The Economist, a weekly newspaper, wrote an article entitled “Green,easy and wrong” – and I think it is preposterous. I realize I am taking a big stab here, and might well destroy any shred of credibility by coming out against such a well regarded publication.  Yet, I’m surprised that the Economist came out so strongly, and frankly, inarticulately against what is a critical investment by the United States’ government.

Please read the article and come back to get my thoughts.

It is precisely because the United States has two huge problems – an economy that is sickly at best (doomed at worst) and an environmental (and energy) predicament that should be disconcerting if not alarming – that this country’s government should do everything in its power to align a pathway to success for both issues.

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After Obama’s win, it did not take long for the first blog and news articles to appear speculating about the future of CleanTech.

One of these articles is coming from the Cleantech Group asking ”Does Obama’s win spell victory for ethanol and carbon trading?” (link to article):

Cleantech awaits word on cabinet members as certain sectors expect boost with new presidency.

As Democrat Barack Obama handily won the U.S. presidency Tuesday night, cleantech insiders began projecting corn-based ethanol, carbon trading and transportation as winners too.

Obama and opponent John McCain were both considered as having favorable policies toward cleantech, said Neal Dikeman, founding partner at Jane Capital Partners.

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Everybody is talking about “green energy” these days. It seems, anywhere in the world, the “green movement” has taken hold of individuals, companies and organizations. Individuals are making efforts to shift some of their consumption to renewable energy sources, companies are eagerly trying to develop or employ innovative clean technology and organizations are lobbying the green idea. Even governments are actively promoting and supporting the development of renewable energies.

With 64,500,000 search results for “green business”, 30,100,000 for “green energy” and 14,500,000 for “clean technology”, Google provides some insights into the dimensions of this movement.* Other sources give a clear picture: The International Energy Agency (IEA) indicates that investments in renewable energy will nearly triple from the current €40 billion to €115 billion by 2020. At the same time, employment in the overall sector will increase by 54% and even double in the solid biomass and photovoltaic fields, according to the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU).**

There are many centers of activity in this worldwide movement for a better (greener) world, and I don’t want to take sides for one or the other. However, I would like to share an observation:

The United States has been criticized for its high levels of energy consumption, lack of adequate governmental policies to curb usage and insufficient promotion of alternative energy sources. At the same time, it might be the country with the largest and most dynamic “green energy” movement in the world.

Truth of the matter is: There is a large and ever growing group of dedicated people out there in the United States who believe in a “green future”. These are people who want to make a difference, people who are fed up with the current legislation’s stance on energy. These people rally all over the country in a quest for change. And they are pretty good at it.

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Tim Bond, head of Global Asset Allocation at Barclays, an investment bank, has put forth that the Swedish crisis of the late 80’s and 90’s will be a good model for the current, much wider, global financial crisis likely ensuing economic consequences.

In the Swedish example intervention was resisted, there was a tight downward spiral, there was a recovery, and while the economics caught up with the bailouts there was an extended period of negative growth as credit was tight and earnings declined. Whether the US and Global economy rebounds at the same rate or not, there are certain realities that will likely take shape – and a growing unemployment rate is most certainly one of them.

The G7 is working very hard on addressing our financial turmoil. I’ll leave much more qualified people to address the impact of the bail out packages on investment and more, and I hope to motivate someone to write about those effects here on CleanTechies. I will take a shot at suggesting implementing measures that address at least one aspect of the wide spread panic that is gripping so many these days – how this solution could have an effect on employment, education and the preparation of a grid more adequately equipped to accept electricity from intermittent and distributed renewable sources.

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Energy, Healthcare and Entitlement Reform (social security benefits) were clearly at the top of the list of tonight’s discussion. Unfortunately the format was a bit ridiculous in that it limited the answer to such weighty questions to a mere 120 seconds.

Tom Brokaw asked each candidate to address and prioritize these three issues. Senator McCain felt that all three were priorities that could and should be addressed simultaneously. He may have a point – all are clearly needed, and different departments of the executive cabinet are available to deal with them. While this may be the case, his follow-up was weak. He did not present an executable roadmap for how he was going to have his staff address these behemoths (any of them). We are one month away from the election of the President of the United States and there was no mention on how he proposed to change the abysmal track record the United States has on all three of these issues. Unfortunately for him I do not think he did elsewhere in the debate either.

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By now you should know that on Friday the extension of the renewable energy ITCs (investment tax credits) were signed by the executive office of the United States after the Senate and the House approved the bailout bills.

Over the course of eight weeks the entire renewable energy industry in the United States had just about come to a standstill for reasons that did not involve the financial crisis that brought Lehman Brothers to its knees (see Tax Credits are in serious jeopardy… so is scaling the renewable energy industry).

