as posted to CleanTechBlog.com

The Water Innovations Alliance (WIA) recently completed an assessment of the state of the U.S. water infrastructure, which was given an overall grade of D- by the American Society of Civil Engineers in its most recent infrastructure report card. 

Underlying that nearly failing grade, the WIA produced some startling statistics in a recent newsletter (not yet posted to their website):

• More than 20% of water treatment systems in the United States – serving 49 million people — have violated provisions of the  Safe Drinking Water Act at some point in the past five years
• About 15% of municipal water is lost to leaks, representing 7 billion gallons of clean drinking water PER DAY 
• The U.S. water system represents more than 4% of total U.S. electricity usage
• Up to 20 years of significant investment are required to stabilize and modernize the U.S. water infrastructure, with about $300 billion capital required

From this background, the WIA urges the adoption of “smart water grid” technologies – much of which is data-driven and IT-related — to upgrade the U.S. water system.  The WIA projects that a $20 billion investment in smart water grid technologies can generate $100 billion in annual savings through reduced losses and energy consumption — in addition to improving environmental performance (less chemical treatment required, fewer regulatory violations, better human health).

The question that WIA leaves unaddressed is how to motivate these smart water grid investments — especially when they appear to have such good financial returns. Alas, unlike some other countries, most of the U.S. water system is publicly owned by government agencies:  federal, state, and municipal.  As everyone knows, governments are not exactly flush with spare cash, and even though the returns seem attractive, the up-front capital increment of $20 billion is daunting — and not likely to be supported by frustrated taxpayers and voters, who don’t want to spend an extra dime.

Even if this financing hurdle could somehow be overcome, there is still the problem that most publicly owned water organizations are – how should I put this? – saddled with people and processes that make them lethargic, resistant to change, and risk-averse. 

Note that there are 53,000 water systems in the United States, with 83% of them serving fewer than 3,300 people.  These are typically small-town, mom-and-pop operations, staffed with — well — not the best-and-brightest.  Many of the cost savings that can be achieved with investment in the water sector would reduce the need for someone to get in his truck and drive down to fix something, and, in this economy, decision-makers in the public sector are not terribly keen to eliminate jobs.  In other words, smart technologies can and often do replace not-so-smart people — many of whom are friends, neighbors, and relatives.

The WIA’s report is provocative, and hopefully will stimulate more effort to surmount the financing and institutional impediments to investing in a smart water grid.  Even so, it won’t be easy getting the U.S. water infrastructure to improve upon its nearly failing grade.

as posted to CleanTechBlog.com

I don’t know exactly when “green” became the de facto official color of environmentalism, but it dates back at least to the 1970s, when European political parties rooted in ardent environmental positions took the name “Green.”

But, as Paul Markille noted in The Economist’s excellent annual round-up of speculations for the new year — “The World in 2012″ — there seems to be a movement afoot to brand environmentally friendly things with the color blue rather than green.

Green is about trees and plants, whereas blue is about oceans, rivers, lakes, and the sky.  As environmentalism and cleantech increasingly move from protecting pristine wilderness areas toward ensuring adequate clean supplies of essential resources — air and water — perhaps a color change is warranted.

For sure, blue is more acceptable to right-of-center political interests than the term green has become since being appropriated by left-of-center parties in Europe.  Something for cleantechers to think about …

It does bring new meaning to the University of Michigan rally cry, “Go Blue!”

as posted to CleanTechBlog.com

Last September, one of the world’s largest banks, London-based HSBC (NYSE: HBC), issued a very interesting research report titled, “Sizing the Climate Economy.”

At less than 60 pages, it’s an excellent read for those interested in the future growth of the advanced energy economy.  There are really too many highlights to capture in this blog post, but here are a few snippets.

HSBC pegs the global low-carbon energy market – comprising low-carbon energy supply (renewables, nuclear, and carbon capture/sequestration) and energy efficiency (vehicles, buildings, industrial, energy storage, and “smart-grid”) – at $740 billion in 2009.

The HSBC authors characterize four potential scenarios between now and 2020:  ranging from a “Backlash” scenario where most world economies retrench from commitments to reduce or limit carbon emissions, to a “Green Growth” scenario in which many nations commit (and actually follow through on those commitments) to clamp down on emissions to an even greater degree than in earlier headier days of 2009. 

