December 2010

“Where is Noah’s ark to save human beings?”

December 23, 2010

BYD's e6 electric car

Great companies have a purpose that goes beyond making money. Google wants to organize the world’s information. Walmart seeks to save people money so they can live better. The Walt Disney Co. tries to make people happy. (Or at least it used to; Disney’s current mission statement is a bunch of gobbledygook.)

Purpose matters. It’s a big reason why people go to work every day.

BYD, the Chinese company that makes electric cars, batteries and solar panels, has a grand purpose: It wants to save us all from climate change, which it calls “slow suicide.”

In a new company video (below), BYD says:

Glaciers are melting. Sea levels are rising. Who can guarantee that the next victims won’t be us?

Where is Noah’s ark to save human beings?

Where, indeed?

I’ve been fascinated by BYD — the letters are the initials of the company’s Chinese name, but they have come to stand for Build Your Dreams — since writing a FORTUNE cover story about the company in 2009. Two years ago, I visited BYD in Shenzhen, met with its founder and chief executive, Wang Chuan-Fu, and spoke about the company with Warren Buffett, Charles Munger and especially David Sokol of Berkshire Hathaway, who sits on the BYD board. Through its MidAmerican Energy subsidiary, Berkshire Hathaway bought 10% of BYD for $230 million in 2008. Despite some recent stumbles at BYD, the company’s market capitalization has grown to about $33 billion, so Berkshire’s stake is now worth about $3.3 billion. Not too shabby.

Lately, I’ve been in contact with  U.S. investors  who are bullish about the firm. One of them, Shai Dardashti, a Buffett admirer who runs a small money management firm, pointed me towards this seven-minute company video. It’s worth watching (although it ends abruptly for reasons that I haven’t been able to determine).

This video is fascinating in light of  BYD’s remarkable but brief history. Since 1995, it has evolved from a manufacturer of cell-phone batteries into one of China’s largest automobile companies and it is now making a major push into clean energy, both with the manufacturing of solar panels and  utility-scale batteries to store energy. (For more on BYD’s energy storage plans and MidAmerican Energy, see Warren Buffett’s Big Battery Play at GreenBiz. Recently, the city of Los Angeles’s Department of Water and Power (LADWP) and BYD said they would work together to develop a grid-scale battery project for renewable energy storage. [click to continue…]

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A global thermostat?

December 21, 2010

Global Thermostat sounds too good to be true: It’s a startup company that aims to address the threat of climate change by capturing carbon dioxide from the air, and then making productive use of it.

The CO2 could be used to help plants grow faster in greenhouses, as a feedstock for algae, for enhanced oil production, as an ingredient in bottling plants, as a natural refrigerant, or as a circulating fluid in a geothermal energy installation.

Prof. Graciela Chichilnisky

While Global Thermostat calls itself “a carbon negative solution,” its technology is in practice a form of geoengineering. It would appear, however, to be less risky than better-known geoengineering techniques such as  solar radiation management or marine cloud whitening.

“We’ve faced skepticism about the solution because it’s so radical,” says Graciela Chichilnisky, a co-founder and managing director of Global Thermostat. But, she says, a carbon negative solution to the climate crisis will be needed “to contain rising levels of atmospheric carbon because we procrastinated too long and carbon emissions reductions do not suffice.”

There are several reasons to take Global Thermostat seriously. First, it’s more than an idea–to test the idea, the company opened a pilot plant in October at SRI International in Menlo Park, CA. SRI is a big research institute, which works for governments, FORTUNE 500 companies and startups.

Second, its founders–Chichilnisky and Peter Eisenberger–have impressive pedigrees. A Columbia University professor, Chichilnisky founded a pair of successful tech companies, helped design the carbon market under the Kyoto Protocol and has advanced degrees including a PhD. in math from MIT and a PhD. in economics from Berkeley. (She’s also been involved in a series of lawsuits against Columbia alleging gender bias, but that’s another story.) Eisenberger, who  founded  the Columbia Earth Institute (before Jeffrey Sachs),  has been an executive at Bell Laboratories and Exxon, a physics professor at Princeton and vice-provost at Columbia. He has a PhD. in physics from Harvard. [click to continue…]

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From the Gulf to the Volt

December 20, 2010

When trying to save the planet, every litter bit helps.

