World is Green

Business Pundit asks the question, Will Products That Enable Energy Independence Be Big Business?

While the Micro Fueler product certainly isn’t cheap, and may or may not succeed, it does raise an interesting question: do products like this one, which would help to decentralize the source of energy in the US, have the potential to generate big profits?

A real interesting one. Past experience shows that centralization provides economies of scale, efficient production and better utilization of resources for providing energy. However, the downsides are flexibility, costs and the possibility of a large breakdown in case of any downtime.

Decentralization can be helpful to check out new products, can work in remote areas where the grid is not available. The other possibility is “non-consumers” like villages in India. Now, the question is of profitability.

I think that decentralization is a phase that will be strong between now and the clean energy future. How long is that? we do not know. Depending on the market needs, the cost of implementation and the break-even number for the products, these decentralized energy products may be profitable. But, there are lots of variables to work with.

Kleiner Perkins going greener | Cleantech.com

Kleiner Perkins said the $500 million Green Growth Fund is intended to help speed mass market adoption of solutions to the world’s climate crisis.

John Denniston, a partner at Kleiner Perkins, will co-manage the new fund along with Ben Kortlang, plucked from Goldman Sachs where he previously co-directed alternative energy investments.
[...]

The VC firm also announced the formation of KPCB XIII, a $700
million fund that will invest in cleantech, information technology and
life sciences ventures.

Kleiner Perkins said within the cleantech sector, KPCB XIII would
mainly back early-stage entrepreneurs, while the Green Growth Fund
would support companies that have already entered their growth phase.

X Prize: $100 Million for Clean Fuels

In its richest and largest competition yet, the foundation will divvy up some $100 million for transformations in biofuels, clean aviation fuel, energy storage, the provision of basic utilities for developing nations, and other categories.
[...]
The X Prize Foundation has previously launched competitions for breakthroughs in private space travel, genome mapping, and high-mileage cars. In 2004 aerospace entrepreneur Burt Rutan won the Ansari X Prize by sending his rocket-powered SpaceShipOne to an altitude of more than 367,000 feet with a pilot and the weight equivalents of two passengers. More recently, Google ( GOOG) has backed an X Prize of $30 million for the first team to send a robot to the moon, travel 500 meters, and transmit video, images, and data back to Earth.

Google Lunar X Prize Team Announcement
[...]
He says one prize will be for innovation in providing water, broadband, and clean electricity to villages in the developing world. Other energy categories will be for innovation in energy transmission and the construction of energy-efficient houses and commercial facilities.

More details on their website (PDF). The incentives of X Prize has proved before to be powerful enough to solve issues never before solved like non-government space flights.

V.C.’s Clean Energy Investments - National Business News - Portfolio.com

“You start to see this rise in enormous appetite for energy, and someone’s got to feed that mouth,” says Erik Straser, general partner at Mohr Davidow Ventures, a V.C. firm that has invested more than $400 million in clean energy ventures.
[...]
“The primary difference between what is happening now and what has
happened in prior market cycles is it’s now economically feasible and
desirable to pursue these types of solutions,” says John Balbach,
managing partner at Cleantech Group, a network of clean technology
investors and companies. “If the outcome is less pollution or reduced
carbon or some impact on climate change, that can benefit in a positive
way, but the primary [concern] is return on investment.”

Jim Butler from Hotel Lawyer gives a set of reasons and trends for Hotels to go green.

Rule #1: Get the best consultants and advisors early.

If you are going to get serious about GREENING your hotel future, the first thing you need to do is tap some of the best GREEN resources you can find, and do it from the outset.
[...]
For more discussion about GREEN resources, including many of The Hotel Developers Conference™ speakers and a rich library of reading, please see the rich assortment of articles in the Green Hotels topic at www.HotelLawBlog.com, particularly, “Green Hotel Lawyer: Why should you do GREEN hotel development, and HOW do you do it?”

