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It's musical chairs time at Silver Spring Networks.

Judy Lin, who had been serving as the chief product officer at the company, and John O'Farrell, who was executive vice president for business development, have both left the company. O'Farrell has joined Andreessen Horowitz, a venture capital firm. Lin is on vacation and couldn't be reached. The departures were amiable, according to Silver Spring.

Lin came to Silver Spring last year from Cisco, where she oversaw the Ethernet switching group. It was considered a coup because the rivalry between the two companies was just heating up. O'Farrell joined in early 2008.

Silver Spring -- which has raised over $275 million from investors -- has landed large, multimillion-dollar contracts with utilities in North America and elsewhere. It has also seen others in the industry come around to its way of thinking on a number of issues. The company was an early advocate of low-powered mesh networking for linking meters and open standards. Whether Silver Spring's networks is really open or a mix of open and proprietary standards has been an ongoing debate in the industry. Either way, other companies are now taking a similar approach, so hats off to SSN.

The rising profile, however, has also brought challenges. This week, Cisco inked an alliance with meter maker Itron and bought mesh networking specialist Arch Rock. Together, these two moves give the networking giant the elements of a platform upon which to compete directly against Silver Spring.

Sources also say that Silver Spring has been trying to enhance its strategy to pave the way for a long-anticipated initial public offering. A sizable portion of the revenue in these utility contracts ultimately ends up with meter makers. Silver Spring makes the radio card and provides services to its customer utilities, but the meters come from other manufacturers. (The SSN-powered meter on my house came from GE.) Networking technology can be a big business, but it doesn't encompass the entire contract; in other words, boosting margins could burnish the IPO. Many smart grid companies are putting an emphasis on the software applications that can reside on these networks.

Silver Spring has not commented on its strategy plans or the IPO, and our sourcing is anonymous. Thus, take that last paragraph with a grain of skepticism if you'd like. Nonetheless, this is what we are hearing.

Oh, behave!

That could actually serve as the informal motto of the energy industry. Getting individuals and businesses to change the way they interact with their thermostat has become one of the primary goals of utilities, regulators and energy startups. To spur adoption of renewables, incentives have to be properly calibrated.

But what works? One of the most successful companies so far in bringing behavioral dynamics to energy is OPower. It sends notes to individuals about their energy consumption in their utility bills. On average, the system -- backed up by complex software and reams of survey data -- gets individuals to reduce power consumption by around 2 percent to 3 percent. In Europe, CityBin has managed to boost recycling in a similar manner.

I've been collecting suggestions on ways to change the dynamics between utilities and consumers. Are they possible? Sure. Practical? That's a debate. Solar leasing sounded kooky at one point, too. Nonetheless, here they are. If you have suggestions, please send them along.

1. Sell Energy by the Square Foot. Rather than sell energy by the kilowatt hour, utilities could charge consumers by the size of their house, suggests Karl Rabago, vice president of distributed energy services at Austin Energy. Let's say its 10 cents a square foot. An apartment dweller in New York City might see a discount, while homeowners in the South would avoid the onerous utility bills of July that are jacked up by air conditioning.

In exchange, utilities would gain the right to control the house to some degree: install new insulation, replace an old refrigerator, etc. The utility gets to take energy hogs off the grid and the consumer gets a remodeled house.

And individuals do respond to incentives: Austin Energy has 100,000 customers on a plan now that allows the utility to shut off their air conditioners for 20 minutes on 14 days of the year to curb peak power. In exchange, the homeowners get a new thermostat.

"Nothing will get better if we continue to do the spin-the-meter model," he said.

Rabago had another suggestion too: allow utilities to increase the cost of kilowatt hours by the distance it has to deliver it to the consumer. Providing service to distant communities costs money, after all.

2. High Feed-In Tariffs for Crazy Energy Concepts. Tidal and wave power, osmotic pressure gradients and space-based solar all have potential. The problem is that few want to invest in them because of long development times and an uncertain payoff.

If utilities offered extraordinary feed-in tariffs, the economics could suddenly become intriguing, theorizes Dan Adler, president of CalCef. At the same time, the output from some of these devices would likely remain low for years, limiting the potential burden on state budgets. I can hear the fuel cell companies cheering Adler's name already.

3. Insurance Companies Replace the Feds. This one comes from Paul Frankel at CalCef's innovation fund. In the past year, banks have often agreed to fund solar, wind and other projects only after federal and state loan guarantees. Unfortunately, governments only have so much money.

Instead, why not require renewable developers to take out performance policies with insurers. It would add to the cost of projects, but make renewables more palatable politically. It could also accelerate the pace of projects because insurers can fire out a policy more rapidly and with more frequency than some agency can craft a loan program. Suddenly, the financial giants would be lobbying for green.

4. Don't Own Appliances or Lights. Instead of having businesses or landlords own and maintain their own heaters and air conditioners, HVAC systems could be owned by a third party or a city. Cold or hot air could then be sold as a service. Consumers, ideally, would see lower bills and the municipality and third-party providers would have a huge incentive to install the most efficient appliances it could.

This has begun to take place. Skyline Innovations and Metrus Energy conduct retrofits on commercial sites and keep title to the solar thermal water heater and other appliances. The fees charged to the consumer are less than they would have paid for power and both companies say they can turn a profit on these contracts. Meanwhile, utilities in Southern California will deploy ice-powered air conditioners for reducing peak power in part through title shifting.

It could also work in lights. Once LED bulbs drop to $20, utilities could give them away for free to curb peak power, argues Alan Salzman at VantagePoint Venture Partners.

6. Retrofit Instead of Default. Architecture 2030 came up with this one. Commercial real estate owners in danger of defaulting could get deductions for retrofits. "Commercial building owners could trade or sell these tax deductions to investors, who would provide the infusion of capital over a three-year time span. The capital would be invested in putting our highly skilled construction workers back on the job, retrofitting these properties. Property values would rise while energy bills decline," says this article on the Huffington Post, which itself coined the "don't pay people" business model.

There are a few hurdles here. Personally, I favor bringing back the PACE program for commercial properties not in danger of foreclosing. Either way, there seems to be interest in figuring out ways to retrofit without the pain of paying it up front.

7. Feed-In Tariffs for Electric Cars. Giving a utility the ability to extract power from electric cars during a peak power event sends shivers down the spine of auto makers. It would accelerate the age of the battery and, potentially, wreak havoc with warranties. Consumers also likely don't want to see their car depreciate to benefit Southern California Edison.

So pay them 50 cents per kilowatt hour. Consumers would acclimate to the idea rapidly. Warranties could be shifted from being calculated in years to number of charges.

8. Make Cars a Fringe Benefit. In Israel, employees at big companies like Intel get cars as a fringe benefit. That's one of the big reasons Better Place will deploy its network of swapping and charging stations there. An employer guarantees a nice-sized market and the employee has been happily deprived of choice. Electric cars flourish. It also involves less paperwork than trying to let car makers give instant discounts based on the upcoming tax credits on electric cars.

9. Pay Fleet Owners for Openness. Who can afford to build propane, CNG or ethanol pumps? Not gas station owners. A ethanol pump might cost $150,000. But Walmart and Target can, because they want to run trucks and forklifts on alt fuels. If they get a direct per-gallon subsidy for letting the public gas up, finding a station for your flex-fuel car wouldn't be so tough.

SmartGridCity, the smart grid/home automation project in Boulder, Colorado created by Xcel Energy, has received its share of lumps.

The project has cost far more than expected, many prospective partners shied away from participating, and regulators, community leaders, and others have raised objections to having the cost of the $100-million-plus budget whittled down through tariffs on utility bills.

"First, and most importantly, there is not a clear consensus among the members of the Boulder City Council with regard to the value of SmartGridCity in its present state or the prudence of this investment," the city stated in a public filing last month.

Such is the sometimes the fate of ambitious projects.

The overall project, however, has started to provide benefits to the utility and, ultimately, its customers, according to Xcel spokesperson Tom Henley. SmartGridCity, he added, consists of more than the home automation pilot. Under the project, Xcel has automated four of its five substations (one was not touched in order to allow it to act as a control group) and created a broadband-over-powerline network that reaches 46,000 power meters. Roughly half of those meters are smart meters. The new infrastructure has allowed Xcel to adopt twenty-plus applications for controlling its grid.

Since 2009, a fault detection application, which anticipates when a component will fail by analyzing its ongoing performance profile, has led to 25 percent fewer transformer overloading outages in the relevant region. As a result, complaints related to voltage issues (lights flickering, etc.) have dropped from 7.1 percent in 2006 and 2007 to 5.3 percent in 2008 to 1.25 percent in 2009.

