For green building companies, the good times have just begun. Despite the worldwide economic crunch, a number of companies with green building products or services are doing well. Kevin Surace, CEO of Serious Materials, said that his green drywall company had a record year last year and is in the midst of a record quarter at the moment, he told an audience at the Cleantech Forum in San Francisco. Matt Golden of Sustainable Spaces, which does energy assessments for homes, says his company is wrapping up a record month. Dan Geiger, who heads up the U.S. Green Building Council in Northern California, says interest in the group continues to build. Classes are exceeding expectations. And to top it off, David Elien, CEO of GE Lumination, says that the LED market is down, but because notebook makers are buying fewer LEDs. "General lighting is up," he said. So what gives. "Some of the bigger customers are taking their dollars out of new projects and putting them into their existing footprint and optimizing it for energy efficiency," said Elien. "When they come out of the downturn, they want to lower their operating expenditures." Surace had another explanation. Housing starts are 83 percent down. But new home builders have never been interested in products like Serious' EcoWall. "Big tract home builders don't care. They don't pay your electrical bills," Surace said. (Surace, by the way, sits on numerous green building advisory committees and boards. Serious also sells windows.) The product is mostly being bought by commercial builders and custom home builders. A lot of these segments are only down moderately. Large builders like Webcor now get the lion's share of revenue from green projects. The stimulus bill will also pump billions into retrofits and energy efficiency programs, Surace and Golden said. You can learn more about it at the Green Building Summit we are holding in Menlo Park, Calif. on June 11. If you have a business plan for green building or would like to participate, drop me a line.

Achates Power, which has been touting its opposed piston/opposed cylinder engine for the past few years but not providing a lot of details, unfurled a good portion of its business plan today at the Cleantech Forum during a presentation and an interview. First, to recap. The company is working on engines based around a design originally coined by the Junkers aircraft company back in the 1930s. (You know -- the guys who made planes for the Third Reich.) The Junkers Juno had one of the most efficient engines ever made, said CEO David Johnson (Johnson replaced James Lemke who became CTO a bit ago.) In these engines, the pistons face each other in one long cylinder, rather than sit in separate cylinders. Competitors like EcoMotors (which also has opposed piston/opposed cylinder engines) say these engines could lead to cars that get 100 miles a gallon. Now, the new material. Although based around the engine in the Junkers Juno, Achates has tweaked the engine to give it more balance torque. "We are both highly efficient and have high power density," he said, calling the engine "clean, durable and compact." "We eliminate the cylinder head and improve the performance," he added. The engine also weighs less than standard diesel engines, which further improves gas mileage. The company has already completed and built a two-stroke first generation engine, which it calls the A40. It has one cylinder and two pistons. "A military customer has already taken it and packaged it into a vehicle," he said. A new engine with four cylinders and eight pistons will be done in about two months. Achates now wants to raise $25 million to design a second generation engine based on a different design. To date, Achates has raised $35 million already from, among others Sequoia Capital and John Walton. Walton, a member of the Wal-Mart family, is also the guy who plunked money into First Solar. Achates, he added, won't make engines. It will license the designs to large manufacturers and vehicle makers. The company will charge $50 million in up front fees and five percent of revenue earned from its products after that. It hopes to sign its first deal in 2010. Licensing is common practice in pharmaceuticals, but in hardware it often results in acrimony and lawsuits. Johnson, though, said that the vehicle industry would license. One, they've done it before -- the Wankel engine was produced under licenses. Second, vehicle makers have to meet CAFE standards. They may have no choice. The first customers will likely be truck makers. Diesel in the U.S. is bigger in trucks than cars and truck makers are friendlier when it comes to licensing than car makers. Johnson showed a slide that says the company has been in talks with Eaton, Delphi, Caterpillar and others. Oh, one of the board members is Gary Convis, who ran Toyota in the U.S.

What will get the U.S. moving toward greenhouse gas reductions and greater energy autonomy? A $1 a gallon gas tax, says Arno Penzias.

Penzias, who won the Nobel Prize in Physics in 1978 (with Robert Wilson) for confirming the Big Bang and who now works as a VC at NEA, says that the tax should then be paid directly to the states. (I ran into Penzias in the hallway at the Cleantech Forum taking place in San Francisco.)

What else needs to be done? Smart grid. “We’ve got to have a grid� that works better, he said. Penzias is also something of an advocate for nuclear for providing baseline power.

New technologies, he added, aren’t necessarily the answer nor do we necessarily have the luxury of time to wait for them. Greenhouse gas reductions could be accomplished with existing technologies. They just have to be implemented.

“We’ve got to make do with what we have,� he said.

Getting infrastructure implemented in the U.S., however, isn’t easy. He said he’s been waiting for better cell coverage at his vacation house for a while.

Bioplastics are no longer the Cadillac option.

Cereplast, which makes biodegradable and compostable resins for food containers and industrial parts, has managed to reduce the cost of some of its resins so that they compete with regular petroleum-based plastics, said CEO Frederic Scheer in an interview at the Cleantech Forum in San Francisco. That’s a big change from three years ago when bioplastics were more of a disposable status symbol.

Last summer, when oil was around $100 a barrel, conventional petroleum-based resins sold for around $1.00 per pound. Cereplast’ s compostable resins, which completely dissolve in landfills, sold for about $1.05 a pound while the company’s hybrid bioplastics, which mix conventional and renewable resins, sold for 85 cents a pound. Thus, hybrid bioplastics were cheaper. Where carbon credits applied, compostible plastics were too.