Living buildings that produce more power than they consume - sustainable design

Kip Richardson, Director of Business Development for Ankrom Moisan Associated Architects, kicked off the day of educational sessions with a presentation entitled, “Beyond LEED: The Cutting Edge of Sustainable Design.” Richardson described some of the reasons why it is  important to take a sustainable approach to hotel design and construction.
[...]
Richardson provided a glimpse into the future of hotel design, saying that within five years, hotel buildings may produce more energy than they consume and consume more waste than they produce. These “living” buildings will capture and treat rainwater and have zero net impact on the environment.

Hotel Financing for Green Hotels
While “green” may be the current hot trend, it will not trump other value-determining business fundamentals such as location and brand identity, panelists said. Being a green hotel developer does not necessarily guarantee funding success.

“Before you can be a green hotel developer, you have to be a hotel developer who knows how to get a deal done,” Muldavin said.

The opportunity is growing.

One of the clean tech areas of the future is Water. Allianz has launched a new fund which will target this area across the world.

“Less than 0.007% of all the water in the world is potable, or safe for consumption,¹ yet the demand for fresh water is steadily increasing,” said Bozena Jankowska, portfolio manager of the Allianz RCM Global Water Fund. “Solving this global water challenge demands a long-term effort from institutions around the world which we believe will require significant investment from the private sector.”

The Fund will seek long-term capital appreciation by investing in a portfolio of companies that are substantially engaged in water-related activities that relate to the quality or availability of or demand for potable and non-potable water. The following are included among these activities:

• Water production, storage, transport and distribution;
• Water supply-enhancing or water demand-reducing technologies and materials;
• Water planning, control and research;
• Water conditioning, such as filtering, desalination, disinfection and purification;
• Sewage and liquid waste treatment; and
• Water delivery-related equipment and technology, consulting or engineering services relating to any of the above-mentioned activities.

John O’Brien, a friend of mine and the Managing Director of Australian Cleantech launched the Australian Clean Tech Index. This is the first time anybody has grouped together all the sectors which comprise clean technology and environmental services in Australia.  

Mr John O’Brien, Managing Director of Australian CleanTech, said concerns about climate change and energy consumption have led to greater interest in the cleantech industry and an increase in the economic value of clean technologies.

“For the first time we will be able to provide a picture of the Australian cleantech industry’s growth in a single measure,” Mr O’Brien said.“In 2007 a trialled ACT Australian Cleantech Index outperformed both the ASX 200 as well as the ASX Small Ords,” he said.

“The growth of the renewable energy sector in Australia will be driven by the Federal Government’s commitment to achieve 20 per cent of energy generation from renewable sources by 2020.”

The ACT Australian Cleantech Index includes over 75 companies, large and small, from Sims Metal Group with a market capitalisation of over $3 billion to Skydome Holdings with a market capitalisation of $5 million – plus a few outstanding performers with CBD Energy posting a 147 per cent increase in returns over a six-month period to December 2007.

I am planning a new series of interviews with people working in the Green sector. In the coming weeks, John O’Brien will be interviewed.

Rediff has an interview with Joseph Massey, Deputy Managing Director, MCX in India which recently started trading in Carbon credits.

India and China are likely to emerge as the biggest sellers and Europe is going to be the biggest buyers of carbon credits.

Last year global carbon credit trading was estimated at $5 billion, with India’s contribution at around $1 billion. India is one of the countries that have ‘credits’ for emitting less carbon. India and China have surplus credit to offer to countries that have a deficit.

India has generated some 30 million carbon credits and has roughly another 140 million to push into the world market. Waste disposal units, plantation companies, chemical plants and municipal corporations can sell the carbon credits and make money.

Carbon, like any other commodity, has begun to be traded on India’s Multi Commodity Exchange since last the fortnight. MCX has become first exchange in Asia to trade carbon credits.

Economic incentives are strong motivations to change the behaviour of consumers. One such incentive is being rolled out in South Australia.

The SA government has passed the Feed-in-tariff bill in both the houses and this has led to an opportunity to increase the solar power installation in households across the state.