"The system allows us to see voltage at a transformer level and monitor and correct it," he said.

This October, Xcel will begin a time-of-use pricing pilot. Time-of-use pricing, of course, requires a network. Consumers that reduce power consumption during peak periods will get a rebate. Those that don't will see higher bills.

The home automation pilot is being conducted on 1,200 homes. Right now, it's on standby until the security issues can be worked out.

This data likely won't completely reverse many opinions. At $100 million, the cost of the network still comes to $2,173 per meter. While powerline has enjoyed popularity in Europe, some U.S. companies have said it is too expensive and provides more bandwidth than necessary for applications like remote meter reading and account management.

Nonetheless, it does help provide a more complete picture.

Convergys’ Kit Hagen, director of utilities, thinks the Maryland and Baltimore Gas & Electric Company negotiation was a good moment for smart grids.

“There’s a lot of spin around smart meters, both positive and negative. People just don’t understand them,” he said.

To this end, Hagen thinks this shift looks like what the cable and telecommunication guys went through when they changed from an analog network of a few data points to digitization on the network.

Cell phone companies like AT&T and Sprint used to run on analog, but now they run in real time. The cell phone companies figured out how to bundle their services in terms of minutes. Utilities need to follow suit.

Lisa Alexander, principal of the Van Denburgh Consulting Group, said energy launches should bundle packages like cell phone plans -- and offer daytime, nighttime and weekend minutes.

In the cell phone industry, it’s all based on minutes. That’s certainly not how the cell phone industry calculates their bandwidth, Alexander said.

But they’ve figured out how to translate that currency in minutes. But when time of use (TOU) and critical peak pricing tariffs are introduced, will customers change their behavior?

And then of course, there is the other problem. Most utilities don’t have permission to implement time-of-use pricing. Any proposed pricing plans are thoroughly scrutinized for fairness, how they would impact customers and other issues. Whipping up a cell-phone-like billing system is like asking Fed Ex to start carrying freight with untested aircraft out of random airports. There are rules and circumstances far beyond the utilities' control.

The customers like seeing two bills through a trial period, so they aren’t worried about being overcharged.

The bundles need to be easy to understand, said Christine Hertzog, managing director of the Smart Grid Library. “If it doesn’t make sense to Joe and Jane Ratepayer, then they can’t identify what’s in it for them,” Hertzog said. How could the energy currency could play out? For instance, you get a certain number of minutes in electricity, plus you get certain devices that you could have in your office or building.

Whether this type of bundling would appeal to consumers is another question. CenterPoint, the large electricity distributor in Texas, conducted a smart grid test with powerline networking, a broadband standard that would have also allowed Centerpoint to sell internet services. After it learned that customers really didn’t want to get internet from them or didn’t care, the company dropped powerline and went with a less expensive mesh for its meters.

However, several Australian companies are bundling energy and telecom together. It's a work in progress. Consumer feedback, hopefully, will help provide an answer someday soon.

Coda Automotive, the Sino-American car company coming out with an all-electric sedan later this year, said it will bring its cars to Hawaii in the third quarter of next year.

The company is already slated to bring out a limited number of cars to California later this year. Hawaii is an interesting choice. The state is seen as a growth market for PV panels, wind, solar air conditioning and oceanic air conditioning. The weather is amenable and conventional power is expensive. The state gets the bulk of its electricity from diesel-powered generators. Thus, both the electric cars Coda and Better Place will bring to Hawaii will initially be inefficient diesel mobiles, but that should change over time. By 2030, Hawaii wants to get 70 percent of its power from renewables.

Coda's car has a 33.8 kilowatt hour battery, which is larger than the one in the Nissan Leaf, and will go 120 miles on a charge.

Coda also has said that it will raise a fourth round of funding over the next few months. The company has already raised over $125 million. Lio Energy Systems, the related battery company, has accumulated $427 million in equity and loans.

Elsewhere:

--Ford Motor company said it would employ a liquid cooling system for the battery in the all-electric Ford Focus coming in 2011. The liquid essentially absorbs heat coming off of the battery pack like a radiator. The system can also be used to moderate the temperature of the battery right before and during charging. General Motors and others employ liquid cooling as well. Nissan--and many of the electric motorcycle vendors--employ air cooling.

Compact Power, a subsidiary of LG Chem, is building a battery cell factory in the Midwest that will supply both Ford and General Motors with cells.

--Semitech has come out with a new OFDMA (Orthogonal Frequency Division Multiple Access) based power line transceiver. The chip essentially eliminates noise and chatter on power line networks and improves the quality of smart grid and meter-reading applications. While it certainly doesn't have the high ground in the U.S. power line remains popular in Europe.

--Coulomb Technologies unveiled a charging station in Michigan. It's part of the company's $37 million ChargePoint America plan.

--Demand for biofuels could engender a land grab in Africa, says Reuters.

--California Governor Arnold Schwarzenegger said he will try to rescue SB 722, which would require California get 33 percent of its power from new renewables by 2030. The bill died when the legislature ended on August 31.

"I don't know what the problem is, but I'm sure it can be solved without resorting to violence," he said in the movie Twins.

 

To help California reach its renewable portfolio standard goals, The California Independent System Operator (the ISO) may be aggravating a rivalry between large- and small-scale renewable energy producers.

The Small Generator Interconnection Procedure (SGIP), the ISO's proposed rules governing grid connection for five megawatt to twenty megawatt projects, is now at the formal proposal stage. It has stirred up a controversy because the ISO wants to include small generation into the newly revised process by which it evaluates larger systems.

The ISO achieved a significant streamlining of interconnections for large projects -- with a single fundamental shift. Instead of considering each project application individually, it began announcing an application deadline for projects of a given type and then considering them in clusters.

"Today's influx of renewable projects makes that serial study process unworkable," ISO spokesman Gregg Fishman said of the ISO's earlier method of studying applications one by one, "because each subsequent new project, or change to existing projects, requires us to begin the study process all over again for projects that are already in the queue."

The cluster study approach for smaller generation will "shorten the actual time it takes to complete the study," Fishman said. "We have seen this work in the large generator process."

Fishman said the cluster study approach also solves another interconnection problem in favor of small developers. "By applying the window for new projects proposals to both large and small projects, we remove any incentive there might have been for large projects to split into many smaller ones."

Ted Ko, Associate Executive Director of the FiT Coalition, thinks the ISO's approach may hold back small-scale developers. The Coalition is emerging as a spokesman for small developers because it advocates a California feed-in tariff (FIT) for projects in the five-to-twenty-megawatt range similar to the one that created the unprecedented expansion of renewables in Europe.

"One of the fundamental things that we have an issue with," Ko said, "is they don't seem to truly acknowledge the difference between what it takes to do a small project and what it takes to do a big project." Small developers, Ko explained, "do things in a different order. And the issues are different than for the larger projects. That's why we don't think they should all be mixed into one process."

Ko thinks the ISO's proposal puts an undue burden on small developers. "Some of the fees and security deposits may be different," Ko said of the ISO's proposal, "but the procedures and the back-and-forth and the reports -- it's all the same," he said. "There's no longer an SGIP and an LGIP; it's just GIP."

The FiT Coalition and other backers of small projects want the ISO to slow down. "In the early part of this year, Cal ISO had many informal conversations out of the public eye with developers -- we don't know who they were -- and then they came out with a proposal, a solution," Ko said. "A lot of the feedback we've been getting from talking to smaller developers is that it looks like it's going to be worse and take longer -- up to two years or more to get an interconnection procedure done. You're pretty much going to kill a whole lot of projects."

The ISO's proposal also seems to be aggravating infighting that has been growing between large and small developers over things like which size projects are the best way to achieve California's renewables standard and whether a feed-in tariff will be an effective tool. California's goal is to get 20 percent of its power from "new" renewables (non-big hydro) by 2010, which it will hit through permitted extensions. A plan to expand the goal to 33 percent by 2020 missed a deadline but may come back.

The Center for Energy Efficiency and Renewable Technologies (CEERT), a long-time renewables champion, backs the small producers' call for more transparency. "CEERT would like to request that a formal reporting system be implemented," it said in public comments.

There were even more aggressive criticisms from neutral commentators.

"The lack of location-specific data and updated information to enable the development of a robust and competitive wholesale generation market is still a problem," the California Energy Commission (CEC) said in its public comments.

