Ocean Thermal Energy Conversion (OTEC) uses the temperature difference that exists between deep and shallow waters to run heat engines. In the Bay of Matanzas on the northern coast of Cuba, scientists are experimenting with the potential of this renewable energy. Little research on OTEC has been conducted anywhere around the world to date.

According to information provided in the July "renovable.cu" newsletter published by the Center for Energy Information Management and Development (Cubaenergía), scientists on the Caribbean island are investigating the possibility of making use of temperature differences in the oceans around Cuba. Among the remarkable results mentioned, it appears that "suitable oceanographic conditions for conducting a feasibility study to establish an OTEC demonstration plant in the Bay of Matanzas have been verified".

After completing analyses of the marine topography of the area, the researchers also argue that "the results confirm that the oceanographic characteristics of the Bay of Matanzas are very favorable to locating an OTEC plant near the coast, with major sea depths within the bay ranging from 300 metres to 500 metres, and temperature variations of around 12°C between the surface and the seafloor".

The researchers are confident that “locating a demonstration plant at the aforementioned site will enable the technology for converting ocean thermal energy to be studied and developed".

The newsletter also highlights that a map showing marine energy resources off the coast of Cuba has been prepared, along with academics studies to design marine power turbo machinery.

OTEC projects on the drawing board elsewhere around the world include a small plant for the US Navy base on the British-occupied island of Diego Garcia in the Indian Ocean, which will be used to provide 1.25 MGD of potable water to the base. OCEES International, Inc. is working with the US Navy on a design for the proposed 13-MW OTEC plant, which would replace the current power plant running diesel generators.

A private US company has also proposed building a 10-MW OTEC plant on the US-owned island of Guam in the Pacific Ocean, while Lockheed Martin's Alternative Energy Development team is currently in the final design phase of a 10-MW closed cycle OTEC pilot system which will become operational in Hawaii in the 2012-2013 time frame. This system is being designed to expand to 100-MW commercial systems in the near future.

For additional information:

Cuban Center for Energy Information Management and Development

Thermal Energy Conversion Generates Hydrogen and Oxygen

Ironically, one of the most capital-intensive green energy holds significant hope for achieving one of the low-cost holy grails of alternative energy.  OTEC (Ocean Thermal Energy Conversion), as part of its energy production process, generates hydrogen and oxygen.

For the past decade, researchers have focused on two components of developing hydrogen as a viable environmentally friendly fuel for use in everything from automobiles to homes and business.  While hydrogen has been produced, using electrolysis, in high school labs for half a century, the process is inefficient on anything but the largest scale, and offered no practical way to store the element.

OTEC system advocates propose to store the hydrogen produced by OTEC facilities as a liquid form, to be stored and used as a transportation fuel.  However, to transport from the oceanic OTEC site to the industrialized centers where the hydrogen would be in demand is a costly process.  Instead, system developers are exploring the viability of using the hydrogen locally, and, in turn, stimulating local business incubation and development.

As an option, hydrogen produced by OTEC plants could be stored on board, to be used as fuel for electrical energy production during peak demand times.  This approach would assist the OTEC plant ship owners in resolving issues of scalability of these huge energy stations, allowing for high demand to be met by supplementary fuelling of generators when OTEC components are unable to meet the demand.

Currently, the OTEC plant ship conversion process involves the same electrolysis as that which each of us used in high school physics, except for a massive increase in size of the apparatus.  Under evaluation is a Japanese polymer electrolyte membrane electrolyser (PEM), developed by the Japanese international clean energy network (WE-NET) using hydrogen conversion.  This process offers hope for a significantly more cost- efficient method of hydrogen production. Coupled with the hydrogen combustion turbine being developed, hydrogen could easily fuel a secondary electrical generation onboard plant.

In a co-located operating environment like an OTEC plant ship, using and reusing materials and resources provides penultimate environmental responsibility leadership. By minimizing transport costs for co-generated products, by relying on renewable energy sources, by actually helping to reverse climate change impact on ocean currents, and by stimulating economic and social development in the coastal countries in proximity to the OTEC plants, OTEC developers are providing essential protection for the ecology and the economy.

And, ironically, as oxygen produced by hydrogen generation through the OTEC systems is vented into the atmosphere, the hydrogen fuels vehicles and businesses, emitting, in turn, more clean water.

ENERGY

A major component in the deployment of any energy production system is the issue of transmission of that power.  Without an effective method of transmission, any power generated needs to be stored, or converted to a form that can be used effectively. Take for example, wind energy.  Many of the current wind farms are set up in areas that are remote from electrical grids.  To transport that energy, power lines must be built.

The issue of transmission is particularly relevant to hydro-electric systems, that are almost always at great distance from larger centers that utilize the power.
Coal-powered or natural gas-powered power systems, though, often are built near larger centres.  The ``storage”   of that power is also the energy source; namely the coal or natural gas that is transported to the generation site.

Whenever power is transmitted over wire, there is an inevitable loss of power that occurs. That loss must be built into the calculations of the feasibility of the project.
Such is the case with OTEC power.  Transmitting OTEC-generated energy over long distances is particularly problematic, since most potential OTEC sites are at some distance from shore, where the energy is to be used.  Use of underwater electrical power lines inevitably would result in loss of considerable power, run the risk of corrosion due to salt, leakage due to water, or damage due to unpredictable weather.

If standard power transmission lines are not viable, then alternatives, such as thermochemical transmission must be considered.  Ecotera Energy offers an innovative turbine, the Thermochemicasl Energy Conversion (TEC) engine, that, using a closed cycle process, will converts a “carrier” energy  though a chemical reaction to regenerate energy that has been “stored.” TEC systems are not radically different in principle from conventional battery storage systems, in that the energy captured by the thermochemical process is held for later use.

Batteries appear to have reached close to their maximum effectiveness.  They are able to store energy that is inputted to them in a limited to moderate manner.  The standard wet cell battery, for example, works the same way as an electric eel, regenerating electricity between a series of plates (or cells).

Batteries and thermochemical processes are governed by the same principle: energy can never be destroyed or created.  It is always conserved, but can be converted.  Look at the work of a spring in a windup toy.  On the surface, the energy released (the toy’s movement) after the wound spring is released appears to come from nowhere.  But the energy inputted by the hand winding of the mechanical component equals the energy outputted.  Nothing lost, nothing gained.

The best we hope for in conversion of energy is that we rely on other “assists” from latent energy.  Pulleys, screws and  lever & fulcrums all provide instances of energy that is being redirected, and used more effectively.  No energy is lost or gained.

In OTEC  system design, a major concern is transmission, storage or conversion of energy.  Converting OTEC energy captured into hydrogen is the most commonly considered method.  But the need to explore better means of converting, storing and transmitting the huge amounts of energy that OTEC can generate opens significant opportunity for a breakthrough in OTEC deployment.

Earths Oceans

The ocean comprises 70% of the Earth’s surface.  Climate change is causing an increase in the temperature of the ocean’s currents, which are also experiencing a modification of their lanes of travel.  As arctic ice melts, the volume of water impacts on ocean levels, threatening seaside cities.  And, as the ocean warms, oxygen levels are decreasing in key areas, methane levels are rising in sub-arctic regions, and sea life is being threatened in dramatic fashion.

Along comes a technology that impacts on and is impacted by ocean water temperatures – OTEC – and inevitable questions arise.  How will OTEC be impacted by climate change, and more importantly, how will the climate be impacted by OTEC.

Ironically, it is the former question and not the latter that has scientists excited.

OTEC involves piping nutrient-rich cold water from the deep levels of the tropical ocean, exchanging it for warm surface water.  Concern is being raised about the potential for this nutrient-rich water to infiltrate the surface shorelines, causing algae blooms that starve the ocean wildlife of oxygen, and creating dead zones.  However, the algae and plankton blooms pull CO2 from the air, providing oxygen to the atmosphere.

If OTEC can cause ocean algae blooms, then it can also be used to develop aquaculture and mariculture.

This problem & benefit balance appears to be miniscule in comparison to the potential benefit of OTEC development.  In terms of energy potential, ocean thermal energy’s big selling point is that it is always “on,” and its always available, unlike solar that requires sunlight and wind that requires, of course, wind.  And the ocean is a vast storage battery of energy, while solar and wind’s big drawback is the inability to “save up” energy.

The primary attraction to those seeking ways to mitigate the damage of ocean warming on our climate, and vice versa, is the impact of the exchange of hot and cold water on ocean thermal balance.  Currently (no pun intended), the ocean is a vast circulation system, with warm water from the tropics flowing northward, where, as it cools, it falls.  Drawing its way back to the tropics, where it is heated by the sun and diluted by salt-free rains.  Here, it begins its journey to the arctic regions again.  The process, known as thermohaline circulation, is considered to be at risk of shutting down as a consequence of global warming.

But OTEC rides to the rescue.  By drawing up the cold water near the equator, and cooling the surface water, the flow of too-warm water to the arctic regions is slowed, and, as a result, the impact of cooler water on arctic ice melt and methane gas release from the permafrost below the seas inhibits the negative impacts currently experienced by out-of-balance currents.

It may be a first: drawing on the world’s energy stores actually will have a positive impact on the environment, and may be the white knight of climate change mitigation.

Pure Water From OTEC

The process of desalinization to provide drinkable water for Small Island Developing States (SIDS)

It uses only warm seawater as its fuel, and some sunlight as its supplementary energy source.  It not only doesn’t consume any of the Earth’s depleting natural resources, it puts back more into storage than it took out.  And, it breathes new life into the atmosphere, helps to provide financial opportunity for its neighbours and always has a free drink awaiting everyone who needs it.   Sounds like the perfect friend, the ideal environmentalist.  And it is.  It is OTEC.

Although ocean thermal energy conversion has been around since 1881, it has been used commercially only a handful of times, and never to its maximum capacity.  It has been treated more as a novelty than an opportunity.  Aside from its significant capital cost, OTEC has been viewed with some scepticism and suspicion, largely because it seems too good to be true.  It is – too good, but also too true.

OTEC generates electricity by drawing up cold water from the ocean’s depths, passing it by warm water from the ocean’s tropical surface water, and, through the heat exchange method, creating electricity.  But it creates more.  In addition to raw hydrogen and oxygen, OTEC creates fresh, desalinated water; enough drinking water to provide over 1,200,000 liters along with each megawatt of energy generated. Some estimates place the total production potential at 2.8 million liters per megawatt per day.

