizing our electricity architecture means creating more reslience in the network, redundancy and safeguards against catastrophic failure.  Information technology and an upgrading of the architecture to manage variable generation--linked to intelligent demand will be key to achieiving the clean energy promise.

At yesterday's event, Energy Secretary Chu talked about the incredible innovation that has occurred at the edge of the grid-- as in LED lighting, electronics and solar panels--in sharp contrast to a system of transmission and distribution that Edison, Tesla and Westinghouse would recognize.  Going forward, it will be critical to open up portions of the network that those pioneers launched to a richer ecosystem of modern day innovators to bring the electricity backbone into the 21st Century. 

Also at the event, John Holdren, the President's Science Advisor and Aneesh Chopra, the CTO of the government, spoke about the critical role that grid modernization must play in moving America toward a clean energy fuure.

All in all, it was an excellent day of discussion around a very important policy document.

We are very fortunate that later this week on Thursday at 12:30PM at NDN, Nick Sinai of the Office of Science and Technology Policy, one of those who worked closely on the Framework, will be participating in our Clean Energy Solutions event at NDN where he will talk about the Framework

Our event will also feature a number of other distinguished speakers and include a presentation by Verizon debuting an exciting new service in this space. 

Don't miss this important and very timely event.   RSVP here.

End Opec Now

The OPEC cartel that meets in Vienna today has thrived in its 50-year history. First ignored, then despised for using the "oil weapon" on the West, and ultimately granted a strange legitimacy due to age, it has assumed all the trappings of an international organization. This week's meeting of Mahmoud Ahmadinejad 's Iran, Muammar Gaddafi's Libya and Hugo Chavez' Venezuela to fix quotas, for example, will take place not in Gaddafi's tent but in a sumptuous building on the Helferstorferstrase in Vienna. Press is likely to report not on why oil prices are set by a cartel of the world's worst leaders but rather on whether oil quotas are modestly adjusted to cover wells out of order since the Libyan revolt

Unfortunately, the cartel's victims have not fared as well. OPEC has over the last century engineered a massive transfer of wealth from the rest of the world to its rulers. At key junctures, it has used the "oil weapon" to destabilize the global economy as with the 1970s oil shocks, the 1980s debt crisis triggered by soaring oil bills and the 2008 financial collapse (when it cut quotas with prices over $100). Less well known is the role of oil price spikes in stoking misery and instability in developing countries. The final victims have been the people of the oil states themselves who have not shared in the wealth enjoyed by a few while seeing democracy pushed indefinitely into the future.

Adam Smith famously observed "Seldom do businessmen of the same trade get together but that it results in some detriment to the general public." Based on a long history of economic study, today cartels are illegal in virtually all developed countries. The question with OPEC, therefore, is not why it is bad but why has it survived. During the first Gulf war in 1991, the US and its allies saved Saudi Arabia, liberated Kuwait and dictated peace terms to Iraq. Yet after the war, all three countries continued as prominent OPEC members. In 2002 we invaded Iraq again, this time overthrowing Saddam Hussein. But rather than insisting that Iraq leave OPEC, the United States actually became a de facto OPEC member through the provisional Iraq authority.

The superficial answer to this question of why OPEC has persisted is it has successfully claimed sovereign immunity. Unlike a private cartel -- hundreds of which have been prosecuted by the Justice Department since 1990, OPEC is comprised of governments that happen to set quotas for oil. But this argument is weak. The 1976 Foreign Sovereign Immunity Act contains an exception to immunity in the case of governments engaging in commercial activities. The real reason that OPEC has survived is a lack of US resolve to break it up. In 2007 and 2008, the House and Senate passed legislation that would have forced the Justice Department to go after OPEC. However, a veto threat from President Bush prevented final passage of the legislation.

There is an equally strong case for trade action against OPEC, made compelling by Senator Frank Lautenberg. The WTO unequivocally prohibits quota-based cartels except in the rare case of conserving resources or national security and of the 12 OPEC members, five are WTO members and 3, observers. Yet to date, the US Trade Representative has not filed an action.