Even in the most-pessimistic (in my view, most realistic) scenario, the global low-carbon energy market is projected by HSBC to more than double by 2020, to about $1.5 trillion, representing an annual growth of more than 6%.  By any account, and even under this uninspiring scenario, the low-carbon energy market is a solid growth market of the next decade.  If the dominoes fall right and we get a result similar to HSBC’s most optimistic scenario, then the low-carbon energy market would nearly quadruple to $2.7 trillion by 2020, for a 12.5% compounded annual growth rate.

The numbers in the HSBC report need to be taken with a grain of salt.  Any system or market as complex and multifaceted as the global energy sector cannot be modeled with any great degree of precision.  If HSBC’s forecasts for 2020 end up within +/- 50%, I’d say they would be doing well.  What’s more valuable, in my opinion, about studies of this type are the qualitative conclusions that can be drawn.

In general, the energy efficiency side of the ledger fares better in HSBC’s analysis than low-carbon energy supply.  No doubt, this is because many efficiency options are lower cost (certainly, lower cost per ton of emissions reduced) than new low-carbon supply options – and because the demand for new energy supply options will inevitably be depressed as more efficiency is implemented.  HSBC is particularly bullish on electric vehicles, especially in the second half of the decade – an optimism I’d like to share, but can’t at present based on the decidedly mixed results of 2011 for electric vehicles (as discussed in my last post here.)

For most of the report, HSBC uses their “Conviction” scenario as “the most likely pathway to 2020,” in which Europe meets their renewable energy targets but not their energy efficiency targets, China more than meets their clean energy targets and becomes the largest market for low-carbon energy in the world, and the United States (disappointingly, but predictably) experiences relatively limited clean energy growth.  So, for those of you in the clean energy marketplace, the place to be is … NOT the United States.

This report was written by a team of HSBC analysts based in Europe – and it shows in many places. 

The text refers several times to human-driven climate change as a phenomenon that’s commonly known and understood to be a real issue, and the need for public sector intervention to address the issue – if not cap-and-trade or carbon taxes (which seems unlikely for the foreseeable future), then command-and-control regulation.   Alas, much of corporate America and most of one of the two major political parties in the United States (lots of overlap here) contends that climate change is unproven at best or a hoax at worst – and therefore undeserving of any policy initiatives. 

This study could never have been issued by a U.S. bank, or even a U.S.-based team of a global bank, or else they would be disavowed.  It certainly won’t help HSBC grow market share for U.S. corporate banking services.

Notwithstanding the lack of political will and leadership (especially in the United States), HSBC is more hopeful about progress in lowering carbon intensity, because other co-aligned forces will be powerful in the coming years.  In particular, austerity will squeeze out inefficiencies.  Furthermore, the authors note that many countries are pursuing low-carbon strategies because such an emphasis fosters industrial innovation or offers the prospect of creating many “green jobs.”

As HSBC notes, “a low-carbon economy will be a capital-intensive economy.”  This makes intuitive sense, as the use of carbon-based fuels implies an ongoing set of economic activities to continually extract and consume the resource.  Put another way, low-carbon energy will be more about capital expenditures and less about operating expenditures.  And, a LOT of capital will be required:  HSBC estimates about $10 trillion of capital cumulatively through 2020, tripling from 2009 levels to reach an annualized rate of $1.5 trillion per year – “a large but manageable sum in our view.”

 Where will this investment capital come from?  “It will be private capital from corporations and consumers that will finance the climate economy – with governments setting the framework and providing capital at the margin.”  In typical understatement, HSBC notes that “the challenge for investors, however, is the lack of certainty over both policy intentions and actual implementation.”

That’s a polite way of saying the world will likely muddle through, somehow.

as posted to CleanTechBlog.com

It’s that time again:  sifting through the detritus of a calendar year to sum up what’s happened over the past 12 months. 

Everybody’s doing it – for news, sports, movies, books, notable deaths … and now even for cleantech:  Here’s the scoop from MIT’s Technology Review, and here’s a post on GigaOM.

So, my turn [drum roll, please], here’s my top 10 take-aways from 2011:

1. 1. Solyndra.  The utter failure of Solyndra, and the messy loan guarantee debacle, has been a huge black-eye to the cleantech sector.  It’s a political football that will be kicked around extensively during the 2012 election cycle, further widening the schism of support levels by the two major U.S. political parties for cleantech.  In other words, cleantech is becoming an ever-more polarizing issue  – with Solyndra serving as the most visible tar-baby.

