As posted on CleanTechBlog.com

For years, the utopian vision for powering humankind’s energy requirements has been based on hydrogen, produced by decomposing, ever-abundant water, via renewable sources of power (e.g., sunlight). When hydrogen is used in fuel cells to produce electricity on demand, the only byproducts of the chemical reaction are water vapor and pure oxygen. In other words, an energy cycle that is infinitely sustainable (at least as long as we have a sun).

Of course, there are a number of well-documented challenges to achieving the so-called hydrogen economy. Producing, transporting and storing the hydrogen are all expensive relative to the current conventional energy approaches - and they require a major change-out of infrastructure, which would entail a massive societal investment. Fuel cells also remain expensive because of high materials costs and short lifetimes, until further engineering obstacles are overcome.

With this as backdrop, it’s interesting to read “Sun + Water = Fuel,” an article in the current Technology Review. The article profiles the work of Daniel Nocera, a professor of chemistry at MIT who claims to have discovered a catalyst that facilitates a reaction in which oxygen is generated from water by sunlight - making, in effect, an artificial leaf.  Of course, if one produces oxygen from water, one is also producing free hydrogen.

Therefore, Professor Nocera is suggesting that he is on the verge of discovering how to produce hydrogen from water via sunlight. If true, this would be a major breakthrough toward the hydrogen economy, dramatically simplifying the hydrogen production, storage and transportation issues, because water and sunlight are respectively inexpensive and free - not to mention almost ubiquitous.

That being said, we must be cautious to avoid getting prematurely overexcited. To illustrate, let’s not forget the promising claims of cold fusion made in 1989 by Pons and Fleischmann. Twenty years hence, and other than lots of controversy, not much to show for it. And even if Professor Nocera is really on to something, there’s still the little issue of repairing hydrogen’s public reputation in the wake of the Hindenburg disaster: 70 years later and many urban legends about hydrogen’s dangers still linger, as in this recent satire.

This reveals a constant occupational hazard for those of us who work in the cleantech field: things just don’t change as fast as we often would like for them to change. In the case of hydrogen, many things must change, and some of the changes - technical, institutional and cultural - must be profound for hydrogen to become a major actor in the world’s energy economy. I hope that day comes far sooner than I frankly expect it will.

In a recent story, CNN profiled the new home of Bill and Sharon Kastrinos.

154 square feet. That’s right, 154 square feet. Actually, it’s 98 square feet downstairs plus a 56 square foot loft upstairs. The closet – well, that’s inside the car.

Why would the Kastrinos live in such a miniscule dwelling? Apparently, it’s driven by economics. Mr. Kastrinos wants to live on $15,000 per year, but he also wants to live in a nice place, California wine country (specifically Calistoga), where real estate costs are astronomical. With this home, costing $15,000 and with a utility bill of $15 per month, he and his wife can make it work. And when they get the urge to go elsewhere, they can tow their home, which has wheels and a chassis on the bottom, making it essentially an RV.

The small pre-fab home market has become a bit of a “cottage industry” (sorry, couldn’t resist). Mr. Kastrinos himself has made and sold 11 of them in the last half-year. In nearby Sebastopol, Jay Shafer’s Tumbleweed Tiny House Company offers a full range of home designs between 65(!) and 774 square feet.

The common theme of the customers is a desire to downsize their lives and their consumption patterns, the equivalent of a colonic cleansing. It’s a bit extreme for me. I couldn’t imagine making such a big change in lifestyle in one fell swoop. But there’s little doubt in my mind:  unAmerican as it may be, if we as a society are to achieve significant reductions in energy consumption and emissions output, some degree of downsizing will occur. The question is going to be: Will it be by choice, or will it be forced?

As posted on CleanTechBlog.com

I consider myself an equal opportunity offender. Many people in the energy industry or those who for some reason don’t believe in climate change think I’m somewhat of a radical. On the other hand, many ardent environmentalists think I’m too apologetic, conservative or pessimistic about what carbon reductions can realistically be achieved in what time frames and at what costs.