The California Public Utilities Commission (CPUC) went further. "CPUC staff trusts that the ultimate purpose of revising the GIP rule is to accommodate more generators connecting to the grid faster, which will help the investor owned utilities (IOUs) meet the State's Renewables Portfolio Standard (RPS) goals," it said. But "the proposal should do more to help accommodate small generators," it went on. "CPUC staff supports the CAISO's proposal to study projects regardless of size through a cluster study, but does not support the proposal to study all distribution and transmission level interconnections in one cluster," it said. "There should be one cluster for distribution level interconnections, and another cluster for transmission level interconnections."

The most significant criticism of the ISO proposal may be that of the Interstate Renewable Energy Council (IREC), whose annual report on U.S. interconnection has become the topic's de facto report card.

"IREC does not support the proposal in its current form," it wrote. "CAISO Staff has moved expeditiously," IREC acknowledged. "IREC agrees with CAISO Staff that SGIP reform is necessary." But, IREC said, "more stakeholder input is needed" because SGIP was developed to allow small generators with limited grid impacts to proceed faster to interconnection," whereas the ISO's proposal "will substantially increase the time, cost and complexity of interconnecting a small generator."

The Structure Group, an independent organization retained by the California Public Utilities Commission to examine the smart meters installed by Pacific Gas & Electric in Northern California, issued its report today.

The meters worked. Increases in bills were largely due to a 2009 heat wave, which caused air conditioning use to spike. Structure also did not detect manufacturing problems. Structure tested 750 meters and 147 electromechanical meters, and in field, meter-to-meter and laboratory tests, found no problems.

PG&E, however, did not communicate the technology and benefits behind smart meters to customers and did not handle customer complaints well. Structure examined 1,376 complaints about smart meters from consumers and found numerous problems.

"In some cases, customers experienced multiple cancelled bills followed by re-billing, which exacerbated customer confusion and frustration. In addition, customers indicated to Structure that there was a lack of communication and notification from PG&E about their Smart Meter installation," the CPUC said of Structure's findings. "The report also said that the CPUC's handling of certain consumer complaints created confusion for the customer when the CPUC deemed the complaint closed even though the customer was still not satisfied with or did not understand PG&E's resolution of their complaint."

"The report is encouraging in terms of the performance of actual meter hardware.  However, I am very concerned about PG&E's performance in terms of industry best practices and how in some of the best practices areas, PG&E's performance has actually declined," said Commissioner Dian Grueneich in a prepared statement.

The hearing is going on right now. So far, all of the speakers have stuck to talking about the alleged harm caused by electromagnetic transmissions. Some highlights:

--One individual allegedly died from smart meters, according to one witness. Granted, the witness admitted that the individual had cancer, but argued that smart meters accelerated the disease.

--Another person quoted Shakespeare and said that smart meters violated the U.S. constitution.

--Another analogized smart meter rollouts to the Nuremberg trials.

--Another witness said she felt anxiety and palpitations when visiting cities with smart meters.

--Another witness said that another person entered a home with a smart meter and felt sick. Then she put foil around the meter and felt 50 percent better.

EMF has been studied for several years, particularly since cell phones and many lights emit EMFs. The FCC, IEEE, EPA, FDA, OSHA and other organizations had studied the potential health effects with regard to cell phones and found no correlation. Still, a certain percentage of consumers and some scientists believe EMFs present a health risk.

Interestingly, the San Francisco Chronicle recently noted that smart meter complaints arising from PG&E's deployment of meters in Bakersfield have caused complaints to crop up in other areas.

The brewing competition between Cisco and Silver Spring Networks just lost its subtlety.

The networking giant today bought Arch Rock, a privately held company that specializes in standards-based mesh networking technology for monitoring data centers and, more importantly, for connecting different assets on the grid (namely, AMI networking solutions). Yesterday, Cisco cut an alliance with Itron, the smart meter maker, that will lead to Cisco complementing Itron's meter offerings with AMI networking hardware and software.

With these two deals, Cisco has created the foundation of a communications platform for remote meter reading and, some day, for demand management and possibly home automation. That's the same basic strategy Silver Spring has been following for the last several years. Silver Spring is debatably the undisputed leader in the AMI networking space, as it's out in front of the market with some of the industry's largest AMI networking deployments.

Cisco has money, time and expertise. Silver Spring has signed contracts. It has also been trying to prepare for an IPO, according to sources. Who will win? It's hard to say at this point. The real challenge for both companies, though, is that the customer base in this space is small indeed. There are only around 3,100 utilities in North America. By contrast, Cisco sells IT networking equipment to millions of different customers. With that said, there is opportunity for growth beyond AMI applications, including distribution automation, networked charging infrastructure for EVs, etc.

These utilities will likely create their networks with technology from one or two vendors. Many of the smaller utilities will base their decisions on the test results from the larger ones. Thus, the fate of manufacturers will hang by a few contracts. Silver Spring's track record helps it. Then again, it has been embroiled in controversy in California. An independent consultant will deliver a report today to the CPUC on PGE's smart meters, which include networking software and components from Silver Spring.

"This acquisition makes a lot of sense to me. Albeit later to market than Silver Spring Networks, Trilliant and others, Arch Rock, in my eyes, is the most interesting startup in the AMI Networking space," said Rick Thompson, president and co-founder of Greentech Media. "This acquisition provides Cisco with the targeted technology solution it needs to move its partnership with Itron from a marketing message to a market reality."

Also  interesting to note is that Arch Rock CEO Roland Acra has a long-time relationship with Cisco that spans years. Prior to taking the helm at failed core router startup Procket Networks (which sold its IP and assets to Cisco for $89 million in 2002), Mr. Acra was a 13-year veteran and senior VP at Cisco.

Cisco, however, has less extensive field experience. On the other hand, the company has a history of successfully absorbing acquisitions. Last year, it bought Richards-Zeta Building Intelligence for controlling AC and other appliances in buildings. If the company can weave all of these technologies together and absorb some more, it could become one of the first large companies to offer a comprehensive network for controlling and monitoring power consumption.

Arch Rock is in a way a double-whammy for Cisco. The company first came to prominence by offering tools for monitoring and controlling power in data centers, an increasingly lucrative market. Although data centers only account for around 2 percent of the electricity consumed in the U.S., the total is growing and corporations have shown a willingness to invest in data center improvements. Arch Rock competitors include SynapSense, Sentilla and Power Assure. Hewlett-Packard resells SynapSense's technology.

Cisco, of course, already has several data center clients. Potentially, this will give Cisco an easy, early route to monetize Arch Rock's technology. Over the long haul, it can then try to take the Arch Rock technology into building control and the grid. SynapSense, in fact, is already pursuing a similar strategy. Will Silver Spring try to get into data centers? That could be tough considering how crowded the field has already become, but you can't rule it out, either. The company, according to sources, has been trying to broaden its customer base.

"GTM Research plans to release the definitive U.S.-based smart grid market forecast in September. In that forecast, we look specifically at AMI Networking (smart meters and AMI network communications infrastructure) as a sub-segment of the larger smart-grid market," Thompson added. "We see the AMI market in the United States reaching its peak of $3.5 billion in the 2012-2013 timeframe and tapering off slightly through 2015."

The concentrated photovoltaic (CPV) market has been long on promise and short on results.  But there have been a few hopeful signs of late.

Kleiner Perkins saw fit to invest $130 million into CPV systems vendor Amonix.  And shortly after that fund raise, Cogentrix announced a 30-megawatt project with Amonix.  That's easily the largest CPV project in the history of CPV.

SolFocus recently said that it would have 10 megawatts in the ground by the end of the year.

Concentrix Solar, German-based CPV vendor, funded by Good Energies and recently purchased by Soitec, just announced the opening of a U.S. office and a CEC listing.

And today we saw JDSU, the optical networking, laser and coatings expert, announce that they were entering the CPV market as a chip supplier.  The firm has a market capitalization of $2.1 billion.

One of the chicken-and-egg problems that has long plagued CPV is the cost and supply of the triple-junction compound semiconductor solar cell that performs the actual photovoltaic conversion.  The low-volume supply chain for these chips has depended on somewhat dysfunctional suppliers Emcore and Spectrolab.   Emcore has a history of losing money, questionable management and flirting with entering the CPV system business. Spectrolab makes a quality product, but both of these firms, with a history of supplying the space and satellite market, have found the transition to commercial manufacturing a bit of a cultural stretch.

