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1. Xcel's SmartGridCity Can Thank Fiber For Ballooning Costs
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2. Big Year Ahead for Solar Industry, If It Can Woo Congress
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3. What The Ausra Purchase Says About Greentech
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4. Toyota Troubles: Lessons in How (Not) to Handle a Green Halo
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5. 10 Questions for Greentech Investor David Gelbaum
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6. Fisker on DOE Loan Timeline (Next Month) and Pulling Out of Michigan
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7. Daily Sprout
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8. Quiet Quercus Trust Chief Gelbaum Signs On as Solar CEO
Xcel's SmartGridCity Can Thank Fiber For Ballooning Costs
Jeff St. John - smart grid
According to a Friday story in the Boulder Daily Camera newspaper, SmartGridCity — one of the most widely publicized experiments in bringing smart grid systems to an entire city, with a who's who of industry partners including GridPoint, Accenture, Current Group, SmartSynch, Ventyx and OSISoft — has seen capital costs balloon from an initially projected $15.3 million to a new estimate of $42.1 million, and that doesn't include operations and maintenance (the entire project is expected to cost in excess of $100 million).
The CPUC has approved the utility's $11 million rate hike to cover additional SmartGridCity costs as part of a broader rate case approved in December. But it has also ordered the utility to file a "Certificate of Public Convenience and Necessity” proving that the hike will serve the public interest, something that Xcel hasn't yet had to do for the project.
According to Xcel, it’s the cost of building the fiber optic network that serves as the backbone of SmartGridCity's communications, a task that was given to consortium partner Current Group, that’s mainly responsible for the ballooning cost. Not only did the utility need far more underground fiber than it originally anticipated, it also faced other unexpected costs, such as using diamond-tipped drill bits to tear through granite and bringing in cranes and dump trucks to remove boulders, the utility reported in a May document.
Until now, Xcel and its SmartGridCity partners have footed the entire bill for the project without a rate increase, said utility spokesman Tom Henley. Just how much of the additional costs, absent the most recent rate recovery, are being borne by Xcel versus its partners, including Current Group, he didn't say. (He also declined to comment on a January report from Greentech Media that Xcel demanded $5 million from each of its partners to take part in the project, saying that he couldn't disclose dollar amounts contributed by each partner.)
Rumors that SmartGridCity was facing fiber-related cost overruns have been circulating for some time. The whole affair brings into question whether smart grid services alone can justify the cost of building out a fiber optic network. While many utilities have fiber optic networks installed, they’re usually limited to major transmission lines and end at big substations, rarely venturing out into neighborhood distribution grids.
Granted, some municipal utilities have installed fiber optic lines to homes and businesses and are now looking at providing smart meter connectivity through them — but those investments have typically been justified by including the potential to sell video, data and voice communications over the same lines. Examples include Tacoma, Wash. municipal utility Tacoma Power, which has turned to vendor MuNet to hook up some 17,000 smart meters via already-laid fiber optic lines, and Chattanooga, Tenn.. where municipal utility EPB won a $111.6 million Department of Energy smart grid grant to build a $200 million fiber optic, teaming up with Tantalus for the smart meters and Alcatel-Lucent for the fiber optic network.
Xcel has until late February to file its certificate of public convenience and necessity, and the CPUC could take six months or so to review it, said commission spokesman Terry Bote. In the meantime, Xcel can continue to collect ratepayer money to cover the $11 million — but might have to refund that amount if the CPUC rejects the certificate, he said. As for how it will make this decision, "The commission is looking to make sure the project is in the public interest," he said. "That's about as specific as I can get at this point."
But he did say that the CPUC was considering opening a separate "investigatory docket" to review various aspects of the SmartGridCity project — including the matter of the costs and benefits of using fiber optic networks versus other forms of communications for further expansion of smart grid services in Xcel's Colorado territory. Fiber is undoubtedly the fastest and most reliable communications network available to utilities, but costs can be a killer, and many utilities are deploying cheaper alternatives, such as utility-owned wireless or power line-carrier networks — as well as turning to public cellular networks such as Sprint, AT&T and Verizon — to get the job done at lower cost. CPUC's docket on the matter could yield some very interesting information on these questions — stay tuned.
