For a long time ‘clean’ and ‘green’ marked the forward trend in the energy industry. Then came the quest for ‘smart’ energy. And now ‘innovation’ is the buzzword.

It’s easy to see why. As Americans, we believe our ability to innovate sets us apart in today’s international market. Sure China can manufacture computers and cell phones more quickly and cheaply, but we came up with Google and iPhones in the first place.

The energy industry offers a lot of opportunity for US innovators, given our aging grid, quest for alternatives to fossil fuels, and our glimpse into the possibilities of a virtual, democratized grid that gives consumers more control over their energy use and production.

But will energy innovation help the US job market? Or will the products be conceived here but be manufactured elsewhere?

Siemens U.S. CEO Eric Spiegel offers some interesting thinking in a recent piece: “Where the Jobs Are: Higher Technology Manufacturing.” He takes issue with the idea that US manufacturing is doomed.

Such thinking wrongly assumes that the manufactured products of the future, like those of today, will be commodities, “the kind that could be built of equal quality, with equal technology, anywhere in the world,” Spiegel wrote. Blue jeans are his example.

He said that if innovation delivers, tomorrow’s products will be more high-end and require “skilled workers, precision assembly, intensive research, and complex technology,” the kind of thing the US does well.

Many new energy products, like smart grid technologies and wind turbines, require skilled manufacturing. Another, he points out, is the high efficiency natural gas turbine that Siemens builds in North Carolina. If the US remains an innovation leader, more of these high-end manufacturing jobs will make their way here, according to Spiegel.

But he isn’t Pollyanna about the US’ economic future. Sure, high-end energy manufacturing is occurring in the US, but it’s happening elsewhere as well: Europe, Brazil and parts of Asia. They too are innovating.

So the US has no reason to be overly confident about its innovation economy. Well aware of the intense competition, the federal government, states, universities and others are trying to create a more favorable climate for innovators. Below are a few ways that’s happening. I welcome readers to add to the list in the comments section of this blog. With the exception of the NYSERDA program, all of these were announced this week.

Elisa Wood is a long-time energy writer whose work appears in many of the industry’s top magazines and newsletters. She is publisher of the Energy Efficiency Markets podcast and newsletter.

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The Chinese government has ordered five cities and two provinces to set caps on greenhouse gas emissions in preparation for a series of regional carbon markets.

Last week, China’s National Development and Reform Commission urged Beijing, Tianjin, Shanghai, Chongqing and Shenzhen, as well as the provinces of Hubei and Guangdong, to set “overall emissions control targets” and submit strategy proposals on how to achieve them.

A plan developed by Guangdong — which commits the province to achieving 20 percent of its total energy consumption from non-fossil fuels by 2015 — has already been approved by the central government. The province must also cut its “carbon intensity,” or the CO2 emissions per unit of economic growth, by 19.5 percent.

China as a whole, which has already passed the U.S. as the world’s biggest greenhouse gas emitter, has committed to reducing its carbon intensity by 40 to 45 percent by 2020. According to a new government report, China’s urban population surpassed its rural population for the first time ever in 2011.

Article appearing courtesy Yale Environment 360.

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In front of a packed house of dignitaries, delegates and energy industry leaders assembled for the 2012 World Future Energy Summit in Abu Dhabi, United Arab Emirates, Chinese Premier Wen Jiabao and Korean Prime Minister Kim Hwang-sik each independently reaffirmed their country’s commitment to nuclear power as an essential part of a low carbon future. Speaking at the opening ceremony of the World Future Energy Summit in Abu Dhabi on Monday morning, the two leaders outlined their country’s clean energy and energy efficiency accomplishments over the last several years, and outlined the framework for transitioning to a low carbon energy economy in the years to come.

“We will gradually change the current energy mix dominated by coal,” Chinese Premier Wen Jiabao said at the opening session of the 2012 World Future Energy Summit, by raising the output of “natural gas, renewable energy and nuclear energy,” referring to nuclear as “safe, reliable and technologically mature.”

Premier Wen outlined a long list of Chinese accomplishments in renewable energy and energy efficiency, capping them off by reporting that China now gets 11% of its electricity from renewable energy.

But Premier Wen underscored that the transition to clean energy would not be sudden. “Fossil fuels will continue for a long time,” Wen told conference attendees. “So we need to follow a low-carbon approach to carbon-intense technologies,” Wen said.