2. 2. Shale gas and fracking.   A chorus of ardent proponents of natural gas development, most vocally Aubrey McClendon, the CEO of Chesapeake Energy (NYSE: CHK) – the largest player in the shale gas game  —  is repeatedly chanting the mantra that shale gas is so plentiful that it can very cheaply serve as the major U.S. energy source for the next several decades.  And, recovery of this resource will create a bazillion jobs for hard-working Americans in rural areas.  In this view, who needs renewables?  Interestingly, this view also poses increasing threats to coal interests as well.  On the flip side, of course, the concerns about the use of fracking techniques, and the implications on water supplies and quality, are constant fodder for headlines.  Clearly, shale and fracking will continue to be hot topics for 2012.

3. 3. Keystone XL.  The proposed pipeline to increase capacity for transporting oil from the Athabasca sands of Alberta to the United States  is the current lightning rod for the American environmental community.  Never mind that denying the pipeline’s construction will do very little to inhibit the development of the oil sands resources — Canadian producers will assuredly build a planned pipeline across British Columbia to ship the stuff to Asia.  Never mind that blocking the pipeline will do nothing to reduce U.S. oil consumption — which is, after all, the source of the greenhouse gas emissions that opponents are so concerned about.  This has become an issue of principle for NRDC and other environmental advocates:  “We must start taking concrete steps to wean ourselves from fossil fuels.”  Nice idea in theory, but this action won’t actually do anything to accomplish the goal, and will only further paint the environmental community in a damaging manner as being anti-business and anti-economics.  In my view, we have to work on reducing demand, not on curtailing supply; if we reduce demand, less development of fossil fuels will follow; the other way around doesn’t work.  The Obama Administration has punted approval for the pipeline past the 2012 election, but Keystone XL — like Solyndra — will be a major framing element in the political debates.

4. 4. Fukushima.  The terrible earthquake/tsunami in Japan in March killed more than 20,000 people — and sent the Fukushima powerplant into meltdown mode in the worst nuclear accident since Chernobyl in 1986.  As costly and devastating as Fukushima was to the local region, it pales compared to the damages caused by the natural disasters themselves.  Even so, the revival of the perceived possibility that radioactive clouds could spew from nuclear powerplants put a severe brake on the “nuclear renaissance” that many observers had been predicting.

5. 5. Chevy Volt.  Released after much anticipation in 2011, the plug-in electric hybrid Volt has been selling well below expectations.  Furthermore, as I recently discussed here, a few well-publicized incidents of fires stemming from damaged batteries have been a huge PR blow to gaining widespread consumer acceptance of electric vehicles.  Clearly, Chevy and others in the EV space have their work cut out for them in the months and years ahead.

6. 6. Challenges for coal.  As I recently wrote about on this page, the EPA has been working on promulgating a whole host of tightened regulations about emissions from coal powerplants.  These continue to move back and forth through the agencies and the courts, and coal interests continue to wage their battles.  But, between this set of pressures and low natural gas prices (see #2 above), these are tough days for old King Coal.  Not that they couldn’t have seen these challenges coming for decades, mind you, and not that some of their advocacy organizations don’t continue to tell their pro-coal messages with some of the most heavy-handed and dubiously factual propaganda outside of the recently deceased “Dear Leader” Kim Jong Il. 

7. 7. Light bulbs.  One of the most absurd and petty dramas of 2011 unfolded over the planned U.S. phase-out of incandescent light bulbs, as provided for in one of the provisions of the Energy Independence and Security Act of 2007.  Representative Joe Barton (R-TX) led a backlash against this ban, arguing that it was an example of too much government intrusion into consumer choice — and succeeded in having the ban lifted at least for a little while, tucked into one of the meager compromises achieved as part of the ongoing budgetary fights.  This was accomplished against the objections not of consumers, but the objections of light bulb manufacturers themselves, who had already committed themselves to transitioning to manufacturing capacity for the next-generation of light bulbs:  CFLs, LEDs and halogens.  Now, the proactive companies who invested in the future will be subject to being undercut by a possible influx of cheap imported incandescent bulbs.  Way to go, Congress!  No wonder your approval ratings are near 10%.  Is it possible for you guys to focus on the big important stuff rather than on small bad ideas? 

