The S&P Global Clean Energy Index, a diversified benchmark of 30 clean energy companies from around the world, underperformed the S&P 500 every calendar year of the last five. Over that time (2008-2012) it lost 88 percent of its total value, according to Bloomberg. This year, however, clean energy stocks have strongly outperformed U.S. equities overall (which have themselves surged to record highs in 2013). So what’s the deal? Is clean energy truly back?
Though there is no doubt many cleantech companies could not survive another economic downturn the likes of the one we’ve seen the last five years, that also means that none of the companies in the game today are pretenders. The sector is probably stronger now than it ever has been, and not just because investor cash is finally flowing in: Entrepreneurs have finally figured out how to make money in clean energy.
That’s true for S&P Global Clean Energy Index constituents like First Solar, a utility-scale photovoltaics provider, and it’s also true of earlier stage companies that are set to make a splash in clean energy. The recession’s secret silver lining is that it forced companies to innovate their technologies and their business models simultaneously.
Here in New England, we have no shortage of innovative clean energy upstarts whose businesses look promising. Altaeros, for instance, makes a wind turbine unlike any you’ve seen before – it hovers hundreds or even thousands of feet in the air, where winds are stronger and no one can complain about a windmill ruining the view. Don’t believe me? Check out this video of the turbine in action:
Portland, Maine-based Ocean Renewable Power Company is also putting turbines in unusual places, in this case, deep in the ocean, where the company harnesses the massive energy of tidal currents. Big Belly Solar (hailing from Newton, Massachusetts) has actually combined two clean technologies – recycling and solar energy – to revolutionize public trash collection. Its waste and recycling stations (which, by the way, can send email and text message alerts when they’re full) can now be seen from Times Square to Viborg, Denmark.
There’s never any telling where a market as new and swiftly changing as clean energy might be headed, but it’s safe to say that things are looking up. And that’s good news: After all, what other industry is good for investors, global economies and the environment at the same time?
Ten years ago, ethanol was one of the hottest commodities on the market. Americans (especially those in Congress) had fallen in love with the idea that we could make a renewable, plant-based fuel to replace oil. You mean I can power my car with corn and sugarcane? That sounds like a great way to stay away from foreign oil and be (sort of) green.
Today, that picture is quite a bit different. Ethanol is no longer broadly viewed as a pro-American or particularly green fuel. In fact, Congress introduced legislation last month that would counteract 2005’s Renewable Fuel Standard, a policy that required incremental increases in the standard percentage of biofuels blended with gasoline (today it’s about 10 percent).
Why did ethanol fall out of favor? A big part of the change is probably due to the massive natural gas boom, which has gone a long way toward making the U.S. energy independent. But ethanol has had its own problems. The overwhelming majority of ethanol in the U.S. is made from corn, but corn has plenty of other uses. And though anyone who has driven through Iowa would have trouble believing it, there actually isn’t enough corn to sustainably produce ethanol.
Corn ethanol is created from the plant’s sugars and starches (in other words, the good stuff) which means that those same corn kernels can also be used for corn oil, corn syrup, livestock feed and many other functions. These other customers create demand for the corn which ultimately makes ethanol too costly to produce on a large scale. The same is true for ethanol derived from sugarcane or other valuable crops.
But sugars and starches aren’t the only parts of a plant that can be used to create ethanol. It is also possible to use cellulose, an inedible component of almost every plant. Since the cellulose is found in the undesirable portion of a plant (i.e. corn stalks and husks rather than kernels), it makes for a widely available, cheap feedstock. That’s why many are calling cellulose the future of ethanol, and perhaps the future of biofuels in general.
There is a catch, however. Any bootlegger can turn corn kernels into alcohol, but creating ethanol from cellulose is much more difficult. Only a few companies, such as Massachusetts-based Mascoma, have figured it out. Using proprietary technology, Mascoma introduces bacteria to materials such as wood and agricultural waste to create cellulosic ethanol. The final product is identical to corn ethanol, but the method and feedstocks are much more sustainable and scalable.
How big will cellulosic ethanol’s impact on the renewable fuels industry be? The answer depends in part on Congress’s decision about the Renewable Fuel Standard, but a sea change has already begun.
The Northeast has become a hotbed for environmentally-conscious companies that also have strong business models. Call them what you will – clean tech, sustainable, green – just don’t call them treehuggers or do-gooders. These are businesses that make real money; they just happen to offer a product or service that will help lead the way to the future of U.S. energy independence and environmental sustainability.
This Friday, April 5, many of New England’s most prominent energy leaders will gather at Babson College for the school’s annual Energy + Environmental Conference. Greenough has sponsored this event for years, and we’ve heard insightful thinking by everyone from Rhumb Line Energy Founder and former Massachusetts Secretary of Energy and Environment Ian Bowles to representatives from ExxonMobil. This year’s slate of speakers and panelists looks as impressive as always.
For instance, Claire Broido Johnson, co-founder of SunEdison, will deliver one of four keynote addresses. SunEdison is, of course, North America’s largest solar energy services provider, a company that has developed more than 883 MW of solar energy capacity. Considering that the U.S. only has about 7,700 MW of total capacity, it’s fair to say that SunEdison has had a huge impact. Claire also heads up Boston-based Next Step Living, a residential energy efficiency provider.
We’re also excited to hear from David Schatz of WiTriCity, who will be sitting in on a panel about energy transition in the auto industry. WiTriCity is a pioneer in the new field of wireless electricity. Using magnetic fields, the company’s technology enables wireless charging of any electronic device, from a light bulb to a laptop, so it will be fascinating to hear David speak.
