GE's Approach to Cleantech Financing

Being a truly enormous company has its advantages.

While cleantech venture has slowed down, GE’s financial services arm is making strategic investments. It’s not unheard-of for large companies to have their own internal venture operations, but it’s rare to see them used so effectively to further the overall mission of the corporation. Compare these two examples:

1. Intel Capital invests in Six Apart. Intel makes microprocessors and Six Apart makes…blogs.

2. GE Capital invests in TPI Composites, a supplier of wind turbine blades:

The new capital announced will help support TPI’s growth. Last year, the company reportedly tripled capacity to produce lighter, stronger and more durable wind turbines blades in its Joint Venture facility in Mexico for Mitsubishi Power Systems. In addition, TPI last year opened factories in Newton, Iowa, and Taicang, China, under supply agreements with GE Energy.

The ability for GE to further technology improvement and secure the supply chain for its component parts is a compelling reason for this manufacturing company to have its own internal financing arm.  Another excellent one: GE Capital is currently providing project financing for many of GE Energy’s customers during a time in which it is very difficult to get it otherwise.

Conglomerates are a rare breed today, and GE is one of the few successful ones remaining.  It’s interesting to note the instances where the business model really does make a lot of sense.

Report Outlines Appalachian Energy Efficiency Potential

With the presidential inauguration complete, the energy industry is perched on the edge of its seat awaiting what many think could be nothing less than a transformation. Obama’s inaugural address included a prominent mention of energy and he’s made some significant commitments in recent weeks. It even seems as though Congress wants to put up the money, with $54B of the proposed stimulus package directed towards energy.

While government willingness is a necessary first step, this money must be channeled to where it will make the most difference in order to create meaningful results. Enter the Appalachian Regional Commision and its upcoming report, Energy Efficiency in Appalachia. Written by the Southeast Energy Efficiency Alliance (SEEA), the report provides a mix of policy proposals and supporting data that map out a potential energy future for Appalachia.

Appalachia has long been one of the country’s leading sources of coal, producing 35% of the national output. As a result, energy prices have historically been low in the region, decreasing the economic incentive for consumers to prioritize efficiency. The policy changes suggested in the report would reduce annual energy consumption in the region from 11.2 quads to 7.7 quads by 2030, a decrease of 24 percent. Given that 76% of Appalachian energy is generated by coal, that equates to over a billion tons of CO2 saved annually by 2030.

The report finds the economic development benefits from energy efficiency to be similarly significant. The policies outlined are estimated to create more than 15,000 Appalachian jobs per year from 2010 to 2014 and increase thereafter. In an area where a significant portion of the workforce is involved in mining, every job that can be shifted from mining to energy efficiency leads to a healthier workforce and population. Ben Taube, the Executive Director of SEEA, believes that the Appalachian labor force is up to the challenge. “The technical colleges, universities and high schools will be critical to this transition. While this work is definitely technical in nature and the skills largely don’t exist today, I think this is a barrier that can be overcome fairly quickly.”

Taube hopes the report will provide guidance to policymakers as they allocate the funds from the proposed stimulus package, which includes $19.6B for energy efficiency implementation. “The states and local governments that are poised to get these dollars have never seen this kind of money. I’m hoping that organizations like mine and reports like this are poised and ready to help to spend this money where it makes the most sense.”

Taube will be presenting Energy Efficiency in Appalachia at the upcoming Making Energy Work conference in Raleigh, NC. I asked him if he is hopeful that energy efficiency measures such as those suggested in the report will be adopted in the coming years. “I absolutely think its going to happen. Everything is in place from a regulatory standpoint that makes it have to happen.”

The report is an excellent example of the type of information that we are likely to see more of as governmental energy investment increases. Look for Energy Efficiency in Appalachia on the SEEA website within the next two weeks.

Honestly, Nanosolar? Governmental Price-Fixing Is Not the Answer

One of my favorite companies in cleantech, Nanosolar, publishes an excellent blog. It’s the real deal; entries are written by the CEO, Martin Roscheisen, and aren’t purely advertising. Sure, there’s a promotional aspect to most of what is written, but there are interesting insights as well.  Yesterday’s article, however, provides an excellent illustration of the risks of corporate blogging. Roscheisen and a co-author wrote a long editorial promoting governmental price-fixing for renewable energy:

Here is one effective, low-cost approach to encourage innovation: Create a set of national Standard Offers or Feed-in Rates for new, significantly better renewable technologies. This policy would offer predictable compensation to any renewable energy generator in the form of long-term power purchase contracts, thus creating a streamlined administrative national framework that makes developing renewable energy projects and manufacturing new technologies highly investable for entrepreneurs and private capital alike.

Honestly?  Nanosolar actually wants the US government to engage in the setting of prices for its product?  I am no Hayek—I believe that the government has a role to play in the shaping of public markets for the common good.  And we as a country have certainly stepped away from pure free market capitalism.  But every fifth grader in the US is taught that the difference between capitalism and communism is market-based pricing vs. governmental price controls.