8. 8. PV market dynamics.  Solyndra (#1 above) failed in large part because the phovoltaics market has become much more intensely competitive over the past year.  Module prices have fallen dramatically — no doubt, in large part because the market is now saturated by supply from Chinese manufacturers, who are sometimes accused of “dumping” (i.e., subsidizing exports of) PV modules into the U.S. marketplace.  This is stressing the financials of many PV manufacturers, including some Chinese firms and other established players.  For instance, BP (NYSE: BP) announced a few weeks ago its exit from the solar business after 40 years.  However, the stresses are falling mainly on companies that employ PV technology that cannot be cost-competitive in a lower pricing regime, whereas some of the new PV entrants — not just Chinese players, but some U.S. venture-backed players like Stion (who just raised $130 million of new investment) – are aiming to be profitable at low price levels.  And, after all, the low prices are what is needed for solar energy to achieve grid-parity, which is what everyone is seeking for PV to be ubiquitous without subsidies. 

9. 9. Subsidies.  Ah, subsidies.  In an era of increasing fiscal tightness (see #10 below), pro-cleantech policies are under greater scrutiny.  In particular, renewable portfolio standards are being threatened by state legislators of a particular philosophy who are opposed to subsidies in all forms.  The philosophy is understandable, but the lack of understanding or hypocracy is less easy to defend:  The status quo is almost always subsidized too, especially during its early days of development and deployment — and often remains subsidized well after maturity and commercial profitability.  Fortunately, there’s an increasing body of high-quality work that assesses the energy subsidy landscape in a generally objective manner, such as this analysis released by DBL Investors in September.

10. 10. Europe.  Although not a cleantech issue per se, the vulnerability of the European economy, the European Union, and the Euro in the wake of the various debt crises unfolding across the Continent is a major negative factor for the cleantech sector.  Europe is the biggest cleantech market, and many of the leading cleantech investors and corporate acquirers are European, so a recession (or worse, depression)  in Europe will be a very big and very bad deal for cleantech companies.

In all, 2011 was not a great year for the cleantech sector, and I don’t see 2012 being much better.  But, that’s not to say that good things can’t happen, or won’t happen.  Indeed, there will always be rays of sunshine among the clouds … or, to use another metaphor, you’ll always be able to find a pony in there somewhere.

Happy New Year everyone! 

as posted to CleanTechBlog.com

For the uninitiated, “nanotechnology” refers to the science of the very small, engineering particles and their corresponding materials at the nanometer scale.  For a sense of perspective, at one-billionth of a meter, a nanometer is about 1/60,000 of the width of a human hair, so we’re talking engineering not just at the microscopic scale, but the electron-microscopic scale.

Why bother?  Because researchers from across a number of disciplines have discovered that engineering particles at such minute scale can change the fundamental performance characteristics of the material.  You want a material that captures a certain wavelength of light, or transmits a certain frequency of energy?  You just might be able to obtain it by tweaking currently available materials at the nanoscale, to change the “morphology” (think texture) of the particles so that they behave in the desired way.

The nano-world is sometimes mind-bending.  For instance, with enough wrinkles, folds, or pockets, a particle with the volume of a grain of sand can have a surface area much greater than that of a basketball.  When you’re able to play topological tricks like this, amazing performance improvements in even the most basic stuff can be achieved.

As this capability has been increasingly revealed in the past decade or so, more and more academic research and an increasing number of companies are investigating how nano-engineering can improve the performance of all sorts of things.  This is especially true for the cleantech arena. 

Product innovation ranges across the map:  nanomaterials optimized for increased performance of membranes for fuel cells and cathodes for batteries, enhanced thermal insulation for building materials, higher capacity of contaminant capture from water, and on and on and on.

A few weeks ago, as the investment banking firm Livingston Securities convened their 7th Annual Nanotechnology Conference in New York City, Crystal Research Associates released a new report, titled “Nanotechnology and the Built Environment:  The Transition to Green Infrastructure”.  This document profiles some of the seemingly mature industrial sectors that are being transformed by nanotechnology, including some of the biggest corporations in the world such as GE (NYSE: GE), BASF (Deutsche:  BAS), Siemens (NYSE:  SIE), and Honeywell (NYSE:  HON) working on some of the smallest scales imaginable.

