Category Archives: GreenBiz

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GreenBiz

Building Efficiency, Batteries Drive Johnson Controls’ Record Growth | Global CCS Institute

Green is proving to be a good bet for Johnson Controls, Inc. Despite the anemic condition of its two key markets — automotive and construction — JCI recently announced record sales and profits for 2011. And the record run will continue next year, too, company executives predicted at an analysts meeting in New York this week, with green technologies providing much of the lift.

With overall GDP growth inching along at close to one percent and talk of a double dip recession echoing widely, Johnson’s rapid resurgence and bullish guidance came as a surprise. Based on preliminary figures, JCI’s revenues hit a record $40.7 billion, growing by 19 percent as net income climbed by 24 percent, to $1.7 billion, in its 2011 fiscal year ending Sept. 30.

Looking out to next year CEO Steve Roell predicted revenue would expand by another nine percent to $44 billion, while earnings per share would surge by some 20 percent. Long term, Roell anticipates 10 to 15 percent annual sales growth, a pace that if realized, could double JCI’s size in five years.

How is JCI growing so quickly when the overall economy is stuck in neutral? There’s a hint in the breakdown of where JCI expects growth next year.

Sales will expand by about 10 percent next year in its Building Efficiency unit, spurred by accelerating spending on retrofits and efficiency upgrades. Likely to expand faster still is the Power Solutions unit, where revenues will rise by around 12 percent, stoked in part by rising demand for batteries for hybrids and electric vehicles.

The company’s largest unit, Automotive Experience, will grow by 6 percent, supplying interior components and subsystems to auto makers — think seats, dashboards and doors.

Roell made the case that while broad pessimism was probably overstated — there’s a risk that the market will “talk itself” back into a recession, he said — JCI’s green focus is part of the reason it’s well positioned to grow in emerging markets and to grab share in slower-growth developed markets.

“Our market strength, product technology, and global distribution make us uniquely positioned to take advantage of the global mega-trends of energy efficiency and sustainability, and growth in emerging markets,” said Roell.

The green tint to these rosy results stems from JCI’s growing bets on building efficiency and electric vehicles. While VC-backed start-ups, and exotic new technology tend to attract the spotlight in discussions about the potential of clean tech, JCI’s outlook offers evidence of how methodically developed green offerings, coupled with strong execution, can mine huge growth from both established and emerging markets.

Panoptix and Bending Company Culture to the Cloud

Consider JCI’s last building efficiency initiative. Long a market leader in building control hardware, earlier this month JCI announced plans to push into the software services space. At Greenbuild, on Oct. 4 JCI unveiled Panoptix, a suite of cloud-hosted applications that promise to improve the collection and management of building performance data.

Building management software is complex challenge that has attracted, and spat out, quite a few players, such as Cisco, as I was reminded by Dave Myers, JCI’s president of building efficiency after the meeting. It’s a tricky space for pure IT experts to understand, so while they may “get” the challenge of connecting varied building systems, they often lack a deep fluency in the insular world of building control technology and practices, a world where Johnson Controls is a 125-year veteran.

“We have the presence in the market, the intelligence to operate buildings, and our gap was more of the connectivity,” Myers said.

To fill that gap, Johnson Controls built an in-house software development lab, importing coders from outside the building industry, specifically to cultivate a very open sensibility about standards. Doing so also meant bending corporate culture that the system must be open to communicate with competitors’ offerings. “It’s essential that Panoptix be able to talk with building control systems, including our competitors,” said Myers.

JCI’s entry into this space comes at a time when building owners are pressing harder for verification that investments in green technologies and retrofits deliver a payback. As critics of the USGBC’s LEED green building standard have emphasized, design standards don’t guarantee more efficient performance.

Better building performance data, Myers added, will not only spur programs like LEED, but should make it easier to finance retrofits too, by giving lenders clear data about improved operating costs.

The second green growth area that JCI emphasized was batteries — but not, to my surprise, the lithium-ion type that rule the roost in most advanced electric vehicles (EVs). Rather JCI sees big promise in old-school lead acid batteries, the sort cars have relied on for a century or so to start, for lighting and ongoing ignition.

In an era of space-age EVs packed with thousands of exotic li-ion power packs, where do lead-acid batteries fit in? JCI’s answer: start-stop systems for conventional cars.

While maybe not as sexy as Chevy’s Volt or Nissan’s Leaf, these lower-cost systems can stop a car’s engine when at idle, then fire it back up when the gas is pressed. At a premium that pays for itself in a year or 18 months, car makers can deliver 5 percent to 7 percent fuel savings.

Those mileage gains may be modest, but Alex Molinaroli, JCI’s president of power solutions explains, given its affordability, start-stop systems will have a deeper impact on the industry, and overall mileage, far sooner than advanced EVs. In the coming decade, Molinaroli said, advanced electrified vehicles — from plug-in hybrids to pure battery EVs — will make up only a few percent of sales. In the interim, the true “mass market” approach to EVs will come from start-stop systems added to conventional cars.

“It’s the math. Let’s say EVs mean 5 percent of cars improve their mileage by 100 percent,” said Molinaroli. “You have more impact improving the mileage of 100 percent of cars by 5 or 10 percent.” Already widely adopted in Europe, start-stop systems will make their way into the majority of U.S. models in coming years, Molinaroli added, as automakers begin the push to hit new federal 54.5 mpg standards by 2025.

In parallel, li-ion batteries will grow continue to grow, as well, and JCI rationalized its control of its advanced battery operations. On Sept. 30, JCI completed the $145-million buyout of its joint venture with France’s Saft, gaining ownership of Li-ion battery technology, rights to licenses and a recently completed plant in Holland, Mich.

JCI currently supplies Li-ion batteries to Azure (which makes electric trucks for FedEx and others), BMW, Daimler, Ford, China’s Geely, Jaguar/Land Rover, Odyne (another truck maker) and VW.

Lead acid batteries were recently at the center of a dust-up at JCI’s plant near Shanghai. Built by and acquired from Delco, JCI had to shutter its lead-acid battery plant in Pudong New Area last month when authorities requested the factory halt operations after exceeding its quota of lead emissions.