It is a cruel twist for small island developing states (SIDS) that, living along a huge ocean of water with massive energy potential, the two essentials to which they are most often denied access are clean drinking water and cheap energy.   But OTEC’ s potential to supply both means that these SIDS will see a huge window of opportunity open both for improved health and improved economic opportunity.

The concept of desalination is so simple that it can be replicated in one’s garage.  As the warm water effluents from an OTEC generation unit is passed through a flash evaporator and surface condenser, the sea salt is precipitated out of the seawater, leaving clean, drinkable water.  That flash evaporation involves nothing more than submitting the warm (20-25 degree) surface ocean water to a turbine pressurization process that creates steam (leaving behind the salts & minerals) or by using a refrigerant like ammonia, exposing it to the cold ocean water from the depths of the sea, which condenses it back into liquid once again.

Compare this virtually cost-free process to multistage flash desalination at a cost of $1 per 1,000 liters, or reverse osmosis costing about $0.50 per 1,000 liters. What a welcome neighbour an OTEC plant could be! Free drinks, a chance to put cash in its neighbour’s pockets, and the alter-ego to the stereotypical leeching friend.  OTEC- the environment’s (and SIDS’) best buddy.

Lockheed Martin Will Receive $1 Million In Grants To Advance Ocean Thermal Energy Conversion Development

The mark of acceptance for green energy is the backing of government for mainstream deployment of a project.  OTEC and SWAC have just received that honour.
The US Department of Energy announced, last month, that Lockheed Martin will receive $1 million in grants to advance ocean thermal energy conversion development. In fact, Lockheed will receive a second grant, as well, to develop saltwater air conditioning applications.

Saltwater air conditioning involves drawing cold water from the bottom of the ocean off the shores of tropical and subtropical coastlines, and using that cold water to provide space cooling.  This method provides the corollary benefit of cooling the surface warm ocean water when it is returned to the ecosystem after completing its task. SWAC currently is being used in Hawaii, Stockholm, Bora Bora and Ottawa.   Replacing fossil fuel-driven air cooling systems with this simple system design concurrently reduces demand for non-renewable energy, and minimizes the discharge of atmospheric pollutants.

OTEC systems have existed as prototypes at various times since the 1880s.  The primary impediment to commercialization has been the immense capital cost of the systems. These systems are best deployed in tropical coastal regions, where, as a rule, countries are not positioned to be able to afford the huge initial investments.
Lockheed will explore and map the amount of potential energy generation from OTEC and SWAC, and will identify regions where OTEC will be economically and practically viable.  A second part of the development grant will be used to provide estimates of utility-scale project lifecycle costs and performance.

Honolulu will become the first warm-weather city to be cooled by SWAC, according to William Mahlum, president of Honolulu Seawater Air Conditioning LLC.  That company’s $240 million project, owned by investors from Hawaii, Sweden & Minnesota, is being supported by the US federal government, and energy funding.

With Lockheed developing the administrative infrastructure necessary for OTEC and SWAC, and Honolulu Seawater Air Conditioning providing the practical application of the technology, the utilization of OTEC and SWAC takes a giant leap forward.  Being able to prove, not through modelling or prototypes, but through full scale operation, that the twin technologies are cost effective, and beneficial, clears the final hurdle to successful wide-scale implementation of a pure, eco-friendly and environment-positive energy system to benefit regions of the world that have been, to date, denied cheap safe power for individuals and business growth.

Scotland and North Americas Renewable Energy

From Scotland’s shores, to New Brunswick on Canada’s east coast, to British Columbia on Canada’s west side and the neighbouring north western  USA state of Oregon, governments are in a race to capture power from the ocean.

Last month, Scotland announced a $20 million competition to explore wave and tidal energy solutions.  At the same time, it announced billions of dollars worth of leases to companies that will establish power generation systems of the coast of that country.    Off the coast of neighbouring England, developers are at the starting line of a unique marine laboratory, where energy projects can participate in a research & development cluster enabling projects to plug into a common “socket” that will feed that country’s energy grid.

At the Globe 2010 conference in Vancouver, Canada, the British Columbia energy minister, Blair Lekstrom, announced that his province is set to announce programs enabling BC to make a push to become one of the leaders in ocean energy technology.

It’s a race in which Scotland is universally held to be the leader.  That country, though,  is limited largely to wave and tidal energy, and is substantially excluded (due to water temperature considerations and current technology) from participating in OTEC energy development.

Oregon is not willing to forfeit the energy race to BC or Scotland, just yet. Two weeks ago, the Oregon Wave Energy Trust commissioned research into the potential of wave energy off its shores.  Simultaneously, Reedsport is moving ahead with plans to build a wave energy park offshore by 2011.

On the east coast of North America, tiny Canadian province, Nova Scotia, is seeking investors to explore the opportunity to develop power from the world’s largest tidal surges in the Bay of Fundy.  As small as the province may be, its big dreams are not unwarranted.  Located just a few hundred kilometres from the east coast hub of the USA, the market for users of power is huge.  But first, the Fundy Ocean Research Centre for Energy (FORCE) wants to see how project development will affect the world-class tourist destination.

The plethora of initiatives that are being announced by coastal states, provinces and countries is an indication of the perceived potential of ocean energy.  The myriad of wave and tidal energy parks being developed off coastlines in the northern hemisphere is just the first phase of anticipated growth in a variety of ocean energy, from wind turbines mounted on huge platforms, to OTEC energy ideas, to solar recapture devices.

If the race currently is being led by Scotland, with North American players dashing to catch up, it will soon be joined by dozens of other countries, partnering with private businesses to open up a world of energy for developed, emerging & underdeveloped ocean-front nations and individuals.  It is an amazing race!

SCALE OF OTEC

David and Goliath scalability of OTEC -- The barriers to development regarding cost and the potential to reduce those costs.

One of the areas of concern for development of OTEC systems is the issue of scalability – the ability for a facility to be either ramped up in size smoothly, or ramped down, considering both the operational and financial implications of scaling.  While many “green” energy applications are concerned with being scaled down, OTEC presents barriers to successful increase or decrease in scaled size.

Take wind energy, for example.  Current turbines are easily being upsized to produce significant wind power.  However, smaller, home sized units remain cost- inefficient.  Solar has yet to reach an affordable per-watt cost, with prices not yet breaking the $1 per watt barrier for home-based units.  Biogas facilities focus on large, while small-scale biodiesel plants cannot hope to compete, unless relying on a closed market.

The current cost of OTEC infrastructure has inhibited development of commercial facilities.  With a price tag in the millions for the smallest plant, investors have demonstrated a reluctance to finance construction, although the technology has been proven.  This hesitancy means that a large commercial project has yet to be financed and built privately.

Yet, OTEC systems have limitations for sizing up units.    The largest proposed land-based OTEC facility does not exceed 40 MWe.  This limitation means that per MW costs are quite high.  On the other hand, ocean-based plantships currently can scale up to 400 MWe, reducing per MW capital costs.

Unfortunately, many small island developing states (SIDS) do not need the large power outputs (due to financial constraints as well as population), but are strategically located where large facilities are warranted.  Smaller plantship facilities incur much of the same infrastructure costs, and, therefore, carry very high capital and start-up costs.

Smaller, land-based facilities that could work in some SIDS cannot be built because coastal land is at a premium.

System types also determine scalability.  Open loop systems can scale to 10 MW, while closed loop systems scale to 100 MW.

The incorporation of modular (component) system design into current energy plans may ameliorate scaling problems, however, as would use of polypropylene vapour turbines and aluminum heat exchangers.  Use of these materials also helps to reduce per kw costs to as low as $0.004 per kw.

Until scalability issues have been properly addressed, there will continue to be hesitancy in funding & launching OTEC systems of any commercial size.

Combination Energy Initiatives

It would seem intuitively logical that the best way to develop cost efficiencies with ocean energy systems would be to develop systems that used two or more of the predominant methods of energy production.

For example, partnering tidal energy with wave energy, or OTEC with wave energy should cut transmission costs, generation & infrastructure costs.  However, the reality is that each process requires different conditions, and each works best only in specific regions or conditions.

Wave energy, for example, cannot effectively be harnessed everywhere.  The richest wave-power regions include Scotland, southern Africa, Australia, northern Canada and northwestern USA.  Of those regions, only Africa offers potential for OTEC energy.

Tidal hotspots include the Bay of Fundy, at Canada’s eastern shores, with surges of up to 17 meters.  However, wave energy is moderately weak in that region, and OTEC potential is virtually non-existent.  On the other hand, estuaries along Canada’s west coast provide fairly high tidal ranges.  This corresponds to a wave generation hot spot.  Other good tidal energy spots include India, Korea, NW Australia, Brazil, UK, Maine, California & Alaska.  Of these, parts of Brazil, Australia, India & Korea may offer near-term opportunities for OTEC, while the UK, California & Alaska may hold potential for wave energy conversion.

Since wave technologies have been designed to work in near-shore, off-shore or far-offshore locations, it conceivably be implemented with deep water OTEC applications. In deep water, longer period waves transport their energy more rapidly and propagate more quickly.  Regularity of deep-water swells opens the door to energy capture systems that are less vulnerable to the damage incurred by cresting waves.

However, it is not currently feasible to build tandemed energy systems, using only the three cited ocean energy technologies.  Yet, two other energy sources – wind and solar – offer significant potential for partnering with wave generation or OTEC systems.

Wind obviously is a factor in wave generation.  However, just because a wind exists, does not mean that wave energy can be generated.  In near-shore applications, wind turbines could provide backup power generation for wave system platforms.  In fact, in the North Sea, near-shore wind systems have been deployed.

The real potential for hybrid solar or wind hybrids exists with OTEC systems.  In fact, OTEC is intended to use solar to provide supplementary heat for the heat exchanger systems.  In marginal OTEC regions, where temperature differential between ocean floor and surface water is very near 20 degrees, solar can be used to “boost” the system.  The solar power also provides support for desalination of the ocean water.  Because of the size of off-shore OTEC systems, construction of medium-sized wind power systems become viable.

Although hybrids and partnerships between various energy systems would appear logical, there is a wide gap between theory and application, and, as yet, few projects are aggressively pursuing the hybrid options.

Co-located and Spinoff Business

In a report tabled by the Phillipine Congressional Commission on Science & Technology and Engineering, researcher Daniel MacNamara comments on the numerous opportunities for co-located and spinoff businesses that may be generated from a nearby ocean thermal energy conversion (OTEC) facility.