As for Xcel, "We're looking at all types of options for which parts (of SmartGridCity) we'd like to transport to other parts of our service territories" as the utility seeks to expand its smart grid system, Henley said. "We have to determine what's the best way to do that." Xcel is using multiple technologies in SmartGridCity, including broadband-over-power line communications over the same lines that carry electricity, as well as existing DSL lines from Qwest, to bring connectivity to homes, and both fiber and cellular for the "backhaul" networks that bring data back to utility control centers.
Notably, Xcel hasn't chosen to use wireless mesh technologies from vendors such as Silver Spring Networks and Trilliant to connect smart meters — the first choice of most of the U.S. utilities doing smart meter deployments. In the meantime, Xcel has hooked up about 20,000 Boulder customers, of an eventual 45,000 or so, with smart meters, and is seeking permission to start a pilot variable pricing program with about 2,000 of those customers, and hopes to get CPUC approval by June. No doubt it’s eager to get CPUC approval of its rate hike being in the public interest, to avoid having the uncertainty weigh down on the entire project.
Image courtesy of Xcel SmartGridCity.
Big Year Ahead for Solar Industry, If It Can Woo Congress
Josie Garthwaite - Energy
“I’m hopeful that 2010 will be the year that we actually break a gigawatt for just the photovoltaic industry alone,” he said. “We all thought 2009 was going to be a dreadful year in terms of installations and jobs,” and yet the sector created nearly 20,000 jobs. “We are just starting to regain our foothold to become a leading country in solar. This was not by accident,” he said, but largely because of provisions in the Recovery Act.
Resch anticipates this year could bring another 35,000-45,000 jobs — if Congress enacts several key policies, including a national renewable energy standard and an extension of tax credits. Noting that the Recovery Act “is not a one-year shot in the arm,” he said, “I think 2010 is going to be a bigger year than 2009.”
Soon enough, however, incentives rolled into the stimulus package will end, and that could dramatically slow the solar industry’s momentum. “There are several provisions that expire at the end of this year from the Recovery Act. If those provisions aren’t extended,” said Resch, “you’ll have a push that reaches a cliff.”
While Resch cited gains for the U.S. solar industry on the global market, recent analysis of 2009 wind market data held a surprise that American Wind Energy Association CEO Denise Bode said should “add urgency for Congress to act” and establish long-term policies: China finished the year with more new wind installations (13 gigawatts) than any other country. “We thought we would still be number one for the second year in a row,” said Bode. “We need to move forward into 2010 to not just doing this on-again-off-again tax policy.” If strong policies come into place, she said, “We’re ready to rock and roll.”
Image courtesy of Flickr user Itiro (Creative Commons)
What The Ausra Purchase Says About Greentech
Katie Fehrenbacher - clean power
For several of the venture capitalists who collectively invested close to $130 million into Ausra, including Kleiner Perkins and Khosla Ventures, this week’s deal marks one of their first exits in the greentech industry. If you check out Kleiner and Khosla’s portfolio companies on their websites, no other startups have been disclosed to have been bought or gone public (if Silver Spring Networks or Amyris go public Kleiner will have some big ones coming soon).
There are a series of greentech IPOs expected in 2010 (Tesla, Silver Spring Networks, Solyndra, Codexis), but when it comes to acquisitions, the Ausra deal could end up being pretty typical for greentech investors. Founded in 2006, Ausra clearly has a smart team and a solid technology, but realized last year that the amount of financing it would need to compete with some of the players that both develop the technology and also own and operate their own solar plants, would be massive. Ausra then shifted to become a company that licenses its technology (Update: including the design, manufacture and installation.)
How much is that tech worth? Ausra’s value is largely based on its team (70 employees), its intellectual property and its licensing deals (it has announced two licensing deals, but has said that more are in the pipeline). The company is reportedly not profitable and the acquisition price has been rumored around $200 million.
Ausra is clearly not worth as much as Siemens paid for Solel ($418 million), given Solel said it was making revenues on the order of nearly $90 million for the first half of 2009, thanks to its solar receiver supply business, and had 500 employees.
