JUICE: Renewable Romances

By Published On: November 17, 2006

Alternative energy has gone from being the wallflower to the bonne vivante, and venture capitalists are in hot pursuit. More than $635 million was invested this year in clean-technology companies, with $287 million invested in the third quarter of this year, according to Thompson Financial. This year’s investment represents about half the $1.38 billion invested since 2001. Last year, venture capitalists invested $195 million in the alternative energy sector. “Clean Tech is one of the fastest growing segments of venture capital-passing the semiconductors as the fifth largest investment category,” stated Bob Epstein, a board member of a new bank targeting green businesses that opened this week in San Francisco. The investors raised $25 million to lure alternative energy technology firms to New Resources Bank. “The new bank is responding to a market demand for more customized banking and by focusing on a growing wave of green or sustainable businesses and the people who value them,” according to New Resources. Last week in the City by the Bay, it was speed dating for clean-technology companies and venture capitalists at a conference sponsored by Pacific Growth Equities. CEOs and other representatives from more than 50 public and private companies in and outside California specializing in demand response, fuel cells, solar, biomass, other renewable power, and less polluting coal competed to tout their wares and investment prospects. These companies’ increasing sex appeal is attributed to California’s greenhouse gas reduction law, the California Public Utilities Commission’s Million Solar Roofs program – or Solar Initiative – and Democrats winning the majority in both the U.S. House and Senate last week. Senator Barbara Boxer will take over as chair of the Environment and Public Works Committee in January. In contrast to the current chair, climate change skeptic James Inhofe (R-Oklahoma), Boxer pledged to push federal legislation to curb greenhouse gas emissions on par with California’s target of cutting CO2 emissions by 20 percent by 2020. “We cannot imagine a more polar shift in committee leadership interests and outlook,” said Michael Carboy, managing director of the Signal Hill Capital Group. Alluring qualities of the companies on display at the November 8 Clean Technology Conference attended by 500 people were efficiency technology, pollution reduction, and long-term deals. Another draw is that many believe this sector has met only a fraction of its potential. Compare investments made in telecommunications with those in the energy sector. Less than 1 percent of commercial and industrial firms use advanced technology to measure and manage energy spending, while nearly all of the companies use advanced technology to manage telecommunications systems, according to Tim Healy, chief executive officer of EnerNOC. EnerNOC is a private firm that specializes in demand-response systems and management. It’s moving in quickly to fill the void and has seen its revenue soar by producing negawatts from measures it implements to reduce end users’ consumption at times of high power use. The company, founded in 2001, saw its revenue rise from $1.1 million in 2004 to $10.2 million in 2005, to reach more than $25 million this year, according to Healy. The Federal Energy Regulatory Commission estimates that the demand-response market will reach $7.5 billion by 2010. EnerNOC is working with the California Public Utilities Commission to help improve the paltry level of demand response during hot days to keep power flowing in the state. It is a third-party aggregator and helping to shape CPUC resolutions to reap needed negawatts from the utilities. The investor-owned utilities fell far short of the energy savings target this last summer. When power use exceeded predicted peak levels, demand-response programs yielded less than half of the goal set out in the joint agency Energy Action Plan. Scott McGaraghan, EnerNOC’s business developer for California, said his company’s California demand-response customers “were burned out” by frequent calls from utilities to shed power, which were often for more power than they were willing or able to cut. The company program includes real-time monitoring and “surgical cuts from noncritical load,” McGaraghan said. EnerNOC, which has worked predominantly in New England and New York, receives capacity payments for the promised energy savings and an energy payment from the grid operator when called on to produce agreed-upon savings. The end users in turn get a lower utility bill. Healy noted that demand-response programs beat out the competition when it comes to the time line to produce real-time energy. Creating 100 nega-megawatts, or (n)MW, takes between 60 and 90 days. A biomass company that signed a long-term deal with Pacific Gas & Electric for gas from dairy farms is also sitting pretty. Cow patties create large quantities of methane gas, which is a greenhouse gas 20 times more potent than CO2. However, when that methane is converted to fuel instead of evaporating, it supplies natural gas. Microgy, a subsidiary of Environmental Power Corp., agreed to supply PG&E with 8,000 million cubic feet of gas a day. On November 13, the company announced that it had signed a number of agreements with several dairies to install its multitank gas production units on their land. The utility agreed to pay the interconnection costs for the tanks. Microgy also gets to keep the greenhouse gas credits created by turning the cow manure into marketable gas. The digesters are estimated to cut global warming emissions by 1 million metric tons a year. The current value of the carbon credits on the Chicago Climate Exchange is estimated at $3 million. “We will continue to aggressively pursue additional manure supply and long-term gas purchase agreements in this largely untapped market,” said Rich Kessel, Environmental Power president and chief executive officer. Environmental Power’s earnings dropped this quarter, ending September 30, by 9 percent, from $45.9 million last year to $41.6 million this quarter. Part of the decrease was attributed to Microgy switch from selling its gas facilities to owning and leasing them to dairies because of the expected boom in this renewable resource – or, as the company says about the huge amounts of generated cow poop, “energy that is beyond renewable.” Another private company provides data communications and monitoring for distributed generation. Fat Spaniel Technologies was involved in the development of the performance standards of the CPUC’s California Solar Initiative, which seeks to create up to 3,000 MW of solar power. Many solar power systems have fallen short of promised energy, and Fat Spaniel has developed technology to track system output. The end user pays for the technology, estimated to cost about 1 percent of the solar energy system’s installation costs, said Thomas Dinkel, company vice-president of sales. The functionality of one of the San Jose-based company’s communication devices can be viewed on the company Web site at www.fatspaniel.com. It monitors in real time the output from a 2.1 kW solar system on a large building. It also tracks how much power is consumed on site and sent back to the grid. For example, in the early afternoon of November 14, this system was producing 1,401 watts, exporting 1,139 w, and using 262 w. The renewable system is credited with cutting 17,216 lb. of CO2 and 59 tons of NOx since its installation in April 2002. It also is credited with producing the equivalent amount of energy needed to make 507,010 cups of coffee. While I am not in the market, watching all those swinging singles flirt, twirl, and whirl gives me a big time caffeine buzz. -Elizabeth McCarthy

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