Now, conventional resins sell for 50 to 60 cents a pound, thanks to a drop in oil prices to $35 to $40 a barrel. Compostable resins are around 85 per pound, so still expensive, but the company’s hybrid resins go for around 55 to 65 cents.

“We are very, very competitive,� he said.

Bans on Styrofoam will also push demand and in turn lower prices, he added.

Another factor that’s helping drop the price of bioresins is the paper industry. The paper industry buys a lot of starch. With Web-based publishing, increased recycling (and increasing stockpiles of recycled paper) the price of starch has been dropping because demand for paper has dropped.

And no, it won’t compete with food just yet. “We use four different starches, but in the U.S. we primarily use corn starch,� he said. “If you take the entire bioplastic industry, we represent less than one thousandth of 1 percent� of the starch market.

Meanwhile, the next time you pick up ginger at Trader Joe’s, you’ll be picking up some recycled coconut fiber too.

Earthcycle Packaging sells recyclable containers made from Malaysian palm fiber, said company representative Tracy Chmelaukas. The company makes containers for Trader Joe’s. Just thought you’d like to know. Cereplast and Earthcycle both have booths at the show.

SAN FRANCISCO -- I’m in the hallways at the Cleantech Forum in San Francisco today and here is what’s happening.

The Masdar Foundation, the massive investment and development organization funded by the government of Abu Dhabi, is raising a $700 million fund, according to a source. The foundation will partner with Deutsche Bank. Masdar partnered with Credit Suisse on their first fund, but there are more to come. The whole Masdar effort — which involves building solar factories, erecting net-zero energy cities, and starting a graduate school for energy efficiency with the help of MIT — is going to be billions. More on this later.

California Attorney General Jerry Brown spoke today. I missed his talk but ran into him (and his larger-than-life eyebrows) in the hallway. His office is putting together its own solar and renewable energy effort. Governor Schwarzenegger already has one. The efforts are somewhat similar, but Brown may focus a bit more on energy efficiency and distributed power, indicated Cliff Rechtschaffen, special assistant to the AG.

I also told Rechtschaffen about an idea from Matt Golden, CEO of Sustainable Spaces: give tax credits for energy efficiency and energy reduction that are equal to the solar credits. Right now, California residents can get whopping credits for solar, but less for reducing power consumption. Rechtschaffen said that is one of the ideas they are looking at.

Boston-Power is going to Asia to mass-produce its high-performance lithium-ion batteries.

The Westborough, Mass.-based battery maker on Tuesday named Hong Kong-based GP Batteries as a “strategic partner� to expand production of its Sonata rechargeable batteries, which are to be used in select Hewlett Packard notebooks (see HP Adopts Green Batteries for Notebooks, With More to Come).

Under the five-year agreement announced Tuesday, GP Batteries will dedicate a lithium-ion battery factory in Taiwan exclusively to making Sonata batteries. That factory is expected to double its 2008 monthly production this year, Boston-Power announced.

Terms of the deal with GP Batteries, and projected production rates from the Taiwan factory, weren’t disclosed. But Boston-Power did say that HP plans to deliver Sonata batteries to customers in the first quarter of this year.

The news comes on the heels of a $55 million investment Boston Power landed last month, bringing its total take to $125 million since its 2005 founding. Investors included Foundation Asset Management, Oak Investment Partners, Venrock, GGV Capital and Gabriel Venture Partners (see Boston-Power Gets $55M More to Produce Lithium-Ion Batteries).

CEO Christina Lampe-Onnerud told Greentech Media last month that Boston-Power was able to produce about 300,000 batteries per month, but wanted to reach “multiple millions per month� production in the near future.

Boston-Power is hoping to land another deal with a notebook vendor this year, and is working with HP on putting its batteries in other portable devices.

Its Sonata batteries can go through 1,000 charging cycles before losing their capacity to hold power, which is about three times more than conventional lithium-ion batteries.

The federal stimulus package will help greentech companies weather the economic downturn, but it also could lead to some undesirable effects.

“It’s critical for the industry to view the stimulus package and all the helping hands as incredibly temporary,� said Michael L. Goguen, a general partner of Sequoia Capital. “We don’t want a company to depend on the government. It’s easy to be deluded into thinking that you are in a sustainable business because you’ve got all those money [from the stimulus package].�

Goguen’s comment, made at the Cleantech Forum in San Francisco, is a reminder that government aid comes with potential side effects. The federal and state government had played key roles in promoting the growth of solar and other greentech sectors even before the financial market crumbled. Now that they are making even more money available, will the tech industry become co-dependent?

For H. Jeffrey Leonard, CEO and co-founder of the Global Environment Fund, the need for government dollars also reflects the importance of financing, which dwarfs the importance of technology development during this tough economic climate.

“The structure of the cleantech market is changing dramatically. What really matters is project financing,� Leonard said at the forum.

Investors also can’t expect high return any time soon. Leonard said back in the mid 1990s, limited partners were making a 30 percent return in the stock market, so investing in startups wasn’t so lucrative. Now that the stock market is tanking, the LPs are looking for other opportunities and adjusting their expectations.

“It’s hard to make consistent double-digit returns in a subsidized industry,� Leonard said.