The report covers many of the sectors you’d expect to be revolutionized by materials enhancements, such as photovoltaics and lighting, but also touches on a couple of real surprises.  For instance, consider NanoSteel – a company that is commercializing metallic coating technology developed at the Idaho National Laboratory to improve the performance of structural metals under challenging environmental conditions, such as high temperature or corrosion.

In addition to NanoSteel, other presenters at Livingston’s nanotech conference that particularly piqued my interest included Siluria (developing an approach to convert methane into ethylene, thereby reducing the requirement for petroleum to make plastics) and QM Power (offering a new basic design of motors and generators promising higher-efficiencies).

It’s always interesting to go to events such as this to get exposed to companies working under the radar screen that are aiming to achieve fascinating innovations, sometimes in the most mundane or obscure areas.  Even if not all these companies will ultimately be successful, either in serving customer needs or in generating good returns to investors, it’s heartening to note the degree and scope of creative disruption that continues to seethe in our world of incredible challenges, turbulence, and pessimism/cynicism.

 Many players thinking big about the future are moving small, as small as possible.

as posted to CleanTechBlog.com

I generally like creating my own content, riffing off other newsy material I find in the print or electronic press, but sometimes someone writes such good stuff that it’s really hard to improve on it.  This is one of those times.

Also, sometimes I’m just too busy to come up with original material or do the requisite secondary work to make a broader set of points.  This is also one of those times.

Last week, Matthew Nordan of the venture capital firm Venrock penned (well, OK, typed) an excellent four-part series titled “The State of Cleantech Venture Capital.”

Part One focuses on the amount of venture capital into cleantech.  Looking at capital flows over the past several years and projecting forward, Nordan concludes that a record amount of cleantech venture capital will be required over the next few years to bring deals from recent years across the goal line to exit — but expresses the concern that “there may be insufficient Seed/Series A capital available to fund new cleantech enterprises.”  This is a worry to me, as well.

Part Two aims to analyze the returns that cleantech venture investors have been able to generate.  Nordon notes that the conventional wisdom — that cleantech venture capital must have much worse returns than venture capital overall — is patently incorrect.  “Relative to its level of funding, cleantech has actually overdelivered on exits…[venture-backed cleantech start-ups] take less time [to exit than companies in other sectors]…[and] cleantech-only VC funds have about the same valuation metrics as VC funds overall.”  Of course, Nordson does not emphasize that the venture capital sector as a whole has performed poorly over the past decade, but at least cleantech VC doesn’t trail a field that is sucking wind.

Part Three profiles 24 cleantech firms that have undertaken or filed for an initial public offering (IPO) since 2000.  Nordon’s analysis indicates that half of the seemingly successful companies — these are only the ones that IPO’ed, after all — “stumbled” somewhere along the way toward their exit.  By Nordon’s definition, “stumbled” means receiving investment at a too-high valuation at some point, and then suffering when the valuation falls in a subsequent round of investment.  Such “down-rounds” are inevitably very painful.  As Nordon advises entrepreneurs at the end of his piece, “the share price that really matters is the one at the end.”

Part Four offers some brief concluding remarks, among which are “It’s still really early [in cleantech venture capital}”, and “The optimal investment vehicle [to finance cleantech start-ups] remains to be figured out.” 

Nordon and his firm Venrock are eager to play in this cleantech venture capital game, rough-and-tumble though it may be.  I am too.

as posted to CleanTechBlog.com

Long a dream of environmentalists, and long a laughing-stock among car enthusiasts because of lame designs (e.g., GM’s EV1 and a long litany of goofy looking vehicles that look like a cross-breed between golf carts and toys), electric vehicles (EVs) are finally starting to make a real impact in the mass-market auto marketplace. Of all the electric vehicles, the most prominent is the Chevy Volt, which is a really good looking car with pretty impressive performance (range, acceleration, and fuel economy.) 

However, a negative news item about the Volt is starting to gain a little momentum:  that the batteries are prone to fires.  Over the summer, a Volt caught fire at a National Highway Transportation Safety Administration (NHTSA) facility a full three weeks after a crash test.  And, more recently, a Volt being charged in a home garage in North Carolina was involved in a fire.

Notwithstanding the possibility of misinformation — it now seems that the latter fire was not caused by the Volt, but started elsewhere in the garage, according to the local fire marshal — nevertheless there’s high potential for the Volt and all EVs to be stained and tarred with the perception that they are unsafe fire hazards. 