Premier Wen was not alone in committing to nuclear energy in the long term. In the second keynote address at the opening session of the 2012 WFES, Korean Prime Minister Kim Hwang-sik told conferees that “To accelerate the worldwide spread of renewable energy and for it to replace fossil fuels we must promote the peaceful use of nuclear energy.”

The message from Prime Minister Kim was very clear: climate change is a serious issue that poses a threat to people all over the planet. “Humanity faces a serious challenge with global climate change,” Kim said.

And if you take Prime Minister Kim’s words at face value, his government is backing up their clean energy talk with clean energy action. According to Kim, the “green government has invested 2% of GDP [gross domestic product] in renewable energy and clean technologies and has set a goal to be the worlds fifth largest clean energy economy.”

Wrapping up the morning’s powerhouse session of Asian leaders, UN Secretary-General Ban-ki Moon praised the promise of “sustainable energy,” demanding that “energy poverty must end.”

“It is not acceptable that 3 billion people have to rely on wood, coal and charcoal and animal waste for cooking and heating,” said the Secretary General.

Article by Timothy Hurst, appearing courtesy ecopolitology.

Tim Hurst’s travel expenses to the 2012 World Future Energy Summit were covered by Masdar.

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The minerals known as rare earths are likely the most important, but least understood factor in our transition to a low-carbon, clean-energy future. They’re essential ingredients to just about every source of renewable energy and nearly every consumer electronic device we use today.

But China dominates worldwide rare earth supplies and production, and their monopoly could corner the world economy. energyNOW! chief correspondent Tyler Suiters explores how U.S. dependence on China’s rare earths could affect our energy future and high-tech lifestyles. The full video is available below.

Americans are used to seeing the words “Made in China” on most things we buy, but could they soon also read “Mined in China?” The nation controls 97 percent of global production of the elements we rely upon in every aspect of modern life. Consider the technologies requiring rare earths: computers, smart phones, military jets, rocket systems, electric cars, wind turbines, energy-efficient light bulbs, and flat-screen televisions, to name a few.

China’s claim on the rare earths market began in the 1980’s. Premier Deng Xiaoping famously quipped “the Middle East has oil, but China has rare earths,” and the country ramped up mining efforts. This drove production costs down so sharply that rare earth mining became unprofitable in other countries, including the U.S., which had led global production since the 1960s. It also boosted China’s economy.

“They were very effectively using their control over the rare earth industry to force high-tech manufacturing into China,” said John Burba, CTO of Molycorp, operator of the only active rare earths mine in America. “I could look and see how fast it was leaving the United States.”

Molycorp hopes to counter China’s rare earths monopoly through its Mountain Pass mine in California. Until the 1980s, Mountain Pass was the single top producing rare earths mine in the world. Plunging commodity prices and a series of environmental accidents forced it to close.

Through a revamped approach that favors computer control and automation, Molycorp says it can safely produce 40,000 tons of rare earths a year by 2013 – equal to all U.S. demand. “A facility of this size in China would probably require 3,000 to 4,000 people,” said Mark Smith, Molycorp CEO. “We’ll have 300 or 400.”

Meeting that demand is critical to the burgeoning cleantech economy, which consumes 20 percent of the world’s rare earths. They coat the inside of compact fluorescent light bulbs, go into the magnets that turn electric vehicle batteries, and power the electrical generators inside wind turbines. For context, some of the biggest turbines can each use two tons of rare earths.

If production can’t be increased, another solution may be to find replacements. Companies with a big stake in renewables are actively looking for rare earth substitutes. General Electric says it has developed a higher-performance wind turbine magnetizer coil, completely free of rare earths, and Toyota is working on an EV motor that doesn’t need rare earths at all. But, both are still in the experimental phase and not yet market-ready.

So while breaking up the rare earths monopoly has environmental consequences, it also represents an economic imperative – and the window is closing. “The big danger is that China totally controls the production of all devices containing rare earths,” said Jack Lifton, of Technology Metals Research. “If we haven’t made any significant moves by 2015, we will simply no longer be a nation with any hope of doing so.”

Article by Silvio Marcacci, appearing courtesy Earth & Industry.

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• China to Keep Rare Earths Export Quota at 2010 Levels
• China and Rare Earths – Monopoly for Now
• Molycorp’s Expansion across the Rare Earth Supply Chain
• Molycorp Prepares to Reopen Their Rare Earth Materials Mine
• Rare Earth Mineral Deposits Discovered on Pacific Seafloor

A recent Bloomberg survey of key energy decision-makers concluded that China shows more government support than any other country for funding renewable energy. It also shows equally high support for transformational clean technologies, like smart grids and electric cars. With the right government backing, China could address its own energy security issues with technology to spare for export.