These tools alone might suffice to end OPEC. But the ratcheting up of US engagement in the region recently creates a new opportunity to break the cartel.

The Middle East -- the geographic center of OPEC -- is clearly undergoing fundamental change. Not only, of course, did the US midwife democracy in Iraq, we remain the guarantor of security of Saudi Arabia, Kuwait and the UAE, and are now also supporting the rebels in Libya. The expanded US and EU role in the region provides an opportunity to make a simple case to all parties. US and more broadly EU support must be contingent on a timeline for withdrawal from OPEC.

In short, the conditions exist to end OPEC. We only need resolve. Here is a plan forward. By July 4th, Congress should pass legislation revising the FSIA to strip OPEC of any hint of sovereign immunity. The US Trade Representative should immediately begin studying action against the OPEC countries in the WTO. The Obama Administration should make it clear to parties we aid in the Middle East they need to plan to transition out of OPEC. We can end OPEC but only if we act. Time is of the essence due to the tenuous state of the global recovery.

Secretary of Commerce Nominee, John Bryson

There are many reasons that John Bryson, nominated by President Obama yesterday to be the next Secretary of Commerce, is an ideal pick for the job.  Bryson, as many news outlets have reported, is a highly successful CEO who, sitting on the boards of companies like Boeing and Disney, understands US business in its many dimensions.  He also has exceptional environmental credentials as a founder, years ago, of the Natural Resources Defense Council.

However, of greatest relevance to the future of the US economy, may well be that as the former CEO of Edison international, the parent of Socal, one of the most progressive utilities in the nation, he understands the challenges of the electricity industry to an exceptional degree.  Electricity lies at the heart of the clean energy challenge and Bryson will bring to the job extraordinary expertise in building the clean energy economy of the future.  Indeed, his choice for the job highlights the degree to which energy has moved from being a resource issue to an economic one that lies at the heart of US competitiveness and the future of the US economy.

While helming Edison International, Bryson earned high marks for increasing the role of solar and wind power in Edison's portfolio.  Today, its subsidiary Southern California Edison buys 65% of all solar power generated in the United States.  And it sources close to 20% of its power from renewable sources.  If the entire United States were equally friendly to renewables, the clean energy revolution in the United States would be well on its way to completion.  In fact, of course, non-hydro power today still supplies only about 3% of US power compared with 20-30% in some European countries.

Perhaps most important of all to the clean energy project, Bryson also has shown he understands the importance of modernizing the grid which the Administration is also making a high priority.

As the US continues to recover from the Great Recession, having a skilled economic leadership team in place is more important than ever.

Congress should move quickly to confirm the John Bryson nomination.

Securing Oil Independence through Electric Cars at Scale: Lessons from Israel

With gasoline prices edging northward of $4 dollars in many states and some analysts predicting $5 per gallon gas by Memorial Day, gasoline prices are on everyone's mind.  Whether due to political unrest now roiling the Middle East, the revival of demand in the global economy or speculation about supply disruptions, 2011 is promising to be a rough one for consumers.  Yet paradoxically, it is shaping up to be another bonanza for oil exporters.  It may be OPEC's first trillion dollar year. 

Unfortunately, an oil bonanza is no more likely to bring stability to the Middle East this time than in years past due to the corrosive influence that oil revenues have had on democracy.  And for consuming nations like the US, it will come at a high cost.  While the answer is clearly to shake the oil addiction, acheiving oil independence has been an unrealized dream since President Nixon first proposed it decades ago.

Now, however, for the first time, there are signs that oil independence and true energy security may be achievable.  One nation Israel, is taking steps now that may enable it to shake the oil addiction.  A company playing the leading role in the transition is Better Place, a Palo Alto-based startup launched by Shai Agassi.  Tomorrow, NDN will host a breakfast in New York City with Michael Granoff, head of oil independence policies for Better Place who has been deeply involved in the company from the outset who will discuss Better Place's role in Israel's historic effort to end oil dependence.

