Who can figure Oil out?

First of all I would like to apologize to my readers for missing last week's post. I was out of the country in a business trip. I would also like to inform you this will be the last post of the year, since I will be, again, out of the country for the next week. So, to all of my (millions and millions of!) readers I would like to wish a happy new year, happy Hanukah, merry Christmas, happy Kwanzaa, and all the good stuff!

Now, let’s get down to business: Oil is Greentech’s biggest allied and its biggest enemy too!

On one hand its price becomes an incentive or disincentive to new alternative energy technology development. If the price goes up it’s an incentive for greentech.

On the other, it shapes the world economic outlook in a way that it frees or strangles resources flowing into greentech. If the price goes down more resources are available for greentech development (notwithstanding the global crisis).

Are you confused yet? Wait there is more:

What drives the price of Oil? Well this is also a complex answer.

Any traditional product follows the supply-demand curve. As the amounts of supplied product increase and demand diminishes, the price drops. On the opposite end, if supply is low and demand is high the price escalates.

Oil has a couple of added ingredients that make the supply-demand curve bend in different directions.

HIGHER PRICE, HIGHER SUPPLY: Oil has a very particular characteristic. Its supply sources become more abundant as the price goes up. Many heavy oil production fields, as well as other, less profitable sources, become feasible only after oil hits certain price targets. That is the case of the Athabasca Oil Sands a large deposit of heavy crude in northeastern Canada, where “despite the large reserves, the cost of extracting the oil from bituminous sands has historically made production of the oil sands unprofitable” (additional info can be found here)

LIMITED SUPPLY: Oil, as we al very well know, is a non-renewable natural resource. Therefore, its Supply quantity is a finite number. Many different estimates exist as to “how finite” oil is (i.e. when will it run out?), but there is a general consensus that IT WILL in fact run out some day.

As we get closer to the day Oil runs out, the price will skyrocket to levels never seen before. As any other scarce resource it will become a luxury.

SPECULATION AND CRISIS: This is a factor that has altered oil prices recently, it relates to the “market perception” of the above mentioned factors.

When the economy was booming and oil prices escalated, investors started getting into oil to make big profits, pushing the price further up.

Now, the economy has slowed down and demand has decreased and oil is at 30% the price that it was 6 months ago, investors have shun away from oil.

I will not attempt to include this factor into the supply-demand graph, as it is a very volatile and subjective variable.

The reality is that we are facing uncertain times, and as such people are going back and reconsidering their strategies. Will this affect Greentech?

In one sense it will, because the people that were unconvinced will tend to tilt more towards non-green as the price of oil gets lower and resources for greentech gets scarcer.

On the other hand this will be the big trial for greentech because it will test weather the critical mass of believers in a greentech future exists. And, if this critical mass will be able to propel Greentech to the next level (the mass market or mass implementation of green technologies).

I personally believe that people are aware that whereas oil goes up or down we need to do something to get off the “Oil rollercoaster”. Furthermore, people have also realized that oil dependency has very serious political consequences and they are more willing to do something about it. And, last but not least, oil has an environmental impact that many people are aware should be changed before we destroy our planet, and with it: ourselves.

Again, HAPPY HOLLIDAYS and SHALOM! See you in 2009!

Are we there yet?

Depends who you ask.

According to the Saudis, Oil will be the primary source of energy for many years to come (see the interview with Ali Al-Naimi, the Saudi oil minister, in CBS "60 minutes"). In the segment, the reporter shows the new petroleum facilities being developed in Saudi Arabia. They claim they will find DOUBLE the amount of oil they already have in the near future. It makes you wonder weather we are overreacting to the "end of times" for the oil sources.

In addition to the oil conundrum we are facing a challenge in the renewable energy front, and according to the NY Times here in the US we are not doing too good (read "Energy Goals a Moving Target for States").

A mere 10 to 15% goal of renewable sources of energy is an uphill battle for many states to achieve. According to the article: "Nationwide, the hard numbers provide a sobering counterpoint to the green-energy enthusiasm sweeping Washington".

On the other hand

The US will soon have a new president. The general expectation (based on his own words) is that the "Green Economy" will be a priority. This effort towards renewable energy and clean technologies is one of the tools Mr. Obama proposed as a strategy to overcome the current financial crisis (see Obama’s entire plan at Elections and Greentech, are they related?)

Additionally, the same NY Times, did a whole section on the "Business of Green" in September (featured in one of our entries "NY Times Week-in-review"). I believe they were responding to a trend, therefore being optimistic about the growth of the Green Business.

So which one is it? Are we reading too far into the energy and pollution crisis, or are we in the verge of major changes towards the "Green Wave".

Until next week, SHALOM!

This will make it happen!... will it?

I was listening to the radio and they were talking about a controversial law in Norway that mandates all companies to have at least 40% women in their executive board. Then I realized this could be the solution to better legislation for a green world.

If you have read my past entries you would have noticed that I am for free market and against too much regulation. Well, this simple law they introduced in Norway has accomplished what many other laws in other countries have failed to do. It has given women equal rights in the workplace. Whereas you are pro or against women's equal rights, you would have to acknowledge that implementing a single law to modify a trend as strong as that is remarkable.

The key element of this law (and what I think is applicable to greentech legislation) is that it modifies only the ultimate consequence of a desired trend, leaving the process to sort itself out. In other words, the law only regulates percentage of women in executive boards, the law forces companies to create their own process to groom women into the board room and to ensure that 40% of their employees that will be eligible for board positions are women. The law does not bother with employment or compensation factors.

If we translate this type of legislation into greentech we may start thinking about the ultimate consequence of living in harmony with our environment. Then we may suggest the following legislation to be applied:

• All companies and all households should become progressively carbon neutral every year until reaching 100% neutral by 2020.
• Water recycling should have a similar goal. 75% recycled water usage by 2020.

Then we should start talking about the consequences of non-compliance.

What if the company or the individual does not comply? Then we shall be as drastic as the Norwegians: they shut down the company. We may want to say: "pay us for the cost and installation of the best technology available, plus a penalty and we will install it for you"

What do you think? Will this work? Will it create the mindset to have a greener world? Will it promote the right technologies to the consumers? Intriguing questions!

Until next week, SHALOM!

An Ideal Greentech Portfolio - Part II

Following last week's post (An Ideal Greentech Portfolio - Part I), we will continue to explore the basis for an Ideal Greentech Investment Portfolio.

Last week we mentioned three criteria to ensure a balanced portfolio: Technological innovation, Business maturity and Market. What now?

First of all, let’s talk about dollar amount of investment. It is always preferable to be either a strong investor (owning substantial equity and voting rights) or to be in good company (i.e. follow the big investors). The saying: "money attracts money" is very applicable in this kind of investments, if investors start joining in a particular technology; then results are bound to improve.

By now we have taken a holistic approach to our portfolio. We know we need to look into diverse enough opportunities. We need to have a money strategy. We should have diverse stages of maturity in our companies. Now, let’s assume we are face to face with the CEO of one of our investment targets. What are the things we should look into?

First of all we need to understand the product. What is it for? How does it work? For this step it would be wise to freshen up on basic physics and chemistry knowledge (mostly in thermodynamics principles). Many companies out there are offering the "perpetual motion" machine. Be aware of false promises and the pot of gold at the end of the rainbow.

Next, we need to understand the Competitive Advantage:

(a) Is the product competitive? What is the advantage of this technology? Who would be interested in this product and why? What are the potential savings for end users?

(b) Are there barriers to entry for competitors? What is the cost of production? How complex is the technology to produce? How difficult is it to imitate? Are there any bigger players that may become our competitor?

(c) How does the product fit within the Green spectrum? Is it a technology that is ready for the public? Do we need to wait for further advancements in a specific field to have a market? Is this product an application for the short term or for the long run?

Finally, and certainly not of least importance we need to asses if the company has Strong Management. When you are seating at the table with any member of this company, do they know the basic numbers up and down? Are they well organized? Do they have a positive attitude? Are they open to your questions? Do they seem too enamored with their product to take criticism?

It is important to have “the gut feeling” for the company and for their product. If you feel the product is not good enough, but the management gives you a “good vibe”, then perhaps you should go for it. I always refer to the example of a company in Silicon Valley that set up with a weak product, but their attitude was “we are here to succeed”. They ended up becoming a great success with a different product (I believe it was Hotmail)

I know there are several books out there that talk about investment strategy and about VC investment. I am sure in these couple of entries I have only scratched the surface of this subject. The idea is to keep me and whoever reads this Blog on our toes and to be able to generate a conversation. Its always good to keep these concepts fresh. Feel free to add or comment on the available space.