The graphs charting China’s economic growth and energy demand mirror one another: each resembles the left side of a mountain with no peak in sight. By the IEA’s reckoning, China’s electricity demand alone will nearly triple by 2035. On the surface, this may come across as resoundingly bad news to environmentalists. However, China’s industrial cloud has a strong green lining. And unlike the Olympics, China’s not just using green paint this time.

This year, Bloomberg Businessweek Research Services in partnership with ABB surveyed energy professionals, government officials and CFOs about the future of energy, the opportunities and the barriers. Among the results of this 2011 Energy Survey, China emerged as the strongest government supporter of clean energy technologies.

China’s renewable energy: Readers may remember that China’s wind power capacity surpassed the United States in 2010, and continues to grow. The National Development and Reform Commission estimates that China, the world leader in wind, could generate as much as 1 TW of wind energy by 2050. Similarly, this year China bumped its four-year targets for solar generation up by 50%, and the shear volume of solar panel production from the People’s Republic had US solar manufacturers suddenly in a panic.

Where will the greenbacks for China’s green energy growth come from? The Bloomberg survey shows that nearly 90% of Chinese energy decision-makers believe that the government should fund renewable energy growth. That makes China far and away the most enthusiastic about government support of renewables. By contrast, fewer than 40% of Americans surveyed think it’s the government’s role to fund clean energy. In the ongoing war of words between China and the US over climate change and energy security, those numbers speak volumes.

Smart grids: China will likely soon also be the world’s biggest smart grid market. Last year alone, it invested 3.7 billion US dollars in modernizing its electricity grid, and the so-called “12th Five-Year Plan” calls for wide installation of smart meters, IT software and other components of a smart grid over the next few years. The 2011 Energy Survey reflects the same strong government support of smart grids as for renewable energy. All of the decision-makers surveyed agreed that updating China’s is either somewhat important or very important. Moreover, as with renewable energy, over 90% believe that continued investment in China’s smart grid will come from the government.

Electric vehicles: With a smart grid with vehicle to grid technology in place, electric vehicles (EVs) also become a convenient way to store and provide energy to the grid. China’s planning to have one million EVs on the road by 2014. To support these electric cars, it’s building 400 electric vehicle charging stations by 2016. According to the 2011 Energy Survey, over 80% of Chinese decision-makers believe that the Chinese government should support the EV infrastructure, a full ten percent more than the next leading country and a great deal more than the USA, where fewer than 40% agree with government support for EVs. To this tune, the Chinese government is investing 100 billion Yuan (15 bn USD) in alternative fuel vehicles over the next ten years.

The 2011 Energy Survey is still open for participation for members of the public to give their input on the future of energy and compare their views with those of energy market decision-makers. Take the survey. You can also view a detailed list of the survey’s conclusions and watch related videos. For a summary of the conclusions, see this infographic.

Article by Gavin Hudson, appearing courtesy Earth & Industry.

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The Chinese government has increased its solar energy target for 2015 by 50 percent, setting a new goal of 15 gigawatts annually, state media reports.

The new target, which was reported by China National Radio, follows a rapid surge in Chinese solar power installation in recent months after the government unified grid feed-in tariffs for solar projects in July.

At the end of 2010, installed solar capacity in China was less than one gigawatt. But China, the world’s top exporter of photovoltaic products, had already doubled its solar energy target to 10 gigawatts by 2015 following the Fukushima nuclear crisis in Japan, and the government now has boosted that goal to 15 gigawatts.

Meanwhile, a new industry report shows that U.S. solar installations jumped by nearly 40 percent during the third quarter of 2011, pushing the nation’s total annual installation beyond one gigawatt for the first time.

Article appearing courtesy Yale Environment 360.

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A new report from ExxonMobil predicts that nearly half of the world’s cars will either be hybrids or powered by alternative fuels by 2040.

While hybrids now account for just about 1 percent of all vehicles worldwide, the oil giant forecasts that hybrids and alternative energy vehicles will move to the mainstream as governments increasingly push for better fuel efficiency.

The ExxonMobil report, “The Outlook for Energy: A View to 2040,” predicts that overall energy demand will remain flat in developed nations over the next three decades, but demand in developing nations such as China and India will increase nearly 60 percent from 2010 to 2040.

The report also predicts a worldwide boom in shale gas production and forecasts that 30 percent of the world’s electricity will be produced from natural gas, while demand for coal will peak before seeing “its first long-term decline in modern history.”