If you have ever driven an electric car--and that includes a hybrid or even a golf cart---you have probably noticed electric drive is quieter than gas, has higher torque, meaning you accelerate faster. And it is clean: mechanics who work on electric engines do not need to wear gloves.  Add to that the fact that electricity is far cheaper than gas and better for the environment.  The disadvantages have traditionally been range compared to a gasoline car, time to charge and up front cost.  The newest batteries, however, have solved the range problem. 

That leaves charge time and up front price and Better Place has developed a unique business model, analagous to that for cell phones, that addresses these challenges.  In turn, the Israeli government has enacted important policies to speed the transition to emission free cars.  All told, Better Place's is an intriguing business model and story with the potential to revolutiionize transportation not only in Israel, Denmark and Australia where trials will soon begin, but throughout the world.

I hope you can join us for this special event with Michael Granoff, a leader in electric transportation and energy security, the second in our series of New York Clean Energy forums. 

"Securing Oil Independence through Electric Cars at Scale: Lessons from Israel" with Michael Granoff, head of oil independence policies for Better Place.

The event will be on Tuesday, April 12, at 8:30am at the Harvard Club, 35 W 44th Street in the
Mahogany Room.  RSVP here.

Energy One Year Later

In the year between President Obama's Energy speech at Andrews Airforce Base at the end of March, 2010 and his speech yesterday at Georgetown, much has changed in energy.  Unfortunately, with the exception of the promise of fracked gas, it has not been for the better.

A year ago, there was a real prospect of comprehensive legislation that would have rewritten the rules for energy for decades, setting the US on a path to ramp up renewable technologies and revamp or retire fossil fuels.  That legislation did not move last year, and a new Republican House has totally different priorities for energy, making the politics of legislation this year far more difficult.

With respect to energy itself, two key elements of the President's plan last year were increased offshore drilling and nuclear power.  Only three weeks after his Andrews Airforce Base Speech, however, the BP Deepwater Horizon rig blew up.  The explosion highlighted the risks of deepwater drilling and brought it abruptly to a halt.  The future of nuclear power is far more uncertain in light of the ongoing Fujushima meltdowns, the full extent of which are still unknown.  Finally, a political tsunami, set off by soaring food prices, is roiling the Mid-East, driving oil prices upwards.  The result is that there is a crying need for action on energy policy at the very moment when figuring out what policies to adopt remains more uncertain than ever.

Yesterday, the President called for a one third reduction in oil imports over the next decade, a reopening of offshore drilling, more nuclear energy and also a clean energy standard (that would include nuclear) in lieu of last year's renewable-only standard.  As the New York Times makes clear today, calls for energy independence, despite their long history, going back to President Nixon that give them a Groundhog's day quality, have yielded results.  For example, the US has eliminated oil from its electricity portfolio (oil once supplied 15% of electricity) and even cut imports 10% in the last four years.  Oil from Canadian tar sands is now a reality, ethanol is a real business and other biofuels--unlinked to the food chain--are on the horizon.  It would be wrong to say that efforts to grow energy independent never work.  The goal of cutting imports by one third is if anything, modest.

However, the US still exports $400 billion per year on oil or over 2% of GDP.  Solar energy supplys only about 1/10 of 1% of our electricity--though it supplies 10 or more percent in parts of the EU.  And electric cars--promising as they are--have yet to gain real market share.  In short, policy is not working nearly fast enough.

The Presidnent set the right overall goal of energy security.  Here, however, are my suggestions on the policies needed to translate the overall goal to reality.

First, while a few countries have faced up to the significance of the Fukushima disaster, there has been an odd suspension of judgment in the United States.  In fact, Fukushima is a truly cataclysmic disaster that means that nuclear energy cannot be relied on to solve the world's climate problem or future energy needs.  Nuclar energy, already very expensive and unfinancable privately, will grow much more expensive and uncompetitive.  It will continue to supply a share of the world's electricity, but is not a growth industry.  The US despite what some say--probably won't build any new plants.  It is time to disabuse ourselves of the idea
that nuclear power is the answer to our problems.