What changed since the last time it went to vote in late July? Well, it is directly tied to the state of the current US economy and the $700 Billion congressional bailout. The extension of the ITCs were wrapped up in the bill – here are the pertinent points that relate to the Renewable Energy Industry.

• Extension for eight years of the 30% tax credit for both residential and commercial solar installations.
• Elimination of the $2000 monetary cap for residential solar electric installations, creating a true 30% tax credit
• Elimination of the prohibition on utilities from benefiting from the credit.
• Allowance for alternative minimum tax (AMT) filers, both businesses and individuals, to take the credit.
• Authorization of $800 million for clean energy bonds for renewable energy generating facilities, including solar.

The gist of it is that renewable energy investors can now make projections for the investments that they are considering. The big kicker is that third bullet point – because now, large utilities like PG&E, SDG&E and others can take advantage of the tax incentives and we can truly begin to scale these technologies by producing massive solar and wind farms to produce carbon free, locally generated power.

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Sorry for the absence… we’ve been busy building out the new site – with much more functionality and slowly but surely, we are pleased with the results!

Here is the update we paired up with iLeonardo to work on our knowledge sharing platform, we got Marco to consider joining the team, and we are now working together on developing the site.

For the time being please join your fellow CleanTechies on our LinkedIn group: CleanTechies

CleanTechies Notebooks <- This is what we are working on with iLeonardo. Together with them we are going to continue to make it more user-friendly . Don’t fret, if you have used other bookmark sharing systems like Digg or StumbleUpon isn’t hard to participate. If you would like to collaborate on a particular folder, send us an email telling us which folders you’d like to help us with to collaborate (at) cleantechies.com and we will grant you access to folders you specify.

If you were hoping for a long and deep discussion.. sorry! But if you are keen for a read about career switching, get a peak at this article:

Energized by new career prospects

I have the opportunity to open the evening’s event – here is an expanded version of what I’m thinking of saying… Keep in mind that it will be held at the Marines’ Memorial Club when reading:

I realize that I am preaching to the converted. We are at a cross roads that is bringing an unlikely cast of characters apprehensively around the same table – grizzled Marines, ardent environmentalists, venture capitalists, corporate executives and union activists.

The next president of the United States will take office before a backdrop of mounting environmental concerns, national security fears, economic instability and an increasingly discerning, concerned and impatient constituency. As so many factors come together to contribute to uncertainty, we are reminded that turbulent times call for exacting and effective leadership.

The leader of this country can have a tremendous impact and make our country a true leader among nations. Like it or not, the United States is still a dominant power; despite failing to take top marks in any recent international popularity contests. This country of immigrants is still seen as a definer of the international world order.

It is fitting that the event will be held at the Marines’ Memorial. For those of you that are unfamiliar with the Marine Corps, it is an institution that holds the honor of leadership to be sacrosanct. Marine Officers are welcomed into the Marine Corps with a motto – “Ductos Exemplo,” which means “Leadership by Example.”

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Ladies and Gentlemen,

As “cleantechies” you need to get involved in politics, and quickly, to make sure that an important group of industries that will benefit our economy and our environment are not left out to dry.

The United States has demonstrated that it has remarkable renewable energy resources, industrial capability and business acumen; managed properly these resources could produce a tremendous amount of energy and set a standard for the rest of the world. There are many ways to accelerate the adoption of renewable energy, and the US’ current tax incentives have proven to be (somewhat) effective over the past 10 years – they have been the playing field on which individuals and organizations have made the decision to invest large amounts of capital. These tax incentives have set the rules of the game, for both individuals and corporations, and have stimulated the large capital outlays needed for energy projects. In previous blog entries (and everywhere on the net) you can read about the importance of stable, transparent legislation. It is critical that legislation remains clear as the investments being made are in the billions of dollars. Yesterday, the US Senate voted against allowing for a meaningful discussion about extending the current tax credits for another year – your senators have largely voted in blocs along party lines, as you can see here .

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A standard question fielded by many involved in the CleanTech space.

That there is quite a persistent buzz about the sector is an understatement, but what about this talk of a bubble – are we going to see something similar to the tech explosion seen in 2000 or more recently in the global housing market in general and the United States’ in particular?