Molinaroli said the closing came despite the fact, in the past, JCI has been solicited by Chinese authorities to transfer practices to help local plants lower their lead emissions. The Shanghai plant, Molinaroli emphasized, operates at the same standard as JCI’s facilities in Europe and the Americas. JCI has the right to resume operations at the plant on Jan. 1, and is developing four additional facilities elsewhere in China.

GreenBiz

Why a Former GE CSO Is Taking the Plunge to a Water Startup | GreenBiz

After more than two decades working his way up the ranks at GE, Jeff Fulgham took a hard look at his past achievements in the water business, and looked out ahead its future prospects. Worsening water shortages and rising water prices in ever more regions, he concluded, all meant that the typically sleepy world of water was about to start roiling.

As Chief Sustainability Officer at GE Power & Water, there were plenty of ways to tap into the opportunity. But Fulgham, 52, saw another option. In mid September, he started as employee No. 3 at Banyan Water, a San Francisco-based startup that is barely a year old. He enters as the company’s chief sales officer.

A well-connected industry insider, Fulgham is tasked with scaling up a young business and guiding a team of decades-younger MBAs to build a new kind of water business. The move comes as a surprise to many in the business — it’s only the second time Fulgham has left a company. And with retirement on the horizon, staying at GE promised a future of steady compensation, healthy options and a comfortable pension.

“It’s a challenge to walk away: GE’s been fantastic. And I’m not much of a job jumper,” Fulgham reflected last week, when I caught up with him in New York City. In town for Climate Week NYC, Fulgham spoke on a panel titled “The Energy-Water Nexus” which I moderated.

In the end, the challenges of building a business from scratch won out. Compared with the pipes, pumps and chemicals approach that Fulgham knew at GE Power & Water, Banyan’s model is more 21st century, more Silicon Valley. Founded by CEO Tamin Pechet and backed by Catamount Ventures — where Pechet was until recently a principal — the company isn’t focused on developing its own technology. Instead, Banyan is buying up specialist companies already at work in the market.

Banyan then will scale up and customize those services into a comprehensive suite it can offer to big enterprises — such as universities and corporate real estate managers — looking to cut their water use, streamline billing, and lower costs.

“The idea is that we can pull in great little companies, and bring them together into one larger, more efficient, durable company, making them the part of a much stronger whole,” said Fulgham.

Typically, the experienced companies Banyan is evaluating have great technology but are hamstrung by a lack of capital, said Fulgham, and thus face a hurdle moving beyond their home markets. Banyan hopes to help, with capital, plus sophisticated sales and support systems.

“It’s a business model combining technologies and services in a field that, five years ago, probably wouldn’t have worked,” he said. “The market is ready now, though.”

“In drought-stricken areas like Atlanta, in Texas, and in California, water prices have risen by five or even ten times in the past decade. This makes new business models possible,” Fulgham said.

Not surprisingly, Banyan’s initial focus will be water-starved stretches of the southern half of the United States. Fulgham is understandably cautious to say too much about Banyan’s strategy just now, given that it is about to unveil its first acquisitions.

He offered the example of a hypothetical Texas university, facing diverse water challenges, including scores of bills for different sites, aggregate water fees in the million-dollar range, and scant knowledge of just how much water was flowing to which facilities.

To help this university get a handle on its water use, one of Banyan’s first offerings — there are more in the pipeline — will install a smart-grid style network of sensors and controllers that deliver real-time data on how much water is going where and when, notifying managers if flow rates spike at a given sensor, indicating a leak.

For the university grounds, Banyan could install state-of–the art irrigation management software that knows when to delay watering – by knowing not just when its raining, but able to use weather forecasts to delay today’s watering if rain is due tomorrow.

To finance these retrofits, Banyan aims to adapt a model used in the power sector by energy services companies, or ESCOs. The approach pays for efficiency upgrades by using the savings freed up by the retrofits to finance their purchase. This allows a client to pay for improvement from operating budgets, rather than as a capital expenditure.

But why “Banyan,” I wondered? Banyan trees, Fulgham reminded me, have adapted to thrive even in arid climates by sending out aerial roots penetrate the round, vastly extending the tree’s reach to soak up moisture. “We’re hoping to do the same thing: reach out to small companies, and connect them into a stronger, more successful whole,” he explained.

Photo CC-licensed by Jeff Howard.

GreenBiz

Carbon War Room Aims to Cut the Barriers to Building Energy Retrofits | GreenBiz

The Carbon War Room today launched a new consortium that aims to cut through the Gordian knot of barriers that has made it tough to finance commercial building retrofits. In the process, the groups involved hope to pick off billions of dollars worth of the lowest-hanging fruit of building energy efficiency.

The Carbon War Room’s approach opens the door to zero-upfront-cost deals for mid- and small-scale retrofits, where in the past only a limited group of larger projects could land financing for such deals.

To turn this trick, the new plan upgrades an existing financing model known as PACE. It also relies on private capital, rather than public subsidies.

“This is game changing. It has the potential to solve the problem of the commercial retrofit market that has lingered for 35 years,” said Jigar Shah, CEO of The Carbon War Room at the BusinessClimate 2011 event today in New York City.

Across the country, older buildings are ripe with some of our economy’s largest concentrations of energy waste, and thus offer some of the least-costly fixes. Improving the world’s building stock offers the opportunity to save 5 gigatonnes of greenhouse gas emissions per year, and amounts to a $2.5 trillion investment opportunity, said Shah.

Dubbed PACE Commercial Consortium, or PCC, the approach brings into alignment the interests of a series of players that in the past have failed to find the right profit motives, risk levels, or technologies to get beyond one-off, complex deals to finance major green commercial retrofits.

For commercial building owners, the PCC offers a turnkey model that delivers financing, the building upgrade and deal insurance, all paid through a increased tax assessment that is more than offset by reduced energy costs.

The players debuting today with the PCC’s first round of deals are:

• Lockheed Martin (Bethesda, Md.) will provide building technology and services to audit, install and authenticate efficiency gains.
• Energi (Peabody, Mass.) insures the deals, using proprietary
 energy engineering underwriting standards, to help guarantee the savings promised by Lockheed. As a reinsurer, Hannover Re will back Energi’s policies.
• Barclays Capital will raise the capital to finance these deals and Ygrene Energy Fund (Santa Rosa, Calif.) will administer the financing.