Article appearing courtesy Yale Environment 360.

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It’s December again (how did that happen!?) and our annual time for reflection here at Kachan & Co. So as we close out 2011, let’s look towards what the new year may have in store for cleantech.

There are eggshells across the sector for 2012. Global economic uncertainty in particular is leaving some skeptical about the chances for emerging clean technologies. And those who watch quarterly investment data, or who look only in a single geography (e.g. North America) may have seen troubling trends brewing this past year. But the true story, and the global outlook for the year ahead, is—as it always is—more complicated.

As you’ll read below, we predict a decline in worldwide cleantech venture capital investing in 2012. But as you’ll also read below, we believe the gap will be more than made up by infusions of corporate capital. And the exit environment, depending on who you are and where you list, still looks robust in 2012 for cleantech (it may not have felt so, but it was actually surprisingly robust in 2011, according to the data. See below.) All in all, if you’re a cleantech entrepreneur seeking capital, our advice is brush up that PowerPoint and work the system now… while there’s still a system to work.

Because, as we detail below, the largest risk, to cleantech and every sector in 2012 we believe, is the specter of precipitous global economic decline and the systemic changes it might bring. Details below.

Here are our predictions for cleantech in 2012:

Cleantech venture investment to decline
In the face of naysayers then forecasting a cleantech collapse, in our predictions this time last year, we called an increase in global cleantech venture investment in 2011. We were right. At this writing, total investment for the first three quarters of 2011 is already $6.876 billion, with the fourth quarter to report early in 2012. Given historical patterns (fourth quarters are almost always down from third quarters), we expect 2011 to close out at a total of ~$8.8 billion in venture capital invested into cleantech globally. That’d be the highest total in three years, and second only to the highest year on record: 2008.

Total 2011 investment is expected to show growth from 2009’s figures once the fourth quarter (dashed lines, estimated) is added. However Kachan predicts total venture investment in 2012 to decline from 2011’s total. Data: Cleantech Group

Yet in 2012, we expect global venture and investment into cleantech to fall. Not dramatically. But we expect cleantech venture in 2012 as measured by the data providers (i.e. companies like Dow Jones VentureSource, Bloomberg New Energy Finance, PwC/NVCA MoneyTree, and Cleantech Group) to show its first decline in 2012 following the recovery from the financial crash of 2008. Our reasoning? There are factors we expect will continue to contribute to the health of the cleantech sector, but they feel outweighed by factors that concern us. Both sets below:

On one hand: What we expect to contribute to growth in cleantech investment in 2012

* China gets a hold on its economic turbulence – For five years now in our annual predictions, both here at Kachan and when I was a managing director of the Cleantech Group, we foretold the rise of China as cleantech juggernaut. Yet, now with China having become the largest market for and leading vendor of cleantech products and services by all metrics that matter, and now receiving a larger percentage of global cleantech venture capital than at any point in history, there have been recent warning signs. New data just in (for instance, falling Chinese property prices and sluggish export growth because of faltering first world economies, not to mention the first decline in clean energy project financing in China since 2010 as wind project financing declined 14% in the third quarter of 2011 on fears of over-expansion) suggests the Chinese economic engine is slowing. On the face of it, that might look bad for cleantech. But we put a lot of faith in China’s central government and the seriousness with which it views this sector as strategic. Even now, the country has just gone on the record forecasting creating 9 million new green jobs in the next 5 years. Nine million! And China has a good track record in executing its 5-year plans.
* Rise in oil prices – Cleantech is a much wider category than energy. But for many, renewable energy is its cornerstone. And while there’s no question about the long-term markets for renewables, the biggest factor affecting their short-term commercial viability is the price of fossil-based energy. The good news: indications are that oil prices are headed upwards in 2012, which should be expected to help make renewables more economic. Naysayers maintain that a poor global economy will destroy demand for energy, keeping the price of oil artificially low. For much of 2011, the price of oil was relatively low. But we argue the price per barrel will continue its inexorable rise in 2012 given continued growth in the size of the global market for oil, driven by market expansion in the developing world. Further adding to the expected oil price increase is a little-known fact: there’s been a decline in the quality of oil the world is seeing on average. And the poorer the quality of the oil, the more it costs to refine it into the products we require. Oil prices are headed up.
* Corporations’ even stronger leadership role – Corporate venturing was up in 2011, possibly setting new record highs, according to the data providers (4Q data not in yet.) Cleantech corporate mergers and acquisitions globally were up in 2011, again possibly setting new record highs, according to the data. The world’s largest companies assumed the leadership we and others predicted they would last year at this time—and indications are they will continue to do so in 2012, with balance sheets still strong.
* Solar innovation as a perennial driver – Investment into good old solar innovation and projects is still strong, and has remained so for years, while other clean technologies have risen and fallen in and out of investment fashion. And that’s despite most solar companies being in the red and having billions of dollars in market capitalization disappear over the last year. As some solar companies will continue to close up shop in 2012, look for investment into solar innovation to remain strong in 2012 as the quest for lower costs and higher efficiencies continues.
* Persistence of the fundamental drivers of cleantech – The sheer sizes of the addressable markets many cleantech companies target, and the possibilities for massive associated returns, will continue to draw investors to the sector. Why? The world is still running out of the raw materials it needs. Some countries value their energy independence. More than ever, economies need to do more with less. Oh, and there’s that climate thing.