This stems from the use of lithium-ion batteries — which offer high energy and power density as is critical for non-stationary applications, but also have a propensity to burn.  Indeed, this was a serious issue a few years ago for laptop computers — and while that concern largely faded away, it came back into focus last week after an iPhone caught fire on an Australian commercial flight, and now threatens the EV sector before it can gain solid market traction.

Of course, no one’s claiming that gasoline-powered vehicles aren’t prone to fires either.  Indeed, between the flammability and the toxic nature of the fuel, it’s hard to imagine the gasoline-powered auto we have taken for granted for decades being approved by regulators now if it were just being introduced today. 

However, gasoline vehicles have not been generally known to spontaneously combust when standing still, either.  

The last thing that the EV sector needs is a Hindenburg image.  The car makers and the battery makers in the EV arena need to tend to this issue, immediately.  The quicker-than-normal response of GM, offering loaner cars and the possibility of buy-backs to Volt owners concerned about safety issues, indicates how urgent the situation is.

as posted to CleanTechBlog.com

It’s long been on the short-list of things that keep utility planners and security experts awake at night:  Hackers find a way to enter the control system of critical infrastructure and command it against the interests of users.

Well, it appears to have finally happened:  In early November, a small water utility in downstate Illinois reportedly experienced a cyberattack from a source in Russia, in which a pump was repeatedly turned on and off until it failed.  The event is under investigation by the Department of Homeland Security and the FBI.

In some ways, it’s surprising that this first incident took so long to occur.  Hackers and terrorists are determined and many have access to the latest in technologies, while the information systems and governing architecture of the U.S. utility grid is essentially decades old.  The SCADA systems typically in use to manage utility assets are generally antiquated, with proprietary code, and who-knows-how-many bugs and loopholes and vulnerabilities since they were programmed by people who are now mostly either retired or dead.

There’s a lot of hype about “smart-grid” technologies to manage the grid and its assets for better efficiencies.  Not much of the smart-grid discourse centers on security issues.  But, it would be pretty stupid for a newly refurbished smart-grid to remain so vulnerable. 

I’ve heard from reliable sources that blowing up just a few of the most critical substations in the United States would cause prolonged and wide-reaching blackouts until new equipment such as large transformers could be fabricated, as quantities of these things don’t just sit on the shelf. 

Let’s hope that the relative silence about grid security in the smart-grid space is more a function of desired stealthiness than of inattention or neglect.

As posted to CleanTechBlog.com

Seemingly generating nary a ripple here in the United States, the International Energy Agency (IEA) just issued its 2011 World Energy Outlook – its annual synopsis on the future of the global energy sector. If ignorance is bliss, then we’re certainly blessed by generally not bothering to confront the pretty-alarming conclusions of the report. 

A pastiche of the highlighted snippets in the Executive Summary, when stitched together, provide a glimpse of the world we’re now choosing to invent for ourselves and future generations:

“There are few signs that the urgently needed change in direction in global energy trends is underway.”

“Global investment in energy supply infrastructure of $38 trillion (in year 2010 dollars) is required over the period 2011 to 2035.”

“The age of fossil fuels is far from over, but their dominance declines.”

“The cost of bringing oil to market rises as oil companies are forced to turn to more difficult and costly sources to replace lost capacity and meet rising demand.”

“Factors both on the supply and demand sides point to a bright future, even a golden age, for natural gas.”

“Coal has met almost half of the increase in global energy demand over the last decade.  Whether this trend alters and how quickly is among the most important questions for the future of the global energy economy.”

“The dynamics of energy markets are increasingly determined by countries outside the OECD.”

“All of the net increase in oil demand comes from the transport sector in emerging economies, as economic growth pushes up demand for personal mobility and freight.”

“China’s consumption of coal is almost half of global demand and its Five-Year Plan for 2011 to 2015, which aims to reduce the energy and carbon intensity of the economy, will be a determining factor for world coal markets.”

“Russia’s large energy resources underpin its continuing role as a cornerstone of the global energy economy of the coming decades.  Russia aims to create a more efficient economy, less dependent on oil and gas, but needs to pick up the pace of change.”