The new program builds on an older model of retrofit financing known as the property-assessed clean energy program, or PACE. As pioneered in California in 2008, PACE legislation enables property owners to accept a voluntary tax assessment as a means of repaying upfront financing of energy efficiency and renewable energy improvements. Twenty-six states in the United States have enacted legislation enabling the secure and scalable financing PACE structure.

Because they are repaid alongside tax assessments, PACE assessments are already considered a very low risk financing option. The PCC goes further in a number of ways, according to Murat Armbruster, a senior advisor who led the Carbon War Room’s involvement.

First, PCC lowers the risk of retrofit deals by having Energi insure the energy savings contracts that Lockheed signs with building owners. With reduced risk on the payment stream derived from these energy savings deals, Barclays Capital and Ygrene Energy Fund can offer lower-cost funding by bundling a number of these deals into an investable asset sought out by pension funds and institutional investors.

How do the players make money in this complex relationship? Here, I’ll crib from the New York Times, which has the best explanation of this process I could track down. (There’s also a graphic from Ygrene at the bottom of this post showing the process graphically.)

Ygrene and its partners will gain exclusive rights for five years to offer this type of energy upgrade to businesses in a particular community. They will market the plan aggressively, helping property owners figure out what kinds of upgrades make sense for them. Lockheed Martin is expected to do the engineering work on many larger projects.

The retrofits might include new windows and doors, insulation, and more efficient lights and mechanical systems. In some cases, solar panels or other renewable power might be included. For factories, the retrofits might include new motors or other gear.

Short-term loans provided by Barclays Capital will be used to pay for the upgrades. Contractors will offer a warranty that the utility savings they have promised will actually materialize, and an insurance underwriter, Energi, of Peabody, Mass., will back up that warranty. Those insurance contracts, in turn, will be backed by Hannover Re, one of the world’s largest reinsurance companies.

As projects are completed, the upgrade loans, typically carrying interest rates of 7 percent, will be bundled into long-term bonds resembling those routinely issued by governmental taxing districts. Barclays will market the bonds. Retirement funds have expressed interest in buying these bonds, which will be repaid by tax surcharges on each property that undergoes a retrofit.

At a time when public funding for green retrofits is drying up, tapping private capital pools holds great allure. “These investments are 100 percent private capital. There is no government debt or cost involved. The markets can supply this financing because the economics are sound, engineering performance is insured, the security is strong, and clean energy capital assets are profitable,” said Brian McCarthy, CEO of Energi Insurance Services in a prepared statement.

In the deal announced today, the Carbon War Room unveiled details about the size and location of the first round of investments to be place: $650 million in PCC deals will be focused on two commercial markets.

First, Miami-Dade County, Fla., a market estimated to have $550 million in retrofit funding potential. This funding can, in turn, generate up to $1.8 billion in economic activity in the Miami-Dade region.

The second site the consortium is focusing on in this first round is the city of Sacramento, Calif. where there’s an estimated $100 million market and another $530 million in potential economic activity.

As a side note, least year, the Federal Housing Financing Agency (FHFA) — which oversees Fannie Mae and Freddie Mac — issued a letter that all but froze PACE financing for residential mortgages.

However, because they are not backed by the housing agency, commercial PACE deals were not impaired by the ruling. That said, the ruling has had a broad chilling effect on PACE backed business models. In the meanwhile, court challenges to FHFA’s ruling are proceeding in California and elsewhere.

figure 1

Top photo courtesy of Serious Materials; chart courtesy of Ygrene.

GreenBiz

Pink Hats Build a Gold Tower: Inside Avon’s New LEED Gold HQ | GreenBiz

In fitting out its new U.S. headquarters in midtown Manhattan, Avon Products Inc. required that contractors — from electricians to wall board hangers — hire as many women workers as possible.

In the process, the 125-year old cosmetics company set a record for New York City, with a 17 percent female-crew ratio for the duration of the project. “We were proud this project was built by so many women, from the cabinet makers to the electricians,” said Louise Matthews, Avon’s Vice President, Global Real Estate at a press introduction to the building.

On site, women’s construction hats were pink, the color Avon has transformed into a global symbol of its long-running effort to boost awareness of and research funding to beat breast cancer.

avon receptionThe results of those pink-hatted laborers were unveiled today at 777 3rd Avenue, Avon‘s new US headquarters.

At its 275,000 square-foot quarters, occupying the bulk of a 38-story, early ’60s modernist tower, Avon retrofitted its new home to hit the Gold standard for commercial interiors under the U.S. Green Building Council‘s Leadership in Energy and Environmental Design (LEED) rating system. The designation will be granted once LEED has reviewed the project’s scorecard.

Eighteen months in the making, the project’s design and construction was led by HOK, a St. Louis-based architecture firm that specializes in sustainable design. HOK collaborated with Avon’s internal design committee to help select a light color palate for a somewhat feminine, timeless feel to the interior, said Doug West, an HOK architect. The firm worked to keep the green features and technology systems behind the scenes, he added.

In making a move from its recently vacated former headquarters, just a few blocks to the west, Avon focused on saving energy and water, while improving the work environment for its staff:

avon officeLighting. To save power, the headquarters turned to high efficiency lighting, which cut energy use by 22 percent compared with a conventional system. Motion sensors in private offices and meeting rooms shut off lights. To maximize the use of natural daylight, work-station dividers are low, permitting light to penetrate deep into the floor plate. Some 96 percent of working positions have views to the outside.

Water. In bathrooms and pantry areas, high efficiency fixtures are the norm, saving about a third of water compared with regular designs.

Waste. During construction, 84 percent of waste was recycled, minimizing landfill demand.

Sustainable materials. Consistent with LEED goals, HOK sourced local building materials wherever possible. New York-area manufacturers produced the offices’ wood flooring, glass-paned office fronts, and ceiling panels, for example. Over 91 percent of the wood used throughout the project is certified as sustainably harvested by the Forest Stewardship Council.

Transport. Avon negotiated with the building owner to include bike racks and showers in the basement to spur bicycle commuters. The building is just a few blocks north of the Grand Central Station rail and subway nexus, as well.