There are some indicators that would say that this is the case – in the last three days three different solar thermal companies raised a total of $263 Million (eSolar, Bright Source, SkyFuel) and there are plenty of people far more intelligent than than me that have argued the case, as recently as yesterday on Platts’ blog – A Solar Energy Bubble? Or continuing prosperity? – http://www.platts.com/weblog/europower/2008/05/13/a_solar_energy_bubble_or_conti.html

Certain segments of the greater CleanTech market, silicon photo-voltaics (PV) market in the case of the article above, have seen boom and bust cycles of growth during constrained supply periods and consolidation once capacity begins to come online and outstrips demand. This isn’t unlike other technologies (think chips). The difference is strong macro-economic and environmental factors are propping up this sector which ultimately touches many industries – energy, water, transportation, construction and agriculture to name the most prevalent. There is not going to be a bursting as seen in the tech crunch of 2000 and real-estate markets in 2007/08 because of five core reasons that are all evident in articles printed in the last two days: 1) the realization of externalities 2) increasing costs of substitutes 3) consumer demand 4) smarter legislation 5) big industry and economies of scale. The aim of Clean Technologies is efficiency and sustainability – technologies that are efficient, sustainable and adoptable will succeed because they are adding real value.

EXTERNALITIES

Industry is slowly realizing that externalities (consequences affecting others that are not reflected in the costs of the goods involved) are going to continually be priced into the cost of goods manufactured and sold – specifically water, carbon, and pollution. Companies are great at cutting costs – something that work forces are all to familiar with; allocating a price on these previously under regarded components of production force organizations to be more efficient, frugal and consider alternative ways of getting the same product with less cost (in this case generating less bad stuff CO2 or using less good stuff H2O). How do we know that carbon is going to be priced? Because companies are factoring prices into their financial models. They are expecting that emitting CO2 in 2013 will cost them something, and that is prompting them to be careful and seeking alternatives to how they are currently getting their energy and bringing their products to market. Water is universally seen as a finite resource that has a cost – just ask the Mayor of Barcelona who recently received 2 tankers full of water for his parched city. Relevant article from yesterday?

Forbes – The Water-Industrial Complex (http://www.forbes.com/energy/2008/05/13/water-electricity-industry-biz-energy-cx_bp_0514water.html?feed=rss_business_energy)

INCREASING COST OF SUBSTITUTES

I’m not talking about substitutes for fossil fuels here which is how we have usually heard information presented. Flip the argument around with me, and look at fossil fuels being the alternatives for renewables…
we all know that the cost of oil has skyrocketed to over $125 a barrel. But coal is abundant and cheap you might say – nuclear has remarkable potential and is great cheap base load power you could argue; the economics become very rocky if you look into the future and begin to tack on externalities – carbon dioxide emission costs are making coal less economically compelling (but it makes risking some seed money on early-stage carbon capture and sequestration technologies more so). In the case of Nuclear power the burden of the pollution and carbon dioxide emissions associated with mining for uranium have not been accurately assessed if you are claiming it as a CO2 neutral power source, and the life-cycle costs of nuclear are being heavily subsidized by tax payers (here I’m referring to transportation and storage costs of waste and insurance liabilities shouldered by government).

There is no reason to be staunchly anti-nuclear nor anti-coal. Quite to the contrary, it would be fabulous if the two technologies could be used in an environmentally sustainable fashion – that day might come. But for the time being they present extremely costly externalities that are borne by the environment and the tax payer. As those become priced into the cost of production then the technologies will tend to being more efficient, less destructive and more expensive – all the while, making the exploration of true renewables more compelling. Finance guys typically are not dumb, and as long as their bonuses are hinging on success they will steer away from bad calls. They are increasingly taking the long term view and realizing that Clean Renewable Technologies that have negligible ongoing fuel costs (wind, sun, tides, waves, geothermal) are worth the capital investment of risking some money on technologies that might not work, but fuel costs are only going to get more expensive as supplies are constrained because finite resources or environmental pressures – that propels efficiency and alternatives. Relevant articles

Platts – The Barrel:OECD Oil Demand Feels the Pinch http://www.platts.com/weblog/oilblog/2008/05/oecd_oil_demand_feels_the_pinc.html

EvWorld News Wire – Hybrid Costs Being Recouped in Less Time http://www.evworld.com/news.cfm?newsid=18234

New Energy Finance – Econcern Aims to Invest $17 Billion in ‘Sustainable Energy Projects http://www.cleanedge.com/news/story.php?nID=535

CONSUMER DEMAND

I mean this in two senses, both in that green = hip and in that as the world’s population grows, we need more energy to fuel our economies – fossil fuels cannot address this demand, because of both finite resources and increasing environmental concerns. As a population of educated and wealthy people (if you are reading this blog you are wealthy – if you don’t think so…. fly to Haiti jump in car and drive in any direction for a few minutes) have realized that economic growth as we know it is not sustainable, and that Hummers and Suburban’s just aren’t cool. Driving a Prius shows you are smart, hip, and forward thinking. As we implement projects the costs of delivery will continue to go down, and large scale solar projects will become viable in developing the world – energy demands are correlated with their economies and both are growing at fantastic rates. Articles:

Just go to EcoFabulous.com… they’ll remind you daily that being green is Hip, Hot and Healthy.