A few VC-funded startups -- Solar Junction, Cyrium and QuantaSol -- are aiming to provide chips to the system vendors.  But the market remains relatively low volume and has not taken off like the flat solar panel market with its increasingly massive volumes and plunging prices.

We have long claimed that if the CPV market ever did start to take off, larger semiconductor vendors would take notice and follow with their III/V material chip entries.  We had suggested that a fitting candidate could be an LED supplier, as a triple-junction solar cell is approximately a reverse LED.  But JDSU's entry, with its distinctive optical pedigree in lasers from a long-ago acquisition of SDL, makes a certain amount of sense.

I spoke with Jan Gustav-Werthen, the Director of JDSU's photovoltaic group, about the announcement of their entering the CPV market.  It's been a rather poorly kept secret in the CPV world, but at least it's official today.  Werthen arrived at JDSU through the acquisition of his company, Photonic Power, which delivered power over fiber optics.

Werthen said, "We aim to be number-one cell supplier in the world.  If we didn't think we could be number one, we wouldn't enter the market."  Werthen spoke of JDSU's "vast and deep" experience in III/V semiconductors and their internal capacity and strength in epitaxial growth for their lasers.

Werthen continued, "We're not going into this for fun or for the environment; this is a business decision."

Werthen expects that the CPV business "will be taking off in 2011 and 2012 and will be a substantial business by 2020."  He foresees 30 percent module efficiency on the horizon, with cell efficiencies increasing at about one percent per year -- cell efficiencies eventually will be in the 50 percent range.

CPV makes sense in particular geographies and circumstances: high sun and low water.  Werthen sees a day when "PV goes to where the sun is rather than where the money is" and when that happens -- "then CPV will really take off."

Cost remains the ruling fact of life in the solar market and it remains to be seen if Amonix and SolFocus, with the help of vendors like JDSU or Solar Junction, can keep up with the plunging cost of conventional solar. 

It also remains to be seen if JDSU can help enable the CPV market with innovation or cost savings.

Over the past few weeks, I've had a number of meetings with engineers, executives and investors and such, and I keep coming away with the same conclusion.

The fastest-growing and arguably most attractive segment in alternative energy and energy efficiency lies in hardware, software and networking equipment. Yep, green IT. Part of the conclusion is a historical and personal bias: I wrote about semiconductors and PCs for eleven years. But I still think green IT is a sustainable trend. Here's why:

1. Looser-Than-Normal Wallets.

Data centers continue to inexorably absorb functions once handled in the real world--shopping, shipping, etc.--and now and videoconferencing has begun to displace travel.

As a result, data centers are necessarily becoming larger and more power-hungry. Subodh Bapat, Sun's former green guru, has estimated that by 2020 some data centers will consume 50 megawatts and take up 500,000 square feet. Data centers and desktops account for 40 percent of the power bills in the corporate world and can account for 70 percent to 80 percent of the bills in financial services companies, according to Fujitsu.

To keep a lid on their onerous utility budgets, data center owners have resorted to swapping out servers at a more rapid rate, investing in environmental monitoring systems like those from SynapSense and Power Assure, and reconfiguring air conditioners. In the near future, they may begin to start swapping out hard drive arrays for ones with flash memory and chips from companies like Sandforce. Others are building data centers in mines and bomb shelters and harvesting the waste heat.

In short, you have a central corporate function with a "needed now" budget item that comes with quantifiable benefits. Compare that to a solar array -- the lights won't go off tomorrow if the company doesn't buy one.

2. The Fear is Real.

Forget operating budgets for a moment. Power could soon become a life-or-death matter, according to Mike Dauber at Battery Ventures. (Battery invested in Smooth-Stone, which has created a low-powered ARM chip that will compete against Intel chips in servers.) Transistors replaced vacuum tubes, in part, because it would have been impossible to build and run large computers using millions of hot, delicate tubes.

Unless you build new data centers next to the Hoover Dam, it will be tough to physically tap the amount of power that will be required, says Dauber, unless you change the basic architecture.

Potentially, the need means that science projects like HP's memristors, phase-change memory, Microsoft's future predicting algorithms, probability processors and even non-Intel-based servers stand a decent chance of participating in trials at big data centers. Again, compare that to solar. Banks, utilities, installers and large buyers aren't showing a lot of interest in experimentation. (The picture shows Google's first storage device. They've graduated since then.)

3. Everything Dies a Quick Death.

A single piece of equipment might chug along for five years before giving up the ghost. Solar panels, power meters, LED bulbs, wind turbines, and air conditioners must last for decades. Live fast, die young, sell replacement parts. It's a great way to make a living.

4. Bread and Circuses.

Check out this screen from Qualcomm: it lasts five times as long on a single battery charge because it doesn't require an internal light source. Philips and E-Ink have similar energy-efficient color screens. You're selling energy consciousness and consumer lust at the same time.

5. The Trojan Horse Effect.

Is there any reason that the environmental control systems being deployed in data centers can't be used to control the air conditioners or lights in buildings and industrial sites as well? No. SynapSense, in fact, has already begun to talk about transforming its data center control technology into a building management system. Some other building management companies are getting their first contracts to help control energy in data centers, which are the highest-value real estate most companies own. The IT department, therefore, will become the early adopter and guinea pig for green building management.

6. Solar and Smart Grid Need It.

From a certain perspective, the smart grid isn't a revolutionary means for changing how the world consumes power. It is the land of misfit networking technologies.

ZigBee and Z-Wave struggled for years to find a home. Back in 2003, the most promising applications for these wireless protocols were home security systems and wireless keyboards. Then came the smart grid and home energy management. Suddenly companies began to talk about incorporating ZigBee into household appliances and utility meters.

LTE and WiMax? No one would have ever spent the hundreds of millions required for development on these if the estimated customer base consisted solely of the 3,100 North American utilities. The smart grid industry needs telecom to develop its components.

Solar manufacturers, meanwhile, are turning toward equipment from the hard drive industry to curb manufacturing prices and to embedded semiconductors to boost the efficiency of panels. To advance, solar will rely heavily on the work being done inadvertently on its behalf.  

7. Quantity is Quantity.

The underlying rule in corporate life is he who quantifies wins. The inherent nature of hardware and software means that the benefits are often relatively easy to measure. Hara has landed a large number of accounts -- Coke, Apple, News Corp. -- with its dashboard that meticulously measures consumption. In its new five-year plan for ecomagination, General Electric said it will emphasize improving existing technologies with hardware and software.

So what's the downside? IT equipment is actually somewhat efficient. Remember a few years ago when Google announced it would tackle the urgent problem of inefficiency in power supplies? The search giant unleashed a power supply (like the brick on your notebook) that was over 90 percent efficient. Power supply makers told me at the time that they were already in the 80-percent range.

Computers are really only a minor irritant in the grand diet of electrons. Data centers only account for close to 2 percent of electricity consumption. In commercial buildings, computers consume four percent of all energy used, according to the Buildings Energy Data Book from the Department of Energy. Refrigeration also consumes four percent, while lighting consumes 24 percent. You'd have to put six PCs on each desk to match lights. Even if you ran every PC in the world on The Clapper, the power saved would be tough to get excited about.

High efficiency, more profligate applications elsewhere: spending could easily flow into these other areas first, negating everything said above.

Utilities and state governments have not been as active in the rebate department as they could be. NetApp has built a state-of-the-art data center with funds from PG&E. Nonetheless, feed-in tariffs or monster-sized tax credits don't exist.

Nonetheless, think about the world of work. The CIO has gone from being a functionary to a strategic player. His or her budget might sink, but it rarely gets slashed.  Multibillion-dollar technology vendors continually concoct new devices for them.

Inside corporations, IT is the equivalent of the Department of Defense.

Award-winning etching technique puts a trillion holes in a silicon wafer making it blacker and better able to absorb nearly all the colors of sunlight.

Beware the sticker price.

Propel Fuels, which wants to build 75 alternative fuel gas stations in California, unveiled one in Oakland yesterday, according to several news reports. The company already operates stations in Oakland and Seattle.

One of the big problems with ethanol has been the availability of pumps dispensing E85, the 85 percent ethanol/15 percent gas blend. While General Motors and others have sold thousands of flex fuel cars, the U.S. only has a handful of ethanol stations. In 2008, there were 1,400 compared to 170,000 gas stations. Propel is trying to solve that problem by installing and paying for the pumps, tanks and other infrastructure (it can run up to $150,000) itself. Gas station owners mostly just have to have available real estate for Propel to do its work.