Until next week, SHALOM!

An Ideal Greentech Portfolio - Part I

If you believe the Greentech wave is being formed; then you would agree that whoever invests in the future of Greentech should do well.

Following this train of thought I would like to propose, what I think, is an ideal portfolio for Greentech investments.

Greentech is a very wide term. To be more specific we will break it down into three areas: (a) Alternative energy; (b) Water;and (c) Waste Management. But, before we dig deeper into these three areas we need to define the investment criteria.

Criteria I - Technological innovation

It would be wise to invest in both, radical innovations, as well as in existing, proven technologies. The key for the success of greentech is based on "change". We need to change our power sources; change the way we use water; change the way we create and dispose of waste. This change will not come fast, it will be gradual. Therefore we need to bet on existing technologies for the short and mid term and radical, new technologies for the future. Be aware that betting on new technology is riskier than placing your money in proven technology, but the returns are inversely proportional.

Criteria II - Business maturity

Many people say that, when you invest in a business you really invest in the people that manage that business. Since we want to have a balanced portfolio, we should look into both companies that have a well established commercialization plan and an organizational structure to manage it, as well as in companies that are basically "newborn" (probably just a scientist and an idea).

Criteria III - Market

Last, but not least, we want to be as diversified as possible in the areas that (we believe) have an opportunity, within greentech to grow. This criteria has many levels of depth. Not only do we want to invest in the aforementioned three main areas of greentech (alternative energy, water and waste management), we also want to invest in different technologies within each one (i.e. within alternative energy: solar, wind, geothermal, etc). If the size of the investment allows for further diversification I suggest to take it one step deeper and invest, within each area in different technologies (i.e. within solar: PV and thermal; silicon cells and alternative light absorbing material cells; thin film and concentrated solar, etc)

Now we are able to place any greentech investment into our "diversified criteria map".

Let’s take two investments as examples:

Investment A - Capital injection to set up a new wind farm in Europe.

Investment B - Seed money for a new technology to create Hydrogen from water that requires less energy than current methods.

According to our criteria I - Technological Innovation: Investment A is a proven technology (as long as the turbines proposed for this new wind farm are already in use somewhere else). Investment B is a new technology. The ability to forecast the return on the investment (ROI) is much easier for Investment A than for B, but Investment B has a potential for higher ROI than A. As mentioned before this criterion is closely related to risk and return levels.

Criteria II: Obviously the wind farm has a more mature business model, it probably also has a management team in place. Depending on the stage the wind farm is in, it should also have permits and a thorough study of power generation forecasts and an appealing deal with the power company to sell the power injected back into the grid. On the other side, Investment B is only a concept from a highly regarded scientist in a recognized university. Investment B needs to go through many stages and overcome different obstacles to become a profitable business, but if it ever gets there... just imagine! This criterion is closely related to the required amount of investment. Investment B requires probably 100 times less investment than investment A for 50% ownership of the business (something like $100k versus $10MM).

Note that, when you analyze business A and B under the criteria of maturity, a different analysis is required for each one. For the wind farm is important to trust the team and the business numbers that are already in place. For investment B the questions are a lot harder, who is the scientist?, has he any proof of the concept?, what are his previous experiences launching a product?, who has seen this technology before?, do any competing technologies exist?.

Finally, under criteria III, we have looked at two investments in two different areas of greentech. Although both are under "alternative energy", one is related to power generation and the other one is related to power storage with multiple application possibilities.

Next week well continue building our portfolio. Until then, SHALOM!

Shifting the Market Balance - The Initiative

People are like water, they follow the easiest path downstream. If you want to introduce a new product in the market you better make it VERY EASY for the customer to acquire. Otherwise you will find yourself soon out of business.

Perhaps it would be useful to make sure that greentech, as a product, covers the basic principles of commercialization.

How do you make a product “easy to acquire”?

First of all, there should be a group of people which you recognize as your “target market” and they should have a real (or created) need for your product. Second, you have to design a very easy path for their money to reach your account and for the product to reach their house or office (or whatever other place they will need it). Whereas you accomplish this by placing your product in the most visible shelves of the top retailers or by having a super well designed website with a full feature checkout process that accepts all sorts of payment methods. The customer needs to feel at ease spending that amount of money in exchange for that product.

Perhaps you think the aforementioned concepts are very simple and easy to follow, but many greentech initiatives lack these principles (at least according to me!)

Look at “alternative energy” as a product. Is it “easy to acquire”? The short answer is: NO. Is there a group of people that want to “buy” it (target market): YES, count me in! Is it affordable? Right now, NO. Can it reach your home or office easily? Right now, NO.

So, can we change the commercialization strategy for “alternative energy” to make it VERY EASY to acquire? YES, I believe so.

The biggest hurdle for alternative energy is competitive pricing. Neither I nor thousands of others are willing to pay more for our electricity than what we are paying right now. So, should we wait for the technology to become more cost efficient or is there something that can be done now?

IF WE INCLUDE THE CONSEQUENCE OF STAYING WITH OIL AND COAL (THE ENVIRONMENTAL IMPACT, PUBLIC HEALTH, AND PERHAPS A FUTURE ENERGY CRISIS) INTO THE EQUATION, THEN WE SHOULD BE ABLE TO MAKE ALTERNATIVE ENERGY COST COMPETITIVE.

One way to achieve this is by implementing the “cap and trade” system. A central authority (usually government) sets a limit or “cap” on the amount of a pollutant that can be emitted. Companies that need to increase their emission allowance must buy credits from those who pollute less (or “trade” with pollution off setters).

By taxing the pollution and giving incentives to the “problem solvers” we could shift the market balance towards alternative energy, making it easier to acquire.

There are BIG RISKS when the balance of the market is pushed artificially. For example, what will happen if, after implementing the “cap and trade” system, a new more efficient source of energy becomes available? The capital available for new power plants is limited, if most of it is captured by the less efficient method, just because it was available before the other one and it leveraged on the “cap and trade” advantage, then we would have created “false demand”. Eventually, the company with the more efficient product could disappear and the company with the less efficient, but sooner to market, product could become the market leader.

On the other hand, it could be a very long road to mainstream for alternative energy if we don’t put some incentives in place. The possible consequences of this scenario are VERY FRIGHTENING. If we wait for alternative energy to become competitive by itself we could risk a worldwide energy crisis or even worst consequences (depending to which scientist you want to believe).

Like everything in life, there should be a balance. Regulators will need to be very smart and flexible and individuals will have to accommodate certain changes in their “consumer patterns”.

Aside from “alternative energy” there are thousands of products and services in the greentech universe that need help to make them “easy to acquire”. It could be argued that money is always the problem solver. But, greentech (unlike Internet, for the “dot com” boom) is not distributed across the world instantly. Most greentech products are born out of an idea, then they require a proof of concept, then it needs to be tested in the field, eventually it should have market acceptance and finally it needs to develop a distribution network to become accessible worldwide. And, although, this process takes considerable amounts of money, they also require “connections”. The inventor needs to connect with strong management; the company needs to connect with an ideal testing site; then the company needs to connect with the best initial market that will help launch its product; many times the company needs to connect with the available incentives for its product; and finally the company has to connect with the best fitted distributors for its product.

Here in Miami we are launching an initiative, which I hope will tap into this opportunity. Our intentions are to help companies “connect” with management, test sites, market, incentives, and distributors as well as finding available sources of funding for promising greentech products and companies. This initiative is in its VERY EARLY stages, but I have the hope that it will become a model of the types of initiatives that can be undertaken by the private sector in each city.

I will keep you posted of future developments in this area.Until next week, SHALOM!

Elections and Greentech, are they related?

As we head to vote here in the US and elect a new president (hopefully, at the end of the week we shall know the results), I wonder what is at stake for Greentech.

Originally, one of my opening arguments for Greentech investment was the great performance of Greentech when compared to regular stocks (see chart below)

Even though the index is bouncing back faster than the S&P500, this argument is not as powerful as it used to be (in September when the Cleantech Index was 20% to 40% above S&P500).

So, why invest on Greentech?. I believe that, in spite of Wall Street's valuation of Greentech, there is still an undeniable wave towards alternative energy, water purification and irrigation, as well as waste management optimization. Because enough people have come to realize we need to get off oil and start finding alternatives. They have also realized we need to treat our environment with respect in order to have a place where to live.

Looking at the hard facts, in today's economy, governments have become the largest corporations. As times get harder for the private sector, the governments (in theory) can print as much money as necessary to keep them afloat. Here in the US, one of the key points of the campaign was "Alternative Energy". Therefore: The largest corporation in the world has promised to pour money into Greentech

Moreover, when both candidates were asked to name plans that will get cut and plans that will remain under the new economic reality; both, Obama and McCain specifically named their Energy Policy plan as being a priority.