Therefore, I appreciate it when I find someone who makes well-argued, nuanced and balanced statements like those I would attempt to make. A recent example: a September speech at the Metropolitan Club in Washington by David J. O’Reilly, chairman and CEO of Chevron.

I was particularly pleased by his comments on renewable energy and climate change. O’Reilly was quite clear and blunt: “Renewable energy is very real. We need it. It will be an essential part of the future I envision.” His only caveat, which I agree with: “It’s not realistic to suppose that it can replace conventional energy in a timeframe that some suggest,” referring to Al Gore’s well-intentioned but wishful-thinking goal of 100 percent U.S. electricity supply from renewable energy by 2018.

As for climate change, his comments were also measured and reasonable: “There is no doubt that carbon dioxide concentrations in the atmosphere have increased. And although there is uncertainty about the future impacts on climate, most people agree that it’s not a good idea to continue unrestricted hydrocarbon combustion. And I agree.” This line acknowledges that climate science is still subject to considerable uncertainty (see, as one example, a recent paper published in Geophysical Review Letters by two MIT earth and planetary sciences professors), while at the same insisting that it’s very worthwhile to move concertedly toward lower carbon intensity in the likely case that the increased concentrations of carbon dioxide in the atmosphere will lead to unfavorable impacts on the planet.

O’Reilly closes by noting the importance for the next president to mobilize the public in a sustained commitment for change: “We need collaboration to achieve real progress. Businesses and consumers need affordable energy. Young and old want renewable energy. Republicans and Democrats seek reduced emissions…Today, public sentiment supports action on energy policy. That action should lead to a future of greater energy efficiency, enhanced supplies of all forms of energy, and reduced emissions. While I am concerned about the urgency of the situation today, I’m also optimistic. I believe that, by the time my grandchildren are my age, our energy system will look much different. But we must get started now.”

Wise words, in my humble opinion. Let’s hope our new president can pull us together, in the face of declining oil prices and weakening economic conditions, toward a new resolve on energy.

A good start for the president-elect would be to read an open letter written by Ernest Moniz, director of the MIT Energy Initiative, in this month’s Technology Review. Moniz’s four-pronged recommendation for a major step-up in Federal commitment:

1. Implement carbon dioxide emissions pricing, presumably through a cap-and-trade system

2. Add a surcharge on energy to generate $10 billion to $15 billion annually for the next 10 to 15 years to spend on development and deployment of new low-carbon energy technologies

3. Establish a mechanism spanning the various bureaucracies of the federal government that will lead to a truly coherent energy policy – perhaps by appointing an energy advisor to the president

4. Commit to implementing a “smart grid” within 10 years

When one considers that the federal government now allocates less than 3 percent of its research dollars to energy, down from 10 percent in 1980, it seems pretty clear that the U.S. doesn’t put its money where its mouth used to be, and needs to get much more serious. Step one will be a president who himself is serious and doesn’t fall prey to cheap populism or get swayed by protecting the interests of a select set of constituencies.�

We need to stop the dogma and hyberbole from both sides, buckle down, and get on with it. I hope our new president can lead the way.

One of the hottest areas of cleantech investor activity in the past year has been algae. Yes, algae. More specifically, technologies that enable the production of fuels from algae.

The concept is premised on the fact that algae is a rapidly growing organism that converts sunlight and atmospheric carbon dioxide into lipids, which in turn can be refined into various hydrocarbons. In other words, a carbon-neutral fuel cycle. Pretty cool.

A number of start-up companies – such as Solazyme, Live Fuels, Solix Biofuels and GreenFuel Technologies – have emerged in recent years to pursue this possibility, some fetching sizable quantities of capital from blue-chip investors.

I frequently receive emails with links to videos promising interesting energy/environmental technologies, and most strike me as quackery of some degree or another. However, I recently was pointed to a video produced by a company named Valcent Products that appears particularly compelling. To be clear, I am not recommending this company or its stock, but I do like the tack that Valcent seems to be taking.

As posted on CleanTechBlog.com

As some of my long-time readers may know, I have never been a truly ardent fan of compact fluorescent lighting (CFL). Why?