Of course, the most commonly cited growth opportunities focus on desalinated water production, hydrogen generation & storage, and seawater air conditioning applications.  However, these actually are components of the OTEC process, rather than business opportunities that could evolve as a consequence of building an OTEC plant in key locations of the tropical ocean.

At the core of co-located business development for OTEC facilities is the use of waste from the plant.  The term, “waste,” in itself, is grossly inappropriate for the OTEC technology, since that waste consists of cold and warm seawater (the same ingredients that went into the production process) and fresh water.  So, OTEC waste is no waste at all, and could just as easily be disposed of without any environmental concern.

Such operations as growing algae, fish, vegetables & fruit were common at one pilot project.  Aside from aquaculture, nearby land was being irrigated for gardening and small plot farming.  Each OTEC plant offers other opportunities on site, including development of fish farms, and “mining” of the seawater effluent for valuable chemicals and water-borne minerals.

The cold water that is discharged form OTEC plants is a valuable asset, that can be used to feed fish and other aquafarm “livestock” such as lobster, abalone, crab, a variety of fish and shrimp. It is nutrient rich, and could attract wild harvestable sea life, or be used as a liquid fertilizer on shore or in intensely grown on-site plots. 
Cold water from deep in the ocean is largely free from pathogens and pollutants, yet rich in harvestable nitrates & phosphates that can be extracted.

Although seaweed and algae may grow naturally in uncontrolled discharge water (producing oxygen and taking in CO2), the controlled growth of seaweeds for betacarotene offers a valuable resource for the pharmaceutical industry.  A second option is to grow Ogo seaweed as a nutritious human food source. Alternatively, algae could be grown and harvested for use in production of biodiesel.  Considered one of the best raw materials for biodiesel, algae grown in these tropical conditions multiplies rapidly and soaks up polluting CO2 while generating oxygen during its lifecycle.

While many of us look at tropical climates as being able to grow any crop, many temperate crops are unsuited for warm-weather growth (root crops, canola, etc).  By running cool water tubes under the soil, tropical environments may be able to support these temperate-climate crops for local use.

With the dozens of co-located & spinoff applications accompanying OTEC systems, any evaluation of the cost versus benefit of such projects must consider the immense opportunity for other developments that would result from construction of what is, arguably, a very expensive concept.  However, after factoring in return per investment dollar, OTEC holds the potential to be one of the most lucrative & beneficial alternative, green energy concepts for the immediate future.

How Burning Water Can Create Alternative Energy

Forget solar, wind, biofuels or even tidal & wave energy.  It seems that burning water may be the solution to our energy needs!  In the southern part of the Arctic Ocean, the very surface of the ocean is burning vigourously, with continual flames shooting dozens of feet into the air.

Unfortunately for those of us thinking that technological genius is about to snatch us out of an impending climate change crisis, burning water is no more attainable for us as our attempts at the perpetual burning bush.  The plumes of flame that have been reported from the Arctic over the past few months are fed by methane gases escaping from the ocean floor as the water above that seabed warms and enables this potent gas to rise.

Methane has been venting from the ocean for millennia.  It is a natural consequence of anaerobic digestion of the ocean’s organic materials that have fallen to the sea bed.  However, the research of Natalia Shakhova  of the University of Alaska Fairbanks and her colleagues, who  collected 5000 samples of seawater from the East Siberian Arctic shelf over a recent 5-year period, has raised considerable cause for concern.   They have ascertained that, in over 100 hotspots where methane gas is leaking from the seabed permafrost, the concentrations of methane were more than eight times the normal.

What is even more troubling is that scientists believe that the increased release is due to a mere 1 degree increase in ocean current temperature, allowing the gas to escape from its permafrost prison.  If the release is indeed caused by global warming, its potential implications for disaster are immense.  According to calculations, the rate of release is about 7 million tonnes per year, or about 2% of overall methane release.    If the rate continues to increase with each elevation of ocean current temperature, that 2% could triple or quadruple in a few decades.

Methane is one of the worst threats to our atmosphere – far worse than that posed by CO2.  Consequently, a new urgency to discovering ways to “slow the flow” of warmer currents is needed.  OTEC (Ocean Thermal Energy Conversion) holds promise for some reduction in ocean temperature increase.  However, it focuses largely on tropical and subtropical regions, so the impact will be felt minimally during the early stages of OTEC deployment.

On the other hand, methane is a volatile fuel comparable to natural gas or propane.  Can this methane be captured prior to release from the subfloor permafrost, or even captured as it rises in plumes from through the water?  While the concept may seem to be science fiction, using the ocean to heat and cool millions of homes was, until recently, viewed as a futuristic dream.

Perhaps, with a little ingenuity, we actually will see the water of the deep as an energy source as rich as the natural gas veins of northwestern North America.

Otec and Floating Cities

Buckminster Fuller’s name evokes an exceptional range of images for anyone familiar with his life and work.  The creator of the modern geodesic dome (it was actually designed by Walter Bauersfeld 30 years prior), he was a pioneer in the concept of environmental sustainability.  He conceptualized an aerodynamic Dymaxion car.  Even the Buckminster Ball was the official approved design of the FIFA football until recently. His experimentation with polyphasic sleep marks him as one of the most unique futurists of the 20th century.

But his work on his concept of a tetrahedronal oceanic city provides a window on a world where we live as readily on the seas as on land.  In 1966, “Bucky”( as he is often affectionately referenced), in response to a request from the US Department of Housing,  undertook work on his vision for a complete city on the ocean; a self-contained and sustainable world using innovative energy and food production systems that today are only slowly emerging.

Yet, the Buckminster sea-city idea was not just a wild dream.  His calculations showed that the system could provide ongoing housing at a cost that was below the poverty-line rental levels determined by the US HUD department.  The US Navy’s Bureau of Ships analysed the design, and announced that, indeed, it was water-worthy and viable. The US Navy’s Bureau of Yards and Docks confirmed the accuracy of the costing. The city of Baltimore attempted to secure the rights to build such a city just offshore in Chesapeake Bay.

Since floating cities would not pay rent to any landlord, and would not draw on local resources in a detrimental manner, the concept appeared to be an idea whose “time had come.”  Unfortunately, changes in political climate and orientation following the end of the LBJ presidency mothballed the project.

Recently, a new project, modelled after the Fuller vision, has emerged: the Celestopia Project.  It’s aim is to colonize the Earth’s oceans, floating city by floating city. This city concept’s advocates  purport to mine the ocean waters for valuable metals, as well as hydrogen, oxygen and clean drinking water.  It will rely on OTEC to harvest energy.  Each colony will house 5-10,000 people.

Far-reaching projects such as these tend to be met with considerable scepticism, and, often, with scorn. Although each component of the designs have been tested & proven, the marriage of so many futuristic elements tends to act like the reverse polarity of a magnet, pushing conventional investors and partners away.  Much like the way in which Bucky Fuller was seen in many circles as a novelty, but not a serious player, people with good ideas are being ignored.  Yet, it is probable that Fuller may have the last laugh, as the last frontier of colonization – the ocean – may soon become a necessary bastion of conservation for the fragile Earth.

Ocean Energy

Malaysian architect Sarly Adre Sarkum is proof that there is an ocean of opportunity for creative solutions to the green energy conundrum, and to ocean energy, in particular.  In an interview with the Vancouver Metro World News, he unveiled his plan to build not a sky scraper, but an ocean scraper living complex that starts at sealevel and reaches far downward into the ocean.  It is envisioned as a completely self-contained, self-sustaining building, using ocean energy to power the facility.
From high-tech to workshop hobby, unique, sometimes bizarre inventions and ideas for harnessing the energy of the ocean are being conceptualized and developed.  Aaron Goldin, an Encitas, California high school student has invented the “gryo-Gen,” a spinning gyroscope, mounted in a buoy, that generates energy by capturing wave movement energy.

In the Gulf of Mexico, a wave conversion pump called Seadog is creating fresh water while it converts wave energy into electricity. 
Scientists at the Johns Hopkins University and the University of California-Irvine have field-tested theories about how wind transfers energy to waves, opening the door to development of innovative energy capture ideas.

In the backwater of northern Ontario, a group of private citizens, convinced that they have stumbled on to a gold mine, are secretly testing two home-built wave electrical generators on the Lake of the Woods.  These generators operate by anchoring a weight a few dozen yards off shore, through which a cable from a buoy above the anchor links to a generator fixed in place on the shore.  The rise and fall of the wave spins an alternator to generate DC power for a battery.  Simple, yet it appears to provide continuous charging, using these very gentle waves.

In March, 2010, Scotland launched its effort to hit the ocean energy jackpot by establishing a $20 million competition for unique ideas on taming ocean power off its shores.  The winning project will have to generate 100Gwh over a two-year period to claim the prize.

While much intellectual energy is focused on developing creative and effective technologies to harness the vast store of solar and wind energy contained in the ocean, the efforts need not be contained to institutional or bureaucratic initiatives. Smaller projects often have proven to be the stepping stones for mega-project development.  The inventive mind works as well individually as it does collectively.  Although it is obviously true that large groups most often attract large investment dollars, large ideas can emerge anywhere.

The University of Rhode Island hopes to prove precisely that principle, by offering awards for creative genius to students who come up with green energy ideas that are developed and deployed in the Ocean State.

From Malaysia to Rhode Island an ocean (actually, three oceans) away, green ideas from humble to grandiose are being embraced.

GREEN ETFs

The marriage of environmental innovation and investing innovation has created a library of “green” ETFs (exchange traded funds) investment opportunities on the world’s stock markets.

In 2009, investment returns in clean energy ETFs generally performed well, but did not outperform the technology-heavy NASDAQ index.  That is not to say that all green ETFs underperformed relative to the index.  Indeed, solar and wind company stocks generally performed poorly, relative to the industry as a whole.  Investors clearly were concerned about over-stock and a deep price drop over the prior 18 months.

On the flip side, storage and smart grid technologies outperformed, largely attributable to government support for that sector. BYD Company, and energy storage company supported by Warren Buffet investment, rose 439% last year, while energy efficiency company EnerNOC rose 308%.

Exchange Traded Funds are a relatively new investment vehicle, with the first ETF arriving on the Toronto Stock Exchange in 1989, followed soon after by similar funds in the USA.  Basically, ETFs allow investors to bet on specific sub-sections of an index, such as in energy, materials, REITs, and a variety of emerging technologies.
Until recently, though, access to those green funds was hindered significantly, because most of those alternative energy companies were only listed on foreign stock exchanges, and not generally accessible.

