Green Tech

CAMBRIDGE, Mass.--The outpouring of technology innovation in green technologies could be stymied without healthier financial markets and significant changes to government policy.

Numerous speakers at the MIT Energy Conference on Saturday said the economy and current regulations are barriers to cleaning the energy industry fast enough to mitigate the effects of climate change.

"We see technology innovation completely unprecedented, certainly in my memory, in the technology sector," said Ernie Moniz, MIT professor and director of MIT's Energy Initiative. "We also heard (today) that to get scale-up in time will take more. It will take policy innovation...and business model innovation."

To stabilize greenhouse gas emissions in the next 20 years, the energy industry needs to start investing now in a range of technologies, including renewable energy, efficiency, and underground storage of carbon dioxide, different speakers said.

The problem, though, is that the energy industry moves slowly and is influenced by political lobbying, Moniz said, creating a "large inertial system" that takes time to change.

Also, the meltdown of the financial markets has made building new renewable-energy projects, such as wind farms or solar plants, very difficult. That has created a situation where the government needs to take a more active role in clean energy, argued Theodore Roosevelt IV during a panel on policy. Roosevelt, the great-grandson of President Theodore Roosevelt, is managing director at Barclays Capital and an outspoken conservationist.

"We now have in financial markets something equivalent to an overloaded electricity grid...We have something close to a blackout" because banks are afraid to lend money to other financial institutions, he said. "If we want to see investments in alternative energy, Uncle Sam is going to have to put some money into these."

As a "good Republican and good investment banker," he is wary of government involvement but he said the current situation demands the federal government take the lead on energy projects with industry and possibly states sharing some of the investment risk.

"Diversification of our energy is a good goal in itself. It's prudent risk management. Climate change...we need to try to rise to that challenge," Roosevelt said.

Room for auto start-ups?
The pace of "decarbonizing" the transportation industry is also threatened by the economy, argued John Casesa, the managing partner at Casesa Shapiro Group and a leading auto industry analyst. The recession has dramatically cut revenues at large automakers, a situation that is likely to slow the pace of technology innovation.

"I think it's unstoppable. There's been a societal change in terms of the demand for clean energy," Casesa said in an interview. "I also think, though, that some of this stuff that might have been quickly accepted is going to face a longer adoption cycle because of the economics."

For example, if the large incumbent automakers were allowed to go into bankruptcy, there would be a "big hole to fill" for smaller companies with new technologies, he said.

Casesa predicted that by 2020, the internal combustion engine will still be the dominant powertrain, with electric cars remaining a small percentage of cars.

Hard questions on policy
On policy, many speakers endorsed the basic idea of putting a price on carbon emissions. The Obama administration has called for a cap-and-trade system where big polluters have to purchase permits to emit carbon dioxide. The idea is that the auction will generate revenue that can be used for clean-energy infrastructure and research. Allowing permits to be bought and sold is a market-based mechanism for settling on a price for carbon emissions, say advocates.

"The president has it right: let's do a price signal," said Wayne Leonard, the CEO of utility Entergy, who argued that the United States should take the lead on climate change in global negotiations.

Leonard said that there should be an increase in government-funded research in technology to store carbon dioxide underground at coal plants, called carbon capture and storage.

He warned, though, that carbon regulations will push up the price of electricity.

U.S. Rep. Jay Inslee (D-Wash.), who delivered a keynote talk at the conference, said that creating regulations to restrict carbon dioxide emissions, even if they do increase the price of electricity, is more prudent than inaction.

In an interview with the media after his talk, Inslee said that there are already a number of economic problems being caused by climate change, such as a drop in agricultural production in California because of the drought. Also, in the history of regulation, businesses have complained that the cost of compliance would be too high but, in the end, found technical and business solutions, he said.

"Innovation gives us the possibility that there won't be" an increase in electricity prices from carbon regulations, he said.

Regulations, like those in California that give utilities incentives to be more energy-efficient, could also mitigate increases in the electricity rates, he said. "Even if the per-watt rate went up, your monthly bill may not go up--that's the ultimate issue," Inslee said.

There are legislative efforts under way to pass an energy bill this year that would create a national requirement for renewable energy at utilities. Carbon regulations could also be voted on this year. The exact details on how these policies are structured will make a big difference on how quickly new energy technologies will be adopted, say observers.

