21st Century Regenerative Technology

1. Efficient Transmission Maker Fallbrook Raises $25M
2. Why Refundable Tax Credits Are Important for Clean Power

Efficient Transmission Maker Fallbrook Raises $25M

2009-01-12 13:00

Katie Fehrenbacher - Startups

nuvincismall To make our vehicles more efficient every component needs innovation. Monday morning Fallbrook Technologies, a company that makes efficient but low cost mechanical transmissions for vehicles and devices, including bikes and electric vehicles, says it’s raised $25.4 million. The company, based in San Diego, turned to venture capitalists for the first time for this round — previously relying on private equity — and raised the money from cleantech-focused firm NGEN Partners, as well as Netherlands investment bank Robeco.

Fallbrook’s transmission is a form of a “continuously variable” transmission, which changes speeds seamlessly and doesn’t have the distinct gears associated with standard transmissions. Continuously variable transmissions have been used for decades in lower power vehicles, and the technology when used with an engine allows the engine to remain at peak efficiency and can reduce fuel consumption. Fallbrook’s transmission uses the movement and rotation of tiny balls to change the speed (see image below).

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For the electric vehicle market Fallbrook’s CEO Bill Klehm tells us that his company’s transmission can enable a much cheaper but efficient option, and can bring down the price of an electric vehicle on the order of thousands of dollars. The company is currently largely targeting the lower power “light” electric vehicle market. For bicycles, the transmissions delivers a very smooth way to change speeds without jerky gear shifting. While that might not be directly cutting carbon emissions, better bicycles in many countries will get people out of gas-based cars.

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Why Refundable Tax Credits Are Important for Clean Power

2009-01-12 10:30

Josie Garthwaite - Energy

Now that President-elect Barack Obama has presented his economic stimulus plan — and set a goal of doubling clean energy output within three years — it’s time to delve into what wind and solar industry insiders say will be the most crucial incentive for boosting production: refundable tax credits.

In October, industry officials applauded extensions of the investment tax credit for solar and the production tax credit for wind. But with turmoil in the financial sector have come calls to revise the incentive programs. Last week, the Solar Energy Industries Association and the American Wind Energy Association joined forces to push for refundable tax credits in an economic stimulus package. We’re likely to hear a lot more about it as Congress mulls Obama’s plan.

Why does this bit of tax policy matter so much to wind and solar? The recent investment banking shakeup has left energy companies competing for financing from a shrinking pool of tax-equity investors. These investors, which not too long ago counted among their top ranks AIG, Lehman Brothers, Wachovia and Morgan Stanley, basically buy tax credits from solar energy companies and wind turbine manufacturers. As the San Francisco Business Times explains, the firms then use the credits, or tax equity, to shelter otherwise taxable income.

Why don’t clean energy companies take advantage of tax credits directly? Non-refundable tax credits can reduce a company’s tax liability to zero — but not below. (Negative tax liability essentially means you get a check from the U.S. Treasury.) So solar and wind startups, many of which take years to become profitable, may not have enough taxable income to take full advantage of credits.

Refundable tax credits, on the other hand, can drop a company’s tax liability to less than zero. That means a startup can count on a check from the government to help them get going when clean power projects come online. In boom years, the Lehman Brothers of the world have typically provided that early investment. But many of today’s remaining investment banks have acquired troubled rivals. Since 2007, the number of active tax-equity investors has dropped to just five (down from around 20 in 2007), SEIA president and CEO Rhone Resch told reporters in a call on Friday. And recent acquisitions have brought big losses onto the books of major players like JP Morgan, which captured half of all U.S. wind deals in 2007, spurring them to rethink tax plans — and turn away from clean energy projects.