I would even be willing to engage in reasoned debates about the pros and cons of this proposal if it were the only governmental policy that could lead to increased renewable deployment over the upcoming years.  But it’s just not.  Off the top of my head:

• Carbon cap and trade
• Al Gore’s carbon income tax
• DOE’s loan guarantee program
• Huge amounts of proposed direct spending

These proposals, while certainly examples of government interference, are at least less objectionable from an economics standpoint than pure price manipulation.  We’ve tried that before, you know.

Still in Love with the Stor

EEStor got its patent. I don’t know if it applied for multiple and is still awaiting others, but this is obviously the big one:

The present invention provides a unique lightweight electric-energy storage unit that has the capability to store ultrahigh amounts of energy. The core ingredient is an aluminum coated barium titanate powder immersed in a polyethylene terephthalate plastic matrix. The EESU is composed of 31,353 of these components arranged in parallel. It is said to have a total capacitance of 30.693 F and can hold 52.220 kWh of energy. The device is said to have a weight of 281.56 pound including the box and all hardware.

I was a little surprised to find out how little energy it stores. The EESU has always been promised to provide around 250 miles of drive on a charge, and I thought 53kWH (ten 100W lightbulbs running for 53 hours) would never be enough to get the job done. Fortunately, after doing some digging (pdf), I found that I was wrong. It turns out that the Li-ion battery pack in the Tesla Roadster stores exactly the same amount of energy and delivers about 240 miles of drive on a charge:

…the Li-ion batteries in the Tesla Roadster only store the energy equivalent of about 8 liters of gasoline; a very small amount of energy for a typical vehicle. The pack operates at a nominal 375 volts, stores about 53 kilowatt hours of electric energy, and delivers up to 200 kilowatts of electric power.

So, it seems that today’s EVs get something around 4.5 miles per kWH.

At the end of the day we are, of course, left wondering as to the impact that the finalization of this patent will have on getting the EESU to market. Has EEStor just been waiting to get its product out into the world until its patent came through? Companies often maintain a veil of secrecy just long enough to get them through their provisional patent period and open up somewhat once their IP protection gives them cover to do so.  I hope we can look forward to more news in the near future…

An aside: will miles per kilowatt-hour (MPKWH) become the new miles per gallon (MPG) of the EV world? Five letter acronyms are certainly less sticky, and unlike a gallon of gasoline, it’s hard for most consumers to visualize a kWH. There will certainly need to be some measure of efficiency, but I think it’s going to need to be a little more creative.

Update on Saturday, December 27, 2008 at 4:57PM by Tristan Handy

A new article from Clean Break presents some new information on missed milestones.  As always, talking about EEStor remains a largely speculative endeavor for the general public.

EV Woes

I ran across this article today, which features Charles Gassenheimer, CEO of Ener1, discussing his company’s prospects of entering Chapter 11.  If you’ll remember, this is the very same person whom I heard participate—exactly a month ago—in a panel that declared the near-term ascendency of EVs.

I’m certainly not happy with the status of the EV market (Th!nk and Tesla financial woes, gas prices falling to almost 1999 levels, car sales declining faster than the overall economy) but it is strong support of my argument against irrational exuberance. We have a long way to go on the path to electrification. Let’s not get ahead of ourselves.

The biggest news in the auto industry, whether in EVs or otherwise, is obviously the potential bailout.  I was neutral on Congress’s failure to reach agreement on a bailout. I didn’t like the plan itself (more later) but was somewhat worried that a failure to do anything at all would lead GM into bankruptcy too quickly.  I am extremely unhappy, however, with the Bush administration’s pending allocation of monies from the $700BN bailout package, an obvious end-around of the entire legislative process.  While I think that the economic reasoning behind its actions has some merit, I’m dead tired of this administration’s landgrab of political power for the executive branch.  Basically, Congress voted against a package and the Bush administration vetoed them?  That’s not how that’s supposed to work…

Fortunately, GM seems to be giving the Volt program the highest priority of any of its projects. In the event that it doesn’t receive federal loans or in the event of Chapter 11 it anticipates that it will still be able to deliver the Volt by its target EOY 2011 date. I believe its priorities but am highly skeptical of its ability to deliver. Aside from simple track record issues, this article presents a beautifully simplistic and dead-on argument that the Volt’s dependency on LiON battery manufacturers will likely lead to production delays.

Personally, I’d support a bailout package that split up the Big 3 based into discrete product companies.  Ford’s trucks division would be a prime candidate.  The Volt could form the foundation of another.  Each new company would be capitlized through a mix of the parents’ balance sheet and government funding.  All unclaimed Big 3 assets would be either sold to the child companies or on the market.  Jobs would be lost in the short term but the US auto industry would again be comprised of rational, market-worthy firms and be poised for future growth.

The structure of the auto industry is really a question of firm boundaries, rooted in firm theory.  The current industry structure dates to 20th century production methods and Henry Ford.  I strongly believe that the high degree of horizontal integration currently present in the Big 3 no longer makes much sense.  This is a topic for another day, but it’s one of the major reasons why I think that pure-play EV companies such as Th!nk and Tesla can be strong industry competitors if they manage to make it through their current troubles. 

Which makes you wonder…if there were a fixed pool of public capital to be allocated to the auto industry, where should it be spent?  Battery makers and EV manufaturers are certainly holding out their hands for their share.