But there is another issue with cost. Look at the price in that first link. E85 at the Oakland station sells for $2.49 a gallon. E85 only has about 70 percent of the energy of a gallon of gas. Divide $2.49 by 0.70 and you get $3.56 a gallon for fuel. That's more than a gallon of gas costs currently in Oakland. The retail price also already reflects subsidies paid to refiners.

Elsewhere:

--The California Public Utilities Commission just released its periodical efficiency report. The agency reiterated its goal of getting builders to shift to a "net zero" energy standard for homes by 2020 and a net zero standard for commercial buildings by 2030. The technology exists to build net zero homes now -- Zeta Communities has built a net zero home in Oakland -- and the prices for some technologies will continue to fall. More coming from the CPUC at this link.

The CPUC will also hear an independent evaluation from the Structure Group on PG&E's smart meter program tomorrow at 10:00 a.m. We will cover it.

--General Motors is trying to trademark "range anxiety" according to Jalopnik. Why not trade mark "scabies" or "unsightly twitch" while you're at it? Tesla has scoffed. Will GM succeed? "Possibly," says the Magic 8 Ball.

Recurve, the energy efficiency retrofitter and software developer, is getting a retrofit itself.

The company has hired Andy Leventhal as its new CEO, replacing Pratap Mukherjee. Leventhal co-founded Planet Metrics, a carbon accounting company, in 2007, and sold it off to Parametric Technology in February.  

The change in CEO will also usher in some organizational changes. The most important is that Recurve will spin off its operational group -- which conducts home energy audits and retrofits -- into a separate subsidiary with separate offices at some point in the future. Recurve proper will then become a full-fledged software developer.

Recurve (initially called Sustainable Spaces) started as a home energy retrofitter. As the company progressed, it began to amass data on best practices for retrofitting and curbing energy, which it then condensed into a software package.

In 2009, the company began to realize that the software package could be licensed and sold to large, existing construction companies. (See the first story on Recurve's software strategy here.) Becoming a developer would in turn allow Recurve to scale rapidly and avoid the costs and headaches of building local offices and obtaining contractor's licenses in different states.

Google alumni started to work at the company while the executives formed alliances with large contractors and others like Lowe's and Grupe Homes to beta-test the software. (See Post-It notes diagramming a decision tree in this photo of co-founder Matt Golden.)

"We've been trying to operate two very different businesses," said Leventhal.

Earlier this year, Recurve had to lay off employees after the PACE program, which eased the process of financing retrofits, got suspended.

Data and results from the beta program will come in the near future. Lowe's will start to use the software to conduct audits and retrofits in and around 20 Bay Area stores starting this week. Pacific Gas & Electric, the large utility in northern California, recently announced that homeowners can obtain $3,500 in rebates from the utility for conducting retrofits on top of the $1,500 already offered as a federal tax credit. (That means a $5,000 discount on retrofits, according to addition analysts at Greentech Media.)

Homes and the appliances and fixtures inside them consume 20 percent of all of the energy used in the U.S. That energy isn't used in a particularly efficient manner, either. Matt Odynski, who owns a Victorian-era home in San Francisco, says he expects to save $3,600 on his annual utility bill via retrofit.

Leventhal said that Recurve will also flesh out its pricing strategy for the software. Right now, the company is leaning toward charging contractors a per-audit fee and a monthly subscription fee for using the software. The software fees will not likely be tied to the size or scope of the audit.

"We have gotten pushback on a retrofit fee," he said.

In part, the concerns revolve around the potential conflict between an audit and a retrofit. An audit, ideally, exists to identify ways a homeowner can save money. A retrofitter might be more interested in expanding the project. (See Neal Dikeman's experience with retrofitter GridPoint for more on this issue. Disclosure: we had Recurve do a small retrofit on our house earlier this year, but we paid the standard price, were mostly interested in insulation issues, and my wife made all the decisions. Everything worked out fine.)

While Recurve's software, conceivably, could be ported to help study commercial buildings, Recurve will stick with residences for now. The commercial market is already somewhat crowded. The complexity of commercial buildings and the way they operate also puts more emphasis on continuous commissioning -- i.e., constantly resetting air conditioners or lights -- than retrofits.

And, of course, the data behind Recurve's software comes from homes.

 

***

Eric Wesoff contributed to this story.

"You can have a Model T in any color, as long as it's black."  The automotive world has come a long way since Henry Ford made this statement while introducing the revolutionary Model T Ford in 1908.  Today, paint color and quality both play major roles in car-buying decisions.

However, automotive paint is not just about looks. It is also the vehicle's first line of defense against scratches, abrasions and parking-lot dings.  Over the years, automotive paint has greatly improved, and more recent breakthroughs have boosted the quality of paint application, while also reducing its environmental impact. And plastics are playing an integral role in making this new technology possible.

Chemists have developed a colored plastic paint film that adheres directly to vehicle body frames and panels. The process saves time and energy compared to the traditional multi-layer application of liquid paint. Using paint films also reduces by 98 percent the emissions that are typically associated with traditional automotive paint processes.

Here's how it works:

Plastic body-color film, a thick plastic sheet of color, is applied by thermo-forming the material to an automobile part, such as a hood or fender.  The film is made by feeding a sheet of paint film, which looks like a giant roll of kitchen wrap 60 inches wide and 15,000 feet long, through a mechanism that resembles a printing press. This machine applies a clear coat, followed by a pigmented layer of colored paint and then an adhesive layer that bonds the film to the part when it is molded.  The base film is then stripped away, leaving a flexible, durable, high-gloss coating.  The resulting product is a higher quality color adhered directly to your vehicle's body that can be matched to any color in the rainbow; it can even be infused with metal flakes for a chrome-like finish.

Because the color is built into the color film, small scratches and dings do not show up as readily as they would with traditional paint. In fact, plastic paint film is equivalent to 15 coats of traditional automotive paint. The film is sealed with a thick clear coat, further protecting it from wear and tear. Plastic paint film is resistant to UV fading and retains a showroom shine longer than traditional paint. Additionally, the film can be applied to automotive parts through a variety of processes, including a low-VOC adhesive, which allows this innovative technology to be easily adapted to many different types of manufacturers. 

So when can we expect to see this technology in action? Well, the future is now. While mainstream adoption is still on the horizon, independent companies are already performing this process, though in limited-scope applications.  Major automakers are applying this technology on parts that see the most wear and tear, like doors, bumpers and panels. 

Companies such as Soliant Paint Film are currently working with GM, Chrysler and Saab to use this technology in various automotive paint applications, from fascias to skid plates and rocker panels.  In time, mass adoption could lead to a very significant emission and energy savings -- something we can all get behind.

For more information on how plastics are helping to make today's cars greener, safer and better designed, check out http://www.plasticsmakeitpossible.com/c/today-in-plastics/cars-trucks/.

 

***

Jim Kolb is Senior Automotive Programs Director at the American Chemistry Council.

Cisco and Itron are joining forces to go after the smart grid together.

The companies announced a somewhat far-reaching agreement under which the two will work to develop IP-based communication standards for the smart grid. Itron will then bundle and resell Cisco's technology. In short, what you have is an alliance between a company (Cisco) with experience, heft, deep wallets and lots of technology in networking and communications and another (Itron) that has landed deals to sell smart meters to several major utilities worldwide. If all works well, Itron will be a gateway for Cisco into utilities and Cisco will help Itron accelerate its product roadmap.

Just as important, if the alliance works, the cost of implementing smart grids will decline because standards-based communications will replace some of the proprietary standards found in early smart meter deployments. Itron will shift over toward IP communications as this evolves.

The alliance will not likely be completely exclusive. The two, in fact, will promote the communication technologies as open standards and Cisco says it will seek other partners. Alliances in technology also wax and wane in importance, depending on how customers receive them. General Electric and other smart meter manufacturers, meanwhile, have alliances of their own.

Nonetheless, it could be imposing. Itron will embed Cisco's IP into its OpenWay meters and resell Cisco equipment. Cisco and Itron will also work to develop reference designs for equipment based around the communication technologies coined in this alliance.

In the future, a substantial portion of these alliances will likely focus on equipment and technology for improving communications between all of the different assets -- meters, substations, transformers, etc. -- in the field. The data coming from smart meters will likely soon become overwhelming. To manage this problem, utilities will likely begin to allow different field assets to process and store this information and communicate among themselves. SmartSynch, Motorola, IBM and others have all said field communications and processing will constitute a major market.

A press conference with vague statements of goodwill ("We will strive to make a positive impact...") is underway at the moment.

Water is an enormous issue around the globe -- for drinking, farming and industry.  