If Ausra went for $200 million, then with $130 million of investment that isn’t much of a return after four years. Say if Ausra went for closer to $400 million (which I doubt), that would come closer to a good exit, but still not the kind of successful return metrics that venture capitalists are used to from IT. I also think it’s safe to say that if the investors that invested in Ausra, along with Areva, are being quiet on the price and the returns then they aren’t big enough to brag about. Particularly because Ausra has been so high-profile and eager to talk since it started, and was one of Al Gore’s first co-investments at Kleiner.
Update: Todd Woody reports that Areva executive Anil Srivastava told him that the price the company paid for Ausra was “in line” with what Siemens paid for Solel. "The current shareholders are very well-reputed venture capitalists and I can assure you they negotiated very well," Srivastava told Woody.
I would expect that the next acquisitions of solar thermal firms (after Ausra) that are owning and operating projects to go for a lot more $200 million — eSolar and BrightSource seem to have moved up in value considerably over the past year with deal announcements and high-profile projects. eSolar in particular snagged that massive Chinese solar thermal deal.
So who will be looking to buy this next crop of solar thermal firms? One likely buyer is French power component company Alstom, which like Siemens could use the technology to sell through its distribution chain. Alstom was reportedly one of three companies that bid on Solel. There’s other nuclear providers out there that, like Areva, want to offer another form of carbon-free power alongside nuclear. And then there’s the wild card of the power producers that also have a utility arm, like NRG Energy, or Duke — I could see both getting more aggressively into solar thermal.
Toyota Troubles: Lessons in How (Not) to Handle a Green Halo
Josie Garthwaite - Automotive
In an automaker’s lineup, a “halo” car is meant to cast a positive glow over a company or brand — showcasing technology, styling and smarts while also helping to define what the brand stands for and luring customers into showrooms to buy other models. The Prius did this to such remarkable effect for Toyota that the industry took notice. As GM-Volt tells it, the status Toyota acquired as “a media and environmental sweetheart” through the halo effect of the Prius helped inspire GM’s push for the plug-in Volt. But hanging so much of your reputation on one model also carries risk — and that can get lost in the green glow.
Supporting the Halo: Automakers can ride the wave of a halo for awhile, but sustaining a reputation for environmental innovation will require follow through. As BusinessWeek explained in a 2006 piece on halo models, automakers risk falling short of customers’ expectations when they launch (and sometimes hype) these defining vehicles. ”A halo car is a promise,” one analyst explained in the article. “A promise of what great things are coming down the road from the manufacturer. But if that promise falls short the people who took a chance will be slighted and will probably never come back.”
Toyota built up on the promise it made with the Prius, producing one of the industry’s most fuel efficient lineups. How much load Toyota ends up shifting off of the Prius model in the wake of these recent braking problems, and how consumers respond in coming months, will offer a hint of just how far startups can go with their eye-catching first models (Tesla with its Roadster, Fisker with its Karma) en route to more mainstream offerings.
The Tortoise Wins: As the maelstrom around Toyota grows, critics and observers have begun asking whether Toyota grew too big, too fast — prioritizing new markets, new models and ramped-up production over quality. To what degree the emphasis on growth is responsible for Toyota’s current predicament can be debated. But it should nonetheless offer a warning to companies that have pledged ambitious production ramp ups in loan agreements with the Department of Energy in recent months. At the end of the day, it’s better to have a reputation for delays (in the green car market, that’s almost standard at this point) than for defects.
Value of Transparency: Part of Toyota’s troubles at this point stem from the question of how much evidence it had about safety problems, and when, and why it didn’t take action sooner. As the Christian Science Monitor wrote on Monday: “[I]f Toyota had a problem with sticky accelerators in Europe as early as December 2008, why did it wait until the following October before investigating the problem in the United States? And why fix the problem in new vehicles on the assembly line but not on cars already on the street?”
The company now faces a growing number of lawsuits, and the lesson is a simple, somewhat hokey one: Honesty is often the best policy — for safety as well as performance issues. For electric car makers that anticipate battery performance and longevity may vary based on climate and temperature, for example, following this policy would call for public recognition of that tendency (as GM’s Bob Lutz has done, while Tesla has portrayed “the potential for extreme temperatures to affect the range or performance of electric vehicles,” as a somewhat surprising new discovery).