The introduction of a range of global ETFs, though, has opened access to the less volatile ETF packages, allowing individuals to put in funds much like they do with mutual funds or individual stocks.  Unlike index funds, ETFs can be bought and sold throughout the trading day, instead of just at day’s end.  This flexibility is particularly attractive for those who prefer instant reaction to the day’s dynamics.

In much the same way that investors have been able to choose ethical funds in which to  invest, people wishing to focus on environmentally responsible and alternative energy portfolios may pick ETFs that represent their preferences and values.

Online companies like Sustainable Business.com provide excellent guides to selecting the most appropriate stocks and ETFs for your preferences.  You may choose from specific subsectors, such as wind, solar, water, or any of more than a dozen other categories.  Concerned about gray-area eco-stocks? You can carve out carbon-trading ETFs from your list of prospects.  Need to know that the ETF will focus on specific regions of development, or small & mid-sized companies as opposed to larger, international operations?  There are green ETFs that segment into specific countries, and large or small-cap investments.

In any event, the decision to invest in environmental ETFs may be a wise one, given the emphasis that all governments are placing on eco-responsibility, and the rapid pace with which new green technologies are metamorphosing. And, you may minimize the risk of putting all your eggs in one basket, by selecting ETFs with diverse holdings, and varying, from large to small, the size of each green ETF investment

Government Spending on Clean Energy

Does government support for green energy development hurt or hinder innovations in alternative energy?

Jeffrey Immelt, CEO of General Electric and member of President Obama’s Economic Recovery Advisory Board, in an interview with Maclean’s (1/3/10) declared, “The government doesn’t have to spend money, just create clarity and certainty around the investment climate.”  As a key player in energy development, GE certainly should speak with authority on this topic.

A cursory examination of the expenditures by various governments on alternative energy research and project development would appear to show that government intervention is successful.  However, when you examine the actual “bricks and mortar” results, the  strategy of government support for renewable and alternative energy becomes somewhat suspect.

In the USA over the past fifteen years, government at the state and federal level has heavily supported biofuels development, and, in particular, ethanol and biodiesel.  Financing has been delivered as a direct aid to capital projects & infrastructure, as aid to research and as support to NewGen co-operatives, owned and operated by local growers and producers.  While this support strategy has produced significant results at the research & new technology level, it has performed in a less-than-stellar manner at the capital projects level. Since 2005, a host of ethanol projects have declared bankruptcy, or, to stave off insolvency, have been sold to oil companies (who have a vested interest in promoting their oil & gas investments).  Biodiesel facilities, which, in the 1990s were local, smaller units, have become the territory of mega-developers, and companies whose interests are not necessarily aligned with the grower’s or the consumer of biodiesel’s interests.

In Canada, several provinces joined forces to provide funds to startup, locally owned biodiesel facilities.  However, when a more corporately friendly government took power  five years ago, strings were attached to the funding that favoured national corporations over local ones.  At the same time, delivery of that funding stretched from long delays to extraordinarily long delays.

While institutions such as universities and other research facilities are used to long time lines from promise of support to delivery of that support, emerging businesses do not have the patience or cash flow to withstand this impediment to development.  Business operators that are accustomed to exploring an opportunity, deciding on a course of action and pursuing that route within months may find that, what appeared to be a promise of quick delivery from government actually stretches into years of waiting, and a bureaucracy that favours process and procedure over results.

A look at the infrastructure renewal programs implemented by most European countries, Canada and USA in 2009, in response to an urgent economic crisis, highlights this dilemma.  In Canada, for example, a mere 1/3 of the announced funding has been spent.  Similarly, the US programs have spent or allocated under 50% of their promised funding, while European countries hover around the same level of inaction.

But, although capital spending flows slowly from government, and research funding flows equally poorly, the fund programs have served a very valuable purpose.  A number of new technologies have been developed as a consequence of financing for research.  On the capital side, conventional lenders are more willing to lend funds, where equity increases.  Capital grants from government provide that leveraged equity.  Although the 1-3 year wait for delivery of funds carries an inevitable increase in project costs, that overrun seems irrelevant to lenders who see equity stakes on paper, even though overall need for loan dollars is increased.

Consequently, while government money fails to deliver hard projects effectively, it does provide a feeling of security and success for the alternative energy industry.

GREEN ART

While some of us look to conventional ways to invest in “green” technology, and embrace slightly unusual eco-friendly ideas, there are others who literally invest themselves into their projects. And a few of those “investments” may be returning some rather odd dividends. Here are a few examples of “green” eccentrics at work.

According to a recent study by the Royal Institute of Architects and Institute of Civil Engineers, decommissioned oilrigs may be ideal for converting into floating homes and shops powered by tidal flow turbines.

The ultimate in applying human mechanical energy into usable electrical energy comes from Princeton University and Caltech, where a rubber (lead zirconate titanate) chip is being developed that could power items like cell phones and other electronic devices from the movements of walking or even bending. Look out, Star Trek’s “Seven.” Cyborg coming through!

On the more practical side, but less down to earth, there is the Aero 600, a portable wind turbine that folds up for travel to be taken anywhere power is needed (outdoors, of course). Designed by Marcos Madia & Sergeo Osashi, this device will certainly let you set up and watch your favourite television show while you rough it miles into the wilderness. (Extra personnel required to transport the TV, though).

For those eco-minded gardeners who like to get “down and dirty,” there’s a new game in town: La Batalla Verde.” Perhaps modelled after paintball (or dodge-ball!) combatants engage in a fierce battle, lobbing balls of mud at each other. No rules, no holds barred (except you cannot hide rocks & stones in the mud balls). Ideally, of course, this game is played out-of-doors, and, for greatest benefit, in an area that is in need of green renewal. Why? Because the mud balls are packed with seeds, and, two or 3 weeks after your battle, there it is --- the start of a lush growth of greenery.

My favourites are the “green” arts. First, there’s the grass mirror, designed by H2O Architects. A stainless steel backer with an arrangement of growing plants in the foreground allows you to truly see yourself as part of nature. Then, there’s the green wall, made entirely of recycled materials. Plastic cups held in metal holders on a wall contain a variety of plants. Arrange for beauty, grow for air quality in your home. The winner in this category, though, is the Comploo, an igloo shaped pod house designed by Japanese designers, Bakoko, this little home is heated entirely by compost.

Lastly, just in case you thought we were taking our eco-ideas a little too seriously, here are a few of the great “April Fool’s” non-inventions that have hoodwinked hundreds of believers. Norwegian company Statkraft announced in 2008 that they had developed a way to capture energy from starlight, and even released a video “proving” it. In 1981, the British paper, The Guardian, convinced readers that a British researchers had designed a machine to control the weather. Many readers, though, were cool to the idea. Probably the best of the non-inventions, however, was announced on April 1, 1934. “Man Flies Using His Own Lung Power,” newspapers reported. And we thought steroids were a new invention!

GOING GREEN

“Going green” is, more and more frequently, requiring that new businesses go it alone.  Just a few years ago, government funding of eco-friendly projects was in vogue.  Now, with the economy worldwide struggling to recover, government is less inclined to provide loans and grants for innovative green ideas than they were.
In the United States, the 2009 election of Barack Obama led many to believe that he would focus on alternative energy concepts over fossil fuel and traditional energy initiatives.  Indeed, he continues to tout alternative fuels.  However, the emerging alternative energy technologies are being left behind, in favor of nuclear power.  
Last week, the President announced that his administration was seeking to develop two new nuclear power reactors, and promised $8.3 billion in conditional funding guarantees, with up to $50b earmarked for nuclear power development over the next decade.  While this is in keeping with his election platform, his promises to invest in solar, wind, geothermal and water/wave technologies have not been as quickly addressed. He has backed off on cap-and-trade plans, and has quietly enabled off-shore drilling in Alaska, by StatOil and Conocco Phillips, that risks the area’s pristine environment.

In Canada, the federal government announced $40 million in funding for Celgar’s (Castlegar, B.C.) biomass conversion project that will assist pulp mills in generating fuel from waste material.  Prime Minister Harper insists that his government is committed to green energy, yet has provided enormous support for oil sands development, at the same time that local biofuel projects in rural communities have gone begging for assistance.

In Great Britain, the Severn Tidal Power plans have been put on hold until after the next generation, throwing into doubt the future of the wave-generation initiative.
As we have seen from the Kyoto Agreement and the Copenhagen Accord, promises to promote environmental stewardship are made readily (if not easily), but delivery on those promises, or concrete legislation to mandate the necessary changes are rare.

The EU 2020 draft strategy on the  environment and alternative energy appears to make strides toward the goals of |Copenhagen.  But the European Green Party insists that the plan weakens, rather than strengthens Europe’s drive toward sustainability.

However, government backing, both in policy and finance, is not the sole route to stimulating alternative energy growth.  Private funding offers a variety of ways to achieve success.  While there is a plethora of funds being held out to green initiatives, from institutional to angel and venture capital, Wall Street’s experience with the 1999 tech bubble, the 2009 meltdown, and the world’s current economic instability make larger investment sources a little jittery about lending to neophyte businesses or un-established, and, sometimes, unproven technologies.

Consequently, many alternative energy ventures are looking to strategic partnerships to raise capital.  Last week’s announcement of a partnership between Pacific BioEnergy and GDF Suez will stimulate development of Pacific’s biomass pellet production facilities.  At the government level, South Korea and Uzbekistan recently announced their strategic partnership to develop alternative energy sources.

It is fitting, then, that innovative technologies in alternative energy will require innovative financing solutions, and alternative methods of developing successful business models.

Battery Technology and Energy Storage

In spite of all the advances in renewable energy technologies, the most elusive prize remains unclaimed.  Whether it is wind, solar, water or any derivative of these core renewable energy sources, they each have the same limitation – the inability to store generated power effectively and efficiently.  For the most part, energy storage has relied on batteries, albeit more and more advanced types of battery storage.

But we are poised for a breakthrough on the energy storage front, with a number of unique approaches to stockpiling energy.  It is these processes and technologies that will capture the most interest from investors.  A sophisticated, effective storage process may well cross the various renewable energy sectors, offering the holy grail to each of the core renewable energy sources.