So, what is their plan? I will try to be as neutral as possible and list (directly from their website) their Energy and Environmental initiatives:

McCAIN

ENERGY:

• Will Commit Our Country To Expanding Domestic Oil Exploration
• Promoting And Expanding The Use Of Our Domestic Supplies Of Natural Gas
• The Nation Cannot Reduce Its Dependency On Oil Unless We Change How We Power Our Transportation Sector
• Clean Car Challenge: $5,000 tax credit for each and every customer who buys a zero carbon emission car
• A $300 Million Prize To Improve Battery Technology
• Flex-Fuel Vehicles (FFVs): calls on automakers to make a more rapid and complete switch to FFVs (automakers have committed to make 50 percent of their cars FFVs by 2012)
• Alcohol-Based Fuels Hold Great Promise As Both An Alternative To Gasoline And As A Means of Expanding Consumers' Choices
• Today, Isolationist Tariffs And Wasteful Special Interest Subsidies Are Not Moving Us Toward An Energy Solution
• Will Effectively Enforce Existing CAFE Standards (CAFE standards - the mileage requirements that automobile manufacturers' cars must meet)
• The U.S. Must Become A Leader In A New International Green Economy. Green jobs and green technology will be vital to our economic future
• Will Commit $2 Billion Annually To Advancing Clean Coal Technologies
• Will Put His Administration On Track To Construct 45 New Nuclear Power Plants By 2030 With The Ultimate Goal Of Eventually Constructing 100 New Plants
• Will Establish A Permanent Tax Credit Equal To 10 Percent Of Wages Spent On R&D
• Will Encourage The Market For Alternative, Low Carbon Fuels Such As Wind, Hydro And Solar Power
• Proposes A Cap-And-Trade System That Would Set Limits On Greenhouse Gas Emissions While Encouraging The Development Of Low-Cost Compliance Options
• Greenhouse Gas Emission Targets And Timetables:
  2012: To 2005 Levels (18% Above* 1990 Levels)
  2020: To 1990 Levels (15% Below 2005 Levels)
  2030: 22 Percent Below 1990 Levels (34% Below 2005 Levels)
  2050: 60% Below 1990 Levels (66% Below 2005 Levels)
• Will Make Greening The Federal Government A Priority Of His Administration
• Will Move The United States Toward Electricity Grid And Metering Improvements To Save Energy
• Believes We Must Understand The Role Speculation Is Playing In Our Soaring Energy Prices
• Does Not Support A Windfall Profits Tax. A windfall profits tax on the oil companies will ultimately result in increasing our dependence on foreign oil

CLIMATE CHANGE

• Climate Policy Should Be Built On Scientifically-Sound, Mandatory Emission Reduction Targets And Timetables
• Climate Policy Should Utilize A Market-Based Cap And Trade System
• Climate Policy Must Include Mechanisms To Minimize Costs And Work Effectively With Other Markets
• Climate Policy Must Spur The Development And Deployment Of Advanced Technology
• Climate Policy Must Facilitate International Efforts To Solve The Problem

OBAMA

SHORT TERM SOLUTIONS: IMMEDIATE RELIEF FROM PAIN AT THE PUMP

• Emergency Energy Rebate. Will require oil companies to take a reasonable share of their record‐breaking windfall profits and use it to provide direct relief worth $500 for an individual and $1,000 for a married couple
• Crack Down on Excessive Energy Speculation
• Swap Light and Heavy Crude, Release Oil from Strategic Petroleum Reserve to Cut Prices

MID TO LONGTERM SOLUTIONS: NEW ENERGY FOR AMERICA

• Tackle Climate Change
• Implement Cap and Trade Program to Reduce Greenhouse Gas Emissions - 80 percent below 1990 levels by 2050
• Make the U.S. a Leader on Climate Change
• Invest in Our Secure Energy Future and Create 5 Million New Jobs
1. Strategically invest $150 billion over 10 years to accelerate the commercialization of plug‐in hybrids, promote development of commercial scale renewable energy, encourage energy efficiency, invest in low emissions coal plants, advance the next generation of biofuels and fuel infrastructure, and begin transition to a new digital electricity grid
2. “Green Vet Initiative”: more of our veterans can enter the new energy economy
3. Convert our Manufacturing Centers into Clean Technology Leaders
4. Create New Job Training Programs for Clean Technologies
• Make our Cars, Trucks and SUV’s Fuel Efficient
• Increase Fuel Economy Standards: 4 percent per each year
• Invest in Developing Advanced Vehicles and Put 1 Million Plugin Electric Vehicles on the Road by 2015.
• Within one year of becoming President, the entire White House fleet will be converted to plug‐ins as security permits; and
• Half of all cars purchased by the federal government will be plug‐in hybrids or all‐electric by 2012
• Partner with Domestic Automakers: $4 billion retooling tax credits and loan guarantees for domestic auto plants
• Mandate All New Vehicles are Flexible Fuel Vehicles
• Develop the Next Generation of Sustainable Biofuels and Infrastructure: 60 billion gallons of advanced biofuels by 2030
• Establish a National Low Carbon Fuel Standard: fuel suppliers in 2010 to begin reducing the carbon of their fuel by 5 percent within 5 years and 10 percent within 10 years
• Promote the Supply of Domestic Energy
• “Use it or Lose It” Approach to Existing Leases: Oil companies have access to 68 million acres of land, over 40 million offshore, which they are not drilling on
• Promote the Responsible Domestic Production of Oil and Natural Gas
• Bakken Shale in Montana and North Dakota which could have as much as 4 billion recoverable barrels of oil according to the U.S. Geological Survey
• Unconventional natural gas supplies in the Barnett Shale formation in Texas and the Fayetteville Shale in Arkansas
• National Petroleum Reserve‐Alaska (NPR‐A) which comprises 23.5 million acres of federal land set aside by President Harding to secure the nation's petroleum reserves for national security purposes
• Facilitate the construction of the Alaska Natural Gas Pipeline
• Getting More from our Existing Oil Fields: experts believe that up to 85 billion barrels of technically recoverable oil remains stranded in existing fields
• Diversify Our Energy Sources
• Require 10 Percent of Electricity to Come from Renewable Sources by 2012
• Develop and Deploy Clean Coal Technology
• Safe and Secure Nuclear Energy
• Commitment to Efficiency to Reduce Energy Use and Lower Costs
• Deploy the Cheapest, Cleanest, Fastest Energy Source -Energy Efficiency: reduce electricity demand 15 percent from projected levels by 2020
• Set National Building Efficiency Goals: all new buildings carbon neutral, or produce zero emissions, by 2030
• Overhaul Federal Efficiency Standards
• Reduce Federal Energy Consumption: achieve a 15 percent reduction in federal energy consumption by 2015
• Flip Incentives to Energy Utilities: measures will benefit utilities for improving energy efficiency
• Invest in a Smart Grid
• Weatherize One Million Homes Annually
• Weatherize One Million Homes Annually

On a final note I would like to mention the smart effort that Pickens is doing by linking his plan to politics, by signing up people to create political pressure. Regardless of my liking or disliking the Pickens Plan, the idea deserves kudos (details here)

Until next week... SHALOM!

* Not a typo! It is what is written at the website

What is your plan?

The economy is going down the drains, oil prices are also coming down. Does this mean the end for alternative energy? Are people going to be so submerged in survival mode that they will forget what got them there in the first place? Perhaps.

I do believe in the next 5 years we will see fundamental changes in the way we live. I am not sure what those changes will be, I have a feeling the transition is going to be a painful one. The market values will shift from the more superfluous goods and services (i.e. electronic gadgets and fashion) to others more basic ones (i.e. food and energy).

So, if energy becomes a more precious good then we will certainly shift into renewable energy, right? Not so fast, there is a "Tipping Point" to make the shift from fossil fuels into alternative energy, and the odds are against us.

When resources are scarce it is more difficult to decide on a strategy that requires an up front payment even if this strategy is more convenient over time.

If you offer two plans for certain service: plan "A" consist of monthly payments of $10 (for one year total $120); under plan "B" you just make a single $102 payment at the beginning of the year (a 15% discount!). I am sure people with fewer resources will select the monthly plan more times than the "B" plan, simply because it is easier to deliver $10 each month that it is to come up with the full $102. Only if you have the $102 easily available and you are smart enough to calculate the 15% difference (which is more than what most investments return on capital in today's market!), then you will chose plan "B".

