Green Tech

Two companies said Wednesday that they have developed a method for turning sewage sludge into ethanol.

Israel-based Applied CleanTech and Marlborough, Mass.-based Qteros created a joint development project that combines sewage treatment technology and a microbial process for converting biomass into ethanol.

Applied CleanTech's feedstock which can be used to make electricity or liquid fuels.

(Credit: Applied CleanTech)

The method can turn municipal solid waste into a fuel and reduce the amount of sludge processed by traditional treatment facilities, the companies said. Many researchers have been studying ways to extract usable energy from sewage sludge but there are not any commercial operations that make liquid fuel.

Applied CleanTech's core technology, which is already used in treatment plants, extracts the biosolids from raw sewage, which is a way to reduce the overall amount of wastewater that needs to be treated.

In its partnership with Qteros, the biosolids are used as a feedstock to produce ethanol. Qteros, founded two years ago, is developing an ethanol-making process in which a naturally occurring microorganism digests the cellulose in biomass and turns it into ethanol. It's an alternative to the traditional multistep, enzyme-based method.

"Our customer is every municipality that has a waste water treatment plant," said Jeff Hausthor, Qteros co-founder and senior project manager, said in a statement, adding that the process reduces the expense of operating waste water plants.

Clean-technology investing could be seeing a rebound.

Cleantech Group, a research firm backed by Deloitte, released a preliminary report on Thursday showing a slight uptick in clean-tech funding during the second quarter of 2009 in North America, Europe, China, and India.

After two quarterly declines, the increase is good news, but the Cleantech Group noted that the quarter-to-quarter comparison for the same period a year ago is still down.

"The (second-quarter) total is up 12 percent from the previous quarter, although down 44 percent from the same period a year ago. The average round size in (the quarter) was $12.9 million, up from $12.3 million (the previous quarter)," the report stated.

Silicon Valley venture capital funds remained the top clean-tech investors in the second quarter.

(Credit: Cleantech Group)

Cleantech Group said that while solar investments are still down, clean-tech investments in the utility and automotive sectors have risen. In fact, automotive firms saw the biggest influx of clean-tech investments, which Cleantech attributes largely to the government's stimulus package for the automotive industry.

North America was the biggest investor in clean technology, making up about 66 percent. Europe and Israel were the second biggest investors, at 21 percent. India and China were less invested in clean technology, making up only 11 percent and 1 percent of the total investments in clean tech for the quarter, respectively.

The Cleantech Group also pointed to some big automotive deals completed during the quarter:

• Kleiner Perkins and T. Boone Pickens together invested $100 million in San Diego start-up V-Vehicle.
• Fisker Automotive, which plans to make a plug-in electric luxury sedan, raised $85 million from Kleiner Perkins and Eco-Drive Partners.
• Think Global, a Norwegian company that specializes in electric cars, raised $39 million.
• Israel-based ETV Motors received $12 million from Quercus Trust.

Battery companies also saw the love. Lithium ion battery maker A123 Systems raised $100 million from General Electric, and Deeya Energy, working on a "redox flow battery," raised $30 million from Technology Partners.

The Cleantech Group also listed the venture capital firms that invested the most in clean technology for 2Q09. Not surprisingly, Kleiner Perkins Caufield & Byers topped this list of green-tech investors, with Khosla Ventures, Braemer Energy Ventures, Robeco Alternative Investments, Draper Fisher Jurvetson, VantagePoint, and Venture Partners following.

Lithium ion battery company A123Systems has received a $69 million investment round from General Electric and others, the company announced Monday.

With its latest funding, A123Systems plans to expand its facilities in Massachusetts and Michigan, as well as build new facilities in Michigan. A portion of the proceeds will also be used to develop applications for the smart grid, such as utility-scale storage. The company has its headquarters in Watertown, Mass.

GE invested $15 million toward this latest round, bringing its total investment stake to 10 percent in the company. A123Systems also announced GE will receive a seat on its board of directors.

"We've accelerated our plans to expand our U.S. manufacturing. We do not believe our country can afford to wait to develop advanced batteries," David Vieau, A123Systems chief executive, said in a statement.

A123's battery cells are used in hybrid electric vehicles and electric cars. The company's batteries and battery systems are also used for grid energy storage and portable power.