But let’s not lose sight of the forest when we’re saving a tree–or when General Motors is recycling “plastic boom material used to soak up oil in the Gulf of Mexico” into auto parts in the Chevrolet Volt.

Recycling is laudable–indeed, it points the way to a sustainable, zero-waste future where nothing is thrown away, and everything is made into something else. The Chevy Volt, meanwhile, is an innovative and efficient car–the “car of the year” according to Motor Trend. So the people at GM deserve kudos for developing the car and, now, for turning waste into auto parts, as illustrated in the photo below, which shows some of the materials that go into “underhood parts” of the car:

These materials (l to r): recovered boom material, shredded and densified boom material, post consumer plastic and recycled tires from GM's Milford Proving Ground are combined to create airflow management components for the Volt.

Nor is this effort to reuse and recycle an isolated effort. Just last week, according to Automotive News, GM reported that more than half the waste generated at its 145 plants worldwide is now “landfill free,” meaning the waste gets reused, recycled or converted into energy. Those plants employ more than 70,000 people–all of whom, presumably, are learning that it’s possible to reduce and reuse waste.

What’s more, GM last month announced that it was adding 1,000 jobs in Michigan to develop more hybrid and electric cars similar to the Volt, said The New York Times. GM’s chief executive, Daniel Akerson, said then that “electrification is critical to the global automotive industry.”

But a little perspective is required.

Chevrolet expects to sell about 10,000 Volts in 2010, and up to 45,000 more in 2011.

But GM is selling more than 8,000 cars and light trucks every day, according to Ward’sAuto.com, and most of those are SUVs and light trucks. [click to continue…]

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A new energy conversation?

December 15, 2010

A coalition of think tanks–The Breakthrough Institute, Brookings and the American Enterprise Institute, along with the Information Technology & Innovation Foundation (ITIF)–today organized a conference of policy makers, scientists and business people in Washington to talk about a big question: how to stimulate energy innovation.

The backers of Energy Innovation 2010 want to do nothing less than reframe the national conversation about energy. They’d like to see less talk about the question of how to make dirty fuels more expensive (the goal of cap-and-trade or carbon taxes) and more about ways to make clean energy cheaper, largely by driving innovation.

Michael Shellenberger

“We need much more radical innovation–scientific breakthroughs–in order to replace fossil fuel power,” said Michael Shellenberger, the president of the Breakthrough Institute. In an excellent essay published this week called The New Energy Conversation, Shellenberger, his colleague Ted Nordhaus and Rob Atkinson of ITIF write:

The new conversation about energy innovation begins from the recognition that the cost and functionality gap between today’s fossil energy and its alternatives remains wide, and that any serious effort to move away from fossil energy requires closing it – not through unsustainable subsidies to reduce prices, but through innovation that will drive down the real cost of clean energy.

This idea of a new conversation is appealing on its face. Goodness knows we’re all sick and tired of the old one. And who can be against innovation? It’s not a red state-blue state issue, thank goodness, although it will cost money. In report cleverly titled Post Partisan Power released last fall, Breakthrough, AEI and Brookings called for

increasing federal innovation investment from roughly $4 billion today to $25 billion annually, and using military procurement, new, disciplined deployment incentives, and public-private hubs to achieve both incremental improvements and breakthroughs in clean energy technologies.

But the question, how?

How should that money be spent, and who gets to decide how to spend it?

How should be allocated between basic R&D and commercialization, between stimulating the demand for clean energy (through policy like renewable portfolio standards or tax breaks) or stimulating the supply (through policies like loan guarantees for solar-panel factories or nuclear power plants)?

How, most of all, can we muster the political leadership to shake America out of what Andrew Revkin, the Dot Earth climate and energy reporter and a conference moderator, called America’a  long, and bipartisan, slumber party on energy innovation? (You can read Andy’s take on the event here) [click to continue…]

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Will Rosenzweig: Venturing in sustainability

December 14, 2010

Most venture capital investors don’t have a focus. Kleiner Perkins says it is “in search of the next big idea.” Draper Fisher Jurvetson “backs extraordinary entrepreneurs everywhere who set out to change the world.” Mohr Davidow values “entrepreneurs who identify impressive market opportunities and are not afraid to go after them.”

Physic Ventures is different. Its mission is “investing in keeping people healthy.” Specifically, the San Francisco-based venture firm, which has backing from corporate giants Unilever, PepsiCo and Humana, invests in “technology-enabled, consumer-facing companies that help people and the environment stay healthy,” according to Will Rosenzweig, its managing director.

