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Q2 VC in Greentech Comes Back Strong

Eric Wesoff: June 30, 2009, 5:20 PM

More Than $1.2B in 85 Deals Signals a Quiet Recovery in the Greentech Sector

Optimism prevailed amongst greentech venture capital investors in the second quarter of 2009.  Despite the eulogies delivered for the greentech sector because of a less than stellar first quarter, VC investment in greentech rebounded in the second quarter with more than $1.2 billion invested in 85 startups.  

Notable investment trends in the second quarter included:

  • An increase in smart grid, automotive, and energy storage investments
  • No giant $100 million+ solar or biofuel rounds as in 2008
  • Early stage and late stage investments dominated, while mid-stage funding was harder to come by
  • Slightly smaller average round sizes

Ira Ehrenpreis, General Parters at Cleantech VC, Technology Partners, commented on the numbers: “The recent quarter’s balanced distribution of sectors that attracted capital underscores cleantech’s breadth and diversity of opportunity, one of the key drivers behind why cleantech remains an enduring area.”
John Rockwell, founder and Managing Director of Element Partners added, "The growing belief that credit markets and the economy are on the road to recovery has investors back in the market.  Greentech markets are massive and diverse and investors are starting to pour additional money into the next wave of greentech opportunities."

Solar power was once again the leading investment segment at more than $330 million. But unlike previous quarters – the second quarter saw a much more balanced distribution across the various sectors with a marked increase in automotive (more than $202 million) and energy storage (more than $180 million).

One of the drivers for steady second quarter venture investment was the promise of stimulus monies offering start-up investors a non-dilutive funding source. To fully return to health, the cleantech sector needs a rebound in project financing levels, level-headed carbon legislation (good luck to us on that) and some hope in the IPO market.

Details on every greentech deal from this quarter are in this report.

Yellostrom Likes Google’s PowerMeter – And Microsoft Too

Jeff St. John: June 30, 2009, 1:04 PM

German utility Yellostrom will work with Google on testing its PowerMeter home energy monitoring software – but it is also working with Microsoft, which has its own rival home energy platform, on its smart meters.

Google announced its Yellostrom partnership on its official blog Tuesday. The two said they would work to bring energy data to the utility's customers through its Sparzähler smart meters, which it wants to deploy to its more than 1.4 million customers.

That adds a first European utility to the list of eight in North American that Google is already working with. It also adds a new meter to those of North American smart meter market leader Itron, which is working to integrate its meters with PowerMeter (see Google Names Itron, Utilities as PowerMeter Partners).

It may also be the first sign of a rivalry between Google and Microsoft when it comes to bringing energy awareness to the masses, given Microsoft's announcement last week that it had its own web-based energy portal, Hohm, in development  (see Microsoft Launches Home Energy Site, Sees Devices, Demand Management in Future).

Yellostrom's Sparzähler meters are using a communications module based on Microsoft CE, along with Microsoft technologies to manage the data those meters put out in 15-minute increments. The meters communicate with the utility over a TCP/IP network and bring data to customers' PCs through power line adapters.

Yellostrom has also discussed using Microsoft products as the basis of a customer web interface and software to display meter data on customers' PCs – though that was last year, before both Google and Microsoft launched new customer energy portals.

Microsoft also has its own list of partner utilities, including Puget Sound Energy, Seattle City Light, Xcel Energy and the Sacramento Municipal Utility District.

But Microsoft, unlike Google, also plans to open Hohm to consumers who don't have smart meters or other means to collect utility data, giving people the option of typing in estimates of their energy usage to help find ways to save power.

While Google has said it would look to devices beyond smart meters to provide data to PowerMeter, it hasn't said it would seek to deploy the platform without any source of digital data whatsoever (see Google Looks Beyond Smart Meters for Home Energy Data).

Rick Nicholson, vice president of research for IDC company Energy Insights, believes the Google-Microsoft energy monitoring rivalry – if it comes down to that – is likely to be one of the more closely watched battles in the crowded field of giving utility customers insight into their energy use.

Given the number of venture capital-funded startups – Tendril, Greenbox, EnergyHub, 4Home, Control4, and many others – hoping to offer the same services to utility customers, he likely won't be the only one keeping an eye on the two giants (see eMeter Intros Home Energy Platform).

Algenol: The Elephant in the Room

Eric Wesoff: June 30, 2009, 1:06 AM

I wrote a perspectives piece last week (see Algae Fantasists Predict 1B Gallons Per Year by 2014) on the viability of commercial algal biofuels and received a slew of comments, on and off-line, endorsing my claim that we are a longer way off from commercialization than claimed by breathless algae start-up press releases.

But according to Jim Lane of Biofuels Digest: Paul Woods, the chief executive of algae farmer Algenol is adamant he will produce 250 million gallons per year by 2013.   

And according to Lane in email correspondence – when it comes to biofuels from algae, "It really comes down to how one thinks about Algenol. That's the elephant in the room when it comes to photobioreactors."  