"One must say, (we are) only beginning to address the really hard questions on policies," said MIT's Moniz.

CAMBRIDGE, Mass.--Utility company American Electric Power (AEP) plans this year to place equipment in residential areas capable of storing a few hours of electricity, one of the first tests of distributed storage on the power grid.

Ali Nourai, AEP's manager of distributed energy resources, calls the storage program a potential "game changer" for the utility industry. Nourai spoke during a panel on grid energy storage at the MIT Energy Conference here Saturday.

"The key for distributed energy is not because it's cheaper. The key is national security--we don't have a huge storage (device) that can be blown up," Nourai said.

The storage units would be the size of a relatively small "backyard transformer," each wired to provide enough electricity for four to six houses, he said. Together, those storage units could provide back-up power to neighborhoods during outages and potentially for other applications, Nourai said.

"Aggregated, hundreds of these units controlled (by AEP)...effectively do the same as one big storage unit," he said. "It's closer to the load, and it has the potential to (create) competition on price."

AEP is one of the few electric utilities in the U.S. that has already deployed storage on the electricity grid, which is very expensive. The utility, which operates in Midwestern and Southern states, started three years ago with a one megawatt sodium sulfur battery. It now has six megawatts worth of storage in three locations using this technology, Nourai said.

In these cases, AEP can do "peak shaving" in which it draws on the stored electricity during peak times, such as the middle of hot summer day when air conditioning loads are high. Because the stored energy supplies electricity to the grid, the utility doesn't need to pay for electricity at high peak-time rates.

Although this has proved to be a viable application, speakers on the energy storage panel said that the high cost of batteries and other storage technologies makes it difficult for utilities to justify investments in the technology.

Because of the high cost, energy storage devices need to be used for a number of applications to generate sufficient revenue, the speakers said. For example, a large battery could provide back-up power, do peak shaving, and be used to stabilize dips in grid signal frequency.

"At the end of the day, it's going to be cost that drives acceptance of storage on the grid," said Gary Colello, CEO of Premium Power, which makes a zinc bromide fuel cell that provides short-term storage to utilities in the U.S. and Canada.

This is a large megawatt storage device already on AEP's grid. Click on the image to see a photo gallery of power grid storage technologies.

(Credit: AEP)

Another problem is that current utility regulations are structured around utilities making investments in power generation. "Without a fairly radical rethink of utility regulations, to get the mass movement of energy storage beyond a handful of utilities--it's not going to happen," said Matthew Nordan, the president of consulting firm Lux Research.

AEP's Nourai said the regulators need to be educated on the different values that energy storage can provide. Some of those are economic, like providing back-up power, whereas others are societal benefits because they help the environment. For example, storage makes bringing renewable energy sources onto the grid more feasible.

Wind, solar forcing the issue
The growing interest in renewable energy, in fact, is what prompted AEP to explore energy storage in the first place, said Nourai.

"Our business was being threatened by something that everybody loves--renewable power," he said, noting that the amount of solar power from its customers grew from kilowatts to megawatts over the past five years. "We love it, too, but we have no control over it. (Customers with solar) could turn off megawatts of power or not maintain it."

Wind and solar energy are also variable, meaning they can't deliver electricity as reliably as a fossil fuel power plant. Energy storage, through batteries or compressed air storage, is one way to deal with that variability.

To deal with the projected increase of renewable energy, utilities need a "buffer" in the form of storage so that it can control the flow of electricity onto the grid in a managed way, Nourai said.

Although the basic technology for energy storage hasn't changed in decades, interest has peaked substantially in the last few years. Nourai said that five years ago, only engineers went to energy storage conferences; now half of the attendees are venture capitalists and politicians. The energy storage session at the MIT Energy Conference was standing-room only.

For its distributed storage plans, AEP said that just four hours of back-up power could address 90 percent of the outages the utility has to deal with. "When (storage) is closer to the customer, it's more reliable," Nourai said.

CAMBRIDGE, Mass.--Lars Josefsson is the CEO of an electricity utility and a self-described climate activist.

He leads Vattenfall, a Swedish state-owned utility that has set a goal of making its power generation carbon-neutral by 2050. He delivered the opening keynote address at the MIT Energy Conference here on Saturday.

Lars Josefsson, CEO of Swedish utility Vattenfall, speaks at the MIT Energy Conference.