Energy. Avon committed to buy electrify for its headquarters produced from 100 percent renewable sources.

The U.S. headquarters joins a growing portfolio of green buildings in Avon’s network. Earlier this year, the company launched its “Avon Green Building Promise,” a worldwide commitment to achieve at least a “certified green” level in every major new construction or significant renovation project, and to seek a higher level, such as Gold or Platinum (or local equivalent), where possible.

Towards this goal, Avon has also built or converted five other notable sites:

  • Medellin, Columbia: Avon’s Ecobranch Distribution Center is the first building to achieve LEED Gold certification in all of Colombia.
  • Cabreuva, Brazil and Zanesville, Ohio: Distribution centers both earned LEED Gold certification.
  • Shanghai, China: Avon’s R&D Center achieved LEED Platinum certification
  • Northampton, U.K.: Avon’s administrative headquarters achieved a “Very Good” rating under the UK’s version of LEED, known as BREEAM, short for Building Research Establishment Environmental Assessment Method.

Avon’s green building spree is likely to continue. “Our Green Building Promise ensures that we continually work to minimize the impact of our buildings worldwide,” Matthews said. “We hope this will serve as an inspiration to other companies in New York City and around the globe.”

GreenBiz

Patagonia Takes Fashion Week as a Time to Say: ‘Buy Less, Buy Used | GreenBiz

In a novel bid to lower the environmental impact of its products, outdoor-gear maker Patagonia is telling its customers to “Buy less, buy used.” To make it easier for them to do so, the Ventura, Calif.–based outfitter set up an online marketplace in collaboration with eBay.

The tie-up marks a first for eBay, as the auction site’s first-ever venture where its listings are available via another company’s web presence. Used goods can be listed on either site show up at both.

An auction function may not sound revolutionary in the retail world, but Patagonia’s broader agenda here is an unorthodox, perhaps even radical, act for the fashion industry.

Indeed, unveiled in New York last night, against the backdrop of fashion week — that annual blitzkrieg of “toss those togs from last season, here’s what to buy now” — Patagonia’s program points in the opposite direction.

“This program first asks customers to not buy something if they don’t need it,” said Yvon Chouinard, Patagonia’s founder and owner, in a prepared statement. “If they do need it, we ask that they buy what will last a long time — and to repair what breaks, reuse or resell whatever they don’t wear any more. And, finally, recycle whatever’s truly worn out.”

As anyone who has looked on in awe at the long lines of customers snaking through H&M to snap up $11 bikinis or $8 tops, the norm elsewhere in the fashion world has been towards clothes as low-cost, disposable commodities.

To take part in the auctions, customers are asked to take a formal pledge, “to be partners in the effort to reduce consumption and keep products out of the landfill or incinerator,” Chouninard said.

The move entails risks for Patagonia, to be sure. It makes no money on the used transactions, though eBay earns standard commissions. The program has the potential to cannibalize sales of new gear, as buyers postpone purchases of new goods, or look for used alternatives.

Yet with sales of $400 million in 2010, and likely to grow by 25% this year, according to the Wall Street Journal, Patagonia has leeway to try. It’s a move that few listed companies could have entertained. Talking to the Wall Street Journal‘s Stu Wu, Chouinard acknowledged that, as a private company, Patagonia is uniquely situated to experiment. “[Chouinard] doesn’t have any shareholders or other interests to please… ‘I’m in business for different reasons,’ he says. ‘I’ve made all the money I could possibly need.'”

Talk of reducing sales is a sure way to get your run-of-the-mill CEO fired. Yet Patagonia has been pursuing an agenda of the three Rs of waste reduction — reduce, reuse, and recycle — for many years. “Reuse” and “recycle” have proved to be doable. The company has been repairing gear since its beginning — it increased its repair staff to reduce turnaround times, in advance of this announcement — and annually recycles many tons of Patagonia gear from around the world.

The “reduce” goal has proved more elusive, though. At the New York event, Rick Ridgeway, Patagonia’s vice president of environmental programs and communication remarked for companies, “[Reduce] is thorniest one of all.”

He continued: “If we aim to reduce our impact, we have to reduce the amount of stuff Patagonia sells. We have to tell customers to buy stuff only when you really need it. This is an experiment. We’ll see how it goes.”

It’s no small issue. As a reminder of the stakes, Patagonia invited Annie Leonard to the New York event for her take on the conundrum facing companies and individuals trying to do less environmental harm.

Leonard is best known as the creator and narrator of The Story of Stuff, a riveting animated documentary about the lifecycle of material goods. If you haven’t seen it, take the time to do so.

Leonard’s work is unarguably critical of unsustainable mass production and high-volume consumption. Understandably, few companies would be comfortable giving her center stage to remind us why we should consume less. She offered this reminder of the paradox of consumption:

We have built our material economy on a one-way, really fast consumer frenzy, turning stuff into waste. We use too much stuff, and we use too toxic stuff. And people aren’t really talking about this. It’s easier to talk about using less toxic stuff. We shouldn’t have neurotoxins in our lipstick and carcinogens in our children’s toys — that’s a no brainer. We’re not there yet solving that, but at least its acceptable to discuss.It’s a lot harder to talk about the too much stuff problem. We’re getting to the core of some of the fundamental flaws of our growth driven, consumer-mania economy. We start to get to really sensitive places about our relationship to stuff, and how we look to stuff to find meaning, identify or status in life. So it gets tricky to talk about reducing our consumption of stuff.

So when Patagonia called I wondered, “Are you nuts? You’re actually going to tell people to don’t buy a coat unless they need it? You’re going to encourage used stuff to go back to the market?”… [The Common Threads Initiative] is an example of the kind of new paradigm business we need to have, that meets our needs without trashing the planet.

If Patagonia’s move seems controversial, keep in mind that both companies are likely to benefit from increased exposure and reputational gains, attracting new customers interested in the pledge, and cementing the loyalty of existing buyers.

What’s more, I wonder if sales may not be dented as much as it may seem. By formalizing of a secondary market for Patagonia gear, the company will capture the long-tail of demand from tentative, first-time buyers unfamiliar with of shy of the initially high prices for the company’s high quality gear.