On the other hand: What worries us about the prospects for growth in cleantech investment in 2012

* Investor fundraising climate tightening – Today, limited partners (i.e. “LPs” – the organizations and/or wealthy individuals that fund venture capital companies) are still bankrolling cleantech worldwide; in its 3Q 2011 Investment Monitor for clients, the Cleantech Group details 34 dedicated cleantech and sustainability-focused funds receiving billions in capital commitments internationally in the third quarter of 2011 alone. But we expect a slowdown in venture fundraising in 2012. Blame Solyndra for negative American LP sentiment. Or blame the lack of rock star returns in cleantech of late. But there are more indications than ever that some LPs are becoming increasingly reluctant to fund cleantech. They’ve been grousing about cleantech for years. But the politicizing of the Solyndra bankruptcy has amped the rhetoric higher than ever, and will foster a self-fulfilling prophesy in 2012, particularly in America, we believe.
* Waning policy support in the developed world – Expected conflicting government policy signals to continue in 2012. Don’t expect cleantech-friendly U.S. policy leadership in 2012, an election year. We wouldn’t be surprised if the ghost of Solyndra and other U.S. Department of Energy stimulus grants and loan guarantees continued to haunt American cleantech through the whole of 2012, making any overt U.S. government support of clean or green industry unlikely. While cleantech is far from solely an American phenomenon, there’s no mistaking that the (now expired) American national loan guarantee program helped loosen private cleantech capital in an immediately post-2008 shell-shocked economy. However, continued uncertainty over the future of the U.S. Treasury grants program and production tax credits is holding the U.S. back. Policy support suffers elsewhere in the developed world. For instance, in the UK, investor confidence was recently dealt a blow by a dramatic drop in solar feed-in-tariff (FIT) rates, and the erosion of renewable policy support in Germany and Spain is well known.
* Lag time of negative sentiment – Even if the sky indeed started falling in cleantech (and we don’t believe it yet has), it would take a few quarters to show in venture or project investment numbers. Remember, deals can take quarters to consummate. Transactions being counted now may have been initiated a year ago. Fear takes several quarters to manifest. Which is why we believe today’s uncertainty will start to show in 2012’s performance.
* VCs still circling their wagons – In 2007, before the financial crash, the percentage of early stage venture investments into new cleantech companies was roughly the same as later-stage venture investments into established companies. Since the crash of 2008, deals have remained skewed—both by number and size of deals—towards later stage companies, illustrating investors’ preference to keep existing investments alive than take risks on new companies. While the exact ratio varies quarter to quarter, and from data provider to data provider, there have been generally fewer early stage companies getting funded. That’s hampering cleantech innovation. We expect the trend to continue into 2012.
* Perennial concern about exits and IRR – Despite the size of its massive addressable markets and near-record amounts of capital entering the space today, on the whole, cleantech investors are still seeking the returns that many of their web and social media tech brethren enjoy. Even now, 10 years into this theme that we started calling cleantech in 2002. That’s not for lack of exits; 2010 saw the largest number of cleantech IPOs on record (93 companies raised a combined $16.3 billion) and 2011 has already had 35 without the last quarter reporting. And cleantech M&A activity in 2011 was strong and significantly higher than last year. No, the concern is for lack of multiples. For instance, 8 of the 14 IPOs of the third quarter of 2011 were trading below their offering price as of the publication of the Cleantech Group’s 3Q 2011 Investment Monitor. Don’t let anyone tell you exits aren’t happening in cleantech. They’re just underwhelming. And/or they’re happening in China.
* Macro-economic turbulence, collapse, or at least, reform – They’re the elephants in the room: The Occupy movement. Arab Spring. Peak Oil. The continued and growing mismatch between overall global energy supply and demand and food supply and demand. Ever-increasing debt and trade deficits. Currency revaluation or political/military developments. Any or all of these could spur another massive global economic “stair-step” downwards of the scale we saw in 2008, or worse. Concern about all of these points and the impact they’d have on the cleantech sector weighs heavy on us here.

