Wednesday, April 29, 2009

To Tree Hug or not to Tree Hug? That is the question...

Sometimes we run into situations in life where its too late to undo what has been done and the only thing left is to chose between the "lesser evil" option.

If you are at a friends house and accidentally run into a large ceramic vase and the vase breaks. You can't undo what you did, the options left are: 1- to compensate for the loss by buying or paying for a substitute or 2- to piece the vase back together and somehow glue it back into shape. Either choice yields a bad result, but sadly, there is no way to go back in time and undo the damage.

I have talked to people across the "tree hugger" spectrum. People who believe "mother earth" is hurting and "she" needs our love and caring attention. And people who say that climate change is nonsense and that we are not impacting nature in any way by just going on with our lives.

We will only know the reality of today's status when we see the consequences in the future, and by then, it will be too late to change the result.

So let's try to make sense out of what we have today. Does Greentech stand a chance to help us avoid running into a unwanted "point-of-no-return" scenario?

I have said it many times: Greentech has to have economic feasibility. The cost of solar power has to match the cost of coal power. But, who says the cost should only represent materials plus labor. What about cost of public health. What about the cost of losing our bees (read this article Group Sounds Alarm on European Bee Industry)

The other factors we need to take into account when we compare Greentech to existing sources of Energy, Water and Waste Management are (a) the Economies of Scale and (b) the Research & Development amortization.

For example: A coal burning plant has several choices of vendors for their equipment (the risk of building a plant and getting it wrong are minimal); the sources of coal are well established and we know how to exploit them; the electric grid is designed to receive electricity from this type of source, etc. Today's entire world is set-up to generate energy from carbon. On top of all this, the majority of the cost of R&D for coal energy has been already paid for (as well as the cost of R&D for cars that run on oil, classical waste treatment methods, etc.).

Greentech will need a "boost" to achieve a competitive level with the existing technologies. Not only do we need to artificially create Economies of Scale for the replacement of coal plants, but we will also have to find a way to offset the cost R&D. That is why the CEO of Duke Energy agrees that coal is very bad for the environment and we need to substitute it, but he is not taking concrete steps to achieve that. Watch this:

Perhaps we are taking the correct steps to avoid running into a point-of-no-return situation (see Clinton Says U.S. Is Ready to Lead on Climate). I just want to leave you with the following thought: even though many people disagree on what happens after you die, few are willing to take the step to find out.

Here are some interesting comments I received for Who is holding Greentech back?:

"I don't believe it is who but what.
Any investment unless it is an emotional decision comes down to payback. Many green investments don't payback within many financial investor's needed timeframe.
With that said, I believe many are getting close."

"The banks or investors must check the results… that's why, good scientific consultants are required in financial business!!!!"

"So much for the great American Capitalistic system. This kind of environment is no more no less than the same economic mine field that was created around the sub prime mortgage fiasco and no one even wants to discuss it.
What has to happen is that a completely new means of funding has to be created to support viable technologies that are waiting in the wings. This could be done on the same level as what was done in the oil and gas industry with the “Royalty Trust Agreements” or some other financial instrument along those lines that reward the investors based on “PRODUCTION” derived from the process output and the effectiveness of the product in the market place"

"Wow, you really hit the nail on the head. Entrepreneurs like me who have risked so much to create a new technology are being hung out to dry by the more comfortably situated. Real entrepreneurs who risk their own money and careers (not the cushy kind who step right into a paid position with a startup) are treated as irresponsible and reckless"

"Of course oil companies are going to try to stomp out greentech... it is very much hitting them where it hurts...their money. The greentech companies have to infiltrate by really selling themselves with the saving money pitch. I know this may sound like it goes against what greentech is about but you need to speak in the language of big business. If you can go into a hotel chain and tell them your innovation will save them big bucks they will listen and in fact they just might invest in your greentech company"

"Cheap fossil fuels"

"You are correct the decision makers do not have enough information to define what is green or what is brown...they have a lot of hype...and perceptions that are incorrect"

"The Greentech bank is an interesting idea. The US has the resources to become a world leader in the alternative energy space"

"I love it. And it’s even worse if you are not developing a widget. My Energy Credit Card has a business method patent. My customers will be electric utilities and the closer I get to those "decision makers" the more entrenched they are and/or just plain scared of the simplicity of the Energy Credit Card.
For the curious, here is a short video:"

"It is not just the credit markets that are holding Greentech back. Two other candidates are government and the consulting engineering industry"

"Maybe the answer is to learn to do a better job of educating the current crop of money people about the value of taking risks in such areas and/or doing a better job of demonstrating long-term benefits"

Until next time: SHALOM!