For Patagonia, the Common Threads Initiative is an effort to reframe and broaden the scope of its cradle-to-grave focus approach to manufacturing, and integrates with Patagonia’s existing sustainability efforts such as Footprint Chronicles, where the company documents the life cycle of many of its products. Since 1985, Patagonia has donated 1 percent of gross sales to environmental conservation programs.

For eBay, the partnership is another step on ongoing efforts to extend and highlight the company’s Green Team sustainability efforts. In 2010, the company launched eBay Box to make it easier for customers to reuse packaging. The auction house also rolled out eBay Instant Sale to give customers an easier way to sell or recycle used electronics.

GreenBiz

Are We Entering Cleantech’s Dark Ages? | GreenBiz

The budget brinksmanship that, amazingly, lasted all the way into the first days of August pushed me over the edge. Whether a willful choice, or some kind of subliminal denial, I opted for a partial mental vacation in recent weeks, trying to tune out from the mostly dismal news about elections, energy and environment.

But all vacations must end, and as distasteful as the political process has been for the last few weeks, the late-summer news cycle holds potentially big impacts for the world of cleantech.

From policies enacted and planned to electoral and financial developments, all signs suggest we’re moving from relative boom times for cleantech into what will almost certainly be dark days.

Cleantech’s “Age of Austerity”

Let’s start with the fallout from budget deal, known officially as the Budget Control Act (BCA) of 2011. Scanning a few weeks’ worth of news releases from Bloomberg New Energy Finance (BNEF), the prospects for cleantech finance are nothing short of grim.

“For the clean energy sector, the Act heralds an era of austerity in which current subsidy programmes may not be extended beyond their current funding,” wrote Stephen Munro, a policy analyst at BNEF, in a research note on Aug 5 titled “An age of austerity for clean energy?”

The BCA agreement requires cuts of $917 billion in discretionary spending. Clean energy programs aren’t named specifically, but they fall under the discretionary spending portion of the budget, Munro points out.

Programs are likely to become vulnerable as they come up for renewal. First up is the Treasury Department’s “1603” cash grant program for early-stage project investment, which expires at the end of this year.

For solar and wind developers formerly dependent on tax equity finance — which evaporated as a result of the mortgage-backed security crisis — these 1063 grants, which can cover 30 percent of a project’s upfront costs, have been a lifesaver. Last December, the Solar Energy Industry Association estimated that the grant program had made possible more than 1,100 solar projects in 42 states, with a total investment value $18 billion.

Similarly, the 100 percent bonus depreciation incentive for new equipment and property purchased for renewable energy projects sunsets soon. Known by the unwieldy acronym MACRS (short for Modified Accelerated Cost-Recovery System), the federal program allows businesses to accelerate deductions for the capital investments to five years, or just one, for certain bonus projects.

Renewal looks “unlikely” for either of these programs.

There’s some stirring that the tax-equity market — which the 1603 cash grants were established to replace — will rise again. ClimateWire’s Joel Kirkland recently wrote that a return to tax equity financing may be nigh (via the NYT). Given that corporate America is sitting on mountains of cash, it follows that they’ll seek higher returns than are available through Treasury bills.

Kirkland’s central example is Google, which has made seven green energy investments totaling $700 million over the past few years. Although it would be encouraging if those investments marked the start of a rush to market, that’s not the sense I’m getting from my review.

Further out, the bipartisan committee of 12 created as part of the BCA boondoggle is required to come up with another $1.5 trillion in cuts over the next decade. For wind, solar and geothermal projects, tax credits end as early next year, and deadlines continue through 2016.

What’s more, the fisticuffs aren’t over. The Act doesn’t make adjustments to the overall budgets for the Energy Dept. or Environmental Protection Agency or any of their sub-programs, such as ARPA-E. Yet these budgets, Munro points out, will be among the first to be addressed when lawmakers return from their summer recess on Sept. 5. Given the bludgeoning GOP presidential aspirants have lately been administering to the EPA, it’s likely the EPA and DOE budgets could be especially tortured in the next couple of weeks.

“The debt agreement, which is focused on cuts only and not revenue increases, makes it more likely that this infant sector gets strangled before it matures,” said Daniel Weiss, a senior fellow at the Center for American Progress, a Washington policy group that advises Democrats, in an interview with Bloomberg Government.

Subsidies for renewable energy are expected to decline beginning this year, and will fall 77 percent by 2016 from their peak in 2010, according to Bloomberg News, citing data from the White House Office of Management and Budget.

Cleantech VC Investment Ebbs

Well maybe the private sector will step up and fill the gap — maybe Google’s investments are a sign of things to come, right? Probably not.

Second-quarter venture investment in early-stage cleantech startups decelerated, according to the Cleantech Group’s preliminary data for the quarter, released in early June.

Global funding hit $1.83 billion, a 33 percent retreat from the prior quarter ($2.75 billion) and 10 percent down on 2010 ($2.03 billion). Quarter to quarter VC numbers are notoriously volatile, but behind these numbers are other signals that the U.S. cleantech ecosystem is not generating a lot of new companies: Most of the deals — 66 percent by deal number, and 87 percent by value — were B-series or later stages. Funding retreated more sharply in the U.S. than Europe or Asia-Pacific.

A Dearth of IPOs

A close cousin of cleantech venture capital funding is the rate of initial public offerings of shares by young, fast growing companies. By this measure too, the climate in the U.S. is growing more anemic by the week, just when it should be offering a vigorous exit path for smart, small companies.

While the Cleantech Group data reflected a “robust” global IPO market through June, the bulk of the listings have come in China. Here in the U.S., the swooning stock market is reinforcing a sense that much-anticipated listings are likely to hold back. At GigaOm.com, Ucilia Wang captured this snapshot:

“…companies that have filed papers for IPOs (but not yet traded) include solar equipment developer Enphase Energy, smart grid tech companySilver Spring Networks, biodiesel producer Renewable Energy Group, and solar power plant developer BrightSource Energy. VentureWire reported that electric car company Fisker Automotive, and biofuel company Genomatica had also hired bankers to investigate the IPO process. But it’s seemed apparent to some of these companies that the IPO window has been slowly closing.”