Expect the Script to Flip: Automakers seem to be playing musical chairs in the hot seat. Whether under scrutiny for bankruptcy or basking in the glow of a government award, successful launch or trendsetting model, companies in today’s tumultuous car market can see public attention shift relatively quickly. The Detroit Free Press notes research from BrandIndex today showing, “Consumers say they have heard more negative news about Toyota in recent days than they heard about General Motors and Chrysler during their bankruptcies last spring.” Toyota’s next test comes up this week, at the first Congressional hearings on Toyota’s response to reports of safety issues in its vehicles.
What do you think are some of the key lessons for green car makers can take from Toyota’s handling of the sudden acceleration and braking problems in its vehicles?
10 Questions for Greentech Investor David Gelbaum
Katie Fehrenbacher - Green IT
The famously private investor David Gelbaum, founder of The Quercus Trust, and who by his own estimates has between 40 and 50 cleantech investments, as a rule hasn’t done interviews for years. According to the last comprehensive story on him, published in the LA Times in 2004, the former math whiz, hedge fund manager and philanthropist, is so anonymous he’s sometimes mistaken for his gardener. But this afternoon, on the heels of Gelbaum accepting the role of CEO of one of his portfolio companies Entech Solar (the first time he’s taken over as CEO), Gelbaum got on the phone with us to chat about the potential of solar, how he’s lost money in greentech so far, and his focus on making some returns.
1). Why did you take the job as CEO of Entech Solar?
David Gelbaum: I have always been active with our portfolio companies, but this is the first time I’ve been CEO. But I’m passionate about the company, I’ve got an understanding of it and it turned out the board agreed with me. This is a company which I’ve been the most closely involved with — I’ve been working with the team and I know a lot of the people and I’ve been functioning basically as an executive already.
2). Can you tell me a bit more about the process of starting the Quercus Trust? What inspired you?
DG: The Quercus Trust is just an estate planning fund, and I picked the name Quercus Trust because I like oak trees (quercus stands for oak). In 2006 I decided to get into cleanech investing. I was looking around to start making some money and I had some understanding of solar, so I looked at that. It looked really promising, particularly when I realized we were close to solar being at economic parity with fossils.
3). So your cleantech investing through Quercus Trust is meant to make money, in contrast the your philanthropy work?
DG: Yes, I don’t need to make money on this in order to live, but yes, the goal is to make money off the investments.
4). Have the returns in greentech been what you expected — do you have exits yet and if so what?
DG: I havent had any exits and I’ve lost money in this business. It’s just part of the general shortage of credit.
5). Kleiner Perkins’ John Doerr said a couple months ago that if he’d foreseen the credit crunch and the recession, he’s not sure if his firm would have gotten into cleantech back when it did. Have you had similar thoughts?
DG: No, I’m glad I’m in this. I’m very optimistic.
6). What are the sectors you’re most bullish on?
DG: I think most of my investments have huge promise, and many of them are intertwined. Solar can’t go forward without the smart grid, because of the intermittency measures of solar. They all have huge upsides.
7). Are there any areas that you’ll be making more investments in going forward in 2010?
DG: Mainly follow-on investments and focus on getting the current ones to make money.
8). How many cleantech investments have you made to date?
DG: Somewhere between 40 to 50.
9). How have the stimulus funds affected the industry and your investments?
DG: Well, for the companies that got government funding, it’s been good. But for the ones that haven’t it’s been negative. I’m glad that they’ve continued to extend the tax credits for years.
10). You’re just starting to open up and do interviews now that you’ve take on the CEO role. What was the reason for being so quiet and do you expect you’ll be talking to the media more going forward?
DG: It’s just been about being a private person. I expect I’ll be doing more interviews — I’ve done more interviews today than I have done over the past five years.
Fisker on DOE Loan Timeline (Next Month) and Pulling Out of Michigan
Josie Garthwaite - Automotive
By the time that funding — awarded to help the company set up manufacturing in the U.S. and launch the luxury Fisker Karma model — comes through, Fisker expects to have its entire design, engineering, sales, marketing and administrative team located in its Irvine headquarters. According to a release from the company last week, Fisker plans to shutter a Pontiac, Mich., development facility opened in late 2008, bringing the 30 or so full-time Michigan positions out to California by March 1 as the startup gears up to “dramatically” expand hiring to accelerate development of the Nina model.