Alternative energy requires an up front "investment" to develop new technology, to create new infrastructure and to change certain patterns in the market and in consumer behavior. The current oil thirsty system needs no change in the short term, only when oil becomes scarce enough, then we shall see the high cost of staying in this path. Its like having plan "A" with the last month's payment at $200 (rather than $10) and no right to renew!

For the time being the oil barrel has dropped from the $140 level to the $60 level. Oil, as any other product, follows the laws of supply and demand (as demand dwindles, the price drops). What some people don't realize is that supply and demand work for infinite availability products (subject to cost of production), oil has a very clear limit (when the end of oil is near, even if demand is low, prices will soar). Another peculiarity about oil is that, as the price decreases, oil supply decreases as well. Some sources of oil are too expensive to operate at $50 a barrel. This works against the cause for alternatives, as the supply diminishes, new sources become cost effective and reduce the impact of the diminishing supply.

What shall we do (we = humanity)??. We should have a plan!

Only by having a plan we can counter the INERTIA of the masses (and right now the inertia points towards more oil dependency).

Mr. T. Boone Pickens has a plan (recently featured in CBS's "60 minutes"), to generate wind power and use natural gas for vehicles (for pros and cons on The Pickens Plan go to Wind Energy).

In Israel and now in Australia, Shai Agassi has a plan to deliver electric cars, coordinating between government, car manufacturers, battery manufacturers and creating a "plug in" infrastructure (for more on this go to The Electric Car).

My plan is to find investment opportunities in Greentech. Opportunities with the best technology, the best management and the best business plan I can find. And hope they will make it big and create a better environment and at the same time give me a hefty return on my investment.

What is your plan?!

Until next week, SHALOM!

My Greentech Questions

"I only know that I know nothing", Socrates.

This week I am exploring questions that I have about greentech. Some questions may have a simple answer and some may be just rhetorical questions. Perhaps by next week you (the reader) will provide some answers and shine some light into this darkness. So here it is:

When I heard the debate last week, as well as in previous debates, the subject about alternative energy was present. Both candidates agree that new sources of energy are needed (I don't want to start a political discussion, so let's focus on the big picture) with some differences here and there. Both candidates talk about Nuclear power, but NEITHER CANDIDATE ADDRESSES THE DANGERS of this kind of energy source.

It is my understanding that the biggest problem with Nuclear power is the use and disposal of the radioactive fuel. I have heard (and here is my first question) that nuclear plants use less than 5% of the radioactive material power, is this true? And then, we are left with highly dangerous waste that takes over 10,000 years to become safe? To make things more complicated I have also heard that if we increase the percentage of world power generated by nuclear plants we will have no space left to safely store this radioactive material, could this be?

Why is Belgium, a country that generates 54% of its electricity through Nuclear plants, trying to stop construction of new plants and setting additional tax to existing nuclear power generation. Belgium, as well as Germany, the Netherlands and Sweden have all pledged to phase out existing plants. Why?

I would very much like to know the answers to these questions before we embark on a journey that may lead us into a global disaster!

Let's forget about Nuclear power for a second, let’s focus on a wider subject. How are we going to find a way to generate energy without draining the resources that we have in Planet Earth and without polluting our environment?

I guess most of us agree that the current way we generate energy and dispose our waste is dangerous for our future (please note I said: "most of us". "Why is this so?" is a question I will not ask here, for now).

In order to search for an answer on energy efficiency we need to look at the laws of thermodynamics. The first law states that "Energy can neither be created nor destroyed. It can only change forms". Therefore, we will be better off if we try to use energy that comes from outside our planet: Solar energy. Right?

Well Solar energy is the direct consequence of the power of the sun that enters the earth. But waves, wind and tides (I'm not sure about geothermal) are also partly or wholly a consequence of the sun's effect. So, if we choose wind over solar power, are we selecting an indirect source of power and therefore sacrificing efficiency?

In evaluating an energy source we need to look at two factors: (1) how much energy can we "capture"? And (2) How much energy are we going to waste in the conversion process to its "final destination". And finally compare these numbers to the associated costs in order to find the best solution.

(1) Energy "capture": Solar energy is hard to capture, current solar cells can only attain around 8% efficiency. Other cells are able to convert up to over 40% of the sun’s power, but the cost of the materials used in such cells is prohibitive. Never mind that solar cells depend on the exposure to the sun and therefore are useless at night or with minimum light conditions. Why can’t we have both efficiency and low cost? Is 40% the best we can do?

Wind power has a theoretical limit of 59%. This means that the best wind and the best turbine in the world can only obtain 59% of the energy contained in wind (which already is a factor of the energy coming from the sun!). Can we have wind as our main source of energy with a ceiling of 59% efficiency?

(2) Conversion process: It's not enough that solar cells are inefficient within themselves, the process to convert direct current (DC) obtained with the cells into alternative current (AC) requires inverters which eat up between 5 and 50% of the electricity generated. Wind has a similar problem; the rotation generated by the wind has to be converted into a faster rotation speed to match the frequency on the electricity in the grid. This conversion lowers the efficiency of the turbine. Can we find a system that minimizes the loss of power in the conversion process?

Cost: No alternative energy source up to date has an associated cost that can compete with fossil fuels. Right? These sources depend on government subsidies; the idea is to promote economies of scale until they become competitive. Is there ever going to come a day when alternative, sustainable energy is less expensive than coal?

Wind and sun are variable sources; storage needs to be added to the system to make it work. Supposedly one of the most efficient ways to store energy is by pumping water into a high level storage, and later using the water's falling energy to regain the stored energy (this system achieves about 75% efficiency). Can we use such a system in a large scale alternative power generator?

As for Wave and Tide power generation technologies we have yet a long way to go, those areas are far behind wind and solar. Are we doomed to use fossil fuels until they run out?

In the alternative fuel vehicle arena, the argument of many proponents includes the following statement: "We use less than 25% of the gas in the car to generate forward motion" (the rest of the fuel is spent on noise, electric gadgets, pollution, etc). Can this be?

If the efficiency of current vehicles is so low, how come we have not been able to create a more efficient car in a shorter timeframe?

Finally (I am running out of space), I have trouble understanding the logic behind Hydrogen. Why are some people proposing hydrogen as a fuel? Supposedly hydrogen is a great storage media for electricity. The simplified principle is as follows: add electricity to water and you get hydrogen; turn the system around and release the electricity and obtain water back. Well, using the second law of thermodynamics the amount of electricity released from the hydrogen can only be the as much as the electricity injected in the water. This is power storage not fuel!?

I know that many of you will disagree with some of the ideas explained above, please give me your point of view! I also know that some concepts are explained superfluously, unfortunately I have limited time for this blog, and if I get enough requests I may write a book in the future (just kidding!).

Before leaving, I have to announce this week’s big news: I am father of a baby girl, Dana! (my third child).

Until next week: SHALOM!

What the Future Holds

Last year I read a book called "Now, Discover Your Strengths" (by Marcus Buckingham). Together with the book there is an online assessment tool that finds your top 5 strengths. It turns out that my first strength is Strategic. In the results report Strategic Strength is explained as follows:

"The Strategic theme enables you to sort through the clutter and find the best route. It is not a skill that can be taught. It is a distinct way of thinking, a special perspective on the world at large. This perspective allows you to see patterns where others simply see complexity"

Now, I don't pretend to be a visionary extraordinaire or a Warren Buffet. But, sometimes (only some, few times) I am able to recognize future patterns, based on past events, where others don't see it as clear. I call this exercise "Connecting the Dots" after the beautiful Stanford Commencement speech of Steve Jobs (I strongly recommend watching it, if you have not seen it yet - click here)

OK, after this long disclaimer let's get into the main subject of this week: THE FUTURE.

Dot #1: Last month my sister sent me the link to this website called The Story of Stuff (http://www.storyofstuff.com/). Even though I don’t subscribe to ALL the content in the video (which is a bit long, but interesting), I found it very illuminating.

Dot #2: I went to Europe this summer and observed some key differences between them and the US in consumption habits. The Europeans are more moderate than their counterparts in the US. They drive smaller cars, restaurant portions are smaller, live in smaller houses or apartments, etc. If you ask for a glass with ice in Europe they bring you a glass a quarter full of ice; whereas here in the US the glass almost always is 100% full of ice and the glass itself is probably bigger (not to mention the "free refill").

Dot #3: The markets collapsed last week. The economy is facing a terrible crisis and even the very core of capitalism is being tested.