Second, the two main problems with oil imports are one, prices are manipulated by a cartel and two, many imports come from unfriendly countries.  We can't solve the second over night but could solve the first.  Given our huge role in the Mid-East and involvement on both sides of the battles underway--supporting rebels, for example, in Libya but incumbents in Saudi Arabia--we need to simply dissolve the cartel.  Let the cartel continue with Iran and Venezuela members but it is inexcusable that Iraq, Saudi Arabia and other countries we sustain are members.  We can and should break it. 

Third, we should reform our electricity regulatory regime to promote, not block innovation as NDN has proposed through our work on Electricity 2.0.  Simply put, Congress needs to pass legislation analagous to the Telecom Act of 1996 to rewrite the rules for electricity to create large, open, national business platforms that play to our strength in innovation, allow energy efficiency and renewable electricity to flourish, and democratize energy.  A renewable electricity standard should be part of this effort.

Fourth, as Secretary Chu and others have suggested, we need to dramatically increase our investments in new technology, particularly in the area of fast charge batteries and biofuels to create the basic science and technology to underly wholesale change in energy.  However, a far larger share of this money should go through universities and to small businesses than has been the case to accelerate technology transfer.

The bottom line is that we can achieve energy independence as the President proposed yesterday at Georgeown but only after we get the policy right, look truly forward and create the right rules of the road to drive real innovation.


News from the Future

There are times when news is light.  There are times when it is off the charts.  Over the last few weeks, we have seen populist uprisings sweep the Middle East and China, an earthquake and tsunami level Japan, multiple nuclear meltdowns and over the last few days, the entrance of the US into the Libyan conflict, eight years to the day after President Bush launched Operation Iraqi Freedom.  At first this avalanche of news might seem to have no common theme. In fact, however, as a presentation at the recent Cleantech conference by Kleiner Perkins partner, John Denniston explores, there is a central reaon:  stress on the world's ecological balance that is now having immense political as well as economic effects.

While many causes have no doubt contributed to the unrest roiling the Middle East--and China, including technology and envy of Western freedoms, a key factor, Deniston convincingly shows, is soaring food prices.  As NDN's Jake Berliner noted at the time, the spark that ignited the Tunisian and Egyptian uprising was announcements of higher food prices by the government.  And food prices have played a role in the Libyan and Bahrain uprisings as well.  Less well known is the cause of soaring crop rices that sparked riots in Indonesia, Africa and many places crowded out of the news cycle.  That cause is the highest level of extreme weather events ever recorded, according to data maintained by the insurer, Zurich Re which tracks weather for insurance reasons, leading to crop failures in the Ukraine, India and elsewhere.

Whether or not one believes in man made climate change, the demonstrable global impact of last year's weather illustrates the sensitive balance of man and nature as global population continues to grow.  The spike not only in food prices but other commodities from copper to oil to rare earths illustrates the precarious and highly complex interplay in the global economy between population, available resources and the financial markets that mediate between them.  While the US and much of Europe remain in a quasi recession, developing countries such as China, India and Vietnam are booming this year, spurred on in part by the very liquidity developed countries have supplied to address the financial crisis.  While some of the high prices of commodities may have to do with so-called correlation in commodities markets, tight supplies are providing fuel to political unrest not only in the Middle East but in China and across the developing world.  Since the financial crisis began, India has added 60 million people, Indonesia, 11 million, Nigeria 20 million people, China, 15 million and even , closer to home, Mexico 5 million new people.  And, indeed, China has announced plans to shift from a one to two child policy.  Rising population is putting ever increasing strain on the world's resources. To meet the challenge of providing for a growing global population, there is only one answer: techology.  The question is--as it has been since the days of Malthus--will the technology come quickly enough to avert crisis or will the world go through major dislocation while waiting on that technology.