Another local company to watch is Cambridge-based Zipcar. The company has already revolutionized car rentals once through its unique approach, now it’s revolutionizing the industry again with the introduction of plug-in vehicles and other green cars. Director of Business Development Gretchen Effgen will join the same panel as WiTriCity’s David Schatz to discuss the future of the auto industry.
Those are a few of our favorites, but we look forward to hearing from many other energy leaders from around the region and across the country at Babson this Friday. See you there!
The (incredibly scary) answer is, at the moment, pretty much nothing. The U.S. is currently the proud owner of more than 70,000 tons of spent nuclear fuel. Where do we store this phenomenally hazardous material that will continue to be hazardous for hundreds of thousands of years? Essentially, most if it goes into a temporary concrete bunker on the site of whichever nuclear plant created it. Worse still, that pile of spent fuel rods is growing on the order of more than 2,000 tons every year.
Ever since the plan to build a facility at Yucca Mountain, Nevada, was abandoned in 2010 (for reasons that may or may not have been politically-driven), the U.S. has yet to come up with a backup. And even if Yucca Mountain had panned out, it was far from a permanent solution. The facility was planned to last 10,000 years, less than 1/25th the deadly life of the nuclear waste it was meant to contain. It would also have been unable to store our entire supply of spent fuel. Even if the facility hadn’t fallen more than a decade behind schedule before being killed, Yucca Mountain was inevitably doomed.
So what’s the plan? Right now, the U.S. doesn’t have a good one, but the Fukushima Dai-ichi disaster in Japan proved to be a much-needed kick in the pants. A Blue Ribbon Commission report on America’s nuclear future last January urged the U.S. to find an alternative to Yucca Mountain in the near future.
Now that the bat signal has been turned on, innovators have emerged with new solutions to tackle the nuclear waste dilemma. Daher, for instance, a French industrial company, has pioneered a method for evacuating damaged spent fuel rods under water and encapsulating the waste in proprietary container designs. Areva, another French company, has proposed building a $20 billion plant in the U.S. that would recycle used nuclear fuel to create more electricity. And at last year’s Babson Energy and Environmental Conference, a spokesman for an as yet unnamed company told me about a proposal to build a storage facility in Labrador that would last 10 million years.
As the need becomes more dire, innovations in this budding industry will be refined even further. Let’s just hope that legislators pick a solution soon, because nothing good will happen to that growing pile of nuclear waste.
The best explanation of the looming fiscal cliff I’ve seen so far came from Conan O’Brien sidekick Andy Richter last week:
So if Congress can’t get a deal done and we do fall off the fiscal cliff and “crash into the double dip recession river,” what does that mean for clean energy? Like many government programs, clean energy funding would see mandatory cuts. The White House reports that sequestration would take away $148 million from the DOE’s Energy Efficiency and Renewable Energy program in 2013 (I know, it’s a ridiculously long document – look at page 80 if you don’t believe me).
That’s $148 million less to be invested in clean energy over the next year, and even if we do avoid the fiscal cliff, chances are that government funding for renewables will see cuts anyway. That means that the cleantech companies with the best chance to survive 2013 might just be the ones with the most cost-effective products or services. As unconventional as it may sound, technologies exist for which customers don’t have to pay more to be green.
Myriant, a company that manufactures green replacements for petroleum-based chemicals, charges “no green price premium” for its products. And since their bio-based chemicals are identical to those that come from petroleum, there are also no hidden costs for manufacturers making the switch. GreatPoint Energy is another example: the company produces a clean, high efficiency fuel called bluegas that is a cost-competitive replacement for standard liquefied natural gas in many regions.
Many of the companies with the best chance to survive are service providers that save their clients money through green alternatives. Absolute Green Energy Corporation, for instance, uses solar and thermal systems within integrated building designs to help organizations and individual residents save on energy costs. Conservation Services Group offers a similar value proposition: they optimize energy efficiency in residential buildings through weatherization and other services. Next Step Living is another company that helps people reduce their bills through energy-efficiency best practices.
No one in the clean energy industry wants to see government funding fall, but if it does decrease – whether by the $148 million baked into the fiscal cliff cuts or a lower number – the companies with the best chance to thrive will be those (like the five above) that can actually compete with their less green counterparts. Many other cleantech companies have promised cost-effective products and services, and we’ll have to see if 2013 turns out to be a good test of those claims.
Jake Navarro is a senior consultant for Greenough. Send him an email at email@example.com
Some clients prefer the boardroom, others the executive suite. When we think of our clean technology client Harvest Power, however, we tend to think more “outside the cube” and lean towards the great outdoors. Considering that Harvest’s corporate headquarters is smack-dab on the banks of the Charles River – in a picturesque restored watch factory in historic Waltham, MA – hitting the outdoors pretty much means getting on the river.
And that’s just what we did.
Last week, during our regularly scheduled meeting time – which we often conduct by Skype – the Greenough team headed out to Waltham and met our client in person. We dropped our trusty team canoe in the water, and proceeded to hold our meeting between hearty paddling, quiet bird-watching, and frolic-and-detour discussions about “bucket list” items we each wanted to do. We eventually addressed each item on our standard agenda, but we also saw leaves changing color, a great blue heron wading, and turtles lolling on protruding logs. Not a bad way to conduct business.
Blue Heron (Photo: Meredith Sorensen 2012)
Harvest is well on its way to achieving its goal of powering local communities through a robust system of organics recycling, energy generation and soil revitalization. The concept for this change – the “Power-of-We” – was very much present as we powered our canoe along the meandering Charles on a beautiful fall day.
Thank you, Harvest Power, for a great afternoon!
Jay Staunton is vice president, account services at Greenough.