1. Probably most important to me, in my experience with CFLs, I haven’t been satisfied with their start-up characteristics. They take a little while to “warm up” to full luminescence, and until then, the light seems very sickly to me. It actually makes me a bit nauseous. I know that better quality (i.e., more costly) CFLs perform better than cheaper generics, but even CFLs from General Electric I’ve bought still don’t turn on as well as I have come to expect from four decades of living with incandescents.

2. Except for some new (and considerably more expensive) products, CFLs generally don’t work with dimmers. I once found this out the hard way – snap, crackle, pop.  I don’t know about you, but a lot of the light circuits in my house are on dimmers, and as a result I continue to run incandescents on them.

3. It is becoming more well-known that CFLs contain mercury, and hence their disposal is a real issue. Even worse, if one were to break, the release of mercury represents a significant risk – at best a big clean-up nuisance.

4. CFLs aren’t cheap. True, CFL prices are coming down closer to the levels of old/inefficient incandescents, but they are still substantially more costly. For lights that are rarely used, the extra investment doesn’t make much sense to me, as the energy actually saved is small.

So, I’ve been eagerly awaiting the emergence of LED (light-emitting-diode) products for consumer application. I like the quality of LED light, and LEDs don’t have the mercury issue, so it seems like the superior long-term lighting solution.

I’ve been told that household LED lighting is still many years away, but at least some products are trickling into the marketplace. For instance, see EarthLED lightbulbs, which are available at Think Geek. Clearly, they are still a niche item for the early adopters, as they cost $60 to $100 per unit, but at least their emergence into the market now puts consumer LED lighting on the gameboard, hopefully on a quicker path of cost reduction as learning curve and scale production effects are achieved.

Since LEDs have virtually infinite lifetimes, in the future there will no longer be a need to make lamps with removable bulbs in sockets. Savvy marketers out there should begin working to overturn the old paradigm of reusable lamp/disposable bulb, making way for LED lamp fixtures that are inherently designed to capitalize on the unique and compelling advantages offered by LED lighting.

As posted on CleanTechBlog.com

In Cleveland, the Great Lakes Energy Development Task Force (a collaboration involving many local public, private and academic organizations, led by the Cuyahoga County government) has commissioned a feasibility study for developing the Great Lakes Wind Energy Center (GLWEC). The GLWEC would include a demonstration offshore project in Lake Erie off of downtown Cleveland, along with an applied research center to facilitate the development of lower-cost, next-generation offshore wind energy technologies and approaches.

The long-term market opportunity for offshore wind just in the Great Lakes – much less the oceans of the world – is huge. A 2004 study indicated a theoretical potential for almost 250 gigawatts (250,000 megawatts!) of wind installations in the Great Lakes, and the Land Policy Institute at Michigan State University recently released a report indicating 322 gigawatts of potential in the waters offshore the state of Michigan alone.

Of course, nowhere near this much offshore wind generating capacity is likely to be installed, but even if 50 gigawatts is installed in the coming decades, at $4 million per megawatt, this would represent $200 billion of investment in the Great Lakes. That seems worth pursuing with some vigor.

As a member of the task force, I recently traveled to Hamburg, Germany, to present the state of progress in developing the GLWEC at Germanischer Lloyd’s annual offshore wind workshop. This gave me an opportunity to “take the pulse” of how the wind industry was currently assessing prospects for offshore wind.

The general state of affairs is that the wind industry is too preoccupied with prospects in onshore markets around the world to pay much more than tangential attention to offshore opportunities. For instance, according to the 2007 Report of the Global Wind Energy Council, 20,076 megawatts of wind energy was installed worldwide in 2007, but according to statistics from the European Wind Energy Association, only 210 megawatts was installed offshore (all in Europe). With only 1 percent of the market, it’s easy to see how much a runt offshore wind remains in the overall wind industry.

A key theme of the discussions was the need to maximize reliability/availability/lifetime of offshore turbine designs to minimize overall life-cycle costs of offshore wind energy, given the costs and challenges associated with installation and servicing turbines on top of tall towers in the middle of large bodies of water often exposed to heavy seas and weather.

