see also: Clean-tech and environmentally conscious investing , energy industry , Environment issues , solar energy
Electricity Generation
Energy companies in the production side are commonly natural monopolies. For example, it does not make sense for two oil companies to share the same well or two nuclear power plants for one community. Social regulation in this market is needed in order to prevent natural monopolies in this industry from destroying the environment or from ignoring safety for workers and local residents. For example, oil companies in the “upstream” (production side of the industry) could be required to allocate a percentage of profits into a safety development and training fund. Or, they could be required to pay an environment tax that would be a percentage of profits.
We believe that creating incentives, rather than social regulation, is the most efficient method for getting energy production companies in natural monopolies to invest in technology, safety, and training. This can be done by providing tax breaks for companies who meet certain target levels or pass certain safety standards.
In Central America, energy production is highly inefficient and highly regulated. These countries do not have the capacity to produce the energy demanded therefore; they often find themselves purchasing energy from other countries. However, intermediary countries will block the energy transfer and force countries to purchase elsewhere at a higher price. In this scenario, we believe that the best solution is deregulation of the market along with market integration. A Central American energy grid should be created along with an energy exchange. Here, energy producers will compete for demand and energy will most efficiently be allocated. At the same time, consumers/countries will always obtain the best price available.
In developing nations
Electricity distribution is another natural monopoly that should be deregulated. In Nicaragua for example, electricity distribution was privatized and sold to the company Union Fenosa from Spain. The argument for privatization was made for similar reasons listed above; the private company can improve efficiency and provide better services with newer technologies. The National Energy Institute (INDE) has maintained strict price controls on Union Fenosa while the company’s costs have increased significantly. The price INDE has imposed on Union Fenosa is a price below the company’s average cost. This has forced Union Fenosa to reduce output in order to stay afloat. As a result, there are frequent power outages that hinder the national economy. If the price of distribution was market regulated, than we could find an equilibrium of price and quantity that is most efficient.
As ideal as a competitive market would be for efficient pricing of electricity distribution, certain markets are just too small for many firms. And even if one additional firm entered the market, the two firms can eventually collaborate and form a cartel to protect each other. They would protect their assets, while placing barriers to new entrants. Therefore, we must accept that a natural monopoly is the most effective method of operating. In the case of electric distribution, we would suggest that performance based pricing that fluctuates with inflation minus an efficiency incentive would be the best way to simulate a competitive market. However, it would be essential to frequently monitor the rate of the incentive in order to prevent crippling the company or to prevent it from enjoying unprecedented gains common in monopolistic markets.
Nuclear Energy
nuclear energy
Oil Industry
Oil Industry
bp "beyond petroleum" (British Petroleum)
More Energy Companies (external links)
Anadarko Petroleum • BP • ChevronTexaco • Arch Coal • Cameco • ConocoPhillips • Enbridge • Consolidated Edison • Entergy • Exelon • Exxon Mobil • Frontier Oil • GE • Halliburton • Philips • Massey Energy • Occidental Petroleum • PG&E • Peabody Energy • Shell • Sasol • Schlumberger • Sinopec • Suncor • Sunoco • SunPower • Suntech • Suzlon • Toshiba • Valero • Xcel
The Organization of Petroleum Exporting Countries opened a fund for clean technology research and investment during its most recent meeting.
Oil producers investing in cleantech in order to boost or streamline their own production isn’t entirely new. We recently reported on a Chevron fund that has multiple investments, including one in solar energy. However, the OPEC fund is focused almost solely on carbon sequestration. The method preferred by oil producers involves pumping carbon back into oil wells, which can also help force out more oil. Some oil miners hope to eventually earn carbon credits from carbon sequestration, while OPEC probably also has hopes of preemptively “greenwashing” its production as popular opinion turns against use of fossil fuels. For a different take on carbon capture, read our post about Calera.
Alternative (New) Energy
using bio waste to generate energy
solar energy
Ethanol - alternative energy sources in Latin America are springing up. In this section, we will investigate the industry, and see what competitive advantages that particular countries and companies have, and what opportunities for investments that there may be.
Ethanol Importing - energy
Major Players (Companies involved)
General Electric (GE) invests more into clean technologies than any other company.
The company’s yearly allotment for Ecomagination, its cleantech investment arm, totals $1 billion, and GE says it’s on track to raise the number to $1.5 billion by 2010. Compare that to the mere $844 million invested in U.S. clean-technology companies by the entire Venture Capital establishment last quarter, which is at record levels. The GE money will go to both new research and existing projects, as well as partnerships with universities and labs, GE says. Areas of investment include renewable energy, fuel efficiency, lighting and water purification (look here for summaries.)
GE can maintain its investment flow into Ecomagination because the division is actually bringing in revenues — about $12 billion since it was opened in 2005. Like Chevron, which recently opened its fourth venture fund, the company also uses the companies and technologies it invests in for internal projects.