EvWorld News Wire – Challenge X Survey Discovers Fuel Efficiency is Fashion Forward http://www.evworld.com/news.cfm?newsid=1822

Seeking Alpha (returns) – Clorox: When Green Works as an Investment http://seekingalpha.com/article/77386-clorox-when-green-works-as-an-investment-opportunit

EvWorld News Wire – Study Finds Link Between Air Pollution and Blood Clots in Veins http://www.evworld.com/news.cfm?newsid=18229

Stockhouse – Algeria Eyes Solar Energy – http://www.stockhouse.com/News/FinancialNewsDetailFeeds.aspx?n=10768937

SMARTER LEGISLATION

In case you have been sleeping for the last year, corn based ethanol doesn’t make economic or environmental sense. Smart legislation facilitates inventions and investment without looking at specific technology – it should stimulate efficiency and solutions and shoulder some of the risk that keeps projects from moving further. Take the classic project finance issue of a technology in the ‘dead zone’ – a technology that started as a concept and is proven at a small scale thanks to angel and venture financing will not make a difference until it is deployed on a large scale. The problem is that there are operational risks associated with scaling up something that works in a lab or in a small contained test and the sums of money required to make the initial investment can be staggering – but once it is proven on the large scale and kinks are worked out banks and other debt finance options will present themselves. Also, if there are certain incentives being expected, that may or may not be renewed in the future, the financial viability of a project is put into jeopardy. Well planned and stable legislation stimulates these “First of Kind” projects so that financial gurus can accurately forecast returns. Good legislation lays a good framework for success, streamlines projects and reduces bureaucracy (think rail facilitating coal).

Ethanol was an example where bad legislation created a false market, and stimulated the hyper-growth of industry that should not be there (at least not to the levels witnessed). Legislators are beginning to recognize what works and doesn’t – they realize that policies have repercussions. Both sides of the political spectrum need to work together to ensure energy security and environmental issues are being treated with the respect they deserve. They’ll do it, if not, the world’s citizens will elect people that do.

Renewable Energy World – Bipartisan Companion for Extension of Renewable Energy Tax Credits Introduced http://www.renewableenergyworld.com/rea/news/story?id=52433

GreenTechMedia – Winning the Greentech Vote http://www.greentechmedia.com/articles/winning-the-greentech-vote-818.html

BIG INDUSTRY AND ECONOMIES OF SCALE

Big organizations are slow and bureaucratic, but once they start moving in a direction they begin to gain momentum and reduce costs through economies of scale. Sure you should ensure your car has correct tire pressure, you will save some gas and a few grams of CO2 – but if UPS commits to using fuel efficient trucks, then you start seeing real impact. Wal-mart installing LED lighting in all of its stores around the world will justify GE’s investment in a large efficient LED plant, which will make our LED lights cheaper (and better). Exxon has a good understanding of what its clients need, and has tremendous delivery system to get production to consumers. Once these companies start making changes, smaller companies that provide them with services will be able to ramp up production and costs will go down and efficiencies will go up. They are doing it.

Clean Edge News – Rockefeller Family Puts Pressure on ExxonMobile to Pursue Renewables http://www.cleanedge.com/news/story.php?nID=5327

Green Car Congress – UPS Orders 200 Hybrid and 300 CNG Vehicles from Daimler http://www.greencarcongress.com/2008/05/ups-orders-200.html

Green Car Congress – DuPont and Genecor Form Cellulosic Ethanol Joint Venture http://www.greencarcongress.com/2008/05/dupont-and-gene.html

Renewable Energy World – SunPower Reaches 23.4% Cell Efficiency http://www.renewableenergyworld.com/rea/news/story?id=52470&src=rss

Renewable Energy World – Wind Energy Could Provide 20% of US Electricity by 2030 http://www.renewableenergyworld.com/rea/news/story?id=52471&src=rss

So… if you are still reading, these things are happening – all concurrently. A bubble is unsustainable because the underlying economics don’t work. Pull out two or three of these five aspects, and the economics still work. CleanTech is getting lots of attention these days, and it should – our health, wealth, and welfare depend on it. Some technologies will surely fail, yet others will address the critical issues that we need them to – once they do they will be successful, and so will their investors, employees and clients.