National Semiconductor on Thursday announced that it has delved deeper into its energy efficiency efforts with the acquisition of Act Solar.

National Semi, which expanded into the solar business last year, plans to use the privately held company's technology for monitoring solar arrays with its SolarMagic product line.

Under the deal, whose financial terms were not disclosed, Act Solar's business for monitoring technology, which is designed to improve the efficiency of solar panels by balancing, or recirculating energy, will be folded into National Semi's SolarMagic business.

Power efficiency is an issue with electronic devices, given that it effects the life of powering a device and the amount of heat a device can generate. And the output of solar panels can be affected by shade, debris, different panel styles, and aging panels.

"Now with Act Solar, we can further improve the performance and efficiency of solar systems, at the same time providing monitoring capabilities not available before," said Mike Polacek, senior vice president of National's Key Market Segments. "This will make solar installations more efficient and ultimately reduce the cost of solar energy for everyone."

Update at 10:51 a.m. PDT, with analyst comment.

Energy Conversion Devices' shares plummeted 30.3 percent in morning trading on Tuesday, after the solar-equipment maker warned investors that its third-quarter earnings would fall short of earlier projections amid a weakening economic environment.

The company, which issued its warning after the markets closed on Monday, announced that it would cut 70 positions, issue a two-week production stoppage, and consolidate some of its manufacturing facilities. It also erased its third-quarter and fiscal-year forecast, noting that the financial climate had become too murky to predict, sending its stock down as low as $12.85 a share during intraday trading.

The company, which makes thin-film solar-laminate products, said the credit crunch is impacting projects in the global pipeline for photovoltaics.

Other solar stocks fell into the red in morning trading, as investors apparently were spooked by Energy Conversion's announcement and that of Canadian Solar, which reported weaker-than-expected fourth-quarter results Tuesday. SunPower, JA Solar Holdings, Trina Solar, and First Solar were all down in morning trading, while the broader markets moved into the black.

(Credit: Yahoo Finance)

Canadian Solar was also down, falling as low as 16.2 percent, to $3.25 a share, in intraday trading. It said its fourth-quarter revenues fell nearly 43 percent, to $73 million, from those posted last year. And it reported a net loss of $50.6 million, compared with a net gain of $6 million the previous year.

Shawn Qu, CEO of Canadian Solar, said in a statement:

The end of 2008 was a challenging time for Canadian Solar and for the industry. In Q4, difficult credit conditions for our customers, marketwide module and raw-materials inventory price declines, and winter weather in Germany directly affected our revenue growth and profitability.

The challenging environment for solar companies ironically comes at a time when consumers' awareness of green technology is on a steep rise, and government willingness to help offset the costs is growing.

Wall Street analysts at Jefferies & Co. still remain bullish on Energy Conversion Devices' long-term prospects but are cautious in the near term, according to the analysts' research note:

Energy Conversion Devices is well-positioned to serve a niche rooftop market without substantial direct competition for the coming couple of years, we believe. Yet near-term concerns around demand visibility leave us cautious.

As a result, Jefferies reduced its recommendation to a "hold" from a "buy." And it cut its expectations that Energy Conversion will hit $37 a share in the next 12 months to $15 a share.

Investors received another tool Monday designed to track green themes and greenbacks.

Standard & Poor's launched on Monday its S&P U.S. Carbon Efficient Index, designed to measure the performance of large-cap U.S. companies operating with a low carbon emissions footprint.

The index, which currently has 362 companies gleaned from the S&P 500, are selected using calculations from Trucost, an environmental data gathering organization.

David Blitzer, chairman of Standard & Poor's Index Services index committee, said in a statement, "Organizations around the world are paying greater attention to the impact of greenhouse gases on our climate, as increasingly more investors consider carbon efficiency as an important investment theme."

The U.S. Carbon Efficient Index is part of S&P's global thematic index series, which also covers such green themes as water, forestry, and carbon efficiency.

Microsoft, Cisco, Apple, and Google are among the tech companies included in the U.S. Carbon Efficient Index.

Green-tech jobs are providing a bloom to Silicon Valley's otherwise barren employment outlook, according to a recently released economic report.

In the high-tech mecca, Silicon Valley jobs dipped 1.3 percent year over year in December. Per capita income fell 0.8 percent last year over the previous period--the first time it had fallen since 2003, according to a report by the Silicon Valley Community Foundation and Joint Venture: Silicon Valley Network. The two organizations will jointly host the State of the Valley Conference on Friday in San Jose, Calif.