The wind industry appears to be realizing how naive it was in thinking it would be relatively straightforward to move from onshore to offshore, while simultaneously seeing that offshore wind market needs are rapidly approaching because onshore wind prospects will not be sufficient to meet overall demands for new wind energy installations. In other words, the wind industry is likely to become more serious and earnest in taking head-on the offshore promise and challenge in the relatively near future. Industry leaders can’t avoid it forever. But, in the main, they are avoiding it for now.

In the meantime, I am aware of several entrepreneurial companies – some of whom are working in stealth mode, some of them with substantial wherewithal – that are following Clayton Christensen’s “Innovator’s Dilemma” playbook and aggressively developing innovations to take on a market niche that the “big boys” aren’t terribly interested in right now. As a result, the current leaders of the wind industry – Vestas, General Electric, Siemens, Gamesa, Suzlon and so on – may wake up in a few years and find that they “missed the boat” in offshore wind.

As posted on CleanTechBlog.com

Betcha didn’t know that there was an Energy Policy Act of 2008, did you? Well, you won’t find any bill of that name. But, the passage of last week’s appropriately titled “Emergency Economic Stabilization Act of 2008″ is almost tantamount to an energy bill.

The Senate prepared a nice summary of the energy-related provisions that were stuffed into the bill during the chaotic process to get something passed promptly that would reassure the financial markets. I have yet to review all of the provisions, but it’s clear that many of them have favorable implications for a variety of clean energy technologies, inluding wind, solar, energy efficiency, hybrid vehicles, biofuels, and smart grid.

It’s nice that there has been at least one small silver lining to the dark cloud of financial implosions in the past few weeks.

As posted on Huffington Post and CleanTechBlog.com

An investment banker was quoted in Sunday’s Financial Times as stating that the global financial market “changed more in the past 10 days than it had in the previous 70 years.” (registration required to read the full article)

Given such a profound shattering of the status quo, I am skeptical that anyone can yet provide clear perspective or accurate clairvoyance stemming from the unprecedented meltdown still underway. Far be it from me to assume that I’m especially well-positioned to develop a superior synthesis - especially since so many of the pieces are still moving.

Even so, it is my professional responsibility - both to myself and to those I serve - to begin speculating how the current crisis may affect the realm of clean energy. I cannot claim much insight yet, but the following represents a few disparate thoughts that I offer to my colleagues across the physical and virtual worlds to advance the discourse.

Lower growth in demand. For virtually all goods and services for customers in the developed world, it is hard to escape the conclusion that demand will abate (Whether the economy falls into a severe recession or deepens into a full depression is anyone’s guess.) In turn, this means that energy demand will also see a softening. In the past year, demand has already declined measurably for gasoline, as customers have responded to higher prices by driving fewer miles and beginning to buy more efficient vehicles. Demand destruction will now be amplified by the effect of decreasing corporate and personal incomes.

Weaker dollar. In the wake of the calamities of the past few weeks, it also is hard to envision that the dollar can do anything but fall. If true, imported goods into the U.S. will become dearer (thereby further discouraging demands), though it will create new opportunities for exporters such as those developing and manufacturing clean energy products and services in the U.S. In addition, foreign direct investment in the U.S. will become more attractive.

Less debt, costlier debt. With even lending between banks at a standstill, it seems pretty clear that credit markets will be much tighter and debt will be much more expensive for a long time to come. Marginal credit risks - such as ventures in high-growth mode or projects entailing new technologies - are much less likely to be approved for loans. Even if approved, debt coverage ratios will increase. This means…

More need for equity. With less debt to fund expansion, companies and projects alike will require more equity in their balance sheets to achieve growth. Assuming an unchanged supply of equity (perhaps an optimistic assumption), higher demand will drive up the cost of equity alongside the rising cost of debt. A higher cost of capital (both debt and equity) in turn means…

Declining company/project valuations and increased investment hurdles. Higher discount rates, corresponding to an increased cost of capital, mean relatively more value associated with current results and less value ascribed to future possibilities. Certainty and stability become more prized and potentialities with limited near-term returns are punished.  Fewer transactions/projects occur, and those that do occur will happen at lower valuations.