Turning to the second major recent event in recent weeks, the Japanese earthquake, here, one might say is an event that is outside human activity.   However, while the earthquake was exogenous, the repercussions of the disaster also reflect the fragile relationship between man and nature.  Just as the Mid-east crisis highlights our relationship with oil, the meltdown at Fukushima and resulting release of radiation testifies to risks we have undertaken to power the modern economy.  Taken together, these events as Chairman Ed Markey observed yesterday constitute a powerful rationale to rethink our relationship with energy, in particular, dramatically accelerate a shift to clean and sustainable, renewable technologies.

At the Cleantech conference, Mike DeWoskin of Deloitte and Touche parsed the 12th Chinese, 5-year plan that ironically commits China to huge investments in the same information and communications technology it has recently silenced to quash the Jasmine revolution.  Indeed, the Chinese story is central to understanding Cleantech.  Only a blip on the screen when John Doerr and John Denniston laid down the gaunlet to the technology community to reinvent energy five years ago, China has now passed the US in both wind and solar production and is not slowing down but pulling ahead.

The good news for the planet is that fantastic new technologies abound if we can find ways to put them into service.  At the Cleantech conference, Elon Musk, the driving force behind Tesla, Solar City and Spacex described Tesla's new 4 seater electric car that will have a range of 300 miles and discussed plans for its successor, an inexpensive, high volume electric car.  In what is really a milestone in space exploration, Spacex's Falcon rocket will soon begin resupplying the space station, marking a transition from government to private space travel.  The French company Veolia has built a model of innovation that involves outsourcing technology from numerous startups.  Legendary Caliornia energy advocate and scientist, Art Rosenfeld who championed low energy refrigerators explained how higher standards can actually cut costs by inspiring innovation and new assembly lines.  Green builder, John Picard who helped create the Leeds system of building described how LEEDS has gone from an idea to standard operating procedure for new buildings.   More positive news came from Kleiner's Denniston who spoke about the declining cost curve of solar that will place solar below the cost of fracked gas in some markets this year.  Numerous new energy storage (air, battery and fuel cells), solar energy, plastics to oil conversion and other technologies can reinvent energy, particularly as the cleantech industry embraces data.

While there is much to be optimistic about on the technology front, the challenges are also daunting. particulalry to US firms and the US economy. Silicon Valley is waking up to the fact that clean technology is a very different market than software and information technology.  It is huge, so that solar is already as large an industry as online advertising.  However, in many ways, energy has more in common with agriculture.  Energy is a strategic industry that produces vital but low margin commodities under the umbrella of government protection.  Hence the formidable incumbents.  The US is unlikely to match European countries or China in government subsidies of favored technology.  Rather, our shot at catching up will arise only if we play to our strength, rolling out innovation.  Rather than compete with China in subsidies we will do better to create open, scaleable platforms like the Internet where our ability to innovate can shine.

Already the lack of scaleable platforms for energy has claimed casualties such as the Google Power meter which after receiving considerable attention, did not won wide acceptance because consumers did not gain access in the recent smart grid deployment to their data.

In short, the explosion of news in recent days is in large part about how to provide for a rapidly growing population in the developing world.  In the wake of the Japanese nuclear meltdown, stocks in cleantech companies involved in renewable power rocketed by over 20%.  Wall Street recognized quickly that renewable energy may not be merely be the most attractive option to powering the future, it may be the only one.   To meet the Malthusian challenges of the 21st Century, technology wil be the answer.  But how quickly that technology comes on stream, relative to needs, will determine how much news and what kind of news we live through.

Future of Nuclear in Disarray

The fluidity of the nuclear meltdown in Fukushima Daiichi in Japan has congealed.  Complex and confusing information have become grim reality with deadly serious consequences.

In a statement Wednesday of this week, Greg Jackzo, Chair of the Nuclear Regulatory Commission (NRC), said it was "prudent" for U.S. citizens in Japan to evacuate beyond a 50-mile radius of the reactors, in stark contrast to the 12-mile radius recommended by the Japanese government. In a briefing today, Jackzo stated that the U.S is and will continue to work closely with Japan to monitor these nuclear reactors and currently the US has 11 technical experts on the ground collecting information and analyzing the situation.