Oil Prices Falling

With the economy teetering between neutral and reverse, oil prices are falling. West Texas Intermediate (WTI, the U.S. benchmark) fell to around $80 per barrel early in the month, presaging a fall of 40 cents per gallon at the pumps, if the price signal follows through.

Lower fuel prices are salve to an ailing economy, of course. But they’re trouble for companies looking to sell innovative transportation technologies, whether they’re century old automakers pushing advanced EVs or algal biofuel startups targeting their production price for $100 oil. More broadly, low energy prices dilute public urgency on energy efficiency and alternative energy.

In its Aug. 8 research note, Bank of America’s Global Energy Weekly pointed to threat of a double dip recession. By its models, a mild recession would draw Brent Crude (Europe’s North Sea reference blend) to $80 per barrel, and (more importantly to U.S. buyers), WTI to $50-60 per barrel.

While these two blends typically trade within a dollar of one another, in recent weeks their prices have diverged to record levels, with Brent trading at over $25 per barrel more than WTI. The gap reflects unprecedented levels of uncertainty with Europe’s fiscal outlook and worries the U.S. is about to tip back into recession.

Is It Darkest Before the Dawn?

If all these harbingers from the political and economic arenas weren’t enough, we’ve also had one of the most extreme and disaster-filled weather years ever — with 2011 already bringing more billion-dollar catastrophes than in any other year, according to NOAA.

And to top it all off comes news from the Energy Information Administration that U.S. carbon emissions rebounded by more than 3.9 percent last year, the sharpest uptick in more than 20 years, as industrial activity, power generation and travel volumes returned to norms depressed by the Great Recession.

It’s enough to make anyone want to go back on vacation, at least until Labor Day, or maybe Groundhog Day, or … anytime after November 6, 2012.

But perhaps I’m overly pessimistic — I’d love to know if you’re seeing anything out there in the world that offers some hope for a resurgence of cleantech’s potential?

Photo CC-licensed by Samuel Stocker.

GreenBiz

Cisco Quietly Shuts Down Building Energy Management Program | GreenBiz

Another one bites the dust. At the end of June, the names Google PowerMeter and Microsoft Hohm were chiseled on the grave marker of casualties in the race to build smart grid-linked software and gizmos. To this list of famous fallen, Cisco Systems adds its name, with an announcement yesterday that it will exit building management software services while also retreating from the home energy management market.

You could be forgiven if you missed the announcement. The news was tucked into Cisco’s fiscal fourth quarter earnings call. Amidst the perilous rollercoaster-ing of the markets of the past few days, Cisco showed signs of recovering from recent missteps, solidly beating expectations — a performance rewarded by antsy investors with a 17 percent stock price runup.

Almost lost in the din was the news that Cisco is unwinding its investment in the energy management market. Cisco entered this market almost two years ago to the day, with an ambitious announcement of a new product, dubbed Mediator, that would tap into Cisco’s deep networking skills to hook up the many and disparate software networks used to heat, cool, and otherwise operate big commercial buildings.

The precise fate of these business lines remains to be seen, but prospects look dim. At her Cisco blog site, Laura Ipsen, senior vice president of global policy and government affairs, expanded on Cisco’s thinking in a company blog post, although the jargon is tough going. She writes:

“Over the past two years the home and building energy management markets have evolved in such a way that we believe we can provide more value to our customers and the industry by enabling interoperability through our core networking products and solutions (for example, EnergyWise) as part of our integrated architecture within the broader smart grid effort.”

Based on this rationale, it appears that Cisco will likely sell its building management software suite, Mediator. Ipsen writes: “For building energy management, this means we are actively pursuing several strategic options for Cisco’s Network Building Mediator and Mediator Manager product line, with an emphasis on minimizing the impact on current customers, partners and employees.”

The outlook for home energy management systems is less clear — the jargon reaches fever pitch here — but it looks like Cisco is simply going to pull the plug on household offerings, instead focusing on utility and other B2B markets: “For energy management in the home, we will transition our focus from creating premise energy management devices to using the network as the platform for supporting innovative applications and architectures that will improve our customers’ value proposition in the consumer energy management market.”

For close watchers of the smart grid space, the retreat comes as no surprise. At Greentech Media, Michael Kanellos predicted Cisco would retreat last week, pointing out that the company’s earlier success tempted it to overreach into unknown markets, even as its core networking technologies were under intense competitive pressure.

A harbinger of Cisco’s exit was the early-retirement of Ed Richards, an original developer of the software behind Mediator, a system which Cisco acquired in the acquisition of Richards-Zeta back in 2009.

As Google and Microsoft found in their forays into energy management, Cisco’s market expectations went unmet. The market has been slow to develop, utilities have proven hard customers to develop, and consumers have been all but indifferent to the hype around home energy management software, points out Katie Fehrenbacher at GigaOm.

Cisco’s been riding through a winnowing reorganization in recent quarters. In July, the company shed 9 percent — or 6,500 employees — of its staff, part of a plan to lower costs by $1 billion. And in April, the company killed off its consumer business, including the Flip video camera, which it had bought just two years earlier.

Photo CC-licensed by John Brennan.

GreenBiz

GM Upgrades OnStar to Power First Real-World, Smart Grid EV Pilot | GreenBiz

Hard to believe that OnStar — GM’s in-car mobile data service — celebrates its Sweet 16 this year.

Back in 1995, when the service was launched for GM’s luxury line, pundits griped it was just a superfluous add-on. This was back in the cell phone Stone Age when they were still a luxury, analog and kinda huge. Few predicted then that telematics would mushroom in importance over the next decade. These days six million subscribers pay for OnStar’s emergency assistance, remote diagnostics, mapping, entertainment and more.

To that long list, add one more trick OnStar is helping GM to pull off: offering a short-cut to connect electric vehicles (EVs) to the smart grid. GM yesterday announced the launch of a pilot program that can let utilities and customers skip the need to install physical smart grid points to manage recharging of their EVs. The new OnStar service will act as a remote brain, wirelessly tracking and governing the EV’s charging behavior, coordinating the timing and billing, and potentially dramatically lowering the costs to extend smart-grid management features to EVs.