Glut of financial professionals, illiquidity in carbon markets. As the financial institutions get swallowed up, shut down or shrink, lots of bankers and traders will be looking for work. Many of these people were likely to have worked in companies that were the leading players in the still-nascent carbon markets, so it is quite possible that those markets (and monetization of carbon reductions) will dry up.

Increased oil price volatility. With weakening economic conditions, there will be declining demand for oil from the developed economies, from which one might expect prices to generally decline. However, it is eminently possible that demand growth from the developing economies - especially the still-booming China and India - will more than take up the slack. Furthermore, the declining dollar also will put upward pressure on world oil markets, which are supplied mainly from overseas and increasingly denominated in Euros. Lastly, investment in new oil infrastructure or projects may be depressed by the adverse climate. All told, it’s hard to have much conviction about the future direction of oil prices, other than they will continue to fluctuate, perhaps even more severely than of late.

Risks to climate legislation. Though both the McCain and Obama campaigns have stated support to enact cap-and-trade legislation that would drive reductions in U.S. carbon emissions, the dramatically worsened economic conditions might cause either president-elect - and even more importantly, the new Congress - to be more wary of imposing a new set of environmental requirements that would entail a net cost to the economy. On the other hand…

Reduced appetite for laissez-faire capitalism. A wide variety of observers are clamoring that the current financial crisis is rooted in many years of lax regulatory oversight and excesses of unbridled capitalism. Whatever the merits of this logic, to the extent that such thinking takes hold of the public and political imagination, it could imply a general trend toward more interventionist policies and regulations in the energy sphere (and in other aspects of society). In the extreme…

Possibility of nationalization of energy activities in the U.S. I never thought I would write this, but the recent actions essentially to nationalize large parts of a financial industry formerly in private ownership provides a precedent for a not-too-distant U.S. government to take control of a similarly fundamental and strategically critical industry being besieged by crisis. Given the daunting challenges likely to be faced by the energy industry in decades to come, it’s not out of the question to see the same game played out in the energy sector.

Buying opportunities? Short of the U.S. stepping in, many companies and assets will be available to purchase. Savvy players with strong positions will be able to make some really good buys on the cheap. Potential case in point: the Mid-American Energy arm of Berkshire Hathaway announced that it is snapping up Constellation Energy Group, whose trading desk was essentially pushed to the brink by the lack of liquidity in the credit markets. By adding Constellation, the Warren Buffett investment vehicle is slowly but surely becoming an energy behemoth.

End of American financial hegemony. With the recent convulsions, I think it’s becoming clear that the era of undisputed U.S. preeminence is coming to a close, if not already having closed. The 21st century will belong not to the U.S. but to other powers - primarily China, but also India and (unless we move off of oil sometime soon) the OPEC economies. This means that U.S. interests cannot afford to think and behave as parochially as we have through most of our history. As I argued in a recent editorial in Cleveland’s Plain Dealer, and in a recent post on CleanTechBlog.com, many of the best opportunities for U.S. players will lie in China. The U.S. will simply be unable to afford to consider itself the only, or even the most, important market on the planet. 

In the coming weeks, as the outline of our society’s next-generation financial system becomes clearer, perhaps I will become more confident to offer more definitive speculations about the future of the clean energy world. Maybe some stronger causes for optimism will emerge. Until then, like everyone else, I too must resort to buckling up and watching events unfold further. Meanwhile, the storm rages on, and I expect more dominoes may fall.

Great blog post last week by David Roberts in the Huffington Post profiling a new country tune entitled “Drill Here, Drill Now”, written by a Nashville artist named Aaron Tippin.