This dire situation is a huge setback for nuclear power.  For the past few years, the industry has been undergoing what many call a renaissance for the nuclear industry.  But this disaster has renewed calls from environmental groups and some lawmakers for a more cautious approach to nuclear power projects.  On their website, The Sierra Club states they are "unequivocally opposed to nuclear power" citing the dangers of reactor safety, nuclear proliferation and long term storage of spent fuel.  Leading lawmakers have made statements urging caution on further nuclear plants.

 The nuclear industry is fighting hard to limit the negative impact on their industry.  Alex Flint, chief lobbyist for the Nuclear Energy Institute (NEI) has had meetings with over 50 legislators and briefings for staff in packed rooms during this week.  Exelon, a major utility who is the largest owner of nuclear plants with 17 reactors in 3 states is doing the same.  For good reason, the nuclear industry is the recipient of generous U.S. taxpayer subsidies.

For starters, the US Government guarantees huge loans for nuclear power plants. Wall Street has been skeptical and hesitant to invest in nuclear energy over the years, but not our federal government.  In addition, the government insures nuclear power plants against the risk of catastrophic disaster.  Private insurance companies are extremely leery of insuring a nuclear power plant, but not the U.S. government.  Nuclear power is central to the President’s vision for a clean energy future because of its 0 emissions and the Obama Administration budget asked to triple the funding for these loan guarantees.

‘The president believes that meeting our energy needs means relying on a diverse set of energy sources that includes renewables like wind and solar, natural gas, clean coal and nuclear power,” said Clark Stevens, a White House spokesman. “Information is still coming in about the events unfolding in Japan, but the administration is committed to learning from them and ensuring that nuclear energy is produced safely and responsibly here in the U.S.”

It remains to be seen what the ultimate reaction of the American public will be on the subsidizing and building of new nuclear power plants.  In 1979 after the Three Mile Island reactor meltdown, the public spurned nuclear power plants.  But things are different today and I suspect that the public will not be so quick to eschew nuclear.

However, a paper recently released from the Brattle Group made the point that  building more nuclear reactors "cannot be expected to contribute significantly to U.S. carbon emission reduction goals prior to 2030 but that investments in more-efficient buildings and factories can reduce demand now, at a tenth the cost of new nuclear supply.

What has yet to play out is whether the Washington policy makers message collides with the United States public.

The Other CES: Why Community Energy Storage is Such a Good Idea

As the clean energy standard idea proposed by President Obama in his State of the Union address works its way through Congress, another CES is also generating buzz in the clean energy world.  Its full name: community electricity storage.

CES--the storage variety--is about placing storage at the edge of the grid where it is needed and, by so doing, increasing network flexibility and resilience.  It is gaining attention because in a world of variable renewable resources, more electric vehicles and constrained transmission, storage is emerging as a vital element of a clean, stable electricity future. 

It is sometimes said of electricity that it is the only commodity that cannot be stored.  Indeed, storage is so basic to most commodities that the oldest cities in the world, such as Ur in Mesopotamia, had a warehouse and temple in their center to store grain.  Storage--the ability to time shift a commodity--is a good thing because it encourages economies of scale in production, pools supply and demand over time--and lowers the cost of transportation.  If electricity could not be stored that would make it, indeed, unique.

However, a closer look reveals that not only can electricity can be stored, it is: it is just that storage is undersized  relative to volume and, perhaps, more to the point, poorly matched to the network's needs. Other networks, for example, road, rail, water, pipelines and data networks have ubiquitous storage, embedded at every level to facilitate commodity exchange.  With road there is storage for trucks at central depots, for cars in parking lots and along streets and of course localized storage in the driveway.  Computer networks have storage in huge central data centers,on servers sprinkled around the world and on personal computers, phones and even onboard computer chips.

