Deep Throat's admonition to "follow the money" couldn't ring truer than in recent signals on climate change sent out by the big banks. The Carbon Principles, a set of guidelines addressing investment risk in electric power plants, were launched today by Citi, Morgan Stanley, and JP Morgan. While the guidelines themselves are high on fluff and low on actual guidance, they presage highly anticipated GHG regulation and provide a glimpse at what's ahead for advisers and lenders in the traditional power gen industry. The biggest development in today's announcement is the enactment of a so-called Enhanced Diligence framework, essentially a process allowing potential investors to evaluate risk factors in new plant construction. Power companies incorporating energy efficiency, carbon capture and sequestration, and/or renewables into new construction are assessed less risk than those that do not. With the Enhanced Diligence framework, the banks are sending a clear signal to power companies that business as usual construction will be penalized under any future regulatory framework. This is clearly not a cost the banks are willing to bear. What The Carbon Principles tell us is that the big banks - old pros at following the money - are ready to begin thinking critically about technologies enabling a low carbon future. Power plant construction is a multi-billion dollar business, and investors and lenders stand to lose big time if they get caught with their pants down after the initiation of GHG regulation. But The Carbon Principles are more than hedge against future regulatory uncertainty. They're also a smoke signal to Washington that the train is leaving the station. Most major American banks have already built carbon trading practice groups with eyes towards London (and Hong Kong). If the government blows this one, profits won't be the only thing we lose.

Finally some good news for publicly traded solar companies. Yingli Green Energy's shares bounced 14 percent today on news the company has successfully reduced its wafer thickness from 200 microns to 180 microns. The 10 percent reduction means the company will save on feedstock costs as it brings down polysilicon per watt while jacking up wafer output per ingot. In announcing its 2008 guidance, Yingli also noted it has secured roughly 70 percent of its polysilicon for 2008. The vertically integrated supplier also pegged its 2008 module shipment target at around 260 MW. Yingli's stock suffered along with other public solar companies in a big slump that started around Christmas. Today's breakout may signal a light at the end of the tunnel for some stunned solar investors. My guess is that Yingli benefited from its vertical integration, which allowed it shore up its supply chain while also investing in the engineering breakthrough. If this is the case, it means good news for a few companies in a similar position, like SunPower. While the well-stocked companies break away, the rest of the pack will be stuck at the bottom for some time to come.

A few of the interesting pictures follow!! The scene from my hotel room. Although the room itself brought back fond memories of my student days, staying at the YMCAs, the view was fantastic!! Only the Swiss can think of playing golf in the snow!!! Closing session with CNN interview

Thinking back to the Davos experience, these are my observations in a random order:

1. Davos is an excellent forum for the leaders of the world’s nations and companies to come together, exchange ideas and form consensus on various issues; and swap ideas on how their counterparts are handling some common issues. It is so because the forum has a very informal setting - people mingle without their security details or bag-men buzzing around them. While having coffee in the lounge area or during receptions, you run into thought leaders and experts on various subjects, CEOs of large companies, ministers from various national governments and, most importantly, Technology Pioneers. Discussions are almost always cordial and two-way. People are open about their agreements and disagreements, respecting various perspectives and seeking rational arguments for various points of view.
2. The world is very big and we know very little of it. Sitting here in the US, even those of us who pride ourselves on being ‘global’ through extensive travel around the world don’t know a tenth of what is really going on in the world. I will never pretend that Davos is the place to discover the world, but I was amazed at the stuff I learned through informal chats with social entrepreneurs from various places (‘Africa is the next Asia’, etc.), researchers from the cutting edge of science (‘mood control through magnetic waves’), etc.
3. Climate change is a top priority for the world. Duh!, you say but looking at some of the recent policy failures in the US, you wouldn’t think so. However, rest of the world, even Asian countries like India and China, are keyed in on this issue and struggling to find a balance between growth aspirations of their people and the effect of emissions on the climate change. Although policy frameworks are being debated and implemented, I believe that it will take strong and entrepreneurial business talent to guide the world out of the climate mess that we find ourselves in.
4. Water has risen to be near the top of the agenda, as it should. The issue of a viable business model still remains unsolved.
5. Adaptation to climate change is still getting short shrift and that amazes me. Regardless of what we do on GTG emissions, climate change is upon us and violent environmental events are already a reality. I wish that the world paid a little more attention to taking steps that risk-proof people from environmental events and have strong emergency prepared infrastructure.
6. Swiss are a wonderful wacky people – where else in the world can you play golf in snow?

Andy Karsner, the former managing director of wind giant Enercorp and current Assistant Secretary for Energy Efficiency/Renewable Energy at the DOE, was supposed to be Our Guy inside the Bush Administration. Even I was (slightly) convinced by his sweaty, impassioned speech on his team's revolutionary approach to EE and RE at the ACORE Phase II Policy Meeting. The hallmark of that speech was his team's big budget - over which he claims they had ultimate control. But, as with all things Bush Administration-related, Andy Karsner is a fraud. The FY 2009 Budget dropped today and it's hotter than the new Vampire Weekend album. Karsner's EE/RE budget was slashed 28 percent to $1.255 billion, including big reductions in solar, vehicle, hydrogen, and facilities & infrastructure research and technologies. Not to worry, though. Another DOE department, the Fossil Energy Research and Development program, received a 25 percent boost in funding to $997 million. So much for Our Guy in Washington.