For those who want to skip the music, here are the lyrics:

Hello … Is anybody out there listenin’ in Washington D.C.?
This is the suffering voice of America crying out for relief
Now I don’t know what a gallon of gas costs up on Capitol Hill
But we sure know what it costs down here in Realityville
And the damage already done has been a mighty heavy toll
And if we’re gonna fix it we gotta start right here at home

CHORUS:
Drill here, drill now
How ’bout some oil from our own soil that belongs to us anyhow
No more debatin’ we’re tired of waitin’ everybody shout out loud
Drill here, drill now

Every time a foreign tanker pulls up to our shore
They got us over a barrel while they bleed us a little more
And think how much it costs just to bring it all that way
And how many American jobs that’d make if we were drillin’ in the USA
Oh and God forbid if our oily friends should decide to cut us off
We’d be standin’ around with our britches down now listen to me ya’ll

REPEAT CHORUS

Well, the winds of change are blowin’
Yes and we recognize that need
But tractors, trucks, cars and planes can’t run on tomorrow’s dreams
So while we’re workin’ on the future we can’t ignore today
Cuz who knows how much time the alternative might take
Somethin’s gotta be done right now cuz friends it won’t be long
Before this great big country comes grinding to a halt

REPEAT CHORUS

I’m not anyone to critique music, or poetry for that matter. But in a recent post, I have previously dismembered the absurd notions offered by Mr. Tippin in his song that drilling for more oil in the U.S. is going to solve all our economic problems.

Rather than thoughtful humility and purposeful action towards real solutions for our energy challenges, the U.S. gets instead yet another example of beat-my-chest patriotism, overly proud and completely without substance.

As posted on CleanTechBlog.com

I just returned from my first trip to China, a whirlwind 10-day tour spanning the cities of Beijing, Shanghai, Guangzhou, Xiamen and Wenling. The trip involved a number of private meetings (some with senior public officials) as well as public presentations at PennWell’s China Power Oil & Gas conference and at a cleantech symposium hosted by the American Chamber of Commerce in Shanghai (AmCham Shanghai) at the annual China International Fair for Investment and Trade.

It is impossible in a brief blog post to give a detailed report on my visit, or to comment meaningfully about the profound issues confronting the whole world as a result of China’s rise and arrival to world preeminence. With this note, I will only attempt to offer some immediately apparent observations related to cleantech issues and opportunities in China that emerged for me from my visit.

POLLUTION

It is well-known that China is experiencing tremendous environmental challenges, with almost a million Chinese estimated to die each year prematurely from health issues stemming from poor environmental quality. Air visibility can sometimes be less than a mile on what would otherwise be an ordinary hazy humid summer day, though frankly, I was expecting the air pollution to be worse than it was.

On the other hand, the water situation shocked me. China’s Ministry of Environmental Protection (formerly known as the State Environmental Protection Adminstration) is said to admit that 60 percent of the country’s rivers are polluted to the extent that they can’t be used for drinking, and I have heard claims from American sources that a majority of Chinese rivers are so bad that the U.S. EPA would deem their waters to be unacceptable for industrial purposes (much less for drinking).

Even at the finest hotels, guests are warned not to drink the tap water, and bottled water is generally provided as part of the room rate. (In case any of you are eating while reading this, I won’t bring up the public toilets.) The other major surprise for me was how much worse the pollution situation was in the countryside than in the cities. Bad air, disgusting water and (especially) litter are much more starkly obvious in the poorer rural areas – a powerful indication of the positive correlation between income/wealth and environmental quality. This reinforced to me how important it is to promote, rather than retard, economic growth in China so as to facilitate environmental improvement for the sake of the Chinese and for the world.

ELECTRICITY SECTOR

Although I haven’t investigated in any detail, what I heard suggests to me that the electricity industry in China is on the verge of a financial breakdown, analogous in some ways to the California fiasco of the early 2000’s. Retail electricity prices are subsidized (heavily for large industrial customers), and allowed wholesale prices to generators are fixed.

However, coal prices are on the rise because the mining industry is sufficiently fragmented and privatized that government attempts to set the prices are ineffective. Since the vast majority of the electricity in China is produced from burning coal, the combined effect of increasing coal prices and steady electricity prices is putting a financial squeeze on many generators – so much so that in some cases generator firms are reducing output from their plants.