By skipping the need to install physical smart apparatus, the OnStar system can save utilities some $18 million per 1,000 customers, said Vijay Iyer, GM’s director of communications for OnStar, citing GE estimates. To mesh OnStar’s data services with utilities’ internal information management systems, GM worked with GE, whose IQ Demand Optimization Services unit is used by utilities to monitor demand response systems.

This is important step for utilities which are busily, and expensively, building intelligent power and data devices in customers’ garages, as well as at charging terminals, to referee how and when EVs will re-charge. Utilities don’t want fleets of EVs drawing power on 95 degree summer afternoons when power is in short supply. Customers, likewise, will prefer the option of charging at night when power is much cheaper.

The Detroit automaker is calling the trial the first “real-world pilot of smart grid solutions.” This quarter, staff of regional utilities will become the guinea pigs for this program, driving Chevrolet Volts for everyday use. Ford announced plans to scale up a broad smart-grid integration at the last Detroit auto show. And Toyota has laid out ambitions to collaborate with Microsoft.

GM is betting that this approach will let it leapfrog the smart-grid technology demos being piloted across the U.S. Given that OnStar can pick up recharging activity anywhere — whether at home or on a distant road trip — the approach promises to offer deeper insight into how, where and when EVs are charged. Since it doesn’t matter whether the EV is connected to a smart-grid charge point, OnStar should let utilities more accurately model how to manage peak versus non-peak charging too.

GM’s EV approach may get real traction where others have struggled. It appears to offer utilities a faster, cheaper way to hook up a major new source of electricity consumption to the grid. If utilities don’t see the benefit, it will be DOA. We saw evidence of the importance of this recently when software heavyweights Google and Microsoft suspended efforts to develop software applications for home energy management, in part because of the difficulty of getting access to the all-important data stream from utilities.

There are some intriguing long-term implications to GM’s announcement. With smart-grid enabling technology embedded in the car, GM opens the door to a faster rollout of sophisticated vehicle recharging schemes than would be possible if utilities must first build hardware networks of recharging stations.

There’s big global potential too: GM as a company remains the No. 2 auto producer in the world, even after its recent near death experience. Two of the top 10 selling vehicles in China, the world’s largest auto market, are GMs. And China has the largest goals for EV deployment of any country.

The inevitable next question is whether GM might make this service available to other automakers, so that they could roll out smart grid EV charging on a faster track too? Until 2006, GM licensed OnStar through a variety of other carmakers, but has since stopped. This Sunday, however, GM will release a portable form of OnStar that can be installed in any car, OnStar for My Vehicle (OnStar FMV).

Who knows? In time, maybe even your Toyota could hook up to the smart grid via GM’s OnStar.

GreenBiz

How IBM is Enabling Smarter Management of … Medieval Abbeys | GreenBiz

Question:What does a rack of high-performance, network blade-servers have in common with the 15th century Flemish tapestry The Hunt for the Unicorn?

Answer: Both are being watched over by some of IBM’s most advanced smart building systems.

Last week, as part of a roll-out of a broader suite of smart building technologies, I got to enjoy a dose of high culture and high technology, catching Big Blue’s announcement of novel collaboration with New York City’s Metropolitan Museum of Art.

IBM is supplying a suite of hardware and software as part of its Intelligent Building Management system to help the Met fine-tune the maintenance and preservation of its one-of-a-kind collection of medieval artwork.

The move adapts technology developed originally to monitor and manage energy-intensive data centers — cutting-edge technology of the 21st century — to help care or for some of the most priceless, hand-made religious and secular artifacts dating back to 800 AD.

hunting of the unicorn detailAt the announcement, Dr. Paolo DionisiVici, an Associate Research Scientist at the Met, made clear why doing the latter represents the greater challenge.

The Met’s main medieval collection is housed in The Cloisters Museum & Gardens, an assemblage of medieval French abbey structures, transplanted nearly a century ago (more on that below).

Authentic as the setting is, the challenges of managing temperature, humidity, and other variables are daunting: castle-like thick rock walls define a space that sees tens of thousands of visitors each year.

The artwork itself also offers up material preservation challenges of a stupefying variety.

The tapestries, like the most-famous-of-all Unicorn hanging, are made of a combination of wool, linen, metal threads, vegetable dyes and other delicate materials. After 600 years, they remain remarkably vivid.

Nearby in the museum are painted wooded religious artifacts that require different preservation conditions.

“Every object is unique,” DionisiVici said.

memsic iris moteThat’s where IBM comes in. To monitor this menagerie, IBM is deploying a network of low-power motes — small electronics packages fitted with sensors and antennae for communication. [An example of a type of mote IBM has developed, the MEMSIC IRIS mote, is pictured at left.]

“The motes can sense temperature, humidity, corrosion, contamination, light levels, air flow, pressure and more,” said Dr. Hendrik F. Hamann, one of IBM’s research scientists working on the project. The motes are also very energy-efficient and self-configure into a “mesh” network, he explained, by independently figuring out how to route data from one to the next.

For now, the technology covers seven rooms, a portion of the Cloisters’ overall layout, but including the famous Unicorn tapestries.

What can motes do when overseeing a vaulted-ceiling room filled with priceless art? In a way the museum cannot today, the sensors and analytic software can tap into real-time data to observe and model microclimates, revealing with greater precision areas of higher heat, or dryness, or other variables that can conventional sensor systems.

IBM’s analytical models can even guide how to place particular works of art, given better understanding of a room’s thermal dynamics. Wooden materials, for example, need steady humidity for optimal preservation.

“This is the first large-scale deployment of a smart sensing infrastructure coupled with deep analytics in a museum environment,” said Hamann.

IBM’s pairing with The Cloisters continues a century-old tradition of one-of-a-kinds that define the site.

About a century ago, craftsmen in France painstakingly dismantled five cloisters — essentially, abandoned convents or monasteries designed for secluded, contemplative living — packed the pieces in boxes, and shipped them via boat across the Atlantic.

Once landed, the crates were hauled up to the highest promontory of Manhattan, to land owned by John D. Rockefeller — the wealthiest man in U.S. history. Through the years of the Great Depression, some of those same craftsmen methodically reassembled the stones into a meticulous recreation of an abbey complex.