First, innovative work by Saft Energy on a nickel-based battery technology to serve the world’s largest hybrid diesel/wind project on the island of Bonaire, in the Caribbean will see a storage system with a capacity of 3MW for over 2 minutes. While seemingly small, the battery provides emergency power in case of system failure, whereas systems without that backup will experience blackout conditions.

Isentropic Energy is developing a truly creative, yet deceptively simple power storage concept: Using one storage container of hot (500C) gravel, one of cold (-150C) gravel, Isentropic relies on basic heat exchange between the two to generate power. With a round trip efficiency of 72-80% and a projected cost of as little as $8/Kwh, this process potentially crush the cost efficiency of any existing battery storage.

Bloom Energy recently announced its solid oxide fuel cell, producing electricity from natural gas or hydrocarbons on demand.  While current prices are in the range of $7,500 per kilowatt, or $700,000 per system, Bloom hopes to bring those costs down for home generation systems that cost around $3,000 for 2-3 kilowatts output.
Other technologies and processes for storing energy include both compressed air and  compressed nitrogen, as well as pumped hydro.

Pumped hydro is the least innovative, using the same principle as current hydro turbines.  Water is simply pumped to a high level, then allowed to fall through the generation turbines. Most of the larger hydro systems in use rely on lagoon or artificial lake storage to hold pack water power. The major innovation in this process is to  store the water in underground caverns, pump it up to ground level when not needed, and then let it fall down to the caverns again when power is needed.
Compressed air technologies come in several variations.  One will see air compressed and stored in large caverns, for later use.  Because the air does not have to be compressed by natural gas, costs are significantly decreased. General Compression recently announced a $17 million share issue led by US Renewables Group.
A variation on this process is to compress air, generated by wind turbines, into large bags that are stored at depth in the ocean, compressed by the weight of the water.

While each of these systems and technologies has a distance to go to be cost-effective, there is sufficient promise in each to warrant significant interest by potential investors.

PARTNERS FOR CLEAN ENERGY

Smart money for green energy goes to Canada, United States and Australia, if you are an investor who is willing to immigrate to any of those countries.  Each nation offers immigrants willing to invest in that country an opportunity to apply for visas under a special category, predicated on being willing to invest  amounts ranging from $400,000 to $1,500,000.

Both the USA and Canada offer preferential consideration for those immigrants willing to set up business or invest in rural communities.  All three countries place a premium on investments in innovative technology and renewable energy projects.  In Canada, immigrant investors may qualify if they invest either $800,000 in urban or $400,000 in rural business development. In the USA, their $1,000,000 investment requirement is reduced to $500,000 if the applicant invests in designated rural areas or areas of high unemployment.

Astute rural business leaders see this as an opportunity to actively recruit overseas investment, and to develop strategic partnerships.  With access to government grants and favourable loans for renewable energy projects and rural initiatives, the timing is ideal to solicit partnerships with overseas investors. Unfortunately, the slow pace with which all immigration applications are processed (most waits start at 9-12 months, increasing significantly, depending upon the class of application) means that many of opportunities for investment by out-of-country investors under the various immigration programs of each country are several years away.

There is a window of opportunity, though. Investors may bring in money prior to being approved for visas.  While this money may not count as part of the required seed funds that they must show they possess, the investment itself may be used to leverage local funding, develop the business, and generate additional capital. Thus, the investor and the rural partner gain.

In Canada, investors and immigrants applying under the Business category may be expected to conduct a preliminary visit to the province in which they are seeking nomination for immigration.  On occasion, these recruits have established businesses or invested in a business in Canada, then opted to remain in their country of origin.  This practice is more prevalent with Asian, and, in particular, Chinese investors. 
In the USA, Regional Centers have been set up to stimulate local growth. 5,000 of the 10,000 investor visas to be approved each year are set aside for these regional centers to facilitate recruitment of prospective investor immigrants.

By merging incentives offered through the regional centers with immigrant investment and federal and state funding for renewable energy projects, rural communities are provided with significant tools for generating investment in alternative energy projects.

In Australia, as in Canada, investor immigrants need to seek sponsorship from local territorial or state governments to enhance their chances of successfully applying as immigrant investors.  However, funding for biofuels projects is somewhat limited, with a requirement that applicants for capital grants produce a minimum of 5 million litres per year.  Of the six plants sharing $31.7 million recently, only one was locally owned. Other renewable and alternative energy initiatives fare somewhat better.  The Renewable Energy Target, passed in 2009, projects more than $20 billion in renewable energy investment, creating 28,000 jobs.  To achieve this goal, partnerships with overseas business will be needed. Immigrant investment is a key component of that development strategy.

While other countries offer myriad programs to stimulate investment, it is the leadership of these 3 nations in recruiting investment and investors to alternative energy that will set them apart over the next decade, and provide a huge opportunity for those investors wishing to emigrate from their countries of origin.

Clean Energy Systems

When one speaks of investing in oil, only a handful of production options come to mind: oil drilling, oil sands, and natural gas. When one speaks of “renewable fuels,” numerous products are possible: biodiesel (using any of several processes), biogas (from myriad sources), ethanol (from wheat, barley, sugar, corn, etc.), hydrogen, biomass, gasification and so on. However, mention “alternative energy,” and literally scores of options arise: OTEC, wave & tidal for oceans; geothermal, inversion, hydrogen (again) and pressure for water, photovoltaic and solar heat (plus all their derivatives, including passive and active) for solar, and so on.

We have spoken in other articles about innovative alternative energy concepts and systems, each with its own unique advantages and disadvantages.  After decades of neglect, research on alternative energy and alternative renewable fuels has become the focus of future energy production.  The era of “clean & green” energy is arriving.

Governments worldwide spend billions of dollars each year on research, pilot projects and capital construction for alternative energy.  For example, President Obama renewed his country’s commitment to clean energy in his State of the Union address last month, with a $28.4 billion pledge for the Department of Energy alone.  Private investment, directly and indirectly, exceeds $140 billion annually, through corporate investment, stock & bond (and mutuals and ETFs) holdings.  This does not include the tens of thousands of backyard inventors and experimenters designing, constructing, testing and investing in creative alternative energy solutions.
The impact of this huge investment of time, intelligence and capital is two-pronged.  While incredible innovations and achievements are being realized almost daily, the expenditures are so fragmented and diverse that the lack of focus may actually be impeding the emergence of a completely green energy sector.

Take, for example, Canadian government expenditure on alternative energy.  Biodiesel, biogas, wind, solar, water, storage, ethanol, consumer-sized to mega-sized,  privately driven to publicly owned, university-centered research to corporate R&D all must share a piece of the very limited public purse for energy development.  Simultaneously, conventional infrastructure and sources of energy must be explored, developed and supported.

It is unfortunate that creative interests, diverse government and competitive industry fail to adequately explore cooperative efforts.  Backyard energy enthusiasts are loathe to disclose their unique creations and even more loathe to share the glory of the potential discoveries. It is this lack of focus that contributes, in a substantial way, to the relatively sluggish manner  that emerging technologies are being introduced to mainstream, commercial applications and the lack of evolution of energy- and cost-efficient designs for proven technologies.  Each party has his own vested interest in ensuring that he, and he alone, brings the ultimate invention to the public’s attention.

Governments could, and should, be prepared to prioritize funding for specific concepts.  Concurrently, they should be willing to accede to other nations in other fields where they could be competitive.  By divesting themselves of specific fields of responsibility, money could be used in a more focused manner.  It is unlikely that corporate interests could do the same.  The onus, therefore, is placed on governments for guidance.  As logical as the approach may seem, it is unlikely to be embraced.  Governments decide based on internal pressure,  as evidenced by the lack of cooperation in Copenhagen last month. However, even with a fragmented approach to funding, there is optimism.  As more funds and more interest is focused on emerging technologies in alternative energy, the potential for breakthroughs creeps forward.

New Energy of the Future

Renewable energy projects in rural & remote settings have become microcosms of the market economy: driven from both the top and the bottom, from need and innovation.  It is expected, then, that funding for these undertakings should be found both from foreign investment and local input.

As technologies become more advanced, though, the development of projects is propelled more from the corporation employing the technology, and less from local sources.  Community inputs come into play with conventional renewable energy systems, smaller-scale initiatives, and pilot projects.

Rural investors have a variety of options available to invest in alternative energy infrastructure, while rural residents have a variety of income options.

Wind farms have been a boon to many farmers in North America.  Farmers are paid significant amounts for each wind turbine located on their properties.  These fees range from several hundred to several thousand dollars per turbine.  In the USA, three firms have been created by rural investors and entrepreneurs to build turbine blades, in a variety of sizes from 1.5kw to multi-mw units.

Biodiesel is the mainstay for farmer income, with many plants owned by producer cooperatives or local investors, while the feedstocks are produced locally.  Similarly, ethanol cooperatives and joint ventures have put income in producer and local investor pockets.
Often, when a business is looking to establish in a rural community, it will scout out the community, looking for, among other things, local investors and partners.  If infrastructure and resources are in place, outside investors will eagerly join forces with the locals.
One of the tools that is slowly being adopted by rural investors is to establish hybrid types of business incubators, focusing on renewable, alternative energy and emerging environmental technologies.  These incubators are set up either jointly with community development agencies, or privately.  The program’s keys to success are less focused on low rent than they are on ensuring that essential business infrastructure is in place, including trained and specialized employee base, internet technologies, cheap and available electrical power, expansion capacity, and support business services such as welders, machinists, electronics technicians, etc.
Local entrepreneurs looking to establish a renewable energy operation in the community may turn to local capital pool corporations – structures that have been empowered by provincial and state legislation to enable groups of like minded, common-interest people join together without facing the gauntlet of rigid Securities Commission regulations.  Local partners, family & friends and business acquaintances all may constitute this capital pool corporation, without the requirement of issue=ing prospectus, etc.

Other options available to local investors include partnering with larger, related  business interests, developing of  an affiliation with suppliers and  buyers of the energy service.

Even at the pilot project or exploratory level, rural investors have access to a wealth of research funding.  Commonly in the Midwestern USA, universities partner with local interested parties to explore and evaluate emerging systems and technologies, that later may emerge in those communities as successful businesses.
Key to starting and operating any of the renewable energy initiatives in rural settings is the need to develop effective methods of cooperation, since the vast majority of rural investors do not have the capacity (either financial or technical) to start and grow a competitive energy business.  Unfortunately, it is the individual, independent, pioneer spirit of rural residents that inhibits that cooperation, except in times of crisis.  Indeed, given the current business climate worldwide, those rural investors should be looking at new opportunities through the eyes of the pioneer, and consider that their economic base is, indeed, in crisis.