It is unclear how long this can go on before electricity supply inadequacy (already a problem) becomes acute. The financial health of China’s electricity sector ought to be important to the cleantech industry, because a collapse of some type might jeopardize the attainment of the government’s ambitious clean energy aspirations that have been set forth in its Renewable Energy Law.

MANUFACTURING

In some parts of the U.S. such as here in Ohio, we like to think we are a manufacturing powerhouse, but China makes us look like pikers. The ascendancy of Chinese manufacturing is nowhere near its peak. With several hundred million people still living in desperate poverty (pre-industrial conditions) in the hinterlands, the prospect of earning US $1000 per year by moving to the city to work in a factory represents a five- or 10-fold increase in income and quality of life.

In other words, unless and until fuel prices make the transportation of goods prohibitively expensive, stringent emission reduction programs become binding in China to double or triple electricity prices, and/or the yuan-dollar relationship alters dramatically, its huge labor cost advantages can only enable China to further strengthen its already dominant position in global manufacturing. That’s with the exception of certain niches of production, including items with very high shipping costs such as wind turbines, items with limited labor input due to capital-intensive production processes, and items still in low-volume early production runs.

Outside China, we will generally be relegated to being the technology innovators, the product designers and system integrators, the sellers and distributors, the installers and the service people. Rather than rue that position, let’s embrace it. Because of their production orientation, my speculation is that the Chinese are not so strong in innovation, leaving it to others to be the technology pioneers.

After being bombarded by souvenir hawkers and market barterers who make undifferentiated “me-too” offers and compete almost solely on price (or on aggressiveness or loudness), I also conclude that these Chinese will not be the leaders in identifying customer needs as they emerge and evolve, nor in delivering high-value (not price-based) solutions to meet those needs. Those games are for us to play, so let’s go after them.

CAPITAL

It is abundantly clear to any observer on the street that China is awash in money. In Beijing and Shanghai, designer consumer goods and high-end automobiles are not ubiquitous, but they are evident. In Xiamen, I saw an Audi A8L – a $120,000 vehicle in the U.S. – with police lights on top of the roof. Nice cop car! Does your town have a municipal budget that would support a fleet including one?

I met venture capitalists looking for deals in China, as well as a bevy of consultants who facilitate technology transfer and commercialization into China. However, I didn’t see much evidence of interest in foreign investment by Chinese parties. For the cleantech revolution to be amped up, we need to make the case that this Chinese capital is well-served being deployed outside China – not only for good financial returns, but to generate more future opportunities for Chinese domestic investment.

INEFFICIENCIES

Centrally planned economies (e.g., the former Soviet Union) are legendary for begetting ridiculous systemic inefficiencies. The Chinese economy is quite a bit different. The central government indeed establishes absolute policies, but only at a very general level, providing minimal specific guidance and instead allowing individual actors almost complete autonomy to comply within the bounds of what’s permitted. But the inefficiencies are nevertheless astounding.

I speculate that the inefficiencies are driven more by the explosive growth of the economy, which averaged a mind-boggling 9.9 percent per year for the 30-year period since 1978 and which propels businesses and individuals to act quickly, with much replication and little reflection or innovation.

A vivid illustration of this is the abundance of highly inefficient mini air conditioning units, rather than more efficient central air conditioning systems, in relatively new high-rise buildings. That’s presumably because they’re cheap and quick and easy to replicate. The resulting inefficiencies also reach into the social realm: schedules are set late, remain fluid and dynamic up until the event, and tardiness is common. The Chinese way of doing things thus requires some acclimation for those of us accustomed to considerable structure and discipline.

URBAN MOBILITY

Reflecting the economic explosion, people are constantly trying to get somewhere. Even though the big cities (especially Shanghai and Beijing) have reasonably well-developed public transportation systems, including modern subway systems, and even though the per capita level of car ownership in China is only less than 10 percent of what it is in the U.S. - reflecting the amazing fact that private auto ownership was forbidden in China until the mid-1990’s – traffic is truly chaotic in urban areas.