Venture dip made up for by rise in corporate involvement
The world’s largest corporations woke up to opportunities in cleantech in 2011, making for record levels of M&A, corporate venturing and strategic investments. General Electric bought lighting and smart grid companies. Schneider Electric bought some 10 companies across the cleantech spectrum. Corporate venturing activity was high, as were minority-stake investments. In just the third quarter alone, ZF Friedrichshafen invested $187 million in wind turbine gearbox and component maker Hansen Transmissions of Belgium, Stemcor invested $137 million into waste company CMA in Australia, and BP invested $71 million into biofuel company Tropical BioEnergia in Brazil. And there were dozens more minority stake transactions like these throughout the year.

Look for even more cash-laden companies to continue to buy their way into clean technology markets in 2012, supplementing the role of traditional private equity and evidencing a maturation of the cleantech sector.

Storage investment to retreat
Significant capital has gone into energy storage in recent quarters. In 3Q11, storage received $514 million in 19 venture deals worldwide, more than any other cleantech category. Will storage remain a leading cleantech investment theme in 2012? We’re betting no. Here’s why.

Storage recently made headlines as the subsector that received the most global cleantech venture investment in the third quarter of 2011, the last quarter for which numbers are available. An analysis of the numbers, however, shows the quarter was artificially inflated by large investments into stationary fuel cell makers Bloom Energy and ClearEdge Power. Do we at Kachan expect more investments of that magnitude into competing companies? No. Why? Even if you believe analysts that assert that stationary fuel cells for combined heat and power are actually ramping up to serious volumes (old timers have seen this market perpetually five years away for 15 years, now), just look how crowded the space currently is. Bloom and ClearEdge are competing with UTC Power, FuelCell Energy, Altergy, Relion, Idatech, Panasonic, Ceramic Fuel Cells and Ceres Power … just some of the better-known 60 or so companies vying for this tiny market today. And many are still selling at zero or negative gross margins.

But the main reason we’re not bullish on storage: Smoothing the intermittency of renewable solar and wind power might turn out to be less important soon. Sure, nary a week goes by without announcements of promising new storage tech breakthroughs or new public support for grid storage (e.g. see these three latest grid storage projects just announced in the U.S., detailed halfway down the page.) But we believe that utility-scale renewable power storage might be obviated if utilities embrace other ways to generate clean baseload power.

In 2012 or soon thereafter, we expect those clean baseload options will start to include new safer forms of nuclear power (don’t believe us? Read Kachan’s report Emerging Nuclear Innovations—U.S. readers, don’t worry: nuclear innovation won’t apply to you.) Or NCSS/IGCC turbines powered by renewable natural gas delivered through today’s gas distribution pipelines (see The Bio Natural Gas Opportunity). Or even geothermal (gasp!) or marine power (see below). All of these promise to be less expensive than solar and wind when you factor in the expense of storage systems required—incl. electrochemical, compressed air, hydrogen, flywheel, pumped water, thermal, vehicle-to-grid or other—if solar and wind are to be relied on 24/7.

Marine energy to begin coming of age
I’m a closet fan of marine energy, despite today’s extraordinarily high cost per kilowatt hour. We started covering wave, tidal and ocean thermal energy conversion equipment makers in 2006. Anyone who’s heard me talk publicly on the subject has had to suffer through hearing how I’d much prefer invisible kit beneath the waves than have to gaze upon solar and wind farms taking land out of commission.

In 2006, the lifetime of equipment from then-noteworthy companies like Verdant Power and Finavera (which since exited marine power after a failed test with California’s PG&E) in the harsh marine environment could sometimes be measured in days. The designs just didn’t hold up. Even Ocean Power Delivery, now Pelamis Wave Power, with its huge, snakelike Pelamis device, had hiccups in early onshore grid testing. Back then, the industry clearly had a long way to go.