Dot #4: In several magazine and newspaper articles that I have read, as well as in many lectures that I have attended about the Environmental impact of the human activity, I have heard the following hypothesis: “If we don’t correct the damage we are causing the earth today. Then we will cause a major irreversible damage to the earth with unimaginable consequences”. Furthermore, we need to correct at a much higher pace than the pace of damage, because we are increasing pollution and natural resources consumption at an exponential rate and therefore we need to “catch-up” with the exponential curve in order to reverse its effects.

What is the connection between these dots? In my opinion we are about to enter into a new era. It is not something that is going to be announced and recognized right away, it may be a very subtle transition that will take several years. But the end result will be a major shift in consumption patterns.

Let me explain further (before you call me a nut job!).

The Story of Stuff tries to explain the mentality of the capitalist model we have working right now (both in Europe and in the US). True, it is analyzed from the environmentalist perspective and it may have some arguments that are inaccurate. But the fact of the matter is that we have been living in a “consumption based system” where inventory rotation is important and companies are valued based on sales volume (and not on product durability).

The comparison with Europe is important because it shows that we can live with less. I am not saying we SHOULD live with less, but, I am saying that: IF WE ARE UNABLE TO PRODUCE LESS THEN WE CAN SUBSIST.

Dot #3 about the economy is what gives me the impression we WILL need to learn to live with less than we have right now.

And, finally, the last dot in this line. The #4 about correcting the damage to the earth is what makes the line split in two. This hypothesis, if it holds true, may mean that we have two possible outcomes: (1) We will either reach the critical point of “undoing” the damage we have caused Earth, or (2) we will irreversibly damage our environment and therefore damage ourselves (I will let you use your imagination to visualize what this means).

So, in conclusion the new era we are entering into will be one of redefining the way the system works (it could be based less on consumption and more on basic needs). It will be an era of changes in our “standards”, where some of the things we take for granted today (like a glass full of ice) will no longer be. It will also be an era of financial shift, the value of things will change, perhaps a diamond will no longer be as precious and expensive, and water will no longer cost less than wine. And perhaps, it will be an era of becoming more conscious of our Spaceship called Earth, and what its needs are and what do we need to do to keep it in working order.

I CERTAINLY DON’T HAVE THE CRYSTAL BALL THAT TELLS THE FUTURE, BUT I HOPE YOU ENJOYED THIS MIND EXERCISE AS MUCH AS I DID.

Until next week (when I will hopefully be a Dad for the 3^rd time), Shalom!

The Race for The Electric Car

As I was relaxing at home after a busy weekend (my wife, who is 9 months pregnant, had a false alarm Saturday afternoon) I channel surfed my TV until I found an interesting program: "60 Minutes" (CBS 7pm). The lineup for this week's stories: "A Look At Wall Street's Shadow Market" (Trying to explain Wall Street's financial crisis), "Elite Officer Recalls Bin Laden Hunt" (an ex-Delta Force tells the story of how close the US was to killing Mr. Terror himself) AND "THE RACE FOR THE ELECTRIC CAR" (don't watch the segment now, read first, then watch. I provide a link at the bottom of this entry. Thanks!).

I can imagine the editorial meeting for this week's "60 Minutes". "We can't have a full hour of such depressing news!"; "Let's find something people can look forward to" ; "here it is! let's talk about the electric car!". So, in spite of the falling economy and the disaster of the war on terror, The Electric Car takes the stage!

Two things came to mind watching this story:

1- How is the new economic reality going to impact Greentech economics?

On one side, I suppose, the general belief is that Greentech will suffer as the rest of the economy will. Although this may be true, I also believe investments are going to look for new markets and they are going to find that Greentech has gained attractiveness if compared to Real Estate, to Wall Street and to many other current-day options. Therefore, I would not call this downturn "a blessing in disguise" for Greentech, but I would call it a "potential opportunity"

2- Silicon valley vs Detroit. GM's Volt and the Electric Car Business Model

In the "60 minutes" segment the main story is about Tesla Motors. The narrator talks about this company from Silicon Valley that is challenging old-school car manufacturers like Detroit's GM. The story begins with Elon Musk the CEO of Tesla who is a co-founder of PayPal, the reporter asks bluntly who will pay a fortune for these cars ($110,000), Elon response: "It's a deal!". The story then turns to Tesla finally yielding to Detroit. The company that started by challenging Detroit is now massively hiring traditional motor-heads.

[Tesla Roadster]

Something that really caught my eye was the part where they interviewed GM's Vice Chairman of Global Product Development Bob Lutz. My impression of Mr. Lutz was of the Plant Manager recently promoted, with his hands still dirty from the grease and his attitude of constantly dealing with Union workers. Nothing wrong with this, except, if you want to have a radical new product and break away from old vices, then Mr. Lutz may be a liability. He goes as far as to say that global warming is a "Pile of Horse Sh--". His product reflects his personality. The Volt is a car that has been promoted as an electric car for over two years now, and it is supposed to come out to market in 2010. It has a 25 mile range with pure electric charge and a small Engine to charge the battery for longer trips. The design of the Volt is nothing that will turn heads (at least not in my opinion). Just as a comparison point take the much less promoted Mitsubishi i MiEV this car is expected to arrive to market at the end of 2009 and has 100 miles of travel with electric power (four times that of the Volt!). Not to mention that the i MiEV is expected to cost around $28k whereas the Volt had a price of $30 and it was recently announced that it will be more like $35k. If you ask me, GM is no competitor in this race.

[GM's Volt]

[Mitsubishi i MiEV]

At the end of the day, the conclusion that I draw from this segment, is that the next breakthrough vehicle will have to come from a traditional car maker using technologies from smaller specialized hi-tech companies. The large car maker has the muscle to assemble and market the vehicle, there are too many barriers to entry to be competitive in that arena. But, they will have to buy or pay royalties to smaller (more agile) companies that will bring the innovation. Mitsubishi partnered with GS Yuasa for their batteries (a young Japanese company established in 2004). The other conclusion (and this one I feel much more confident in) is that the Japanese are better suited for these innovations than Detroit. I am yet unsure about what the Europeans are doing to stay on top of this race (I think they are waiting to see where the market leads, except that they may be running the risk of being too late into the race). Below you may now watch the "60 Minutes" segment. For now I say "SHALOM"

Watch now "60 Minutes"... THE RACE FOR THE ELECTRIC CAR

NY Times Week-in-review

Dear Miami Greentech readers:

This week I took the liberty of compiling all the articles (that I could find) related to Greentech that appeared in the NY Times in the last week (from the 23^rd to the 29^th). I also included one piece of publicity that I found interesting.

Please browse them and let me know if you can find a pattern in this multidimensional web of information, or at least if you think we are moving forward towards a cleaner environment.

One interesting note about this week's articles is that there was a Special Section on "The Business of Green" on Sept 24th.

So without further ado. Here are the articles:

September 23

Chrysler Enters the Race to Introduce Electric Models

After seeming to fall behind in the race for alternative-fuel vehicles, Chrysler said on Tuesday that it would produce an electric car for sale in 2010 and follow it up with a broad lineup of battery-powered vehicles.

September 24

Amid Boom, Concerns at Small Solar Firms

Solar power is in the midst of a boom in the United States. High energy costs are one reason. But what may be more important are generous state and power company incentives and rebates, as well as tax credits that make solar systems affordable to many more people and businesses.

Solar Panels Are Vanishing, Only to Reappear on the Internet

Solar power, with its promise of emissions-free renewable energy, boasts a growing number of fans. Some of them, it turns out, are thieves.

How Powerful Is Your Workout?

THE four stationary bikes look almost like any others, except that they are fitted with an arm crank and are hooked up to a generator. As riders pedal and turn the lever, the movement creates a current that flows to a battery pack. They generate an average of 200 watts, enough to run the stereo, a 37-inch L.C.D. television and a laptop for an hour at this new gym in Portland, Ore.

Saving the Earth, One Road Race at a Time

Race organizers are working to reduce the amount of waste produced at their races.

While competing in a half Ironman triathlon two years ago, Bruce Raynor had an epiphany: this event, so rooted in strength and good health, was actually polluting the planet. This led Mr. Raynor to create Athletes for a Fit Planet, which helps races become a bit greener by installing recycling bins, ridding themselves of plastic bags and offsetting carbon emissions

A Building That Blooms and Grows, Balancing Nature and Civilization

In the California Academy of Sciences an exhibit of architecture under the motto: “humanity is only one part of an endlessly complex universal system”

SPECIAL SECTION: BUSINESS OF GREEN - Sep 24

Pumping Hydrogen

On Santa Monica Boulevard in Los Angeles, a futuristic experiment posing as an ordinary fuel station may be bringing the world one step closer to the hydrogen age.