Chevron’s focus is broader than just clean-tech: The company is also investing in oil and gas and information technology ventures. About a third of the $75 million it has set aside will go to clean-tech.
The fund’s new director, Trond Unneland, said Chevron is mainly interested in technologies that can assist its own oil and gas operations, like a San Joaquin Valley project where solar panels help turn water to steam for use in oil reclamation.
Between its first three funds, Chevron has invested about $170 million, seeing an internal benefit of $50 million from increased efficiency and cost savings, it says. Asked whether the company planned on helping the companies it invests in develop in the outside world, Unneland said: “Our primary goal is [internal] technology transfers, but financial returns are important as well.”
So with their slightly different focus, where do giant companies fall in the venture capital spectrum? Aside from their focus on technologies they can use for themselves, they may also be more risk-averse than traditional VCs investing in cleantech, like Vinod Khosla.
Khosla Ventures has bet on a number of controversial projects, including one we reported on recently: Calera, which claims to be able to suck carbon dioxide from the atmosphere to produce concrete.
By comparison, GE invests in projects like building cleaner coal plants or working on advanced desalination technology. Chevron, for its part, has put money into Brightsource, the photovoltaic steam-generation startup, and Konarka, a maker of so-called “power plastic”.
Three significant developments today in alternative fuels:
–Range Fuels broke ground on one of the first cellulosic ethanol plants;
–Innovation Fuels took $15.5 million for a New Jersey biodiesel facility; and
–Codexis and Royal Dutch Shell decided to extend their research collaboration for another five years.
We reported in March on a $76 million Federal government grant that Range won preliminary approval for. That grant was part of a $385 million package set aside for six companies.
The Fed has now confirmed that Range qualifies for the grant. The company is using the funding for construction of a plant in Soperton, Georgia. Of the full amount, $50 million will go toward the first phase of construction, and the remainder to the second phase. If Range sticks to its plans, it could have the first commercial-scale cellulosic ethanol facility in the United States. Heretofore, only demonstration plants have been set up, some by larger companies who have avoided investing a great deal of money in cellulosic ethanol.
The hesitation by these companies is because making cellulosic ethanol is a more complicated process than making ethanol from plants like corn or sugarcane. The process requires breaking down the chemical structure of plants like trees and grasses.
Although there are several proven techniques for doing so, the associated costs and challenges in scaling such an operation aren’t well known, and there is uncertainty over which materials are best to use. Range plans on using locally available wood, while other companies have plans to work with faster-growing plants like switchgrass.
Innovation Fuels has made a somewhat safer bet with its plans to build a biodiesel facility in Newark, New Jersey. The news of its $15.5 million funding, the company’s first, was broken Monday by VentureWire (subscription required).
An unnamed bank and hedge fund contributed the funding for the plant, which VentureWire’s source said will have the capacity for about 40 million gallons annually. A separate plant the company is building in its hometown of Hampton, New York will reportedly have a 50 million gallon capacity.
Innovation doesn’t have a publicly available timeline for completing the facilities. The executive team has concentrated experience in trading and investment, which makes us wonder if the entire company isn’t a momentum play on the popularity of biodiesel, with the intention of ultimately selling the plants to larger companies. The company started life a year ago as a division of CEO John Fox’s company Homeland Energy Resources Development, which is essentially a consultancy for the cleantech projects of other companies.
Codexis is one of several companies exploring the use of biological processes to produce fuel; we recently wrote about a competitor called LS9.
The technology behind the process, which in Codexis’ case involves directly manipulating the DNA of microorganisms to produce different enzymes, can also be used for pharmaceuticals and other applications. In April, for instance, the company signed a large deal with Merck, a drug manufacturer.
The extension of Codexis’ research partnership with Shell also involves an investment by that company into Codexis, for an undisclosed amount. However, considering that the company’s last official funding was for $40 million and Shell is taking a seat on the board, we’d guess it was likely a substantial round.
Meanwhile, oil futures hit $97 per barrel today, while demand is expected to continue rising into next year. As rises in oil prices are usually accompanied by heightened interest in biofuel, we can expect plenty more news like this in the next few months.
Smart-grid
the energy networking system that "knows" stuff:
It isn’t always easy to estimate how much power renewable energy installations create or save, so Fat Spaniel is building a business around doing so.
Among its over six hundred clients are companies like Staples and Wal-Mart. The software and hardware Fat Spaniel offers can help discover exact cost savings and secure renewable energy credits from the government.
We reported in October 2006 that the company had raised a total of $7 million for its first round of funding, from DFJ Element and Chrysalix Energy.
Now it has raised a further $3 million bridge round, and is seeking a total of $20 million for its second round, according to VentureWire (subscription required).
VentureWire goes on to note that some investors have decided to avoid the company, as it “will face stiff competition as traditional information technology and networking companies warm to the market potential of so-called smart-grid applications for energy management.”