Today, six years later, we think it’s time to start taking marine energy seriously. A high profile tidal project is now underway in Eastern Canada’s Bay of Fundy. Several weeks ago, Siemens raised its stake in UK-based tidal energy developer Marine Current Turbines from less than 10% to 45%, because it liked the predictability of ocean energy, and Voith Hydro Wavegen handed over its first commercial wave project to Spain. And last week, Dutch company Bluewater Energy became the latest vendor to secure a demo berth at the European Marine Energy Centre at Orkney, Scotland—the most important global R&D center for marine energy. Things are going on in marine power. Still, its major hurdle is the large variation in designs and absence of consensus on what prevailing technologies will look like.

2012 won’t be the year marine power becomes cost-competitive with coal, or even nearly. But you’ll hear more about marine power in 2012, and see more private and corporate funding, we predict.

Increased water and agricultural sector activity
Look for increased venture investment, M&A and public exits in water and agriculture in 2012.

At one point, only cleantech industry insiders championed water tech as an investment category (and, frankly, at only a few hundred million dollars per year on average, it still remains only a small percentage of the overall average $7B annual cleantech venture investment.) Industrial wastewater is driving growth in today’s water investment, with two of the top three VC deals of the last quarter for which data is available promoting solutions for produced water from the oil and gas industry, and the largest M&A deal also focused on an oil and gas water solution. Regulations aimed at making hydraulic fracturing less environmentally disruptive to will spur continued innovation and related water investments in 2012.

Where water was a few years ago, agriculture investment appears to be today. There was more chatter on agricultural investment than ever before at cleantech conferences I attended around the world this past year. Expect it to reach a higher pitch in 2012, because of:

* Growing awareness of the complex interrelationship between water, energy and food
* Increased awareness of the math underlying the planet’s current population growth rate and how that’s going to impact our ability to feed the world, and
* Our reliance on inexpensive oil and gas, petroleum-based fertilizers and hybrid seeds for today’s crop yields

Investing in farmland is even resurfacing, in these uncertain times, as a private equity theme.

Remember the food crisis three years ago, when sharply rising food prices in 2006 and 2007, because of rising oil prices, led to panics and stockpiling in early 2008? Brazil and India stopped exporting rice. Riots broke out from Burkina Faso to Somalia. U.S. President George W. Bush asked the American Congress to approve $770 million for international food aid. Those days could return, and they represent opportunity for micro-irrigation, sustainable fertilizer and other water and agriculture innovation.

And so concludes our predictions for 2012. What do you agree with? What do you disagree with? Leave a comment below.

Article by Dallas Kachan, appearing courtesy Kachan & Co.

A former managing director of the Cleantech Group, Dallas Kachan is now managing partner of Kachan & Co., a cleantech research and advisory firm that does business worldwide from San Francisco, Toronto and Vancouver. Kachan & Co. staff have been covering, publishing about and helping propel clean technology since 2006. Kachan & Co. offers cleantech research reports, consulting and other services that help accelerate its clients’ success in clean technology. Details at www.kachan.com.

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Global carbon emissions soared 5.9 percent in 2010, the largest increase ever recorded, according to the Global Carbon Project, an international collaboration of scientists that tracks carbon emissions.

The increase comes after a short-lived decline in emissions in 2008 and 2009 and is a sign that global CO2 emissions are once again on the rise as world economies bounce back from recession.

The overall jump of more than 500,000 million tons of CO2 emissions from 2009 to 2010 was likely the largest absolute increase since the Industrial Revolution, according to the Global Carbon Project.

Emissions in China, the world’s largest source of CO2 releases, rose by 10.4 percent to 2.2 billion tons of carbon injected into the atmosphere. Emissions in the U.S., after dropping 7 percent in 2009, rose by 4 percent last year, according to the report.

On average, fossil fuel emissions increased about 3.1 percent from 2000 to 2010, about three times the rate of increase during the 1990s.

The combustion of coal represented more than half of the growth in emissions, the report said. Glen Peters, a researcher at the Center for International Climate and Environmental Research in Oslo and a leader of the Global Carbon Project, said the steep rise in emissions is evidence of a trend that portends severe climate change in the future. “Each year the emissions go up, there’s another year of negotiations, another year of indecision,” said Peters.

Article appearing courtesy Yale Environment 360.

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On 28 October Air China conducted its first trial flight of a passenger jet powered by a mix of biofuel and traditional aviation fuel.

The Jet A-1 biofuel kerosene used in the flight was derived from the seeds of tung trees, more commonly known as jatropha.