Such results in the San Jose-Sunnyvale-Santa Clara metropolitan statistical area come at a time when jobs contracted 1.7 percent statewide and 2 percent nationwide during the same period, according to the report.

(Credit: Joint Venture Silicon Valley Network and Silicon Valley Community Foundation)

According to the report:

Until the last quarter of 2008, Silicon Valley seemed to be weathering the global financial crisis and economic recession better than the nation. This is no longer the case. Since November, we have witnessed a spike in job losses and a significant drop in the commercial property markets.

But green-tech jobs have grown 23 percent from 2005 to 2007, according to the report, as venture capital investments in the sector have soared since 2005. Last year alone, venture capital investments in Valley clean-tech companies soared 94 percent over the previous year, the report noted.

(Credit: Joint Venture Silicon Valley Network and Silicon Valley Community Foundation)

And within green tech, jobs involving energy generation, which primarily entails solar system installation, accounted for the largest slice. But in the two-year period spanning 2005 and 2007, jobs involving green buildings climbed 424 percent, transportation rose 140 percent, and advanced materials 54 percent, according to the report.

(Credit: Joint Venture Silicon Valley Network and Silicon Valley Community Foundation)

The report further notes that growth in green-tech jobs may eventually pull the region out of the economic malaise, which has taken out a wide swath of jobs both within Silicon Valley and across the nation:

Today we're racked by the collapse of our nation's financial institutions, a meltdown in the housing markets and a global climate crisis, and yet here too we may already be seeing the seeds of a Valley comeback. It is being driven by our newly emerging "green" economy.

The report further calls on a retraining of the region's workforce to take advantage of this shift and others within the region's high-tech industries.

Over the past decade, for example, Silicon Valley has seen a change in its industry mix from predominately hardware companies to software companies, the report notes.

The World Economic Forum calculates that $515 billion in yearly investment is required between now and 2030 to transition the world to cleaner sources of energy production.

At its annual meeting in Davos, Switzerland, the World Economic Forum released a report (click for PDF) on Thursday urging policy makers to make clean-technology incentives and investments part of government stimulus plans to revive flagging economies.

Economists who authored the report said alternative-energy technologies have the potential to address two pressing global problems--energy security and climate change--while generating good financial returns.

"It is essential that this stimulus also build our capacity to solve the longer-term climate crisis. Well-meaning but short-sighted economic stimulus programs could lock us into a predominately fossil fuel-based world economy for decades," according to the report.

A number of initiatives related to clean-energy, such as retrofitting government buildings to be energy-efficient, can create jobs and lay the foundation for longer-term economic growth, according to the World Economic Forum.

The report identified eight "large-scale clean-energy sectors" that government policies should seek to promote. They include: onshore wind, offshore wind, solar-photovoltaic energy, solar-thermal electricity generation, municipal solar energy, waste-to-energy generation, sugar-based ethanol, cellulosic and next-generation biofuels, and geothermal power.

In the United States, the Obama administration has made clear that it trying to tie economic development to clean technology. There are a number of provisions related to clean energy in a stimulus plan, which just passed the House of Representatives and could be voted on by the Senate next week.

The World Economic Forum's call for massive investments in clean energy echoes the International Energy Agency's 2008 annual report. Because of growing energy demand and climate change, the IEA said the world's energy consumption is "patently unsustainable. Its report concluded that trillions of dollars are needed to "decarbonize" the energy infrastructure and curb greenhouse gas emissions growth.

INDIAN WELLS, Calif.--There's a new cliche in the clean-tech investment community, and we can thank Charles Dickens for it.

As Dickens put it at the start of A Tale of Two Cities: "It was the best of times, it was the worst of times." Who knew pulp fiction about pre-revolutionary France had lessons for 21st-century clean-tech investment?

Here at the Clean-Tech Investor Summit, investors say that signs indicating the energy business is poised for dramatic change have never been stronger, with an Obama administration making energy central to a massive stimulus package.

To understand the "worst of times" part, however, investors are looking at several challenges, starting with the obvious: the slumping stock market.