(Credit: Martin LaMonica/CNET News)

Vattenfall, which means waterfall in Swedish, already gets 22 percent of its electricity from renewable sources, largely hydropower and offshore wind in Sweden, and an additional 31 percent from nuclear energy.

In the utility industry, Vattenfall is well know for being the first to test carbon capture and storage technology at a coal-fired power plants outside Berlin, Germany. When European electricity markets were deregulated earlier this decade, Vattenfall acquired power companies in Europe that rely on coal.

Vattenfall has worked with consulting firm McKinsey on an influential study that examines the most cost-effective technologies for reducing carbon dioxide concentrations in the atmosphere.

Through that work, Vattenfall, like others, have determined that pumping carbon dioxide gas underground at coal-fired power plants--so-called clean coal technology--is necessary to stabilize carbon dioxide concentrations at 450 parts per million. The current concentration is approaching 400 parts per million and was under 300 parts per million before industrialization, said MIT president Susan Hockfield in her conference introduction on Saturday.

Sequestering carbon--an expensive and experimental technology that is still not done at commercial scale--is part of of an economywide transformation that will need to happen to stabilize greenhouse gas concentrations, Josefsson said. If businesses and policy makers wait 10 years to pursue low-carbon technologies, achieving the 450 parts per million target will not be possible, he said.

"This is not a small correction. It's a total redesign of society and the way it's been. It's a totally new infrastructure and for that, you need time," he said. "We think in 40 years, we can change everything as a power company--it's a question of how and in what order."

The company is on a path to reducing its carbon emissions by 3 percent from 2008 to 2010. It projects that it can cut emissions by 50 percent from 1990 levels by 2030 by investing in offshore wind, ocean power, biomass, new nuclear power, and carbon storage at fossil fuel plants, Josefsson said. Those same technologies will allow it to hit its carbon-neutral target by 2050.

At its site in Germany, Vattenfall has found that the oxyfuel technology being tested can effectively cut carbon dioxide emissions by 100 percent by pumping gases underground through pipelines. But it's not clear that this can ever be done economically, Josefsson said.

He argued that the cost of developing carbon storage technology should be shared by government and industry.

"Companies with shareholders and boards cannot take such a loss to get a gain in 20 years. This is a perfect example of a public-private partnership," Josefsson said. "Things will not happen by themselves in the time required if we don't get that match" between industry and government.

In the U.S., there are no functioning carbon-capture facilities. The Department of Energy pulled funding for a research project in Illinois called FutureGen last year. In the Obama administration's stimulus plan and budget, there is $3.4 billion set aside for research in "low-carbon coal technologies," such as carbon storage at coal power plants.

Abatement strategies
To address climate change, the world's economies need policies that manage the "cost and speed of change" to low-carbon technologies, Josefsson said. He mentioned specifically the need for a carbon cap-and-trade system designed to put a price on emitting carbon dioxide.

The European Union has set a goal of three 20s by 2020: 20 percent more efficiency, 20 percent renewable energy, and 20 percent emissions reduction. The government of Sweden recently proposed increasing the country's renewable energy output to 50 percent of power generation.

Josefsson said the McKinsey study found that the cost of emissions abatement by 2030 is about half of 1 percent of global gross domestic product. That's about as much money as a $10 change in the price of oil, which the global economy has shown it can absorb, he said.

Vattenfall CEO Lars Joseffson shows results from a McKinsey study on how to reduce carbon dioxide concentrations and continue economic growth.

(Credit: Martin LaMonica/CNET News)

"It's not a question of money. It's not a question of technology. It's a question of leadership and policy. That is what is in short supply," he said. He argued that businesses need to take an active role in dealing with climate change, not just policy makers.

During her introduction, MIT's Hockfield said that energy technology has "the most immediate potential by far for catalytic innovation" to help revive the troubled economy.

Asked why energy technology cannot change as fast as information technology, Josefsson said that entrenched investment in energy industry means that things move slowly.

"The energy system is such a big system and the inertia so enormous and the investment in it so enormous that the time to change, even if you had innovation, is also very long. So it's not a quick fix," he said.

CAMBRIDGE, Mass.--The chief executive of Duke Energy, James Rogers, is an unlikely advocate for policies to restrict greenhouse gas emissions. But the man who is building two new coal power plants is just that.