OTEC

Ocean Thermal Energy Conversion (OTEC) technology has caught the attention of maritime countries and even the Department of the Navy.  On February 25, 2010, the DON announced its renewed commitment to research and development of OTEC systems, and has partnered with private industry to explore 3rd generation systems for use around the world.

OTEC is nothing new, dating back to the 1880s.  It relies on the temperature difference between top and bottom layers of the oceans (difference must be at least 20 degrees, making it optimally suited for tropic & sub-tropic climates. This month, Hawaii announced development of a 100MW plant, costing $400 million, to provide power for Honolulu.

Use of the ocean as an energy source has received increased attention in the past decade, with experimentation in wave capture and maritime wind  to generate power.  But OTEC offers unique, and almost unlimited potential for development, with more than 70% of the earth’s surface contained in oceans. Even backyard projects have used water in lakes and oceans to produce “air conditioning for homes, and heat recovery for winter use.  These home-sized operations pale in comparison to the potential in OTEC development.

One of the unique by-products of using an open OTEC process is the “creation” of water that is virtually pure.  Consequently, OTEC becomes invaluable for Middle East countries, where water desalinization supplies huge amounts of purified, potable ocean water.  A hybrid OTEC unit could supply both the water and energy needs for many countries of the region.

Along the coastlines of Latin America, the islands of the Caribbean and northern  South America, power generation systems offer the potential to open up industrial development opportunities. Jamaica, for example, has committed to building a sizeable facility to provide power for the island.
Bringing OTEC into the realm of the common, however, is a capital-intense effort.  Yet, the per-unit production cost for OTEC energy is comparable to other renewable energy sources.  Additionally, improvements in technology may lead to the ability to generate and store hydrogen as a co-product of the OTEC process.
Conventional lenders have been somewhat reluctant to finance OTEC plants, due to the high costs of construction. However, a variety of innovative venture capital funds are opening up opportunities for new plant erection.

What is needed to stimulate investment in OTEC is the formation of symbiotic partnerships, by marrying research facilities, investors, and governments intent on achieving the highest levels of renewable energy reliance. As the processes and systems become scalable, new opportunities for those partnerships will emerge.
As OTEC technology evolves, as well, to lower the temperature variance needed to efficiently produce energy, more temperate climates will be able to explore OTEC opportunities.

But even without those advances or partnerships, the potential for financial gain for investors is significantly large that what may be needed is not new technology & processes, or new partnerships, but new investment vehicles that will allow the capital currently parked on Wall Street sidelines to move into this opportunity for profit. In the same way that ETFs allowed living-room investors to invest in the stock market with reduced risk, new stock alternatives for investment in green technologies are anticipated to stimulate renewed interest in renewable energy investments.

Rural Communities Missing Opportunity for Green Investments

Although rural communities are the vanguard for development and incubation of many renewable energy initiatives, those same rural communities are missing out on opportunities for growth of alternative energy programs.

In both the USA and Canada, governments are providing unprecedented levels of financial support for rural business development, driven largely by investments in “green” fuels like biodiesel and ethanol, but not ignoring biogas and wind technologies.

The difference, however, between the three biofuels and wind power is the degree to which rural entrepreneurs are involved in opportunities for investment and growth.  Wind has become “big business.”  A drive down I-29 in the Midwest USA, for example, is punctuated with literally hundreds of wind turbine blades making their way south, west, east and even north from the Dakotas to flourishing wind farms throughout the American states.  These are not being made by farmers, in their back yards.  They are being produced by a burgeoning company that supplies almost half of the wind turbines needed in the western USA.  In Canada, many of the major wind farms are being established by out-of-country businesses, with international interests.  A similar situation exists throughout Europe and , in particular, the Scandinavian countries.

Ethanol, in recent years, has lost the traction it had in the early 1990s, and many companies are being bought up by larger oil companies.  However, there are several ethanol facilities that still are owned and operated by rural farmer cooperatives.  Unfortunately, as oil companies assume majority control of the industry, markets for blended ethanol dry up.

The major bastion of rural renewable energy entrepreneurship across Europe  and North America remains biodiesel.  Biodiesel is a rarity in that economy of scale is not necessarily a major advantage.  This enables smaller operations to compete with larger corporations, and, given the right business model, capitalize on unique advantages.  Biodiesel, to date, also does not face the legislated impediment of having to be blended at the oil company’s refinery.  Thus, it can be blended, or used as a standalone fuel, without the pressure of traversing through a major oil company.

In Germany, Sweden, UK, and several other European countries, a myriad of micro-processors are co-located with cheese plants, potato processors, and farmyards, and remain competitive.  In Australia, farmers tend to drive development of biodiesel operations.

But rural communities could be generating considerably more local business, rather than merely providing raw products. In Australia, some of the most successful business incubators have been developed, allowing emerging businesses to pool resources and safeguard profitability while growing.  Yet, few of these incubators have been established in rural environments.  In Canada, the same problem exists.  In Manitoba, for example, a huge SmartPark incubator has been established in Winnipeg, focused on technology development. Bothe the provincial and federal governments have offered funding for various innovative rural programs.  But of the few rural development groups that have explored construction of a business incubator to stimulate growth, none have actively pursued alternative energy businesses as anchor tenants.  In fact, one group actually rejected the concept in spite of having several “green” tenants lining up to take up residency.

Rural communities, in general, have failed to cooperate sufficiently to realize their development aspirations.  In Canada, capital pool corporation legislation has enabled local investment in business growth for rural residents.  Rural credit unions and banks across North America pool funds to enable local industrial development.  Yet, rural development lags. For the most part, lack of specific acumen plays a role.  However, lack of focus leads the reasons why rural communities are unable to capitalize on opportunities for green investments.

Underdeveloped Nations of the World and Clean Renewable Energy

One of the greatest needs for clean, renewable energy is in the poorer and underdeveloped nations of the world.  Unfortunately, these nations also are the least able to afford the investments necessary to establish such facilities.

In May, 2009, The Strategic Climate Fund established the Scaling Up renewable Energy Program (SREP) to assist  low-income countries to increase energy access through renewable energy use.  The SREP encourages private sector involvement, along with public sector involvement in financing & policy making, to make it easier for private investment to flow into these countries’ renewable energy initiatives.  Thirty-five African, 11 east Asian, 7 Europe and central Asia, 5 Latin American and Caribbean,  2 Middle East and 6 south Asian countries are on the list of eligible recipient countries for SREP support.

Until this month, SREP was a program in name only, when a contribution of $40 million from Japan allowed the program to move forward, with existing investments from the Netherlands, Norway, Switzerland, United Kingdom and a further $50 million from the United States. While the amounts pledged so far appear miniscule, it is anticipated that a host of other countries will be contributing to the fund, and that current contributors will be committing long-term support to the efforts.
One of the criticisms of the SREP is that it facilitates foreign investment in developing countries’ energy infrastructure without enabling local development.  This criticism appears somewhat unfair, in that, ultimately, those low-income countries will provide both ongoing staffing solutions and low-cost renewable energy, while acting as a catalyst to future project development.

However, damage to the concept of CIF and SREP program delivery has been done with the rejection of funding from the World Bank by both Bangladesh and India.  These nations claim that the funds come with too many strings, and that the process would leave the nations at the mercy of the World bank governance.
Having just begun the process of establishing the fund and soliciting observers to oversee fund allocation, it is too early to determine whether the project will succeed.  Yet, there is reason to be optimistic. Yes, many developed countries will have investors that will see this as an opportunity to grow their ventures in new markets.  However, those recipient countries are expected to establish guidelines that will encourage development of strategic partnerships between the governments themselves, foreign investors and local businesses.

Criticism that the fund is too small to be effective is unwarranted, as well. The SREP is not intended to provide the sole funding for each initiative. Rather, it is intended to tandem with Multi-lateral Development Bank (MDB) to establish pilot projects and move forward with full-scale initiatives as investor confidence and systems implementation occurs. The SREP’s guiding principles state that the funds should “commit sufficient funding and leverage significant additional financing from MDBs, bilateral agencies/banks and from other public and private sources to achieve large scale renewable energy impacts.”

While SREP is unproven, and in its infancy stage, it should be looked upon as another doorway for “green” investment in the world’s markets.

The Paradox of Big Oil, Big Banks Investing in Green Industries

Is there reason to be suspicious – or, at least, concerned – with the ethical considerations of big oil and big banks investing in alternative energy projects?
Urban myths about giant automakers and big oil buying up innovative carburetor technologies in the 1960s to prevent introduction of fuel efficient vehicles persisted for decades.  That myth was augmented by the story, only partially unfounded, of an inventor of a unique battery storage system being bought out by automakers, and the invention being immediately mothballed.

At the 2010 Copenhagen Climate Change Summit, major financial institutions from around the world agreed on a framework of Climate Principles, to help guide them in climate-friendly investment and financing decisions.  However, a report by Price Waterhouse Coopers (http://www.theclimategroup.org/_assets/files/Climate-Principles-Progress-Review.pdf) suggests that many of those banks are failing to address the risk of climate change in their investment decisions, and were, in fact, heavily supporting major polluting companies.

For those major institutions, then, to claim that they are supporting green energy growth, while at the same time, delivering a body blow to the environment, may be a clear example of corporate hypocrisy.  The study pointed out that only two of the 5 leading banks involved in the development of the Climate Principles have put in place financing solutions for green energy industries.

While the banks may be somewhat reticent in funding, most of the major oil companies have been accused, outright, of obstructing clean energy initiatives.  How can that be, you might ask, when oil companies are investing so heavily in alternative fuels?

Indeed, last month, Valero announced that it had purchased Renew Energy, an ethanol producer nearing bankruptcy foreclosure.  Shell has announced that it is actively pursuing ethanol facilities throughout Brazil.  The few big oil retailer companies regularly make plays on failing or undervalued ethanol and biodiesel facilities.  Certainly, this does not seem sane, if the intent is to squeeze out green energy businesses from the fuel market.

Yet, energy specialist and author, David Blume, on February 29, 2009, insisted that there was proof that the oil companies were intent on squeezing the green energy newcomers, by launching a $1 billion campaign to drive up the price of corn, thus rendering ethanol economically unviable.   He further claimed that those same oil companies are restricting access to E85 fuels, by limiting supply and pumping facilities at their retail outlets.