To complete the setting, Rockefeller bought up scores of acres of Manhattan land around the Cloisters and — just for good measure — also acquired the ridge of land immediately across the Hudson River, so as to protect the view from his creation.

Rockefeller had no interest in living in the transplanted abbey. In fact, he died a year before the complex was completed.

It was built strictly as a home for the more than 5,000 pieces of medieval art he collected in his twilight years, with the intention of donating the entire complex — building, land and artwork — to the Met.

If visiting New York City, The Cloisters is a must see — one of the best and least-known treasures the city has to offer. With IBM’s help, the masterworks there will be around to enjoy for a long time to come.

Interior Cloisters photo CC-licensed by respres. Mote photo courtesy of IBM.

GreenBiz

How Peppermill Makes the Most of Its Geological Blessings | GreenBiz

In the virtuous race over bragging rights for the title of greenest building, there are various shades of LEED, there’s net-zero energy, and there’s Energy Star, too.

But how many facilities can sink a pipe into a parking lot, tap into more than enough energy to supply year-round heating needs, and just maybe have enough left over to generate much of the site’s electricity?

Welcome to Reno, Nevada, where the filigreed micro-fractures that spread out from California’s San Andreas and other major faults have created a subterranean wealth of hot rocks and heated water.

These geological blessings have made it possible, right in downtown Reno, for the Peppermill Resort Spa Casino a 2.2-million-square-foot complex — to switch off its fleet of fossil-fueled boilers as part of a $9.7-million project to switch over to geothermal heat.

The hotel is saving $2.2 million per year in natural gas purchases. “That is what you call a no-brainer,” says Dean Parker, who as Peppermill’s Executive Director of Facilities, has overseen the four-year project.

Heat exchangerPeppermill’s past and future sit side by side in its spotless power plant shed, a stone’s throw from the main hotel. To get to the new geothermal heating unit, you have to pass by four hulking Cleaver Brook Boilers. Now barely used, the central-plant boilers once cranked out up to 100 million BTUs of heat.

But today, Parker jokes he’s thinking of putting them up on eBay. Replacing all four of the garage-sized boilers is a single so-called “plate and frame” heat exchanger, made by Alfa Laval and pictured at right, no larger than a modest bathroom.

The device sandwiches together hundreds of thin, table-sized stainless steel sheets that work as a radiator, transferring heat from incoming geothermal fluids that measure 174 degrees Fahrenheit into fresh water passing through the heated plates. The fresh water is thereby warmed to 120 degrees and then stored in an armada of oversized Thermoses. Earth-heated water supplies all of the hotel’s needs: 1,600 guest rooms, heating, kitchens, laundry, pools, hot tubs, spas, kitchens and more.

The heat exchanger can meet the hotel’s needs and then some, pulling about 900 gallons per minute of geothermal fluids from the earth. Both it and the well are designed to crank up to 1,500 gallons per minute. “So far as we know, we’re the only hotel-casino fully heated by on-site geothermal,” says Parker.

Geothermal Heating is a Go; Energy is on the Horizon

Electricity generation could be the company’s next project. The geothermal resource below Peppermill has enough capacity that the Peppermill is scoping out a 6- or 7-megawatt electricity generator. With commercial rates for power in the Reno area at around 9 cents per kilowatt-hour, the savings could be considerable.

There are challenges, however. Though warm enough to meet the hotel’s day-to-day hot water demands, Peppermill’s geothermal supply may be a too cool to generate power, since conventional geothermal power plants typically need water at 275 degrees and higher.

But the technology is improving quickly: Parker is hopeful that a so-called “binary cycle” power plants might work. Rather than spinning a turbine by boiling water into steam, these systems use special gases that transform from fluid to gas at room temperatures.

The hotel’s experience developing its new project also reveals the risks of prospecting geothermal resources. Northwest Nevada is rich in geothermal resources, and the hotel had years ago built a so-called “shallow” well, that, at around 900 feet deep, was supplying 120-degree water. Hot enough to heat its pools, but not sufficient to meet operational needs.

To upgrade its geothermal capacity, the hotel decided to dig deeper. Following studies suggesting hotter water could be found deeper down, the hotel erected a drilling rig in a parking lot late in the summer of 2009. Sound barriers helped minimize the noise from affecting guests and neighbors.

Parking lot drillAt first, the drill came up dry, raising the specter of a costly error. Pushing on, and operating round the clock for 28 days — at $100,000 per day — the rig bored to a depth of 4,421 feet down. There it found a gusher of 174-degree water that today provides all of the hotel’s heat.

These days, with the drill long gone, the well is all but invisible, hidden under a manhole cover that straddles two parking spaces in the restored lot. Opening that cover, all that can be seen now is a 9″ diameter pipe that surfaces into a fire hydrant-sized valve which can steer up to 1,500 gallons of hot, salty brine into the hotel’s power plant a few hundred yards away.

In January 2010, the hotel drilled a similar, second well located about 1,000 feet across the hotel’s property. Plunging to just 3,900 feet, this second well is used to re-inject the hot brine back into the earth after it has been used to heat fresh water.

This closed-loop is designed to make sure the subterranean heat resource isn’t depleted. Once the hot fluid surfaces, only some of its heat is extracted before the fluid is piped back to the injection well and sent back down into the same geological formation. Down below, the water re-absorbs heat from the earth, to be recycled again and again.

The Peppermill’s location is blessed with more than ample superheated water. Over the past decade, Reno has emerged as a hotbed (couldn’t resist…) of the geothermal industry. About a quarter of Reno’s daytime electricity demand, and most of its nighttime needs, are supplied by Ormat’s 100-megawatt Galena geothermal plant just outside the city.

Along with Ormat, the bulk of the U.S. geothermal industry — including Ram Power, Magma Energy, Terra Gen, Gradient Resources and Enel Green Power — all operate locally. Dozens of geothermal power plants are in the pipeline, in large part to help meet California’s looming goal of generating one-third of its electricity from renewables.

Political support is strong too: Reno is an area where “Republicans want renewables,” and lawmakers have supported both state-level renewables policy, along with university R&D programs as well as community college courses focused on supplying geothermal technicians.