Rogers delivered a keynote speech at the MIT Energy Conference here on Saturday where he called for policies and technologies to bridge the fossil fuel-based energy industry of today with low-carbon alternatives.

Duke Energy CEO James Rogers at the MIT Energy Conference.

(Credit: Martin LaMonica/CNET Networks)

Rogers heads a company that generates 90 percent of its electricity from burning coal or nuclear power to serve its 4 million customers. So it's not surprising that he says that "coal is not a four-letter word."

But even with his company's marriage to fossil fuels, the potential influence of Duke Energy and its like over the future of the energy industry is undeniable: Duke's capital budget to invest in technology and infrastructure is $5 billion this year.

Meanwhile, the total amount of venture capital that went into clean tech start-ups last year was in the range of $3 billion to $4 billion.

Rogers is one of several industry CEOs calling for regulations that put a price on polluting carbon dioxide and Duke Energy is a member of U.S. CAP (United States Climate Action Partnership), a consortium of large corporations trying to influence policy.

Technology research should be funded now without waiting for carbon regulations, which he expects to come into force in 2009 and 2010 followed by a transition period.

"A vision of a low-carbon world is a hallucination without technology," Rogers said. He said the U.S. federal government is funding research and development in energy at 50 percent of the level it was in the 1970s.

Energy efficiency technology, such as smart grids, should be adopted immediately. But policy makers need to create the same incentives for energy efficiency as they are for renewable energy, like wind and solar, he argued.

He called for "decarbonizing" the electricity power grid. Once plug-in hybrid vehicles come online, a cleaner power system will effectively address cleaning the transportation sector as well, he said.

"I think the technology can do it. We just need to spend the money," he said, complaining about a lack of focus on climate change among policy makers. "Where the hell is the sense of mission? The mission is solving climate change."

At the same time, Rogers cautioned against policies that will dramatically raise the price of electricity for consumers.

In particular, he said that certain states are at a disadvantage to one policy proposal that is the equivalent to a carbon tax because they generate power from coal, which is a dirtier form of power generation than natural gas or nuclear.

"If you have a consumer revolt, one, it will never get passed and secondly, even it does, it gets repealed. So it's very important for us to get that right...

(Policy) has got to be affordable, it's got to be a transition, it has got to make sense, and we need a political consensus to go forward. We can't afford to get started and stop. And we can't delay. We need to get started even faster," he said.

Rogers also called for a fundamental change to utility regulation that does not tie the company's revenues to the amount of power it sells.

Instead, the utilities that can run their power networks most efficiently through software should be the most successful financially, he said.

"I want to change my model so that I create value not by building power plants. I create value by optimizing those networks," Rogers said.

CAMBRIDGE, Mass.--Famed venture capitalist John Doerr is conflicted. He says pace of innovation in green technologies, breathtaking in the past five years, is far from fast enough to address the scale of the world's energy problems.

Doerr was the keynote speaker at the MIT Energy Conference here Saturday. He alternated between expressing wonder at the progress in addressing global warming and discouragement at the overall state of affairs.

Kleiner Perkins investor John Doerr sees a 'green tech' boom whose scale is falling short.

(Credit: Martin LaMonica/CNET Networks)

The theme of the conference is "scale," as in finding the right technologies and policies to address burgeoning global energy demand without polluting the planet to the point of dangerous greenhouse gas levels.

Doerr is a partner at Silicon Valley venture capital icon Kleiner Perkins Caufield & Byers, where he has invested in Google, Amazon.com, Sun Microsystems, and several other successful technology companies.

Thousands of people have seen a video of a talk Doerr gave at the TED (Technology, Entertainment, and Design) conference last year, in which he broke down crying, telling the story of how, after seeing the movie Inconvenient Truth, his teenage daughter angrily told him to fix the global-warming problem because his generation caused it.

Two years ago, Kleiner Perkins announced the creation of its first green-tech investment fund, and Doerr has become a high-profile investor and policy advocate in the field.

Altogether, the company has invested more than a half million dollars in 30 green-tech ventures, many of which Doerr touted during his talk.

Fisker Automotive, founded by a former Aston Martin and BMW sports car designer, will have a four-door plug-in hybrid electric vehicle out next year. Another investment, Amyris Biotechnologies, is using synthetic-biology engineering to create low-cost malaria drugs and synthetic biofuels that mimic the characteristics of hydrocarbons.