Wednesday, April 22, 2009

Who is holding Greentech back?

"He who is firmly seated in authority soon learns to think security, and not progress, the highest lesson of statecraft" James Russell Lowell

If you want to know what else is wrong about today's economic model, you have to talk to any entrepreneur who is trying to implement a new Greentech initiative in a commercial scale.

The logical general path of a new product or service towards market implementation is the following:(1) An idea is conceived;(2) The concept is proven;(3) The product or service is launched to the market. Generally speaking, almost any new product that addresses a big enough market requires a big capital injection at the time of launch to market. Most of the companies seek this capital from banks and financial institutions.

The problem with this sources of capital is that they are very risk averse (now, even more that before!). Therefore, the decision maker for lending money towards a new Greentech product or service will be intrinsically against taking a risk on a new technology, even if that technology represents higher margins, and more so if that technology "only" represents lower carbon emissions.

Think about a new solar cell that is able to generate 5 times more electricity than classical cells being used nowadays. Lets assume that the product has been tested and proven worthy of initial investment. When this product is proposed for a large solar field to generate electricity for an entire town the project is presented to the banks. The bank's loan committee will look at this loan and will try to asses their risk. Someone will ask "has anyone proven these cells for a lifespan of 20 years, which is the loan period we are considering?". A long silence will follow until someone answers "we are not sure how these cells will behave past their first year of life, which is what was tested so far". What do you think the outcome of the loan committee will be?

A similar problem occurs with regulators. When a new greentech product is trying to get into the market is up to the regulators to provide a permit for this product to be commercially feasible. These regulators are also risk averse, at the end of the day they don't get any reward for approving better technologies, but they get punished for approving faulty ones!

To summarize, the lending committees of the world and the regulators are setting the limits to the type of technology we can access. This severely skews the outcome of the technologies being developed and presented to solve today's energy, water and waste management problems. I PROPOSE THE FOLLOWING: LET'S BUILD THE GREENTECH BANK, hire experts in each field to really asses the possible risks of each technology and let's give financial backing to the technologies that deserve to be launched (and hope regulators will follow suit).

Here are some comments I received from The Good News, the Bad News and the Ugly News:

I am sorry, your point escapes me, even after reading your blog. What are you trying to say here? We need to be thinking in terms of substantial changes in the supply of types of energies and the methods of delivering those supplies that are economic and feasible. Man, that is a life-altering experience. Greentech is still a pipe-dream with wet diapers.

Interesting and relevant news. Consistent with what I am seeing. The economy has certainly slowed (but not stopped)

Provide more capital to small start ups - there are thousands of people out there in garages - we do not need the big to protect the markets and have it their way - at one point there were 200 car companies - same here - protect the small and help them grow

Comments from The obstacles to Alternative Energy implementation are in our heads. Are they?:

That's only part of the problem. The other problem is that we are too rich, so we don't give a damn, and can throw away hundreds of dollars per month without even knowing it. The conscious people are satisfied with talking the talk and walking the walk for themselves

The barriers to entry in the Energy Market are in your mind in this respect -- Don't allow anyone person, company & entity to impede your progress. If you provide smart business answers, the volume will follow

I do not think you are wrong, but is the green or alternative energy infrastructure large enough to be part of the mainstream?