Big Oil responds by declaring that they are supporting alternative fuels, as evidenced by their investments, at various levels, in the sector.

The problem for investors in green technology, then, becomes one of being able to isolate and identify those companies that claim to be supporting alternative energy, as opposed to those that actually are supportive. That dilemma is one that becomes more clouded as the smaller “green” operations are hidden in plain view by opponents of the green energy movement, who have purchased those companies to bolster their public claims of “going green.”

Renewable Energy is America's Next Frontier

In spite of all the advances in renewable energy technologies, the most elusive prize remains unclaimed.  Whether it is wind, solar, water or any derivative of these core renewable energy sources, they each have the same limitation – the inability to store generated power effectively and efficiently.  For the most part, energy storage has relied on batteries, albeit more and more advanced types of battery storage.
But we are poised for a breakthrough on the energy storage front, with a number of unique approaches to stockpiling energy.  It is these processes and technologies that will capture the most interest from investors.  A sophisticated, effective storage process may well cross the various renewable energy sectors, offering the holy grail to each of the core renewable energy sources.

First, innovative work by Saft Energy on a nickel-based battery technology to serve the world’s largest hybrid diesel/wind project on the island of Bonaire, in the Caribbean will see a storage system with a capacity of 3MW for over 2 minutes. While seemingly small, the battery provides emergency power in case of system failure, whereas systems without that backup will experience blackout conditions.

Isentropic Energy is developing a truly creative, yet deceptively simple power storage concept: Using one storage container of hot (500C) gravel, one of cold (-150C) gravel, Isentropic relies on basic heat exchange between the two to generate power. With a round trip efficiency of 72-80% and a projected cost of as little as $8/Kwh, this process potentially crush the cost efficiency of any existing battery storage.
Bloom Energy recently announced its solid oxide fuel cell, producing electricity from natural gas or hydrocarbons on demand.  While current prices are in the range of $7,500 per kilowatt, or $700,000 per system, Bloom hopes to bring those costs down for home generation systems that cost around $3,000 for 2-3 kilowatts output.

Other technologies and processes for storing energy include both compressed air and  compressed nitrogen, as well as pumped hydro.
Pumped hydro is the least innovative, using the same principle as current hydro turbines.  Water is simply pumped to a high level, then allowed to fall through the generation turbines. Most of the larger hydro systems in use rely on lagoon or artificial lake storage to hold pack water power. The major innovation in this process is to  store the water in underground caverns, pump it up to ground level when not needed, and then let it fall down to the caverns again when power is needed.
Compressed air technologies come in several variations.  One will see air compressed and stored in large caverns, for later use.  Because the air does not have to be compressed by natural gas, costs are significantly decreased. General Compression recently announced a $17 million share issue led by US Renewables Group.

A variation on this process is to compress air, generated by wind turbines, into large bags that are stored at depth in the ocean, compressed by the weight of the water.
While each of these systems and technologies has a distance to go to be cost-effective, there is sufficient promise in each to warrant significant interest by potential investors.

Report Also Warns That Investing Must Continue To Increase

In the face of some pretty lean economic times, green energy investing fared quite well in 2009, according to a recent report from the World Economic Forum (WEF).
Bolstered by some encouraging stats showing strong positive trends, the future of funding for green companies is looking good. However, while alternative energy investing appears healthy at the close of 2009, investors must keep up the pace in 2010 and beyond in order to continue making headway against carbon emissions.
H2:  Wind, Water, Solar, Biofuels And More Expected To Play A Huge Role
The World Economic Forum’s report, “Green Investing: Towards a Clean Energy Infrastructure,” identified eight alternative energy sectors the authors expect to “significantly contribute in the move to a clean energy infrastructure of the future,” including:
•    onshore wind;
•    offshore wind;
•    solar photovoltaic;
•    solar thermal electricity generation;
•    municipal solar waste-to-energy;
•    sugar-based ethanol;
•    cellulosic and next generation biofuels; and
•    geothermal power.

And these emerging technologies are drawing a huge share of attention and capital, according to the World Economic Forum. “Clean energy opportunities have the potential to generate significant economic returns. The report shows that even after a tumultuous 2008, an index of the world’s 90 leading clean energy companies had a five-year compounded annualized return of almost 10%, unmatched by the world’s major stock indices.”

Alternative Energy Investing Is Profitable, So How Much Money Is Being Invested?

The flashiest numbers from the World Economic Forum’s report show exactly how fast investment in green companies is growing. These numbers (from a January 2009 World Economic Forum press release) speak for themselves:
•    Clean energy investments increased from around $30 billion in 2004 to over $140 billion by 2008. Investments in 2008 exceeded expectations at $155 billion (the report is based on projections for 2008 – which suggests that $142 billion would be invested by year-end).
•    Investment in clean energy has not only increased, but has also diversified geographically. Developing countries attracted 23% ($26 billion) of asset financing in 2007, compared to 13% ($1.8 billion) in 2004.
•    In addition, four key enablers for a shift to clean energy will be energy efficiency, smart grids, energy storage, and carbon capture and storage.
•    Well-developed conditions for innovation, markets for clean energy through public procurement, energy efficiency standards and stable and simple policies are essential to meet the climate change challenge.
H2:  Investment In Green Companies and Alternative Energy Investing Needs To Keep Growing
While the numbers are trending favorably, the World Economic Forum Report issued a strong message of cautious optimism. Green investment funding is booming, but the ultimate goal is to reduce carbon emissions and a reliance on foreign sources of energy.
“New Energy Finance, which collaborated with the World Economic Forum on the report, warns that unless at least US$ 515 billion per annum is invested in clean energy between now and 2030, carbon emissions will reach a level deemed unsustainable by scientists, causing temperatures to rise by two degrees globally.”

Find out more about our Green Venture Fund, JPF Venture Fund 1, LP and how we are working to spur the type of alternative energy investing that the World Economic Forum’s report concluded is much needed.

1/8/2010

Central Penn Business Journal

Imagine being able to extract the solar energy trapped in the world’s tropical oceans and use it as a renewable power source.  Although that might sound like science fiction, a company in Hawaii called Ocees International Inc. is pursuing the technology — and it’s turned to a new Lancaster-based venture capital fund for help.  JPF Venture Fund 1 is the brainchild of Lancaster County resident Jeremy P. Feakins and his administrative team, which includes midstate businessmen Jim Greenberg and Ed Baer.

According to his Web site, Feakins founded and took public Medical Technology & Innovations Inc. and has managed reverse mergers for several companies, including Caspian International Oil Corp., Care Recruitment Solutions International Inc. and IP VoiceCommunications Inc.  A reverse merger is when a private company buys a public company then combines the two.  JPF’s goal is to practice sustainable investing, which involves products or services that improve social conditions, Feakins said.  “We liked the whole area of renewable energy and clean technology companies,” said Baer, the fund’s chief administrative officer and co-founder of The Marston Group Inc., a midstate boutique investment banking and consulting firm.  “We also liked the idea of not only providing the capital and experience to help these companies grow … (and) that everything we look at has a humanitarian aspect to it.”  Of course, the principals of JPF also believe the companies the fund invests in will prove profitable.  “We’re certainly not a charity,” Feakins said. “For us to get involved, the company has to have a product. We’re not interested in things on the drawing board. We’re looking at companies that have proven technology and customers in the pipeline.”

Ocees last fall became JPF’s first client, and several companies are in varying stages of the due diligence process, Feakins said.  He said one company has invented a process to make bricks primarily using whatever soil is available, making housing more affordable to construct. Another company has developed a 15-pound, renewable-energy power pack that could be used by military forces overseas, Feakins said. What the firms have in common is that they need a monetary boost to get off the ground.  “We’re looking at companies that generally have really good technologies and do good for people but haven’t been able to commercialize those (ideas),” said Greenberg, a partner at York-based law firm Katherman Briggs & Greenberg and chief investment officer for JPF.

JPF will require all of its companies to locate as much of their operations as possible at the fund’s 30,000-square-foot warehouse on South Queen Street in downtown Lancaster. For example, the accounting department of Ocees will move to Lancaster, but its power plant will not.  The space could house three or four companies and mean 100 to 150 jobs for the Red Rose city, Feakins said. But before that happens, JPF must raise more funds, Feakins said. The goal is $5 million, and so far the total has reached “in the seven figures,” he said. About 20 investors have signed on, Baer said.  What sets JPF apart, aside from its focus on sustainable investing, is its insistence on management and financial oversight for the companies in its portfolio, the principals sad.  “Too often with these early-stage companies, an investment will be made in the company and they veer from their plan,” Baer said. “We want to make sure that doesn’t happen, as protection for investors.”  JPF’s requirement also is intended to help the company succeed, Feakins said.  “We find a lot of companies are headed by engineers and scientists trying to be CEOs,” he said. “Our view is not that we want to supplant existing management, but we want to be able to help and support management.”

There’s a set time limit on JPF’s involvement. “I don’t know of any (funds) like we are,” Baer said. “We are in effect a short-term investor. We invest in these companies just prior to taking them public, and we insist that they agree to allow us to take them public.”  Baer said the fund hopes to take Ocees public on the London Stock Exchange next fall. Europe offers better opportunities than the United States to take renewable energy companies public, he said.  Companies also must agree to undertake a 12-month campaign to raise more money once they go public. Overall, JPF’s goal is to begin divesting itself of a company after 12 to18 months, Baer said.   Firms would no longer be required to stay in Lancaster once JPF divested itself, but the fund would allow them to keep renting space at the JPF facility, Baer said.

As many of you know Africa is in the world spotlight when it comes to climate change and the many challenges it faces. World Bank Vice President Obiageli Ezekwesili talks about some of the many challenges facing Africa and their plans to move forward on the issue of climate control. Obiageli points out that Africa is one of the fastest organizing continents with only 24% of its population having access to a stable energy source. The number is projected to grow and a cost effective and environmentally friendly solution is needed. Africa is a large contributor of CO2 to the environment and needs to be able to move its continent in a more environmentally sustainable direction.

Obiageli also suggests that another major problem facing the continent is the need for a sustainable land management program, especially in the area of deforestation. Overall Africa needs to adapt and enforce greater climate risk control in order to join the rest of the word in reducing climate change. Obiageli makes the case that in order for Africa to proceed forward they need help in the form of financing, knowledge and access to technology. This is a great video on the subject. Please take a moment to view it below.