According to Crain’s Detroit Business, Fisker had already been outsourcing “much of the development work” in Pontiac for the Karma to outside suppliers and engineering firms “led by a core Fisker team.”
This consolidation into the Irvine headquarters marks a shift from the scheme laid out in the DOE’s announcement of Fisker’s loans last September. At the time, the agency said that in the first stage of the program, Fisker would use a $169.3 million loan “for engineering integration costs” to complete the Karma. Engineering work to design tools and equipment and develop manufacturing processes would take place at the Pontiac facility, the DOE explained, with “support” from the Irvine headquarters and assembly taking place overseas.
Fisker spokesperson Russell Datz told us this morning when contacted for comment on the March time line and loan process, “We'd love to offer more detail but since progress is still ongoing we aren't at the moment.” We’ve also reached out to the DOE for an update on remaining steps for closing the loan, and whether mid-March would be a reasonable time frame in which to complete the process (unfortunately, DOE offices are closed today due to the blizzard, so we may not have answers from the agency until tomorrow).
As we’ve written before, securing a conditional commitment for a low-interest loan through the DOE’s Advanced Technology Vehicles Manufacturing program, as Fisker has done, represents just one of many milestones for companies racing to bring greener cars to market in large numbers.
To Fisker’s credit, the startup has been gaining momentum in recent months, checking off a few key boxes for financing, developing and producing its upcoming models. The company announced a manufacturing site (an old General Motors plant in Wilmington, Del.) for its Project Nina model back in October. And last month, Fisker finally announced a deal with Massachusetts battery developer A123Systems after a couple false starts with other battery suppliers, and closed a $115.3 million round of financing.
But that’s just a start: Reuters reported in January that Fisker needs to raise another $27 million in equity by next Monday (Feb. 15) to hit its next milestone under the loan agreement.
Related GigaOM Pro (sub. req’d) reports:
“The Post-Stimulus State of Cleantech VC“
“Electric Vehicles Give ‘Mobility as a Service’ a Jumpstart“
Daily Sprout
Josie Garthwaite - Misc
Cash Money, Oil Money: The founders of Cash Money Records — Birdman and Ronald "Slim" Williams — have started an oil exploration company called Bronald Oil & Gas. — Business Insider
Siemens Targets Fifth of Smart Grid Biz: “Germany’s Siemens sees the world market for intelligent electricity networks roughly doubling to more than 30 billion euros ($40.98 billion) by 2014 and aims to take a fifth of that market.” — Reuters India
Rear-Wheel Drive Hybrid Cars in the Works at GM: General Motors’ two-mode hybrid powertrain, currently used only in trucks, “will migrate to rear-drive cars in the next generation, according to Tom Stephens, GM’s vice chairman of global product operations. — Automotive News via Edmunds Green Car Advisor
NOAA Hones in on Climate Change: “The National Oceanic and Atmospheric Administration launched a new climate service today, a reorganization effort aimed at improving long-range assessments of climate change, sea-level rise and severe weather. — Greenwire via NYT
Greentech IPO Scorecard: There are now more deals in the IPO pipeline than there have been for more than two years — and a number of those (Tesla, Codexis, Solyndra, Jinko Solar Holdings) happen to be high-profile public offerings in the greentech sector. — Greentech Media
Quiet Quercus Trust Chief Gelbaum Signs On as Solar CEO
Josie Garthwaite - Energy
This move into the executive role for Gelbaum, who was already Chairman and a major shareholder for Entech Solar, comes on the heels of a rough year for the investor. In December 2009, he revealed that "a shift in my financial circumstances" had forced him to rein in philanthropic donations to organizations including the American Civil Liberties Union, Sierra Club and Iraq-Afghanistan Deployment Impact Fund of the California Community Foundation.
It will be interesting to see what other shifts come about for this famously low-profile investor as a result of his new, more visible role at the helm of a publicly traded company.
Quercus Trust, according to the Cleantech Group, was the third-most active venture fund investing in cleantech in all of 2008. As of December 2007, Gelbuam had a 20-company portfolio of clean energy stocks worth more than $400 million, consisting mainly of small- and micro-cap clean energy stocks (check out our list of 10 Cleantech Deals from Quiet Quercus). The portfolio has reportedly expanded by now to at least 48 companies.
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