The credit crisis and recession also have combined to make the current tax-based renewable energy subsidies ineffective in serving their purpose, investors said. Current renewable energy subsidies rely on a tax credit, but with fewer corporations expecting a big tax bill, that means less money is available for clean energy.

As a result, projects in an otherwise fast-growing wind and solar power business are being slowed or scrapped.

"It's a very, very difficult market to get things built," said Scott Brown, the CEO of New Energy Capital, which finances renewable energy projects mainly in wind and biomass these days. "We're only looking at a very, very conservative class of projects."

And because banks are reluctant to loan money, any project with technology risk is a tougher sell. That means it's unlikely that many new technologies from the throngs of clean-tech start-ups will make it out of the labs and into the ground in the upcoming months.

Tax equity and debt double whammy
The funding challenges apply primarily to companies that want to build a large project, such as a wind farm or solar installation, or that need project financing to build a pilot facility to test a new technology like a cellulosic ethanol plant for making biofuel from non-food sources.

These sorts of projects, which can be hundreds of millions of dollars, are typically financed through a combination of debt and equity. But because lenders have become so tight-fisted, there's an absence of debt to finance deals, a situation that isn't expect to change overnight, investors said.

"Ultimately, banks and financial institutions need to lend money. That's how they make money," said Kevin Walsh, managing director of renewable energy at GE Energy Financial Services. "But '09 is going to be tough."

Raising money through an initial public offering (IPO) on the stock market is possible, but likely for only the most promising firms with a combination of healthy revenue and compelling product. "Even during a downturn, IPOs do get done but initially the bar will be higher," said Jeffrey Lipton, managing director at Jefferies & Company.

The overall slumping economy is taking its toll on clean-energy projects in a perhaps unforeseen way.

Right now, investors in renewable energy receive a 30 percent federal tax credit. But because so many more corporations don't foresee having a hefty tax bill in the coming years, sources of "tax equity" have all but dried up, said investors.

GE's Walsh and others are lobbying to have the renewable energy subsidy altered to fit the current economic environment. One idea is "renewable tax credit" that would go directly to a clean-energy company, like a project developer, and to other co-owners of a project.

New Energy Capital's Brown said a simpler and more flexible model than tax-based incentives is to a feed-in tariff, now used in Europe, where utilities need to purchase electricity generated from renewable energy sources at above-market rates.

"It's a much more transparent, much more efficient type of program," Brown said. "In the long run, it can be structured in a way that can be much more effective in bringing these benefits to different parts of the country that rely on different natural resources."

Waiting for policy clarity
The financial doldrums are likely to lead to a wave of mergers and acquisitions, panelists said.

In some cases, that could actually depress the market further. Brown said that ethanol company VeraSun, which declared bankruptcy last year, is trying to sell a number of its biorefineries at what could be firesale prices.

What about that "best of times" part?

• In other clean-tech product areas, consolidation could make sense. A smart grid company that planned to go public, for example, could instead merge with another firm to create a more full-featured product line, said Jefferies' Lipton.

Investors expect smart-grid technologies, energy-efficiency companies, and firms that provide weatherization services will benefit the most from the stimulus plan. Another positive note, said GE's Walsh, is that the U.S. has world-class resources for solar, wind, and biomass energy.

• The same trends that drove the investment boom in clean tech over the past four years, including steady concerns over national security and climate change, remain despite the financial meltdown. Also, there is a growing number of corporations looking into green-tech products, such as Wal-Mart and General Electric.

• Government loans are emerging as a critical piece of the financing puzzle, said investors. A number of companies have applied for existing Department of Energy loan guarantees and the stimulus plan calls for billions more. This is particularly crucial for companies seeking to cross the so-called Valley of Death, where they try to test their products at commercial scale for the first time to prove their viability.

"The projects least likely to get done are the ones with technology risk. This is where a government-supported loan guarantee program has to come in," said Brown.

• Investors are also waiting for the stimulus plan to be passed, which could happen as early as next month. They're also watching changes in state energy policies and how the next installment from the financial industry bailout plan, called Troubled Assets Relief Program (TARP), will be allocated.

"Institutional investors hate uncertainty--it's seen as volatility," said Lipton. "Until a lot of this settles down--and it will probably a quarter or two--we'll have more clarity and that's the key."

Updated on January 26 12:45 p.m. Pacific to clarify the meaning of a refundable tax credit."