There is a looming water crisis facing everyone on Earth as populations rise, pollution increases and climate and weather patterns change.  There is already a water crisis in many developing nations and in some not-so-developing regions, like Australia and California.  The stats for "embedded" or "virtual" water are sobering -- for example, the production of 1 kilogram of beef requires the use of 15,500 liters of water (see WaterFootprint.org).

And water is inextricably linked to energy -- California uses an extraordinary amount of power to move water around the state. In fact, a fifth of the electricity used in California is intertwined with water. So is 30 percent of the natural gas, according to the California Energy Commission. Most of that power is actually used to heat water for hot showers and clean hospital equipment, but around five percent to six percent of all of California's energy gets consumed simply by moving water.

Venture Capital Investment in Water

Business growth opportunities in the water market seem obvious. The water market is:

    • Huge and expanding
    • In a crisis that cries out for innovation and efficiency
    • Deeply enmeshed with energy usage
    • In urgent need of a variety of new technology approaches

But VC lore and conventional wisdom has it that you can't make money in water; it's too long a design cycle, too regulated, and too fragmented a market. The main players in water are large conglomerates like General Electric, Veolia, Siemens -- and they dominate the market.

Flying in the face of this theory is the fact that Energy Recovery, a water desalination company, went public a few years ago.  In fact, the Voltea investment covered below is just one indication that VCs are indeed investing in water across a variety of water sectors.  And there has been a robust M&A scene for water companies -- it just doesn't get a lot of press.

Here's a quick list of of the more than $150 million in water investments in 2009. Note that while Israel has its share of water startups, U.S. VCs seem to be waking up to the water market, as well. Watch out for a surge in water investments this year and next.  It's still a small percentage of total VC in greentech -- but it's not negligible.

VC Investments in the Water Sector (2009)

 

Some Venture Capitalist Views on Water

Susan Preston at CalCEF is "looking hard" for an investment "at the intersection of energy and water."

Peter Nieh, a partner at VC investment firm Lightspeed Venture Partners said via email, ”Water is an alluring market because the need is clearly there and the opportunity is large.  [There is] some great technology out there. The issue for us is that economically attractive distribution is hard to achieve because the market is so fragmented.”
 
“[I] definitely agree that water is a challenging sector... and as such, it's sort of the Rodney Dangerfield of cleantech investments,” observed Steve Vassallo of Foundation Capital.  “That said, we have invested in this area and are actively looking for opportunities to invest in capital efficient businesses that address the needs of commercial, industrial, and agricultural users of water.”  PurFresh was one of Foundation’s first cleantech investments. Purfresh has an ozone purification system that many bottled water vendors use to sterilize their bottles.
 
Will Coleman of VC firm Mohr Davidow Ventures is also looking carefully at water deals and states. “As for water, yes, we have had an interest in water for quite a while, but it has always been hard to identity venture opportunities in the space.  The market is huge. The "water" market in the U.S. alone is over $100 billion annually, but a significant portion of that is in earthworks and pipes. When you slice it a little finer you find that a third of the market is driven by residential, where the cost of water to the end customer is really not a driver” [emphasis mine].

Rachel Sheinbein was a water expert at Intel, dealing with the flood of wastewater produced in the fabrication of Intel’s semiconductor products.  Today, she’s at CMEA Ventures and part of the investment firm's Energy & Materials team. She vets the VC firm’s cleantech deals but has a particular thirst for water startups, and states, “I believe there’s an opportunity in water but I haven’t found the investment yet.”
 
Sheinbein added, “We’re good at materials and membranes,” adding, “We would look to get to market through the commercial and industrial space first, as opposed to the conservative municipal water channel.”

A Recent VC Investment in Water

Voltea, a 20-employee U.K.-based startup founded in 2006, just closed a $5.5M investment from Rabo Ventures and Pentair, a U.S. water technology company, for water desalination via capacitive deionization.  Initial investment for Voltea came from Unilever Ventures.

Capacitive deionization (CD) is an electrical process that combines oppositely charged electrodes with anionic and cationic selective membranes.  When salt water flows into the cell between an electric field, the ions move through the selective membranes to the oppositely charged electrodes and desalinated water leaves the cell.

When the surface of both electrodes is covered with ions, the electrodes are cleaned by reversing the electrode polarity. The ions are pushed from the electrodes and are trapped between the membranes.  The concentrated brine that forms between both membranes can then be removed from the cell.  When the polarity of the electrodes is reset to normal, the cell is ready for use again.

The predominant technologies used to desalinate water are reverse osmosis (RO) and electrodialysis reversal (EDR), and they both tend to be costly, environmentally unfriendly, and energy-intensive processes that produce large amounts of wastewater.

CD would seem to most closely resemble EDR, but Voltea claims that CD has a higher recovery water rate, requires less maintenance and pre-treatment, and is not as sensitive to scaling and fouling.  The company also claims that CD requires much less energy than RO and fewer chemicals than either RO or EDR.

Current applications for the Voltea technology are in cooling towers, water softening, and desalinating brackish groundwater.

Profiles of a Few Other Water Companies

NanoH2O, a well-funded water startup, is commercializing a new membrane material for reverse osmosis based on technology developed by UCLA's Eric Hoek.  

"It all comes down to the performance of the membrane," claims Jeff Green, the startup's CEO. "A more productive membrane allows less energy to be used or provides higher throughput." 

A higher-performance, more permeable membrane allows more fresh water to cross the barrier with less pressure from a pump -- a pump that needs to be driven by an energy source, be it natural gas, diesel, or coal.  The high pressure pump consumes 35 percent to 60 percent of the process' energy budget.  According to the company, municipal and industrial plants optimized for NanoH2O’s membranes can expect up to a 20 percent reduction in energy consumption, a 70 percent increase in water production, or a 40 percent smaller plant footprint.

According to Green, seawater desalination comprises about two-thirds of the desalination market.  Another 20 percent is for desalination of brackish water and the remainder is for desalination of wastewater streams.

The industry standard membrane module is a cylinder 8 inches in diameter and 40 inches long.  A flat sheet of membrane is spiral wound in the cylinder.   Under pressure, the desalinated water moves through the membrane into a tube on the inside, while the waste stream or brine stream remains on the outside.  A typical pressure vessel contains a number of the membrane modules. 

Green said, "We will be able to produce the entire product, from fabricating the membrane to the membrane module itself."  The goal is to make a membrane module that fits into RO systems with an identical size and shape to the existing product. 

Traditional membranes have been made from a polyamide material for decades, but they had a propensity for fouling. “Fouling can severely degrade the productivity of the process or cause a complete shut-down of a system,” said Green.

"If you want to move this forward, you need a better membrane.  We have added nano-particles to the synthesis of the membrane -- it is not a coating; it is a nanocomposite. That allows these systems to have much lower operating pressures or much higher throughput."  And that translates to less energy consumption or greater productivity.  The firm claims that NanoH2O's technology is the first materials breakthrough in RO membranes since the 1970s.

Initial VC funding for NanoH2O was a $5 million Round A from Khosla Ventures, followed by $20 million from Oak Investment Partners and Khosla Ventures.   That funding has taken them from an academic research project to the cusp of manufacturing a commercial product.

The goal now is to scale-up manufacturing.  The firm has 26,000 square feet of manufacturing infrastructure in the Los Angeles area and looks to come to market with a commercial product this year. 

Other firms working on membranes for water applications include the industrial plumbing giant Danfoss, while Novozymes and a startup called Aquaporin are doing similar work. The challenge, said Aquaporin CEO Peter Jensen to Greentech Media, is making the membrane durable.

Desalitech's pilot testing has purified Mediterranean saltwater, using a Closed-Circuit Desalination saltwater reverse osmosis method (SWRO-CCD).

Using common components, without energy recovery, running a high-pressure pump at 81 percent mean efficiency and circulation pump at 37.5 percent mean efficiency, the pilot achieved 48 percent recovery at 2.05 to 2.40 kWh per cubic meter of fresh water. For comparison, Perth's desalination plant using Energy Recovery from ERI achieves 43 percent recovery at 2.32 kWh/m3.

Desalitech aims to increase the mean efficiency of the off-the-shelf, high-pressure pump to 88 percent, to provide recovery at 1.75 to 1.95 kWh/m3 on Mediterranean saltwater. The same pumps used on ocean water could produce equal recovery at 1.5 to 1.7 kWh/m3.