Why don't we spend time and money coming up with ideas to use wisely the energy supplied by renewable energies. If we do not have electricity for one hour or a couple of hours, do we die? No, so many millions in the world do not have and they live every day. Mr Shiro is completely right. It is our own brain, which is creating the problem

Really big obstacles exist, I am currently making suggestions to my local Politician to asses and draw up protective outlines to govern the hapless new wave of installers and dealers of this new technology. Residential involvement seems to want more guidelines on how new dealers with almost no experience can suddenly appear out of nowhere and work on your home or office for a high dollar price. Where will this lead? Homeowners dealing with a nightmare of no set rules and guidelines orchestrating the professional as these newbies call themselves without getting proper identification, certification, licensing and insurance to facilitate these constituents of our local, state, or even federal areas. New dealers are not the only problem; New manufacturers are also popping up and claiming remarkable and physical science impossibility with these products. These New Manufacturers also need to make sure that they express that there systems only work at these outputs, and that the material has been reviewed by either DOE or NREL and certified by UL or consumer reports. We set up rules and guidelines to safe guard our peoples vehicles they ride in in the United States. If you build a car that does not meet the DOT crash standards for instance; it will not be sold to the people. This same concept is what I am proposing to the renewable energy field

Until next time: SHALOM!

Thursday, April 9, 2009

The Good News, the Bad News and the Ugly News

As I flip the pages of the New York times in days past I have encountered the following articles:

Article #1

Not So Green After All (Oil Giants Loath to Follow Obama’s Green Lead)

The Obama administration wants to reduce oil consumption, increase renewable energy supplies and cut carbon dioxide emissions in the most ambitious transformation of energy policy in a generation.

But the world’s oil giants are not convinced that it will work. Even as Washington goes into a frenzy over energy, many of the oil companies are staying on the sidelines, balking at investing in new technologies favored by the president, or even straying from commitments they had already made.


The UGLY NEWS: is that greentech is finding it's toughest obstacles. Traditional businesses are protecting their ground and many big players are reducing their exposure to new technologies. It is only logical that many companies, having to reduce costs and to concentrate on their existing operations lose sight of potential opportunities in the future.

Article #2

Cost Works Against Alternative and Renewable Energy Sources in Time of Recession

Windmills and solar panel arrays have become symbols of America’s growing interest in alternative energy. Yet as Congress begins debating new rules to restrict carbon dioxide emissions and promote electricity produced from renewable sources, an underlying question is how much more Americans will be willing to pay to harness the wind and the sun.


The BAD NEWS: is that Greentech will have to become more cost competitive in the near future. Declining world consumption and energy prices will act as a much stronger filter of Greentech products and services. Only the very competitive and the ones that have the soundest commercialization plans will be able to survive in this economy.

Article #3

A Tiny Camcorder Has a Big Payday

SAN FRANCISCO, Calif. — Pure Digital Technologies thought small and simple, and it paid off big time.

The tiny, eight-year-old start-up famed for its inexpensive and easy to use Flip video cameras has defeated a down economy. On Thursday, the 100-person company was bought by Cisco Systems, a technology infrastructure giant, for $590 million in stock. The deal caps off a bumpy and unpredictable rise for Pure Digital, which bested the Asian companies that dominate the camera industry from an office located above the Gump’s department store in the heart of San Francisco.

“At a time when everybody has just been hammered with stories of misery, this is a really fabulous tale of what is possible against all odds,” said Michael Moritz, a venture capitalist at Sequoia Capital, which invested in Pure Digital.


The GOOD NEWS: There are still winners out there! If Pure Digital can make it big so can others in the Greentech sector. The path towards greentech implementation has become steeper, but the finish line is still achievable.

Article #4

At U.N. Talks on Climate, Plans by U.S. Raise Qualms

BONN, Germany — At the start of the United Nations climate talks here 12 days ago, the Obama administration’s chief climate negotiator, Todd Stern, received a round of rowdy applause. It was the first appearance of the new negotiating team at any global meeting.

But by Wednesday, as the meetings drew to a close, some delegates — and even some United Nations officials — were grumbling that the United States was not moving fast enough to take action on global warming.


More GOOD NEWS: Unlike the experience of the 80's when price of Oil went back down (after a tremendous increase) and all greentech initiatives were thrown out the window, this time around there is a strong commitment towards climate change and clean technologies. The conversation has turned from "are we doing something?" into "are we doing enough?"

Until next time: SHALOM! (for those of you who celebrate: Happy Passover)