Climate Change and Africa from World Bank on Vimeo.

Green Investing Tips From TreeHugger.com

Treehugger.com has published a really great resource listing some tips for investing in green. They say that there is no better time to invest in green than now. The top reasons being a green friendly administration creating thousands of jobs and pledging billions in funding toward the initiatives and the general value ofcurrent green stock offerings. Here are a couple snippets from the report and their top 3 tips for green investing:

1. Look to alternative energy companies for long term investments, not short term:
" Investments in alternative-energy companies, for example, probably won't pay off immediately, but they might in five to eight years, he said." They also note that "Alternative-energy companies could receive a boost if fuel prices go back up, as could makers of hybrid cars."

2. Invest in companies working to curb water shortage—which will soon be a massive issue—especially "companies attempting to develop efficient ways to desalinate ocean water to increase the supply. Other firms are working on recycling water for industrial use."

3. Check out transportation investment options. Most of the advice offered here is pretty standard stuff:

To find out more about Treehuggers green investing tips visit their article located here.

OTEC is the hydro energy conversion that uses the temperature difference between deep and shallow sea water to run a heat engine.

What does it mean?  We can create all the energy we need from our Oceans exclusive of fossil fuel.  JPF Venture Fund 1 is working with the only company that , in conjunction with the US Department of Energy, developed a working Ocean Thermal Energy Conversion (OTEC ) plant for the purpose of producing electricity.  The benefits are too many to list, but here are some highlights and links if you want to learn more about this world changing technology: Chilled soil agriculture, Aquaculture, Desalination, Hydrogen production, Mineral extraction.  Did you know that one 2 megawatt plant can produce 4300 cubic meters of desalinated water each day?  That's 1,135,940 gallons of fresh drinking water every day and that's just a one of the many by products of OTEC technology.  The world is going green and JPF Venture Fund is committed to getting us there.  Call us to learn more about JPF Venture Fund 310 993 5993.

Links:

http://www.nrel.gov/otec/what.html

http://en.wikipedia.org/wiki/Ocean_thermal_energy_conversion

 Great article today from the LA Times!

Are we finally starting to see some

support from the V.C. community?


LA Times.com

Silicon Valley venture capitalists nurturing growth of green technology

Start-ups often need big money and investors steeped in big science and big government.

By Todd Woody

September 20, 2009

Reporting from Menlo Park, Calif.

In what would have been an unaccustomed move for a Silicon Valley venture capitalist not too long ago, Alan Salzman recently flew to Copenhagen to attend a conference on climate change and schmooze government policymakers.

His mission: Explain the role of venture capitalists and their green-tech start-ups in cleaning up the environment.

"All aspects of clean tech bump up against government regulations," said Salzman, whose firm, VantagePoint Venture Partners, has funded such high-profile firms as electric car maker Tesla Motors Inc. and solar power plant developer BrightSource Energy Inc.

A few years ago, venture capitalists rarely ventured too far from Sand Hill Road, a stretch of low-slung office parks nestled among redwood trees in the hills above Stanford University that is home to some of the world's biggest venture firms. As a rule, Silicon Valley venture capitalists kept their distance from regulators and policymakers. Not anymore. Climate change legislation and state regulations are influencing the fate of their green-tech portfolios and helping determine whether a start-up turns out to be the next Google Inc. or the next Webvan, the online grocer that spectacularly flamed out in the dot-com crash of 2001.

"If you're doing tech investing you don't care too much what's going on in Washington with regulatory policy, but it absolutely matters with clean tech -- it's a big driver," said Marianne Wu, a partner at the Sand Hill Road firm Mohr Davidow Ventures. "I don't think anyone from our IT group has been to D.C. in the last year. But our clean-tech group certainly is going to D.C. often."

Reinventing the past

Silicon Valley venture capitalists have always been about inventing the future -- taking a wild idea, nurturing it with cash and creativity and giving birth to new products, companies and industries we once couldn't imagine and now can't conceive of living without: the Web, Google, the iPhone, Twitter.

But as green technology becomes the latest tech wave to break from the nation's entrepreneurial epicenter, it's now all about companies reinventing the past. Solar power companies, electric car start-ups and algae biofuel ventures aim to remake century-old trillion-dollar industries on a global scale.

Venture capitalists poured $4 billion into green-tech start-ups in 2008 -- nearly 40% of all tech investments in the U.S., according to a survey by PricewaterhouseCoopers. Green-tech investment plunged in the first half of 2009 to $513 million as the recession dragged on, but there are signs of a rebound: Silicon Valley's Khosla Ventures announced this month that it had raised $1.1 billion -- the biggest first-time fund in a decade -- that would be largely devoted to investing in green-tech start-ups, many in Southern California.

But green-tech companies face unique challenges, including global markets, tough technological hurdles and a future shaped by government incentives and regulatory policy. Those challenges are changing the game on Sand Hill Road.

"If you're starting a Web 2.0 company, your basic needs are personnel and servers -- there is no physical product, no manufacturing capacity, no inventory, no steel in the ground," VantagePoint's Salzman said, referring to software-based companies that provide services over the Internet.

Green-tech start-ups, he said, often need big money and investors steeped in big science and big government.

Solyndra Inc., a Silicon Valley start-up that makes rooftop solar arrays for commercial buildings, burst onto the market last October with a staggering $600 million in venture funding and $1.2 billion in product orders. If that wasn't enough, it has since raised nearly $200 million more and secured a $535-million loan guarantee from the U.S. Department of Energy to build a factory in Fremont, Calif.

California's requirement that utilities obtain a growing percentage of their electricity from renewable sources has created new markets for Mohr Davidow Ventures' start-ups. One company, Energy Innovations Inc. of Pasadena, is developing photovoltaic power equipment for commercial use. Another, Nanosolar Inc. of San Jose, has raised half a billion dollars and sells low-cost, thin-film photovoltaic panels for solar farms.

Recently, Tesla Motors scored a crucial $465-million, low-interest loan from the federal government to build the Model S, a battery-powered sports sedan, while BrightSource Energy has applied for a loan guarantee to help finance its first solar power plant.

"We have to be competitive on the global level, and to me it's very hard to understand how we can think globally without having some sort of partnership with the U.S. government," said Tom Baruch, a longtime Silicon Valley venture capitalist whose firm, CMEA Capital, was an early investor in Solyndra.

Green investor

Such talk was once heretical in Silicon Valley, and it still rankles Vinod Khosla, one of its most prominent investors. A co-founder of Sun Microsystems Inc. and a longtime partner at marquee venture capital firm Kleiner Perkins Caufield & Byers, Khosla started his own outfit, Khosla Ventures, in 2004 to invest in green-technology companies.

Khosla maintains one of the most eclectic green-tech portfolios -- companies involved in things as varied as solar energy, plant-based industrial chemicals and methods to improve the efficiency of internal combustion engines.

He has developed a reputation as something of a contrarian when it comes to green investing, dismissing electric cars, zero-emission buildings and other favored technologies as unable to pass what he calls the "Chindia" test: the price at which China and India will adopt a technology without subsidies.

"In the end, every single technology has to compete unsubsidized in the marketplace against fossil fuels," said Khosla, rail-thin and dressed head to toe in black during an interview at his Sand Hill office.

For Khosla, green tech is not so much changing the nature of Silicon Valley venture investing as it is about taking it back to the future. Before such investing became more of a financial business, venture capitalists in the 1980s understood technology and took technical risks, similar to what is happening now with clean technology, he said.

"It's not like you have another clever idea and you do a Web application," Khosla said. "It's about fundamental breakthroughs, and that's physics, chemistry and biology, the hard stuff."

For instance, Khosla is backing Calera, which was founded by a Stanford University professor to create "green" cement by combining carbon dioxide emissions from power plants with seawater. Another Khosla-backed company, Amyris, was started by UC Berkeley researchers.

"When I met them they were working on malaria drugs," he said of Amyris' founders. "Six months later the same genetically engineered bugs were producing diesel."

Khosla also dismisses the notion that green-tech start-ups need hundreds of millions of dollars in venture capital. Although that may be true for companies developing large-scale renewable energy projects, most green-tech ventures require no more capital than a typical chip start-up, he said.

"What's different is the amount of technical expertise needed, which many venture capitalists are just not equipped to do," Khosla said. "It's about being more patient and looking for larger breakthroughs rather than rushing things to market."

Forging alliances

Idealab founder Bill Gross has sat on both sides of the venture table and knows the virtues of patience -- solar companies that he started in 2001 are just now bringing products to market. Although it's not a venture capital firm, Pasadena-based Idealab invests in green-tech start-ups. Gross is also chief executive of solar power plant builder eSolar and the founder of Energy Innovations, funded by Mohr Davidow Ventures.

"Putting metal in the ground is a completely different thing than putting bytes on the server," he said. "In the old days you could start an Internet company and go public 15 months later. With a clean-tech company, 15 months later you're still working on a prototype."

Venture capitalists have often forged alliances with mainstream corporations to help their start-ups, but the trend has accelerated as green-tech firms try to break into multi-trillion-dollar markets. BrightSource Energy, for instance, counts among its investors not only Google and VantagePoint but oil giants including Chevron Corp., BP and Norway's Statoil Hydro.

BrightSource in August struck a deal with Chevron to build a solar power plant to generate steam that will be injected into an oil field in Coalinga, Calif., to enhance petroleum production. And this month BrightSource signed up global engineering and construction giant Bechtel Corp. as a contractor for its first big solar power plant as well as an investor in the project.

Such networks now need to be global, venture capitalists say. In the past, technology invented in Silicon Valley would first find a market in the U.S. and then spread to Europe and Asia. Thanks to years of government support for clean technologies in Europe and Asia, the most thriving markets and most formidable competitors are often found outside the U.S.

"Global markets are very, very important, and that requires a broader understanding of the competitive landscape," said Wu of Mohr Davidow Ventures. "In a lot of cases, we're seeing the technology innovation begin in the U.S. but the market starts somewhere else."

For Khosla, the changes wrought by the green wave are just the latest cycle in Silicon Valley's never-ending reinvention of itself. That venture capitalists now have the opportunity to help save the world from climate change only increases the return on investment.

"That's not to say we're do-gooders, but it's nice to work on things your kids are proud of," he said. "And I have a lot of fun at it, going up against the conventional wisdom."

Copyright © 2009, The Los Angeles Times