What should come first — the fuel-cell car or the hydrogen pump? Automakers and oil companies answer is to introduce both cars and new fuel stations, clustering them in urban centers like Los Angeles, Berlin and Tokyo.

Shell’s Santa Monica Boulevard station is part of this strategy. So is Honda’s decision to lease about 200 of its newly developed FCX Clarity cars over the next three years to selected customers in Southern California.

Coal, a Tough Habit to Kick

Coal, the “dark fuel,” may be the most visible villain of global warming, but its use is up and projected to go higher. In fact, the demand for coal is rising faster than the supply. So is the demand for oil.

Cleaner sources of fuel remain more expensive, less available and in shorter supply than an old standby.

Solar Projects Draw New Opposition

WHAT’S not to like about solar power? Sunlight is clean, quiet and abundant. If enough of it were harnessed and turned into electricity, it could be the solution to the energy crisis. But surprisingly, solar power projects are running into mounting opposition — and not from hard-nosed, coal-fired naysayers, but from environmentalists.

The opposition is particularly strong in Southern California. Aside from abundant sunshine and virtually cloudless skies, the California desert has altitude, so there is less atmospheric interference for the sun’s rays, as well as broad swaths of level land for installing equipment, and proximity to large, electricity-hungry cities. But it is also home to the Mojave ground squirrel, the desert tortoise and the burrowing owl, and to human residents who describe themselves as desert survivors

The Alliance for Responsible Energy Policy, an environmental group in Joshua Tree, said: “Our position is that none of this is needed. We support renewable energy, and we support California’s renewable energy targets, but we think it can be done through rooftop solar.”

Reclaiming His Place in the Sun

Arnold J. Goldman, once the world’s undisputed sun king, is back in business with a new company focusing on more efficient solar energy plants.

In 1989, Arnold J. Goldman was the world’s undisputed sun king. His realm was a desolate patch of the Mojave Desert north of Los Angeles, where his company, Luz International, created the world’s largest solar energy installation. At the time, Luz’s plants generated roughly 90 percent of the solar energy on the planet.

Two years later, his reign was over, done in by an uninterested public. While the solar field that Luz built for Southern California Edison still runs today, the company went kaput, unable to compete profitably with the lower costs of companies producing electricity from traditional sources.

After 20 years wandering outside the desert, he is back, with a reconstituted company and a contract from Pacific Gas and Electric Company to purchase up to 900 megawatts of power while creating more efficient solar plants at Ivanpah, Calif., on the Nevada border.

A Cautious Approach to Nuclear Power

Nuclear power plants might seem like part of the solution to global warming, but few reactors are likely to be built soon.

With the federal government offering the nuclear industry $18.5 billion in loan guarantees and billions more in production tax credits and insurance against bureaucratic delays, at least a few new reactors seem certain to be built.

But reactors, it turns out, are not at the top of the list for stopping global warming, at least in the United States, at least not any time soon.

Among the issues are the cost of nuclear power, fears about safety and questions about how to dispose of waste.

Electricity From What Cows Leave Behind

For years, the cows at Green Mountain Dairy here produced only milk and manure. But recently they have generated something else: electricity.

The farm is part of a growing alternative energy program that converts the methane gas from cow manure into electricity that is sold to the power utility’s grid.

The Home Energy Audit Gets an Upgrade

Fuel costs and a drop in the price of special cameras that show where heat escapes from buildings have created a new market for energy auditors.

Kept Out of Landfills and Reborn as a Bag

TerraCycle makes tote bags, pencil cases and other products from juice boxes and candy wrappers, then sells them at some of the country’s biggest retailers.

Founded in 2001, TerraCycle is aiming to make billions by collecting used plastic bags, juice pouches, cookie wrappers and other items that cannot be recycled and fusing them into everyday items like tote bags, pencil cases and messenger bags to be sold at some of the country’s biggest retailers.

September 25

General Motors’ New Plant Will Build Smaller, Fuel-Sipping Engines

General Motors said Thursday that it intended to double its production of gas-sipping, four-cylinder engines by 2011.

To do so, G.M. said that it would invest $370 million in a plant to build its most fuel-efficient engines ever. The factory will open in 2010 and make 1.4-liter engines for two compact cars scheduled to go on sale late that year: the Chevrolet Cruze, which is expected to get about 45 miles a gallon in highway driving, and the Chevrolet Volt, a plug-in vehicle whose engine will start after the battery is depleted.

Europe Toughens Its Auto Emissions Plan

European Union lawmakers proposed tougher-than-expected emissions goals for car makers, dealing a blow to the German automobile industry.

The bill would be the first legally binding carbon emission standard ever for new cars in Europe.

September 26

Nothing to report

September 27

Nothing to report

September 28

Nothing to report

September 29

One More Chance on Energy

Last December, Congress passed a useful energy bill that ratcheted up fuel economy standards for the first time in decades. That seems a long, long time ago. Since then, Congress has gone steadily and sadly backward on energy policy.

Progress on fuel economy standards will remain stalled unless the Senate overcomes its partisan divide over the issue.

PUBLICITY

AFS Trinity Power has developed patent-pending technology that makes it possible for plug-in hybrid electric vehicles to achieve 150 MPG, go 40 miles in all-electric mode, and use gasoline for additional unlimited miles in hybrid mode.

To those of you who celebrated the new year this week:

SHANA TOVAH!

A Dialogue

Two friends meet at a coffee shop somewhere in the US and start talking:

Person A: Have you heard all this nonsense about becoming green?

Person B: Yes I have. I don't believe it is nonsense

A: With all this financial turmoil, do you think someone is going to invest some minute of their time or a dollar from their pocket in "saving the planet"?

B: I believe its necessary. Otherwise the window of opportunity to change the fate of the environment will pass and we will have to deal with unimaginable consequences

A: Pleeeeeassseee! Don't tell me you believe in that "global warming" myth!

B: Let's assume I don't. Would you say we are damaging the environment by creating bigger and bigger cities, by dumping more and more stuff into the ground and into our oceans, and by exploiting the resources of nature without any means of regenerating those resources?

A: So?! I believe there are still many more resources available for exploitation, and the more we advance, the more we will be able to make those resources last.

B: And where does it end? How much more can we "stretch the fabric"?

A: Are you telling me I will have to give up my SUV?

B: I believe some changes will be necessary in our day to day routines. But, other countries have started to embrace those changes.

A: Yes sure!. I will NOT sort my garbage into four different containers! I will NOT live with half a glass of ice instead of my full 16oz plastic cup full to the top! I will NOT install those ugly panels in my house's roof nor will I have any type of propeller to generate wind power!

B: Would you buy an electric car if it costs the same (purchase price plus operating costs) as your SUV and has similar features? Would you move your office to a building that costs one third in electricity than your current one, and on top of that uses 75% less water?

A: Perhaps... But those things are not available yet, and if they are the cost is prohibitive

B: In many cases its a "Catch 22" dilemma. The cost is higher than existing technologies simply because the market is smaller and the economies of scale give an unfair advantage to the existing product. That is where I hope government will intervene (he sighs)

A: Don't tell me you also believe in those stories about the shortage of drinking water?!

B: According to The World Bank 80 countries have water shortages, and 40 percent of the world (more than 2 billion people) has no access to clean water or sanitation. Do you think this is a fairy tale?

A: Perhaps not, but what do I care about some forsaken country thousands of miles away?

B: So, you don’t care about the events in 9/11? Or perhaps you don’t give a damn that we are allowing immense amounts of money to escape from our hands and get to oil producing countries, those same countries that finance hatred against the western world?

A: We will overcome those countries using our military strength and I believe McCain is the man for the job!

B: I don’t want to spoil your plans, but I think Obama will be the next president

And so the conversation carries on….

What will happen at the end? Who is right and who is wrong? Only time will tell

Until next week. SHALOM!

Fluff vs Substance

What is Fluff?

According to the dictionary: Fluff [fluhf] - noun 1.light, downy particles, as of cotton. 2.a soft, light, downy mass: a fluff of summer clouds. 3.something of no consequence: The book is pure fluff, but fun to read. 4.an error or blunder, esp. an actor's memory lapse in the delivery of lines.

So, why do I want to talk about Fluff as related to Greentech?

Because in this MEGA trend called Greentech there is a lot of Fluff (as it relates to the definition #3).

We see it every day. A commercial of ANY product has to have a "green" edge. IBM is not just selling computers and servers, they sell "greener business solutions", they have a website to prove it IBM.com/green and hundreds of thousands of dollars in a TV ad campaign that shows the "green" side of doing businesses with IBM.