Air China’s Boeing 747-400 landed safely at Beijing Capital International Airport at 9:30 a.m. after burning more than 10 tons of the biofuel, a 50-50 mixture of traditional Jet A-1 derived from oil and Jet A-1 processed from the jatropha seeds. The jatproha Jet A-1 is what’s known as a drop-in, simply being admixed in a 50-50 ratio with conventional Jet A-1, and requires no engine modifications.

Air China Vice President He Li said the composition and the burning efficiency of the biofuel admixture had been tested along with its impact on the Boeing 747’s four Pratt and Whitney JT9D high-bypass turbofan engines.

The Hydro-treated Renewable Jet Fuel (HRJ) used Honeywell/ Universal Oil Products’ process to produce the biofuel. According to Jennifer Holmgren , UOP’s former director for renewable energy and chemicals, UOP licenses the process “nonexclusively.” UOP said in a statement, “The flight is a result of a broader effort kicked-off in 2010 by China’s National Energy Administration and the U.S. Trade and Development Agency to address the technical, economic and institutional factors required for the development of a new biofuels industry in China.”

Air China is the People’s Republic of China flag carrier and one of the country’s major airlines, the world’s tenth largest airline company according to fleet size, operating nine Boeing 747s scheduled to be phased out. Air China has already retired five Boeing 747s.

According to the International Energy Agency, China will lead the world in “demand growth” for jet fuel through 2012, reaching 5.6 percent. Total worldwide demand for Jet A-1 is forecast to reach 239.4 million gallons per day during the same period, compared 214.2 million gallons in 2007, a demand-growth rate of 2.3 percent. A 2007 422-page National Petroleum Council study, Facing the Hard Truths About Energy, reports that global demand for energy, including jet fuel – will grow by as much as 60 percent by 2030. It is China’s growing civilian air capacity that makes the test significant, as China Civil Aviation Administration official Zhang Hongying said following the test that the jatropha-derived biofuel was now ready to be used for commercial flights.

The Air China test flight is the world’s sixth such demonstration flight using Jet A-1 derived from jatropha.

The success was long in coming. PetroChina vice president Shen Diancheng remarked that it had taken PetroChina a decade to overcome the technical barriers of converting jatropha oil into Jet A-1 aircraft, but now that tests have proven its viability, PetroChina expects to ramp up production to 60,000 tons of jatropha Jet A-1 annually by 2014.

China’s interest in developing biofuels for industrial use is growing rapidly. In late 2009 Boeing and China signed a biofuel agreement with the Chinese Academy of Sciences and Chinese universities calling for research and development that potentially could support commercialization of jatropha. China has been proactive in the biofuel area for a number of years, with jatropha planted in 2007, and the plant – either wild or cultivated – can be found in Sichuan, Yunnan and Guizhou provinces as well as the Guangxi Zhuang autonomous
region. Yunnan currently has 33,000 hectares under cultivation and the Xinhua news agency reports that the country will have 13 million hectares of biofuel plantations by 2020 that will produce 6 million tons of biodiesel annually.

But commercial jatropha production has its bottlenecks. While jatropha grows wild in tropical regions and can be cultivated on land not suitable for crops, it produces a lot more on cropland, suggesting that if it becomes popular, airlines will have to be careful that it is not squeezing out crop production. Initial field tests of jatropha cultivation suggest that high oil yields require that the plant receive water, nutrients, and soil conditions that are comparable to many food crops.

A substantial drawback to jatropha is that it is currently harvested manually and commercial producers have found that the plant is more labor intensive than originally thought, especially for harvesting.

Despite these setbacks, commercial jatropha production is underway or being established abroad. Abundant Biofuels Corporation, which is headquartered in California, has jatropha cultivation projects underway in the Philippines, Columbia, Peru, and the Dominican Republic. D1 Oils plc of London, United Kingdom, has announced large projects in India, Malawi, and Zambia. A number of companies are reported to have recently acquired rights to cultivate jatropha in Ghana. The central and some state governments of India are promoting jatropha production on tens of millions of acres, although these efforts have been criticized for potential adverse impacts on forested areas, biodiversity, and food production. Early yields in India have been below expectations.

Accordingly, commercial firms growing jatropha and airlines worldwide will be watching events in China with great interest. Fuel and oil comprise 25 percent of airlines’ operating costs and when the price of jet fuel rises one cent, it increases the global cost of aviation $195 million.

Given the fiscal resources available in China, it therefore seems most likely that jatropha commercial aviation biofuel production will arise their first, if sufficient land not impacting the nation’s food production can be found.

Perhaps in the future the East will not be so red as green.

Article by John C.K. Daly, appearing courtesy Oilprice.com

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