Clean Thoughts

Powering Ahead

I started off wanting to do some research on the fundamental physics underpinning the two visions for the car of 10 years from now.  I was curious to explore the efficiency of the cycle for what (today) are the two leading contenders for powering cars - namely hydrogen fuel cells and battery powered electric cars.  I'm specifically choosing to ignore hybrids, because while they clearly offer energy benefits, they rely on an energy cycle which involves several million years of bio matter festering underneath the surface.

Interestingly, I seem to have waded into a long running debate, and found documents dating back as far as 2003 covering this exact question.  The most outspoken author in this area is Ulf Bossel, who is the president of the European Fuel Cell Forum.  (http://www.efcf.com ).

This seems to be a very controversial issue, and I do wonder whether the EFCF is sponsored by the Electric Car industry, for their research tells spells a depressing future for fuel cells in automotive applications.  So just to be clear, I have not done research to verify the voracity of Dr. Bossel's reports - readers should exercise their common sense when interpreting his results.  All I can say is that given my limited knowledge of the science specifics in this area, they appear credible to me.

The basic message from Dr. Bossel is that a Joule of renewably generated electrical energy can get to a car wheel via two routes.  In the fuel cell route, the Joule is used to power an electrolyser, which generates hydrogen from water.  The hydrogen is then transported to a hydrogen fuelling station, into a car's tank, converted back into electricity via a fuel cell and then goes into an electric motor to power the wheel.  Having gone through this route, the Joule one started off with initially, shrinks to a mere 0.17-0.22 Joules of mechanical energy into the wheel, depending on how much one compresses the hydrogen gas.

The other cycle is the electric car one.  Here our Joule is sent via the electrical grid into a battery charger, stored in a suitable battery and then consumed directly by the car's motor.  In this scenario, 59% of our Joule reaches the car wheel (and this can go up to 66% if regenerative breaking is used).  This is approaching 3 times the energy efficiency of the hydrogen fuel cycle.

It's difficult to see how the hydrogen vision of an economy can make any sense give this.  Building a hydrogen distribution network requires a colosal investment, which is unlikely to take place if the cycle is so inefficient compared to the only viable alternative .  The only positive aspect for hydrogen today is that the energy storage density far exceeds that of electric batteries, enabling fuel cell cars to have much longer driving ranges.  Will innovation allow fuel cells to close this efficiency gap while maintaining their energy density lead over batteries?  Hard to tell, but it's not a good place to start from.

References:
http://www.efcf.com/reports/E04.pdf
http://www.efcf.com/reports/E08.pdf
http://www.scribd.com/doc/11079285/Summary-of-Electrolytic-Hydrogen-Production-2004

Why Cleantech is More Difficult Than Semiconductors

The annual reports of Vestas make for fascinating reading.  Not because they’re full of wit and repartee, but because they display that Scandinavian “help build a better society” desire in a way which I struggle to see any Anglo Saxon company trying to replicate.  Specifically, page 7 of their 2007 annual report  2007 Annual Report lists the non-financial highlights for the group going back 5 years.  

This would be the equivalent of the Coca Cola corporation disclosing exactly how much sugar, water and caffeine they use in order to produce a litre of coke….  But I jest.  This page is also full of fascinating insights into the progression of wind technology, from which one can draw some interesting conclusions.

Among these non financial highlights, Vestas is happy to disclose just how much metal, other materials and energy they are using in order to make their wind turbines.  In effect, this allows us to see how much better the world is at making wind turbines using state of the art technology than it was 5 years ago.  And what’s the answer?  See for yourselves:

 

The answer is that if anything, it costs more, takes more energy and more metal today for Vestas to produce 1 MW of wind turbine capacity, than it did 5 years ago.  What’s even more interesting is that the cumulative amount of windpower generation deployed today must far exceed that in 2003 – thus in effect, we are not getting any better at deploying wind power despite the fact that we’ve been busy building so much of it.

Now compare this with the semiconductor field, where as we all know, Moore’s law means the cost per transistor halves every 18 months.  If this were true in wind, Vestas today should be able to produce a turbine which costs 20% of what it cost per MW in 2003.  This is probably the single biggest challenge facing a CleanTech VC considering investment in green technologies.  Any companies which have technology that changes this state of the world will find themselves much in demand by investors.

A sunny bloodbath?

In the festive spirit of making predictions for 2009,  iSuppli has painted a bleak picture of the solar photovoltaics industry.  A summary reads thus:

• Worldwide photovoltaic panel revenue will shrink 19.1% in 2009 to $12.9bn, while the amount of panels produced will increase 62% from 2008 levels

• Prices for a solar watt will fall to $2.50 to $2.75 from the current $4.20

Here’s another great case study of why VCs focus on sustainable competitive advantage.  Providing substantial subsidies for producers of a commoditised products, if done right, will always spark off a landgrab.  While money can be made in the gold rush to cash in on these subsidies, oversupply is only a question of time.  This rapidly brings on the inevitable point where businesses will need a sustainable competitive advantage in order to survive and continue to grow.