Today Algenol told the New York times that it is building a photobioreactor-based algae-to-ethanol demonstration plant at a Dow Chemical site in Freeport, Texas with plastic material supplied by Dow.  Photobioreactors or PBRs, in Algenol's case, are simply plastic covered troughs housing a mixture of saltwater, algae, nutrients, and CO2. 

Note that algae expert Dr. John Benemann flatly states that photobioreactors "do not work” and are useful only in supplying inoculum.

Algenol's proposed fuel harvesting method does differ from traditional algae oil extraction methods.  Rather than grow, flocculate, filter, de-water, and extract oil from the algae – Algenol uses a very different approach. Algenol's "Direct-to-Ethanol" process gathers ethanol produced by algae without destroying the algae and without the necessity of refining oil into biodiesel.  This method, if viable and scalable, has huge potential cost and embedded-energy advantages.

But according to Algenol's website:

  • Initial proof of science was generated by Dr. John Coleman at the University of Toronto between 1989 and 1999. Since then, the process has been refined to allow algae to tolerate high heat, high salinity, and the alcohol levels present in ethanol production.
  • The algae are metabolically enhanced to produce ethanol while being resistant to high temperature, high salinity, and high ethanol levels, which were previous barriers to ramping to commercial scale volumes.
  • Algenol’s prototype production strains can produce ethanol at a rate of 6,000 gallons/acre/year, and are expected to improve to 10,000 gallons/acre/year by the end of 2009. With further refinement, the algae cells have the potential to increase production rates to 20,000 gallons/acre/year in the future.
  • Algenol only uses algae strains that do not produce human toxins. In addition, the specific algae cells used cannot live in the environment found outside their Capture Technology contained sealed bioreactor.

Although this wording doesn't use the specific terms – these algae strains are clearly genetically modified – and that might be a hard sell in the U.S.  The food vs. fuel debate was bad press for biofuels and the frankenalgae debate would be even worse.

Algenol was reportedly underwritten with $70 million invested by the CEO and a few partners. Algenol claims to have plans to build a billion gallon per year facility in Mexico with a subsidiary of Mexican-owned BioFields at a cost of $850 million.  Mexico might be a bit more lax about genetically modified algae.
The company has applied for DOE stimulus bill funding.  More details from Lane at Biofuels Digest here.

I'll close with a comment from another renowned aquaculture and algae expert with more than 30 years of real-world experience:
"Few of the current slew of algae promoters seem to understand the immense energy/financial hurdles that algae fuel production need to overcome to be financially viable alternative fuels and as such their R&D priorities reflect this. As soon as I see an article touting algae's production of oil per unit area over terrestrial plants – I know the author(s) are clueless about the financial economics of algae fuel processing. As soon as I read about some special process that increases algae production per unit area – PBR's (that often use more energy than they produce), aphotic production, etc. I know the promoters don't understand the energy budgets involved in producing and processing algae to fuel.

"Bottom line – in our opinion the reality of economically viable algae fuel production is still quite a few years in the future – unless someone finds a truly novel short cut through the Laws of Thermodynamics and basic economics."

GTM Research has a brief report on algae players and technical challenges available here

Thanks to all the commenters for their input.

DOE: $346M For Building Energy Efficiency

Jeff St. John: June 29, 2009, 6:53 PM

Energy Secretary Steven Chu has pointed to buildings as a key target for saving energy. On Monday, the Department of Energy backed him up with about $346 million in stimulus package funding.

The 81 million or so buildings in the United States use about two-fifths of the country's energy, more than manufacturing or transportation, the DOE says. About three-quarters were built before 1979, making them ripe for efficiency retrofits.

In the future, the DOE would like to see buildings built and operated as an "integrated system" with energy efficiency at the forefront, from design to day-to-day maintenance.

To that end, it set aside $100 million for "advanced building systems research," aimed at the goal of "net-zero" buildings that generate as much or more energy than they actually use.

That's something Chu has said could be accomplished, in part, through smarter software for controlling building HVAC, lighting and other energy-using systems. A host of energy services companies, or ESCOs, provide such services, and startups are coming up with both new technologies and new business models to improve on their offerings (see Making Building Automation Brainier and A PPA Model For Building Energy Efficiency?).

The DOE will also put $53.5 million into its "Commercial Buildings Initiative" launched last year. The money is to help expand the number of companies involved from 25 to about 73, starting in September.

To make homes and apartments more energy-efficient, the DOE is putting $70 million into job training for energy efficiency retrofits. And it will also direct $72.5 million toward "building and appliance market transformation," or that is, the technical and bureaucratic effort to do things like expand Energy Star rating systems and prepare builders and regulators for more stringent building codes.

Finally, the DOE will put $50 million into research into solid-state lighting at the technology and advanced manufacturing levels – in other words, more money for light-emitting diodes (LEDs). That announcement follows Friday's news of new federal lighting efficiency guidelines to take effect in 2012 for fluorescent and incandescent lights.

Creating ‘Utility-Grade’ Solar Panels With Beefier Warranties

Ucilia Wang: June 29, 2009, 12:41 PM

When Roger Efird, president of Suntech Power's North America sales, spoke last week at the Edison Electric Institute's convention in San Francisco, he mentioned that solar panel makers are going to start offering longer and different kinds of warranties for certain discerning customers.