William Taylor's recent Xconomy post on GE's and Wal-Mart's lack of disruptive potential is flawed by the same lack of imagination and innovation Taylor accuses these corporate behemoths of harboring. The post, a response to an article by Intel's Andy Grove on Jeff Immelt and Lee Scott, argues GE and Wal-Mart lack the potential to disrupt critical sectors “because that’s just not the way innovation in established companies works. I have a lot of respect for Taylor and his work at Fast Company and Xconomy, and even more skepticism about the innovative potential of corporate giants, but believe Grove's argument requires another look. In terms of greentech, the game-changing impact of an electric vehicle produced by General Electric at the scale and quality of which they would be capable has significant ramifications for startups, VCs, and policy makers – not to mention the big automakers who would end their day with a soup bowl full of tears. GE is the original disruptor. The light bulb. The electric locomotive. The jet engine.

Commercial radar. The company’s array of businesses would allow them to leverage a number of technologies across an electric vehicle supply chain. Combining, for instance, divisions building engine drive trains, battery technologies, electric generation and transmission, and consumer electronics, into a single business unit – let's call it Ecomagination. This would give the company the ability to shift labor, capital, and technology into a preexisting infrastructure instead of undergoing a massive realignment or outlaying the expense of inventing and developing new technology on the level of gas-friendly to gas-free Detroit. All this leads to what I consider the holy grail for green transport – vertical integration. Consider Tesla, which Grove points out spent around $105 million developing an EV sports car, that will run on fossil fuel powered electricity for the lucky few able to afford it. Consider the ethanol bust or Imperium’s recent troubles. These companies tackled one segment of a multi-faceted industry for which development cannot be uneven. Rule #1 of the green transport supply chain ought to be: just because you build it, doesn’t mean they will come. Rule #2 ought to be: you need to build it all yourself. Shai Agassi and Project Better Place have already provided us with a good example of Rule #2. GE has the capacity to build EVs and the green power systems to charge them. Leveraging its wind turbine, solar panel, and energy storage businesses, the company could build an extended network of roadside green charging stations using a business model similar to Project Better Place. This would provide the company with a secondary revenue stream for its EV business that could become a primary revenue stream (see, e.g., ink jet printers and printer cartridges), while also giving GE’s financial business a new property to manage. But, according to Taylor, just because GE could build an EV doesn’t mean they should. “Why would GE, with so much opportunity in its businesses around the world, and so many headaches from Wall Street (GE shares are barely unchanged from when Immelt took over six years ago), take on a high-profile gamble such as electric cars? he writes. My response – They should, for just those reasons. Since a 3-1 split in May 2000, the company’s stock has had one big peak (September 2000), a bottoming out (December 2002), remaining relatively flat since then. It’s revenues and profits have achieved similar levels of mediocrity, and the company has begun shedding lagging business units, such as its $11 billion sale of GE Plastics to a Saudi Arabian company in May 2007. GE Commercial Finance took a big hit over the summer for its involvement in the subprime mess. While not approaching a near-death experience of IBM’s magnitude, GE is not without its fare share of financial problems. An EV program could stimulate interest in the company’s stock, generate significant revenue through car sales and electricity financing, and boost profits as it boosts margins through streamlining its global businesses units. Finally, as Project Better Place proves, there is an international market for this technology. No other company has an on-the-ground global reach and access to global markets approaching that of GE. Taylor insists big companies “have a hard enough time fixing themselves, let alone fixing society – especially when what ails society is not remotely core their existing businesses. Developing an EV would go along way towards putting GE back on track, not least because an EV is in line with its core business. No one would be surprised if GE developed an electric locomotive (already did it) or built a fuel-efficient jet engine (already working on it). One of the best things about the greentech revolution is that it has given entrepreneurs and innovators an opportunity to think in imaginative ways about producing world-changing technologies. Where is it written that that level of imagination is limited to startups? GE has as much to gain, if not more, from greentech as any company. A GE EV would re-establish the company as an innovation leader and would send a signal to corporate America for it to get its green ass in gear. Everyone in greentech is here because we like to think big. But sometimes big ideas need big capital, and the sooner GE realizes this, the better off we’ll all be.

Our weekly list of greentech events in the (mostly) New England area. If you have an event to list for next week, e-mail us at englander at greentechmedia dot com. February 3

• Boston Going Green Expo, 10:00 a.m. - 4:00 p.m. @ Bayside Expo Center, Boston

February 5

• Energy Technology Innovation Policy Seminar: "The Impact of Policies to Reduce Oil Consumption and GHG Emissions in the Transport Sector: Insights from the National Energy Modeling System", 9:30 a.m. - 11:00 a.m. @ Belfer Center Library (L-369), Kennedy School of Government, Harvard University

February 6

• MIT Energy Club Lecture Series: Phil Rettger, Executive Vice President, Optisolar, 12:00 p.m. - 1:00 p.m. @ MIT Building E51-335
• MIT Energy Club Spring Kick Off Social, 7:00 p.m. - 8:30 p.m. @ Thirsty Ear Pub, MIT Building W1

February 7

• Power, Drugs, and Money: MIT Enterprise Forum Innovation Summit 2008, 7:30 a.m. - 4:30 p.m. @ Seaport World Trade Center Boston. Special programming note - I'll be liveblogging this conference for Greentech Media's Green Light blog. More details to follow later in the week.