Electricity is stored, too, only not as widely.  Since the 1960s, utilities have stored large quantities of power--usually from baseload nuclear facilities--through pumped hydro, pumping water uphill at night so it can power generators on the way backdown during the day.  Pumped hydro storage capacity currently equals about 2% of US load.  That's on the order of size of windpower capacity.

Meanwhile, electricity is also stored at the micro level, in laptop computers batteries, watches, iphones and even on board chips in capacitors through increasingly innovative chemistries.  What's missing is what I have called the middle class of storage, home-sized storage, enterpise-level storage and neighborhood scale storage--enough power to keep a home, building or neighborhood going during a brown or blackout.

The traditional reason given for this gap in electricity storage is that electricity is simply hard to store.  However, the consumer electronics sector operating outside market regulation has accomplished wonders with storage--in battery form--building it into virtually every device we currently rely on.  Utilities have mastered pumped storage as well where topography permits.  And here and there one finds other storage forms---flywheels in hospitals, for example.  The real reason we have yet to see power midway between macro and micro at scale is that our electricity system has been able to work without it.  But for a high performance, 21st Century network storage is a necessity.  Enter CES.

CES, in its strict sense, consists of battery storage units of about 25 kw distributed at street corners.  Physically, it consists of green boxes that look like the transformers already visible in many neighborhoods.  The  company that has pioneered the boxes, American Electric Power(AEP) notes that their benefits include peak shaving, delaying the need for new substations and compensation for air conditioner compressors cycling on and off and fluctuations in solar power connected to the grid. Techically, CES is doable today.  It just requires batteries, rights of way that utilities already have along sidewalks as well as enough smart grid technology to control the units which sit beyond the substation, beyond which, utilities traditionally have not managed power.  Besides AEP, a number of other companies are experimenting with CES.

More generally, CES is a form of storage at the edge.  AEP has also introduced a larger version of distributed storage in substations of about 2 megawatts to serve groups of a hundred or more homes.  As many have noted, car batteries could become important mechanisms for storing power as electric cars come into service.  Ultimately, the ideal solution for a 21st Century network is to see storage become ubiquitous--as it is in the distribution of other commodities.

The fact is, it is not technically difficult to build home scale electriciy storage that might take up no more room than a washing machine, cost less than a large flat screen tv and use power management software no more complicated than that found in a typical laptop.  What's missing are the market forces needed to drive adoption.  Would companies and many people pay for 100% power resilience?  Probably.  Through peak shaving, storage might even pay for itself. (Peak shaving is just the electricity term for the cost saving benefits that result from the ability to store any commodity.) The economics work today.  The trick is aligning business models with returns to make storage ubiquitous across the network. 

Battery technology is only one of many storage technologies that are beginning to pay off.  Other promising storage technologies include ice storage--increasingly used at warehouses, flywheel technology that is well suited for short time periods--for example, during the time it takes a backup generator to kick on, and found today in hospitals as well as in regulation services to keep the frequence of alternating current within a specified range, and air storage.  Air storage is the technology being used by Brightsource a large utility scale solar company to store solar power collected in the desert.  In short, edge storage is coming.  We just need it to come faster.

What could accelerate storage?

First, public utility commissions should take heed of the new technology and look favorably on utility deployment.  However, there is a risk CES may meet the same resistance as smart meters--with PUCs questioning the additional expense and utilities holding out for rate recovery before investing.

There is another way.  Storage will proliferate in areas exposed to market forces because it makes as much sense for electricity as it does for every other commodity.  Why not allow free competition by utilities and start-ups to provide in home and in office storage with users capturing some of the savings?  Why not allow people who store power--by collecting solar or wind energy--to sell it back to the grid or, even better, to others?  (Demand response is an important step in this direction.)  Why not allow a warehouse in an industrial area that stores power to sell it to power hungry industrial users across the street?

The key to accelerating electricity storage is to remove barriers preventing people today from capturing its economic benefits.  Once those barriers are removed, community electricity storage will be a key and money saving part of a high performance, 21st Century electricity architecture. 

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