Recharge-able Battery
Like the self-powered “kinetic” watches many people now wear, M2E Power’s batteries include a micro-generator that continuously recharges battery power as the user moves around.
Aiming at soldiers carrying mobile devices in the field, M2E says it can lower the battery weight they need to carry, saying soldiers often have to carry 10-30 pounds more due to battery-powered equipment. Where most kinetic watches use the motion of a mechanical arm to wind, M2E’s technology uses magnets in a wire coil. The movement of a magnet in the electromagnetic field created by the coil provides the charge. Similar technology has been in use for years, most recently finding its way into so-called “shake” flashlights that need to be shaken back and forth before they light up. M2E’s innovation is an improving the generating architecture to generate more power and attaching the resulting mini-generator to a battery.
While it was conceived during a U.S. Department of Energy project and for now focused on military applications, M2E batteries should also find their way into consumer uses. One could power, for instance, a BlackBerry or digital camera.
Later, when scaled upward in size, they could become part of commercial electrical generators, working off wave or wind power.
The Boise, Idaho company previously took an undisclosed round of seed funding. Its $8 million round was led by OVP Venture Partners, with participation from @Ventures and Highway 12 Ventures.
Ocean Energy
Ocean Renewable Power Co., a Fall River, Mass. company that uses ocean waves to generate electricity, is about to launch its first pilot turbine, and is reportedly in the process of raising $12 million in financing.
The news, reported this morning by VentureWire (subscription required), comes at a time when other efforts to do something similar have failed.
The three-year-old company expects to begin testing its underwater turbine prototype off the coast of Eastport, Maine, by the end of the year.
The company’s pilot is expected to generate about 14 to 25 kilowatts of electricity, but the company wants to reach a significant 20 megawatts within four years — which would consist of a number of turbines stacked together, VentureWire said.
The company said it will eventually require $40 million.
Fuel Cells
fuel cells
Concepts to consider (external links)
 Biofuels - Corn is one potential feedstock for biofuels Biofuel, based on fuel derived from organic biomass from recently living animals or plants or their byproducts, has transformed from a... read more
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Carbon Trading - Carbon emissions in action, EPA Carbon emissions by sector and fuel type, EIA "Warming of the climate system is unequivocal, as is now evident from the obsservations in... read more
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Cellulosic ethanol - It’s hard to open a newspaper without finding a story about biofuels, and in particular, ethanol. Most cars in Brazil can run on 100% ethanol. Ethanol, if blended with... read more
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Clean Coal - Coal can be very dirty. When you pick up a briquette to put in your barbeque, your fingers turn black; when coal is burned in power plants and factories, the smoke released into... read more
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Coal Power - If you are reading this article on a computer plugged into a standard wall socket in the U.S., there is a 50% chance that your computer is being powered by coal. Coal is the... read more
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Corn Prices - Corn is the most widely produced feed grain in the United States, accounting for more than 90 percent of total production. Around 80 million acres of land are planted with corn.... read more
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Global Climate Change - Global warming could mean more freak storms like Hurricane Katrina, pictured above--bad news for insurance companies. For thirty years now, many scientists have been... read more
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Natural gas - Natural gas pipeline, photo courtesy of FERC Remember when your mom used to remind you to "sniff for gas" before leaving the house? While safety was (hopefully!) her main concern... read more
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Nuclear Energy - Nuclear energy involves a controlled reaction to split atoms of nuclear fuel, typically uranium or plutonium, creating two new atoms. When accomplished on a reasonable scale,... read more
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Oil Exploration and Production - Here's a way to make millions of dollars from the oil boom with little money down (and a lesson in the economics of oil exploration). Step 1: Start an... read more
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Oil Prices - Few inputs impact the U.S. economy as much as the price of oil. Oil powers the cars, trucks, and airplanes that transport people and products for the entire economy. As oil prices... read more
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Oil refining (downstream) - Oil refinery in Alaska From crayons to jet fuel, refined petroleum has myriad uses in the modern economy. While we've all seen images of the dark crude oil gushing... read more
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Peak Oil - Recent oil price increases, turbulence in the Middle East, and an increasing awareness of the impact we humans have on the environment have all fostered concerns that the world is... read more
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Renewable Energy - Renewable energy refers to a subset of energy sources that are derived from constantly replenishing sources and hence, unlike nonrenewable energy, will never run out. In... read more
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Solar Power - Love doesn't make the world go round. The sun does. Literally. It's the gravitational pull of the sun on the earth that keeps our planet moving. The sun also, directly or... read more
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U.S. Energy Regulations - President Bush and the Secretary of Energy review a Concentrating Solar Power (CSP) facility, which the Energy Policy Act of 2005 supported Untangling the web of... read more
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Wind Energy - Harnessing the power of wind...(Skandia) It is the ultimate renewable resource. Wind is caused by differences in temperature and air pressure (due to the sun's heating the... read more
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