"We'll start to see things that will be guaranteed that we've never seen before, such as efficiencies," Efird said. "For utility-grade applications, you'll have to give more details than to say you'll get this much after 10 years and this much after 20 years. Maybe a year-over-year roadmap."

Efird, of course, wasn't just making a general prediction. He told me after his talk that Suntech plans to launch utility-grade solar panels. The company is working on what he called "an advanced leap" in solar cell manufacturing that would make it possible to promise better and longer output for its panels.

He declined to say when the company would start selling these new products with beefier warranties. He did say that Suntech plans to continue to work on the tech improvement for this initiative in the next six months.

Solar panels these days generally come with a 20 to 25-year warranty regardless of whether they are meant to go on the rooftop of a home or on the ground of a solar farm.

There are, of course, various power ratings that indicate the range of power output for each panel. There also are solar panels with cells that are made of different semiconductors, which could make a difference in how well they perform. So solar project developers already have many options to choose from.

I imagine utilities would like to have robust solar panels with warranties longer than 25 years though. Banks also could be more willing to finance projects that use equipment with longer warranties.  After all, a coal-fired power plant can stay alive for much longer than that. 

Making Energy Innovation a Team Sport

Eric Smalley: June 29, 2009, 9:26 AM

MIT Institute Professor and former CIA Director John Deutch last week warned that the U.S. needs to revamp its “innovation system” if we want to make timely progress on global warming and energy security. The former Deputy Secretary of Defense and Undersecretary of Energy offered his views on the challenges to remaking our energy system in a plenary talk at the Optics and Photonics for Advanced Energy Technology meeting at MIT.

Deutsch’s main point is that the researchers and entrepreneurs who are rushing to tackle the energy problem are following the traditional model of technology innovation: identify a problem, come up with an idea to solve it, engineer the solution for specific applications, and bring the solution to market.

This linear, technology-push approach is running up against the hard economic and regulatory realities of the energy market as currently embodied by Congress and exemplified by the Waxman-Markey Bill.

Innovation needs to be more of a team sport, Deutch said. You have to start the science, engineering and business aspects at the same time. “So this traditional distinction we have… between discovery and application is blurred because discovery here depends upon the character of the application,” he said.

On top of the systemic challenges, the Waxman-Markey Bill poses a particular challenge for energy innovation, Deutch said. On one hand you have Renewable Portfolio Standards (RPS) that dictate specific amounts of wind, solar and other renewable energy sources. And on the other you have cap-and-trade, which attempts to place a price on carbon emissions.

The two methods clash, Deutch said. “You have an inconsistent set of measures that are supposed to guide our energy future. The problem is RPS hides the cost of the generation technologies that are going to replace CO2, and the CO2 cap-and-trade system recognizes the costs,” he said. “It makes an uneconomic basis for technology choices.

Eric Smalley is the editor of Energy Research News. He has written about technology since 1987 and has freelanced for many publications including Discover, Scientific American, Wired News and The Boston Globe on topics ranging from quantum cryptography to global warming.

PrimeStar Solar Preps for CdTe Panel Launch

Ucilia Wang: June 26, 2009, 1:57 PM

The success of First Solar has given startup companies developing cadmium-telluride solar panels hope. Why, if First Solar could claim to be the lowest-cost producer in the industry while raking in good profits, then we could do it, too.

PrimeStar Solar is no exception. Brian Murphy, CEO of PrimeStar in Arvada, Colo., said at a recent conference that "cadmium-telluride is the only technology proven to move below $1 per watt in manufacturing cost."

The company is moving toward the launch of its commercial product, set to take place by the end of this year, Murphy said. Murphy was rather mum about his company's product specs and production plans, however.

He said the commercial factory would have a production capacity in the "tens of megawatts." PrimeStar produced its first thin-film panel in April 2007 and began pilot production last October, he added.

Murphy declined to disclose the manufacturing cost of PrimeStar. And neither would he say how well PrimeStar's solar panels could convert sunlight into electricity.

Tempe, Ariz.-based First Solar's panels could convert nearly 11 percent of sunlight into power.

PrimeStar has licensed its technology from nearby National Renewable Energy Laboratory. Back in 2007, the company was awarded $3 million from the Solar American Initiative, administered by the U.S. Department of Energy, for commercializing its technology.

Founded in 2006, the company raised $6.2 million for a first-round fundraising that year. GE Energy invested an undisclosed amount in 2007 and poured in more money to become a majority shareholder last year.

PrimeStar hopes to see its panels in power plants serving utilities or on top of large commercial buildings. They're the same markets that First Solar and other thin-film solar companies are after.

Thin-film panels on the market today aren't as efficient at generating electricity as the more prevalent crystalline silicon solar panels. So a thin-film energy system would need more solar panels to achieve the same generation capacity as the crystalline silicon variety.

PrimeStar has about 100 employees.

The company will have to contend with other startups that are developing cadmium-telluride solar panels, such as Abound Solar in Fort Collins, Colo. Abound only recently began commercial production