Like IBM there are thousands of other companies pushing their products with a green "excuse". I see no substance on this adds (only energy savings for more efficient computers), I would rather see an IBM campaign to recycle all their computer cases (collecting and paying for them) and the safe disposal of the mercury of old electronic equipment.

People and institutions are adding to the "Fluff agenda". Governments, universities and non-profit organizations all around the world have spent millions of dollars in brochures and info on how to be more green (use fluorescent bulbs, regulate the a/c in your house and office, take advantage of the carpool, plant a tree, conserve water, etc etc etc.) And even though all these advice would really be helpful for our environment I suspect the driving force behind these initiatives is more to follow the trend rather than to search for a REAL impact on the environment issue. At the end of the day more money is spent on "telling" you how to be more green than the money spent on more efficient a/c or changing all the bulbs of that same institution to fluorescent.

An example of Fluff vs Substance is the extra push Hotels are offering for the guest to be more "green" by not sending their towels to the laundry everyday and instead using them over and over. I call this Fluff because its a "moral trap". If you send the towels everyday to the laundry, then you are a mean earth polluting person. But, if you use the same towel three days in a row then you are a contributor to a "greener" planet and OH! BY THE WAY, WE (THE HOTEL CHAIN) HAVE JUST SAVED $20 ON YOUR ROOM'S COSTS AND THAT PROFIT GOES DIRECTLY TO OUR POCKETS! YOHOO!! I wonder if there is a Hotel somewhere that offers a cost incentive for guests that re-use their towels and actually INVEST money on THEIR green initiative?!

Where is this leading us?

I foresee two possible scenarios:

Scenario A- If the Fluff movement wins, then green initiative will become a fashion. And like all fashions it will die! People will get fed up with this trend and three years down the road no one will want to buy something that is "green" or because is environmentally friendly. Therefore the chance that we have today of changing the course of our planet will be lost because of "over exposure". We have a real possibility of this scenario if we factor the current financial crisis of the world. In hard times like these is about survival and not about "change to become green"

Scenario B- Substance wins, people are able to look beyond the fluff. New technologies get implemented and people change their habits to become TRUE GREEN CITIZENS. And as a consequence greentech becomes a major industry. (i.e. IBM starts building computers that control the a/c temperature and that communicate with other households to plan the ideal carpool for all IBM users, all at a competitive price of a regular computer with components that are recyclable and not harmful for the environment!)

Which scenario will we see? I can't wait to find out!, but for now I say "SHALOM!"

The Complexities of Wind Energy

Last week we commented on some of the potential problems of implementing Wind Energy. The idea is to illustrate the complexities behind developing and implementing these new technologies (Greentech).

This week we will try to illustrate the challenges of building an efficient wind turbine. THE POINT IS TO SHOW WHAT IS BEHIND THESE TECHNOLOGIES THAT SEEM SIMPLE, BUT ARE MUCH MORE COMPLEX ONCE YOU START DIGGING INTO THE DETAILS.

Before we start talking about the challenges of each component and type of turbine, the first issue pertains to the wind.

The efficiency for a single turbine or for a wind farm (multiple turbines) is a combination between turbine design and wind "quality". The wind quality is measured in terms of speed, air density, roughness (air flow affected by earth's surface or obstacles). All these factors have to me monitored throughout at least one year before deciding on turbine type and design. The reason is that the power obtained by a turbine is measured according to this formula:

(source http://ftexploring.com/energy/wind-enrgy.html)

Where (as you can see) the wind velocity affects the power output by a power of 3 (double the wind = eight times more energy output)

Furthermore, each turbine is designed to work under a specific wind speed. If the speed does not match the target for the design, the efficiency of the systems drops.

These are wind maps of Europe (red is strongest wind):

and USA:

Assuming we find a great spot for our turbine and that the conditions will not change much from one year to the next. Now we have to decide on the type of turbine we would like to install.

As shown in the picture (for in-depth knowledge go to http://www.windpower.org) the basic elements of a turbine are: the rotor blades, the gearbox and the generator. These three components are at the top of the tower that has a rotating base (or yaw) to allow the blades to follow the wind's direction and the electronic equipment to control and monitor the turbine.

The rotor blades are a key component because their diameter affects the power output by the power of two (see power formula above). Also, the blades are the main element on the aerodynamics of the turbine. If the blades have poor design, the turbine will work only under a short range of wind speeds and types and it will reduce the force transmitted to the gearbox and therefore reduce the electric output. One of the biggest challenges of today's turbine design is the minimum speed at which they can generate power, the lower the speed the more these turbines will be generating electricity non-stop and the more sites will become feasible for wind farms.

The electric output of these turbines has to be compatible with the electricity we use at home (the one coming from the grid). This electricity has a frequency of 60Hz (50Hz in Europe). This means that the generator shaft has to rotate at approximately 1500 rpm, whereas the blades of the turbine rotate at around 30 rpm.

To solve this issue all turbines have a gearbox. The gearbox converts the slow rotation of the blades into a constant and faster rotation speed for the generator.  Otherwise, the generator should have a mechanism to "smooth" the  power peaks and therefore lose power in the process.

Finally we get to the generator which converts the mechanical force into electrical output. There are several options for these generators, from the number of coils (or magnets), their capacity to the option of having synchronicity or asynchrony between the shaft and the poles.

After all this is studied and budgeted we still need to add the size of the tower and its foundation strength as well as the weight of the whole system as it relates to the "yaw" (the mechanism that allows the turbine to rotate 180 degrees over its horizontal axis to follow the direction of the wind)

(rotor size vs power)

And to finalize our assembly we need to have all the components monitored by electronics. Some components (depending on the design) need to be adjusted according to the monitoring system. The output has to be measured as compared to the wind measurements to account for the efficiency of the turbine. And safety mechanisms (such as mechanical brakes) have to be provided for extreme winds, electric peaks, and component failure.

At the end of the day the most efficient turbine is the one that provides most electricity per cost of its components times their working life. Keep in mind that wind is free, the cost comes from turbine components and their replacement cost (and perhaps also the land where they sit).

As you can see these technologies that seem straightforward at the beginning are much more complex when you get to the "nitty-gritty". The good news is that we are on a steep learning curve and sooner rather than latter we will get to a point where most hurdles will be left behind.

Until next week! SHALOM

Wind Energy

We can't talk about Wing Energy (also known as Eolic Energy) nowadays without talking about T. Boone Pickens and his plan.

The Pickens Plan (http://www.pickensplan.com/ - watch the video presentation) is an energy policy proposal announced July 8, 2008. Pickens' intention is to reduce American dependency on foreign oil imports by investing approximately US$1 trillion to build vast wind turbine farms for power generation, and then shifting the natural gas used for power generation to fuel automobiles.

This is a great move by Pickens, but it has some potential (and very critical) problems, which follow:

1- Problems with the grid (for more on this see the NY Times article). It turns out that all this electricity generated by wind turbines needs power lines to get distributed to the places that need it. The power lines (or power grid) in the US are getting old and have not had an overhaul in quite a while, and like any other equipment that is old and has not been renovated is facing serious breakdowns.

2- Mr. Pickens plan to substitute natural gas for vehicle imported fuel has some downfalls too. Natural gas is better used to provide backup to wind power, not to power cars. Natural gas is burned far more efficiently in power plants than in internal combustion engines. It would be more efficient to generate electricity from natural gas and then power electric cars. Also keep in mind that Natural Gas in non-renewable and is not 100% clean.

3- The plan also has possible ethics dilemma. According to an article in Popular Mechanics, if the plan is accepted, Pickens stands to reap a significant profit by building pipelines to pump billions of gallons of water from an aquifer under the Texas Panhandle, which he has bought the water rights to. The pipeline would follow the same 250-mile corridor that the wind farm would be on, which would be seized from private owners through eminent domain and granted to him. Pickens owns more water than anyone else in the U.S. However, according to Pickens, "I'm 80 years old and have $4 billion. I don't need any more money."

4- Subsidies, government funds… same old. Is there ever a true business model (without having to involve government money)? The CATO Institute (an organization co-founded by Charles Koch, a co-owner of Koch Industries which is the largest privately held oil company in the U.S, and funded by companies including Chevron, ExxonMobil, Shell Oil, Tenneco Gas and Amoco) claims that instead of allowing the market to work, Pickens wants government to limit imports of foreign oil along with installing the wind plants so that he can become richer at the expense of consumers. He also says that if wind power were a sensible economic investment, then it would not require the "lavish federal and state subsidies already in place or the additional largesse sought after by Mr. Pickens."

On the other hand…maybe these are Lobbyist acting on behalf of Big Oil, to protect their turf!

ASSUMING ALL OF THE ABOVE IS DISMISSED OR RESOLVED

There are some serious technical challenges for today's wind turbines.