Desalitech's implementation reduces the cost of powering desalination processes. It also decreases capital expenditures. Nadav Efraty, CEO of Desalitech, said, "This technology is reducing energy consumption by up to 50 percent when we utilize about twice the membranes, reduces energy by about 10 percent to 15 percent when we use only 40 percent of the membranes compared to a conventional plant, or reduces energy about 30 percent when we utilize the same amount of membranes, but in this mode, since we don't utilize any form of energy recovery, we still see a reduction in capital expenditures"  (reporting on Desalitech was provided by Galen Sanford).

Microvi Biotech, led by CEO Fatemeh Shirazi, a fifteen-year industry veteran, believes it has a solution to one of our water problems -- pollution from nitrogenous compounds stemming from natural or agricultural sources.  Almost any wastewater has a nitrogenous element.  “Nitrogenous compounds in drinking water continue to pose a serious health risk, yet traditional treatments are too expensive. They also create byproducts that degrade the environment and are difficult to remove," said Shirazi.  High levels of nitrogenous compounds in drinking water can cause a deficiency of oxygen in organ tissue and have been linked to a dangerous condition in infants called methemoglobinemia, also known as "blue baby syndrome."

The problem is global and the United States alone spends $4.3 billion a year to remove nitrogenous compounds and phosphorous from water.

One of the problems with traditional water treatment is that you end up with a secondary waste stream of concentrated pollutants.  What happens to that toxic waste stream?

Microvi's process encloses microbes inside a semi-permeable membrane, using strains that can assimilate pollutants like chlorinated hydrocarbons, phenols, perchlorate, nitrogenous compounds and pharmaceuticals.  Shirazi said, "Microvi tackles every pollutant in the water industry."

The startup claims that its technology yields water that meets drinking standards with no waste stream, in contrast to the sludge created by conventional wastewater processing.

According to the CEO, the system is easy to handle and operate, and once you set it up, it's almost maintenance-free.  The firm is targeting waste waster in industrial and municipal markets, as well as surface water, ground water and water in the oil and gas industry.

"The technology is fundamentally different than anything on the market," claims the CEO.  Microvi's bioreactors employ microorganisms that have the ability to utilize the pollutants as a food source.  The billions of organisms in the reactor "have been trained" and the conditions in the reactor tuned so that there is no waste stream, according to Shirazi, who adds that "other folks have tried but have not been successful" in this endeavor.  The organisms are not genetically modified, nor are they pathogenic, were they to escape the bioreactor. The CEO was not willing to identify the microbes doing the work.

Shirazi's claims aside, others are aiming at similar goals. Emefcy has created a biological fuel cell that cleans water and generates electricity.

Microvi raised more than $1.25 million in initial funding, and the technology received about $1.8 million in government funding from the National Institute of Health.

***

There are a “scary number” of pollutants in our water supply, said Gayle Pergamit, the CEO and founder of Agua Via, an early stage membrane developer.  These pollutants include “natural” poisons like boron and arsenic, nitrogenous wastes from humans and farm animals, and “other goodies” like hydrocodone and estrogen disruptors. “There can be any of 500,000 different interesting and entertaining chemicals in the water supply,” she said.

“Nanotechnology-based water filtration could deliver completely pure water from any source at vastly reduced energy usage and lower total costs,” added Pergamit. 

”The discouraging thing about this is that [VCs] really don’t understand that we [the U.S.] are entering an era of water scarcity [as opposed to large chunks of the rest of the world, who are already in the midst of water scarcity],” said Pergamit of AguaVia in an email. “Maybe they don’t buy the concept of climate change -- anthropogenic or otherwise. But it also means that they don’t understand aquifer exhaustion and the fact that even if there wasn’t one whit of climate change, we are still going to run out of water.”

Michael Kanellos covered water purification here and I profiled a few Israeli water startups here.  We covered Canadian water innovation here and even more water startups: APT, and water/IT play TaKaDu.

Contrary to popular belief, VC investment in water technologies is alive and well.  In fact, there's actually a pent-up investment demand for the right water technologies and entrepreneurs.

Debate was still going on when midnight rolled around.

The California Legislature last night failed to pass SB 722, a bill that would have required California public utilities to obtain 33 percent of their power from "new renewables," i.e., solar, wind, geothermal, and biomass, but not large-scale hydroelectric dams. Debate was proceeding on a companion bill when August 31 turned into September 1 and the session ended.

The failure is a blow to environmentalists, but also to outgoing Republican Governor Arnold Schwarzenegger, who has made growing California's green economy one of the major pillars of his administration. A.B. 32, the carbon regulation passed by the state years earlier, has created 500,000 jobs, according to Bill Weihl, Google's green energy czar.

But that's the good news: Arnold still has time before the election to call a special session of the legislature to get it passed. He's done it before. Think of the movie tie-ins. "What is good? To see the state senators driven before you and hear the lamentations of the women."

The bill has widespread support among Silicon Valley executives. There are exceptions. Two semi-retired Valley executives -- former eBay CEO Meg Whitman and fired Hewlett Packard CEO Carly Fiorina -- are against it and are, respectively, running for Governor and the U.S. Senate. Whitman has also vowed to suspend A.B. 32, which former eBay exec turned VC Steve Westly calls a "colossal mistake."

California currently requires that the public utilities get 20 percent of their power from new renewables by 2010. The three big utilities -- PG&E, SDG&E, SCE -- will not make it. However, the law has a built-in extension and most will likely comfortably meet the expanded requirement. All three utilities have been aggressively signing contracts to get energy from solar thermal power plants and other renewable power providers. Independent power providers, though, have been having difficulties getting permits and funding for the projects.

Despite bills like A.B. 32 and a thriving startup culture, the bureaucratic tangles have hurt California's efforts to build a green industry. In this year alone, Mississippi and its Republican Governor Haley Barbour have wooed three green companies -- Soladigm, Twin Creeks Technologies and Kior -- with loans from the state and other ARRA-like stimulus packages to build factories in that state. (The bipartisanship on the state level in many areas is actually quite heartening.) The costs are lower and the permits are easier to obtain. Michigan, some VCs have told me, has become attractive for similar reasons, along with the added bonus of a large population of process and mechanical engineers.

"We are extremely disappointed and bewildered that the Legislature could not pass a 33-percent-renewable energy bill this session, despite the unquestionable need to finish the job on the Renewable Portfolio Standard this year," said Laura Wisland, energy analyst at the Union of Concerned Scientists, in a prepared statement.

"A slew of recent studies," energy writer Robert Bryce wrote in a recent Wall Street Journal essay, "show that wind-generated electricity likely won't result in any reduction in carbon emissions -- or that they'll be so small as to be almost meaningless."

Bryce acknowledged in an interview that this claim is "counterintuitive." It is also, on closer examination, dubious.

For his "slew" of studies, Bryce offered three, all from the United States Association for Energy Economics. Bryce identified Wind and Energy Markets, by Ross Baldick of the University of Texas, as the most recent and most significant. The study does not, however, argue that wind cannot reduce climate change-inducing carbon dioxide emissions. It argues there is a significant cost to building up the wind infrastructure that will be required to do so.

Asked directly if the studies show wind won't reduce emissions, Bryce quoted Baldick's conclusion that "even assuming wind does displace fossil emissions, it is not worthwhile to reduce greenhouse emissions."

Bryce obviously did not want to say his references actually question the economics of wind, not its effectiveness at reducing emissions. Whether building wind is "worthwhile" therefore depends on a "slew" of economic factors.

Bryce said he believes nuclear energy and natural gas, not renewables, are the energies of the future because they are scalable and available 24/7. Economic studies and recent investment patterns demonstrate that new nuclear is much more costly than wind. The volatility of natural gas prices makes its value uncertain against wind's pre-contracted long-term price.

In the WSJ piece and in the interview, Bryce relied heavily on "How Less Became More; Wind, Power and Unintended Consequences in the Colorado Energy Market," a study carried out by Bentek Energy LLC that was funded by the Independent Petroleum Association of the Mountain States (IPAMS). But Xcel Energy, a major utility in Colorado that has launched 1,300 megawatts of wind and is planning 700 megawatts more in the next five years, completely dismissed the IPAMS study.

"Wind is not perfect," Frank Prager, Xcel's Environmental Policy Vice President, wrote in the Denver Post. "Wind turbines generate electricity only when wind blows," he went on, explaining how utilities manage wind's variability. "Generally, we prefer to ramp gas-fired plants. If we ramp coal-fired units, the plant's efficiency may decline, causing its emission rate to increase for short periods."