It is said that there used to be bicycles everywhere in China, and while many still remain (often abiding by well-designed separated bicycle lanes), many bicycles appear to have been replaced and superseded by electric scooters that are clean and silent. (And by the way, the silence isn’t always a good thing, as any aimless and unattentive walker is under a constant threat of being steamrolled by an aggressively driven scooter stealthily zooming in from behind.

It appears to me that “rules of the road” is an oxymoronic concept in China, as vehicles undertake passes in the most imprudent circumstances and drive on the left or on the right almost on discretion. Of note, traffic lights are world-class: many have timers indicating the number of seconds remaining for a green light or red light. Taxis are about as ubiquitous as two-wheeled vehicles and are unbelievably cheap – an hour ride of perhaps 30 miles might cost the equivalent of US $20. But you’ll never complain about a Manhattan cab ride again. As a consequence, drivers and pedestrians alike must be vigilant to protect their lives. And it is a good thing for all concerned that foreigners are not allowed to drive. When you rent a car in China, you also get a Chinese driver who is well-accustomed to seeing driving behaviors evidenced in the U.S. only at race tracks and demolition derbies.

AIR SERVICE

Air travel in the U.S. has nothing on China. I was impressed with the very new and modern airport terminals in all of the cities I visited. The primary domestic airlines (Air China, China Southern, etc.) have thoroughly modern Boeing and Airbus fleets. No Soviet-era Tupolevs here anymore, no reason to worry about making it alive to your destination. Fares are reasonable, and they still serve meals (though Chinese airline food is no better than the U.S. airline food of days past).

LANGUAGE

I am no linguistic expert. I struggle with English, and my high school experience in studying French convinced me that I do not possess the language gene. But since it doesn’t use an alphabet and is incredibly reliant on verbal communication and imperceptible shifts of tone, Chinese (Mandarin) is a whole ‘nother level of challenge. I am not raising this issue as an interesting or amusing tangent, but rather because the language barrier (and overcoming it more satisfactorily) will be truly fundamental in determining the future success of Chinese-American relations.

As the work of Maturana and Varela shows compellingly, humans live in language. That is, they make assessments of the world and create new possibilities only through language. Without sharing a language, it is simply not possible to come to agreement on the current situation or to invent directions for beneficial action.

In my time in China, I experienced a deficit of good translators – more properly termed, interpreters – who were strong in both Mandarin and English, and who were also knowledgeable enough about the subject matter to convey the fully nuanced intentions of the speaker. To illustrate, I would hear a Chinese speaker utter 60 seconds of Mandarin, and the English translation would hesitantly be passed on, usually some banal statement like: “China uses a lot of energy.” Come on, I know in his minute of talking he must have said something more insightful and detailed that that! If we’re going to enable massive/rapid cleantech transfer into and adoption within China, there’s going to have to be an order of magnitude expansion of cleantech-knowledgeable people who also possess high degrees of English-Mandarin fluency.

As Mark Twain once was alleged to have said (though in actuality the maxim was coined by the French philosopher Blaise Pascal), “I have made this letter longer than usual, only because I have not had time to make it shorter.” I apologize for my rambling incoherence. I’m still digesting what I observed from my first visit to China, with an aim toward developing and executing an approach to work more systematically with/in China on cleantech opportunities. The above is merely the first transcription of my emerging thoughts. I don’t know what it all means yet, but I do know that there’s something pretty important in here somewhere.

One final anecdote to wrap up: During my trip, I had the pleasure of being able to connect personally with U.S. Assistant Secretary of Commerce David Bohigan, as he happened coincidentally to be leading a group of U.S. business people on a clean energy trade mission to China and India. As Mr. Bohigan noted to me, the relationship with China and the need for clean energy will be the two most dominant forces shaping the U.S. economy in the 21st century.

So at least one bit of clarity has so far pierced the fog in my mind. It is incumbent upon the U.S. cleantech community to engage meaningfully with/in China, as it is there that the largest opportunities both for wealth creation and for environmental improvement lie.