Are governments to blame for distorting the market?  Not really I would argue – at the end of the day they’ve achieved their goal – turn solar photovoltaics into a realistic alternative source of energy.  The upcoming bloodbath in this space will focus relentlessly on driving down costs – after all this is the only real parameter on which firms selling largely similar technologies can compete on.

Green Wash

I came across what is probably the finest example of Greenwash I have ever seen in last week’s Saturday FT Magazine.

Land Rover, maker of the Range Rover 4.4 V8 which has an urban fuel consumption of 12.8mpg (!) has joined the wave of companies presenting themselves as green.  Readers may ask how a car maker whose business model is focused on selling massive cars to people who don’t need them can ever paint themselves as green.

Well, the answer is very simple – they have put a wind turbine on top of their engine factory.  Here it is: 

 

So now all of a sudden their cars are green.

The factory in question is actually involved in assembling engines.  That is probably the least energy intensive bit of the entire automotive supply chain.  When one considers the likely amount of power these turbines generate, it is unlikely they power even the hand dryer in the toilets of the factory.  Never mind that the factory is churning out Chelsea tractors chugging at least twice as much petrol as any sensibly sized car.  Whatever next?

Kleiner's view on Clean Tech

Fascinating in-depth article on Kleiner's attitude to Clean Technology investment from the latest edition of the New York times magazine

Google Unveils its plans for 2030

Google has unveiled its vision for Clean Energy all the way through to 2030 here.

The outline summary of the plan is pretty simple:

1. Use less electricity

2. Make renewable electricity cheaper than coal

3. Drive lots of plug-in hybrids

The first two points clearly make a lot of sense.  The third seems a bit more contentious – does driving hybrids really make that much difference?

I dug around to get some figures – it seems the answer is a resounding “YES”.  The chart below shows US sources and sinks of energy, courtesy of the US DoE.

 

 

The Google roadmap tackles the two biggest lines (in terms of absolute energy flows) on this chart – namely coal power used to make electricity, and oil used for transportation and states “let’s work on improving these”. 

Other important parts of the plan is key – use the market to allow people to channel their energy budget appropriately – through the use of a smart grid.

This is an impressive piece of work in my humble opinion – the results of powerful analysis presented into a deceptively simple structure.  Just the thing a future president of the US can use to drive future policy.

What makes a good marine device company?

With Advent's investment in OreCON, over the past few months I have built up a great visibility of the marine device (wave or tidal) out there.  The experience has been both encouraging and disappointing.  Encouraging because Britain is clearly shaping out to be a leader in what we consider a very important space - the level of innovation and entrepreneurship currently going on in this important space should not be disappointed.  Disappointing because clearly a lot of these companies have a significant distance to go before becoming viable, investable entities.  Here are some of the key things an investor looks for in a Marine Device company:

 

Capital Efficiency

Marine devices are expensive.  Really expensive.  This is not a problem for investors per se, but it does mean that the company needs to have a strong execution focus that is based both on doing the right things at the right time and doing only the things which the company needs doing.  What does this mean in practice?

 

A company that is good at developing devices is unlikely to be good at operating them.  If you're raising money to develop a device, you should stick to developing devices.  If you're raising money to operate devices, you should stick to operating devices.  I can't think of any Clean Tech sector where device developers plan to roll out farms.  Demonstrating a prototype device - sure.  But you only need one to prove that the technology works.  The rest is up to the developers.

 

Relentless focus on "the insignificant" details

The key challenge facing the entire marine renewables sector is reliability.  Clearly cost per kWh is important.  But with the subsidies currently on offer, most devices can get to the ball park.  What separates the wheat form the chaff is the attention to the "insignificant" bits.

 

Issues like deployment.  Are you using the biggest Jack-up barge in town?  If you are, have you looked at availability?  How will you guarantee the barge will be there on time?  How do you know how long you need it for?  Or can you just tow your device out behind a tug boat?  Are you going to pile it into the ground or just set it down using a gravity anchor?  What materials will you make your device out of.  You would be surprised how many developers struggle with some of these basic questions.  This is a death knell for any investor.  How can you entrust millions in capital for the construction of a device before these things have been thought out?

 

Credibility of team

A lot of device developers come seeking investment "pre-team".  More often than not this involves a great inventor coming to raise finance, presenting the idea as a company.  Let's be clear.  A great idea is not a great company.  If one goes looking into the acres of space between the two, one is likely to find (among other things):

            - A great team, with the knowledge, experience and vision to make the idea into a company

            - A market perspective, rather than an engineering perspective

            - An appreciation of the value of the idea and technology when compared with the sheer amount of capital needed to build a device

            - A realistic understanding of the challenges behind deployment and maintenance