But, Prager wrote, the Bentek study "implies that small, short-term emission increases associated with ramping result in significant increases in the total emissions. This is simply wrong. Since 2007, we have added hundreds of megawatts of wind generation, and our overall emissions have declined."

Asked about Prager's statement, Bryce pointed out that recent studies show U.S. energy consumption and emissions decreasing and ignored the fact that Prager specifically cited declining emissions as far back as 2007, when energy consumption was rising.

"There are about a thousand ways to interpret emissions data," Bryce asserted. "That may be true that overall emissions for Xcel or for any utility may have fallen," Bryce went on contentiously. "The Xcel guy has his opinion, the Bentek study arrives at a different conclusion. I honestly don't know who's right. The purpose of writing the Journal piece ... [was to point out] that you have to be careful with the assumption."

The Department of Energy, typically careful with assumptions, concluded that "achieving 20% wind would cut electric sector carbon dioxide emissions by 25%," pointed out American Wind Energy Association (AWEA) CEO Denise Bode. "As Bryce's own book shows on page 111," Bode went on, "Denmark has cut their CO2 emissions nearly in half since 1991 in large part because 20% of their electricity now comes from wind.  Any claim that adding wind energy to the electricity grid would not reduce carbon dioxide emissions violates the laws of physics."

The only substantial reference in Bryce's Journal piece was the Eastern Wind Integration and Transmission Study (EWITS) from the U.S. National Renewable Energy Laboratory (NREL). It modeled the impact of building 20 percent to 30 percent wind power capacity by 2030.

"If you look at the EWITS study, under their scenarios, this massive investment in transmission and massive investment in wind in the eastern two-thirds of the U.S. will result in a reduction of CO2 of about 200 million tons," Bryce said. "I stand behind the Journal piece; that's the bottom line." Bryce then quoted his thesis statement from the piece's opening paragraph. "Wind-generated electricity likely won't result in any reduction in carbon emissions -- or they'll be so small as to be almost meaningless."

The 200-million-ton emissions reduction, he said, "in the grand scheme of things is almost meaningless."

The NREL study actually projected five different scenarios. A chart from the study specifically referenced by Bryce shows the least aggressive developments of wind would, by 2020, see eastern U.S. emissions reduced four percent to five percent.

Other EWITS scenarios found that more aggressive development of wind and new transmission would reduce emissions by 18 percent to 33 percent. And it is, of course, what a nation would logically do if climate change was a threat, nuclear power was prohibitively expensive, reliance on ecologically devastating fossil fuels was a threat to national security, its antiquated grid was unreliable and renewable energy development held the key to economic rejuvenation and international competitiveness.

Bryce repeatedly referenced the high cost of building wind capacity, yet made no mention of the even higher costs of building other new sources of electricity generation. He also made no reference to the returns on such investment. Other studies -- a "slew" of studies, in fact -- have shown that renewable energies provide more jobs and more economic returns than the natural gas and nuclear sources Bryce touts.

But Bryce's attack on wind has to do with the subject of emissions and the only really credible reference he offered was the NREL study. Dave Corbus is an NREL senior engineer and the project manager/technical monitor for that study's ten-author team. "The electrical grid is one of the most complex systems there is," Corbus explained. "Complex systems take a lot of study and a lot of education" to understand.

Asked if he knew of anybody who fully understands transmission and would argue that wind doesn't reduce emissions, he simply said: " No." After a pause, he went on. "I think there's room for people to say it reduces emissions 60% versus 80%. There's certainly room for disagreement and uncertainty because it's such a complex system. But nobody that I know that understands the grid is going to say that it doesn't reduce emissions."

How much power do computers use?

Data centers, desktops, printers and other IT equipment now accounts for around 40 percent of the power bill of large corporations, according to Kartik Ravel, practice director of Green IT at Fujitsu America. At hedge funds and financial services firms, where complex transactional software churns constantly, it can be 70 percent to 80 percent of the bill.

To that end, Fujitsu is taking an energy efficiency program developed in Australia three years ago on a worldwide tour. Under the program, Fujitsu consultants examine your entire organization and trim down the IT assets for efficiency. Some of the more obvious solutions involve getting employees to print on both sides of a sheet of paper or resetting the sleep functions on their PCs, but there are more subtle recommendations (load shifting, de-duplication) as well.  The program came out of Australia because the country was implementing a series of energy efficiency regulations at the time.

As obvious as some of the answers sound, they apparently work. Fujitsu says it can curb IT power spending by 20 percent in eight months. Toyota Australia retained the firm and cut its IT power bill by 43 percent. IBM, NEC, Verdiem, Cisco and others offer additional services and software for these tasks.

Fujitsu hopes to also take these tools and consulting methodologies to  tackle facilities management, i.e., over-air-conditioned offices and lighting management.

A "quick start" evaluation runs $25,000. The company will also do longer, more detailed engagements.

If you're a photovoltaic module startup that has received venture capital funding in the last few years -- it's time to start showing results.

The solar market is no longer the domain of scientists and hobbyists -- the industry will ship more than ten gigawatts this year.  It's about scaling big, scaling fast and driving down costs.  Suntech, Yingli, Trina Solar, First Solar, SunPower and others are all going to exceed one- or two-gigawatt-capacity levels in the next year or two (if they haven't already) and are scrubbing cost out of every process step.  If you're not able to play in this league, why bother showing up?

Striding into this bloodily competitive landscape are the scores of solar module companies hatched by investors in the last ten years. 

Solexant is one of the more interesting of them, and I just spoke with the CEO, Damoder Reddy.

The fifty-employee firm recently raised Round C funding from Olympus Capital Partners, DBL Investors, Brichmere Ventures, Trident Capital, Firelake Capital and Medley Partners.  An SEC filing shows that they closed $41.5 million of a $64-million-dollar round.

Reddy said that Solexant synthesizes "semiconducting nanoparticles" on a "scale never done before."  The nanoparticles are applied to a flexible metal foil substrate using an ink-type solution, and although the current photovoltaic material is cadmium telluride, the process is materials-agnostic.  Roll-to-roll coating is a 50-year-old technology according to the CEO, and "the secret sauce is in the ink."   

Solexant's panels are lighter since they use a single sheet of glass, rather than the typical 'glass sandwich.'  Efficiencies are expected to be in the 11-percent range. 

The company plans to commercialize solar cells based on other higher efficiency printed nanocrystal materials over the next few years.  The goal is to find materials (other than silicon) that are "terawatt materials." 

Solexant was founded in 2006 by Dr. Damoder Reddy along with Prof. Paul Alivisatos of U.C. Berkeley, Prof. Paras Prasad of SUNY Buffalo and Prof. Sue Carter of U.C. Santa Cruz.  (Paul Alivisatos inherited DOE Secretary Steve Chu’s old job in running LBNL.)  Solexant's CFO, James McNicholas, VP of Engineering Craig Leidholm, and VP of Product Development Paul Adriani all served at Nanosolar prior to joining Solexant.  The firm had previously raised more than $20 million in venture funding.

On a recent panel, the CEO claimed that Solexant endeavors not to depend on government subsidies to be competitive, and that the company is targeting a fifty-cent-per-watt cost and a sales price of one dollar per watt.

California seems to gestate firms like Solexant, Twin Creeks, and MiaSole, but cannot offer them the incentives necessary to convince them to stay.  According to Oregon Live, "Damoder Reddy, chief executive of Solexant, confirmed...that the San Jose company plans a solar plant in the Portland area."

Solexant is seeking a $25 million loan from the state of Oregon to finance a solar-cell plant that could grow from 100 megawatts to 400 megawatts of annual module manufacturing capacity.  Here's another article on the Oregon move.

The CEO understands the scaling challenges, saying "If we stay at 100 megawatts -- that's not even enough to be taken seriously."

When asked, "Why Oregon?" for the next manufacturing site, Reddy said that this was "a topic close to his heart."  The CEO spoke of spending a lot of time in the last 18 months travelling to Sacramento and getting a tepid response from California lawmakers.  Yet when he traveled to Ohio or Michigan or Oregon, politicians and senators were willing to give Reddy time and try to figure out ways to get the firm to relocate to their state.  Not so in California.  In the CEO's words, "There's something fundamentally wrong in the way California does business."  The firm expects to spend $40 million in capital expenditures and Oregon made the winning overtures in their effort to build a solar manufacturing hub in the state.

Reddy seemed to want to keep the firm in California, but said, "I had to do what was right for my company."  The new Oregon factory will be about 100,000 square feet and will employ as many as 200 people.