What is the feed-in-tariff. According to Wikipedia:

A Feed-in Tariff (FiT, FiL, Feed-in Law or solar premium^[1] is an incentive structure that boosts the adoption of renewable energy through government legislation. The regional or national electricity utilities are obligated to buy renewable electricity (electricity generated from renewable sources such as solar photovoltaics, wind power, biomass, and geothermal power) at above market rates.

This difference in price covers the cost disadvantages of adopting renewable energy sources, and the rate differs between the different forms of power generation.

In SA’s case, the legislation covers for solar systems installed by small customers (this includes households and small businesses). The legislation ends on 30 June 2028 giving a period of 20 years from this June to recover the cost.

The legislation mandates energy retailers to pay these customers a charge of $0.44 per KwH compared to the current cost of $ 0.18 per KwH for energy in South Australia for energy usage in excess of consumption. In European schemes and other countries, the charge is mandated for all energy created by the solar systems.

In addition to this there is the  Photovoltaic Rebate Program (PVRP) by the Federal government which provides $8/W of installed capacity upto a maximum of $8,000 or 1KW of installed capacity.

This can be enhanced by the Renewable Energy Certificate (RECs) which provides you with a “carbon credit” for the renewable energy used. REC is created for each megawatt-hour of eligible renewable electricity generated or deemed to have generated. The price of RECs change on a daily basis. These can be used for Solar, wind or small hydro electric. They can also be used for Solar hot water systems. You can find the registered list here.

Various government rebate information can be found at the Solar Shop.

In the end, what is the payback for solar systems?

A sample solar power payback calculated by Eenrgy matters which show a simple payback period of 13.69 years without the feed-in-tariff. A more detailed and better analysis is conducted by Mike Bassett-Smith and Shane Robinson of Powersmart NZ. This was conducted for NZ which take into account one-on-one price provided by the utility (no feed-in tariff), no federal government rebate, no RECs but consider the reduction in electricity costs and increased value of property. The result: a payback in 10 years. Mike worked in the investment banking industry before founding Power Smart and he basis his product (grid connected solar systems) as an investment with comparable returns to a government bond and other investments.

It will be really interesting to see the real pay back in South Australia for a similar analysis.

Sustainability is turning up new niche areas of business opportunity. One major area is finance. I came across this bank today called - Ekobanken from Sweden. They have squarely targeted the growing understanding among consumers for sustainability and the increasing innovation from businesses in this field.

This is created in the form a member bank or what in Australia can be called a credit union with the participation of consumers as members or shareholders in the bank. In essence, the goals of users and owners are the same.

They work in the areas which increases social, environmental and cultural initiatives for a sustainable society. It says, “The public good and the benefit of our members is our main driving force and the reason why Ekobanken finances initiatives within the social economy. We are also interested in sustainable business that takes the environment and human being into account.”

In order to target the areas of finance which their members want; Ekobanken has created a unique set of accounts which use the deposits in these accounts to fund projects in that area. For example: savings in the Ecology Account “are used for loans to alternative energy, ecological and biodynamical agriculture, conservation, research and other ecological projects” whereas savings in the Culture account “finances loans to culture houses, artistic projects, community colleges, publishing, production of periodicals and adult education.”

At the time of joining the bank, members can choose to inform the bank to use their bank in all of their initiatives or as the example above suggests to a particular target area. These areas are broadly classified into Ecology, Culture, Healthcare, Child and Youth, The Way Out, Fair Trade and Sustainable development in the local area.

In the area of reporting they are very, very transparent. They produce a loans report every year, (latest is 2006, PDF Download) which takes a few areas of their work like Food, Pre-school and Micro-credits in the 2006 edition and explain their thinking in that field, examples of projects that they have funded and some links. At the end of the report they provide a list of all the projects that they have funded in each of the target areas. An amazing degree of transparency for a bank.

In terms of financial performance, the bank has been growing its deposits steadily, in fact almost doubling in the five years ending 2006; operating revenue growing a decent pace and profits more than doubling in the same period.

The banks vision, theme, products and marketing are all centered around the growing sustainability sector. A fine example of innovation and working in a market niche in this area.