Even though wind turbines (or wind generators) are widely used around the globe (more so in Europe than in America). The existing turbines are far from efficient and some wind farm profitability models are based on government funds. The promise for a next generation of turbines is the solution to increased profitability and lower barrier to entry into the Wind farm market.

How efficient are Wind Turbines?

There are several ways in which a turbine loses its efficiency.

1- There is a fundamental law of physics (Betz Law) which states that the best that could be achieved by a wind turbine is around 59% efficiency. This is due to the fact that if you take ALL the energy from the wind coming into the turbine you should have zero wind speed exiting from the turbine, which is an impossibility (there has to be a FLOW of wind to keep the propellers rotating)

2- Wind Speed: Wind Turbines are designed to be most efficient at certain wind speeds. As we all know (especially here in Florida) wind is very unpredictable. Therefore, today’s turbines lose efficiency because of changes in wind speed.

3- To generate power that can be used by today’s appliances or injected into the electric grid, the turbine has to generate electricity at a constant frequency (60 hertz in the US – 50Hz in Europe) and certain voltage (120 Volts in US – 230V in Europe). In order to achieve this rotor speed has to be “converted” to a constant speed (1500 rpm) and maintained this way throughout the operation of the turbine. This causes loss of efficiency in the speed conversion process as well as in the “monitoring” process (to ensure constant speed).

When all these losses are figured in, you might, if you are lucky, be getting 35% or so of the wind's energy actually delivered as useful electrical energy to the end user in the very best conditions. The average might only be in the twenties.

In the future we will talk about the different types of wind turbines and how each one takes a step closer to maximize efficiency. Until then, SHALOM!

The Gold at the end of the Rainbow

What makes Greentech such an obvious opportunity for me is (a)knowing that the solutions for today's energy, water and waste management problems are within reach, and (b) a lack of worldwide effort to reach for those solutions. In other words, we could (as citizens of the world) decide that regular (incandescent) bulbs should be phased out and use fluorescent bulbs instead. The numbers make an overwhelming point, using a fluorescent 60 watt bulb would save you:

10 light bulb changes
$40.50 in electricity costs
$1.50 in bulb replacement costs
$42.00 in total
Reduce greenhouse gas produced by power plants by: 691 pounds of carbon dioxide

(source http://www.ajdesigner.com/fl_light_bulb/light_bulb.php)

So why are we not doing this obvious things?. Why are governments not taking steps to regulate towards these solutions?

The answer lies within the business opportunity of greentech. People follow the laws of Newton Physics "Every object in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it". Its easier to keep buying the same bulbs, its also easier NOT to make the calculation and decide on the cheaper bulb vs the more expensive one ($0.50 for the regular bulb vs $3.50 for the fluorescent). Another factor is the slow reaction of governments, it takes too much time for them to "enforce" the elimination of incandescent bulbs, perhaps there are many powerful interests involved or its not a law that would generate enough popularity. Either way, my "bet" is that in the near future ALL light bulbs will be fluorescent or some other new technology, because a trend with strong "external forces" is causing the "uniform motion" to change.

We already discussed some of these "external forces" that are bringing greentech about in The Greentech Wave (1-People are changing their attitude, 2-Companies are channeling resources to greentech, 3-Major economic players are influencing the market). All of these are responses to economic or sociopolitical trends that are causing the scales to tip towards greentech. In the case of the light bulb: the cost of electricity has jumped - in the US - by 33% since the year 2000, and is expected to raise even more as fuel costs climb and the electric infrastructure gets older. When those variables become a stronger "external force" then whoever is better positioned to provide these new technology bulbs to the market will benefit immensely. AND THAT IS THE GREENTECH OPPORTUNITY!

In the case of the light bulb, General Electric has already taken the steps to ensure they are also THE manufacturer of fluorescent bulbs. But there are many other areas of greentech where the market leadership is up for grabs. We will talk about these areas of opportunity in the near future. For now, as always I bid you farewell with a cordial "Shalom!".

No Perfect Solution

“The more I learn, the less I know”, I believe that’s how the saying goes. Well in the Greentech world this saying holds very true. As new technologies are presented to me and as I discover more and more facts about alternative energy, about water purification, about waste recycling, the more I am convinced we have not reached a perfect solution yet.

Let me start from the beginning, and let’s take the automotive industry as an example.

A “perfect” solution according to my book would be one that (A) would not contaminate the environment, (B) would make economic sense (make a profit) and (C) could be implemented without disrupting the existing industry so much as to destroy it (i.e. putting thousands and thousands of auto workers out of jobs)

So, let’s analyze the existing alternatives:

- Diesel fuels generate toxic gases (at lower levels than Gasoline!) and therefore are far from being a “perfect” solution

- Hybrid cars: they are great because they can increase the mileage of a regular car. But, they consume gas, they cost more than regular cars and we are uncertain about how to dispose the batteries these cars carry which may damage the environment even more than the gas they save.

- Plug-In Hybrids: These cars have the capacity to run longer distances on battery and therefore save even more gas. Like the plain Hybrid car these cars also have the battery contamination factor and the additional problem of the source of electricity they require. Is that source a “clean” source of electricity?

• If the electricity comes from coal or any other fossil fuel, then we are just redistributing the contamination (perhaps the contamination level will be lower, but certainly not a perfect solution)
• If the electricity comes from Nuclear power then we have the problem of nuclear waste. Nuclear fuel is only utilized on 10% of its energy content in modern day nuclear plants. This leaves behind a large mass of radioactive material that takes hundreds of years to become non-threatening to human beings.
• We are still very far from achieving a substantial amount of power from wind (Denmark is the leader with less than 20% of their electricity from wind, I believe in the US the number is closer to 2%)
• Solar Photo Voltaic cells are also a very small portion of today’s power generation percentage and that responds to the high cost of manufacturing of these cells. Each cell uses silicon which is very costly (and also non-renewable!) or some other substitute which has not been 100% proven yet. The other problem with Solar PV is the “conversion” factor, these cells are only converting up to 30% of the solar energy they receive (very inefficient!)
• Solar Thermo Electric requires large spaces for the reflectors and is also very poor converting the solar power in to energy (I believe its even less efficient than PV)

- Another option for car fuel is the Hydrogen Fuel Cell. The car is loaded with hydrogen and a “fuel cell” converts hydrogen into electricity with water as byproduct. The electricity generated powers the car and the water can be disposed (or used!). Two issues with this solution are: the high cost of building fuel cells and the energy needs to generate Hydrogen. In my opinion Hydrogen is more a means of storage than a “fuel”. To obtain hydrogen you inject an electric current into water and break the H2O particle into its components. The amount of energy needed to obtain Hydrogen is less than the amount the hydrogen can release through a fuel cell. Hydrogen can also be obtained using chemical reactions, but the cost and the energy consumption for this process is equally high.

- Bio fuels where all the rage a couple of years ago, until the calculation was made for the impact of using edible corn, sugar cane and other potential food sources to fuel our energy appetite. New sources of Bio-Fuels are on the horizon (like fuel generated from algae) but none have been tested successfully yet.

So, what is the answer? Where is the “golden rainbow” at the end of this energy and natural resources crisis?

I don’t have the answer for that. I do know that it helps to look at the past to attempt to predict the future. I look into other similar situations the world has faced and try to extrapolate from those.

What could be a good parallel to this situation? (please send me suggestions if you have a good parallel situation)

Perhaps the development of modern medicine is a good parallel? In older times people looked for their religions to provide answers to their illnesses. Little by little people started to develop the science of medicine, as positive results increased more people turned to “doctors” to find cures. This created a snowball effect because it also allowed “doctors” to gain more experience and also experiment more and more to find their answers. The modern health system is not “perfect” either, but the medical results, compared to those of religious rituals, is certainly more effective!

The parallelism: as we adopt more alternative technologies we also give those technologies a chance to develop into something closer to the "perfect" solution.

Another good example could be the industry of personal computers; In the 80’s personal computers were awkward and hard to use. Little by little this industry has grown and has learned very basic lessons on the way. Nowadays we are only starting to see applications where the personal computer is “transparent”. In other word, the application is so “user friendly” and so well fitted to its purpose that the user never has to think about what goes on in the background (unlike managing Windows XP or Vista!!!!)

Perhaps we, as habitants of Planet Earth, will struggle to find a “perfect” solution to our energy, water and waste reduction needs. But we have started a path towards what will be called in the future “modern” energy, water and waste systems. The path to “perfect” solutions is rarely a straight line.

I apologize for my three week absence, from now on please expect our usual weekly entry into this blog. Best regards and SHALOM!