Doerr also successfully lobbied to pass the California Global Warming Solutions Act of 2006, which seeks to reduce greenhouse gas emissions by 25 percent by 2020.

"So what's happened in the couple of years since my daughter yelled at me? We've invested a lot, we've lobbied a lot, and I've learned a lot. Think about it: who would have thought that a designer of gas guzzler vehicles would make a 100-mile-per-gallon plug-in hybrid?" he said in reference to Fisker Automotive.

But despite all the accomplishments of these innovative companies, he struck a downbeat tone on both technology and policy. After listing some of the technologies being generated by Kleiner Perkins-backed companies, he said:

"To the point of scale, who would of thought that all of that is not going to be enough? To get solutions that scale, we are going to have to find answers that are economic for all people everywhere. We are going have to use policy to harness innovation to make sure the right thing to do is the profitable thing to do, so that it becomes the probable thing to happen. There's more money that flows through markets in a day than all the word's governments in a year...

The energy market is $6 trillion. I like to say it's the mother of all markets. Compared to that Internet, which is a big deal, this is much bigger, much more exciting. But the challenge is much larger. Going green--solving that problem will be largest transformation on the planet."

Doerr said the entire planet needs to "reindustrialize" to adopt less-polluting forms of energy.

Many people have called for the equivalent of an Apollo Project or Manhattan Project in the United States to solve the energy challenge. But Doerr said that those, which were multibillion-dollar, single-government agency projects, "fail miserably to convey the size of the challenge."

To underscore how little is being done at the federal level, he said government funding in U.S. research and development on renewable energy was less than $1 billion last year, while oil giant Exxon makes $1.1 billion in revenue a day.

The $5 million in federal research for geothermal power is "so low, it's almost criminal," he said.

He predicted that the three leading presidential candidates will address climate change regulation far more aggressively than the current Bush administration, which has opposed mandates and sought to stay outside United Nations-led climate talks.

Despite Doerr's concern for inadequate action on clean energy, he touched on the question of an investment bubble in green tech. Overall, he said there isn't a bubble, but he does see some problems.

"There's too much money chasing too few good ventures, despite the size of this problem," Doerr said.

Venture capitalists have poured billions of dollars into the sector, making it one of the fastest-growing areas of investment, though it still garners fewer venture capital investments than biotech and information technology. That rapid capital influx, along with the challenges of large capital demands and regulatory complexity in energy, have caused concern that investment has been too aggressive.

In response to a question, he said the venture capital industry will not change to fund more capital-intensive energy projects. And he noted that returns in venture funds have been getting worse.

But he predicted that returns for green-tech investments will be good, once more recently funded start-ups go public in 2009.

Echoing the comments about a "global-warming bubble" made earlier this week by investor and tech luminary Bob Metcalfe, Doerr said "booms," or large investment waves, are generally good for the economy.

"I think that we're at the beginning of a green-tech boom. I can assure you we don't have an overinvestment to deal with the scale of the problem."

CAMBRIDGE, Mass.--The Massachusetts Institute of Technology and the Fraunhofer Institute of Germany on Saturday signed a memorandum of understanding to create a joint research facility in Massachusetts around sustainable energy.

The Center for Sustainable Energy Systems will have initial funding of $6 million--$5 million from the Massachusetts Technology Collaborative state agency and $1 million from utility National Grid.

The center will focus its research on advanced solar modules and advanced materials for building energy efficiency, said Nol Browne, the managing director of the center.

Researchers will also work on building energy device prototypes, such as fuel cell membranes and solar modules.

Officials from MIT, Massachusetts, and Germany sign a memorandum of understanding to create the Center of Sustainable Energy Solutions reserach center at MIT.

(Credit: Martin LaMonica/CNET Networks)

The MOU was signed by officials from MIT, the state of Massachusetts, and Germany at the MIT Energy Conference which started Friday.

Germany's foreign minister Frank-Walter Steinmeier spoke at a press conference to announce the initiative. Spurred by supportive policies, Germany is the largest consumer of solar power in the world, with a number of leading solar-energy companies.

Ernest Moniz, the co-director of MIT's Energy Research Council, said the lab aligns with the university's initiative to develop clean-energy technologies and policies.

"Solar energy, in many ways, is the longest pole in the tent in addressing energy challenges," Moniz said.

Correction added to spelling of Nol Browne's name and full name of the center.