“International concern about the issue of energy access is growing.  Around $9 billion was invested globally to provide first access to modern energy, but more than five-times this amount, $48 billion, needs to be invested each year if universal access is to be achieved by 2030.”

“We cannot afford to delay further action to combat climate change.”

“New energy efficiency measures make a difference, but much more is required.”

“Widespread deployment of more efficient coal-fired power plants and carbon capture and storage (CCS) technology could boost the long-term prospects for coal, but there are still considerable hurdles.”

“Events at Fukushima Daiichi have raised questions about the future of nuclear power.”

“The wide difference in outcomes between [the scenarios analyzed in this report] underlies the critical role of governments to define the objectives and implement the policies necessary to shape our future.”

When observing the dysfunctional nature of the current political ecosystems in the United States, in Europe, and in world affairs (e.g., the United Nations), and the increasing imperative for economic austerity to resolve the shortfalls in public coffers, it is hard to believe that governments (other than autocratic places like China and Russia) will be able to take any meaningful action to nudge the energy sector from its trajectory of “muddle-along.”  The chaos that IEA describes in the world energy scene will thus likely only intensify.

Lots of challenges in this world.  But, then again, lots of opportunities too. 

as posted to CleanTechBlog.com

In the November/December issue of EnergyBiz, you will find an unusual contributor to a magazine about the utility sector:  Bob McDonald, CEO of Proctor & Gamble (NYSE: PG).

Being one of the largest, most successful, and savviest consumer marketing companies, P&G is often considered by utility companies as a model for how to develop and market new products or services. 

As more and more so-called “smart-grid” technologies go to market, enabling more active customer intelligence and management of energy consumption, the skill of rolling out innovative — and potentially lucrative — new offerings to households will be important both from a financial and an environmental standpoint.

For the utility industry, learning this skill is very challenging.  The utility sector grew through the 20th century under a regulated monopoly structure, where customers didn’t have choices about providers, and often didn’t have choices about service levels either.  This codified innumerable business practices across all aspects of the utility business and shaped generations of utility employees to know nothing about individual customers — and frankly, to not much care about customers, other than the overarching mandate to provide reliable service levels.  To this day, many utilities still refer to customers as “meters” or “accounts” — hardly customer-centric terminology.

But it’s not just the fault of utilities.  As McDonald’s opinion piece, “From Soap to Energy,” notes accurately, “Consumers are fairly passive about their energy needs — the only times they get involved are when costs go up or service goes out.”  With such customer indifference, it’s hard to break through the clutter and compel changes in behavior. 

And, this change in behavior is at the root of so many energy efficiency opportunities that — as a widely cited McKinsey study points out – represent much of the “low-hanging fruit” in untapped emissions reductions.  Thus, unless utilities get stronger at marketing, much of the promise of energy efficiency will remain uncaptured.

McDonald’s brief essay is pithy — and not only highly relevant for utilities, but any cleantech innovator seeking to offer a new product/service. 

“We all occasionally fall into the trap of knowing more about the technologies we invent than about the people who use them.  This is usually a prescription for marketplace failure.  Successful innovation requires a deep understanding of consumers’ lives, dreams, frustrations, and aspirations.  This level of understanding breeds insights that, in turn inspire innovation that improves lives.  It’s hard, time-consuming, hands-on work.”

Continuing:  “My advice to the electric utility industry is to get off the grid and into people’s homes.  Understand the role that energy plays in day-to-day lives.” 

For McDonald, this entails a degree of immersion into household behavior and sentiment that probably no utility has today.  For that matter, it’s a degree of immersion that few entrepreneurs developing energy-saving products/services have. 

Ultimately, the future of cleantech is not just, or even mainly, about the technology, or even its economics.  If smart-grid technologies, and cleantech in general, are going to transcend the entrenched customer indifference about energy, the future winners will have to somehow figure out a way to tap deeply buried dissatisfactions or unleash undiscovered sources of happiness regarding energy usage.

As the adage says, “Nothing happens in business until someone sells something.”  And, as virtually anyone involved in cleantech ventures will tell you, there’s no more important validator of a technology or enabler of financial success than revenues.  This all starts with the essence of McDonald’s simple advice:  Know Thy Customer. 

Indeed, given the daunting challenges that utilities face in restructuring their century-old operations and grooming a new cohort of human capital to be more customer-centered, a whole segment of cleantech entrepreneurship may emerge to help bridge this utility-customer gap.