Physic is betting that it can discover and invest in startups that can make “personal and planetary health” a big business, just as richer and better-established Silicon Valley VCs made fortunes by backing information technology startups like Apple, Google and Amazon.

Will Rosenzweig

I had lunch recently with Will Rosenzweig in Washington to talk about Physic and some of its portfolio companies. Will is an engaging and interesting guy, best known for starting a company called The Republic of Tea in the early 1990s. (He and his co-founders, Mel and Patricia Ziegler, who also co-founded Banana Republic, wrote an acclaimed book about the experience that’s also called The Republic of Tea.) Will, who is 51, was also an early organizer of the TED conferences, the head of marketing for Odwalla and a teacher at the Haas business school at Berkeley.

Will and Dion Madsen, who had run a venture fund inside Unilever, the $57 billion consumer products giant, co-founded Physic Ventures about five years ago. It’s an independent fund whose corporate backers who offer strategic advice and research insights. Its financial investors include CalPERS and CalSTRS, the California state and teachers’ pension funds.

Will has written about the fund-raising efforts and strategy in an article called 7 Reasons Why Great LPs Invested in Our First-Time Venture Fund . [PDF, download] He and his partners raised about $159 million by 2008–an impressive amount for a fund in a new sector, with no track record of successful exits.

It’s much too early to judge the success of the fund or its investment thesis, but there’s no doubt that Physic has invested in some intriguing startups. [click to continue…]

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Five myths about electric cars

December 13, 2010

Mary Ann Wright

Today’s guest post comes from three co-authors. Mary Ann Wright is vice president of technology and innovation for Johnson Controls Power Solutions, the largest maker of automotive batteries, including traditional lead acid batteries as well as advanced batteries for hybrid and electric vehicles. Evan Hirsh and Kasturi Rangan are a partner and principal, respectively, with Booz & Company, the big consulting firm.

It’s timely because Nissan has just introduced the all-electric Leaf to the U.S. market, and Chevrolet has introduced its Volt. On a personal note, I’ve been thinking about electric and hybrid-electric cars recently, too, because my beloved Honda Fit was totaled in an accident a couple of months ago. I was attracted to the idea of the Leaf or Volt but replaced my car with a lower-cost 2008 Honda Civic Hybrid–largely because I calculated that I’m unlikely to recoup the added costs of  the battery, even if gas prices rise, because I drive so little (roughly 6,000 miles) a year.

This points to a problem with all-electric cars that the authors highlight below. (See Myth 3) The limited range of electric cars means that they will appeal to customers–city dwellers, those who live in close-in suburbs, people who commute using public transport or work-at-home types like me–who have not not have to drive much each day. But  the higher upfront costs mean that the economics of electrics work better for people who drive a lot of miles.

Consumers want greener, more fuel-efficient vehicles for all the right reasons. Gasoline leaves a carbon footprint. It comes mostly from politically unstable regions, which puts our economic security at risk. Perhaps most of all, it’s become expensive over the last few years, and future prices are unpredictable.

Kasturi Rangan

But is the much-talked about all-electric vehicle (EV) the right alternative? Governments are providing incentives, carmakers are introducing new all-electric models, and the media has generated quite a bit of buzz, giving the impression that the widespread adoption of the EV is a done deal.

Much of the faith in a future of EVs, however, is based on five ideas that have more to do with myth than math. The facts point to a different outcome, especially in the U.S., over the next decade: that the winner of the alternative vehicle sweepstakes will be the gas-electric hybrid – not the all-electric car..

Myth 1 – The desire to go green will drive EV sales

Vehicle buyers want to be environmentally responsible, but they don’t want to pay a lot for it. It’s well documented that the vast majority of people are highly rational when they buy an automobile (typically their second largest purchase after a home). They are sensitive to sticker prices (including taxes, rebates and subsidies) and pay close attention to operating costs, such as fuel and maintenance. They make decisions based on the sum of all those parts – what experts call the Total Cost of Ownership.

In fact, pure electric vehicles, due to the expense of their large batteries, can cost more than twice as much as a comparable internal combustion engine vehicle. The initial price tag is a big deterrent, and the savings in operating costs aren’t enough make up the difference. Although environmental responsibility will drive some sales, mass adoption will come only if the total cost falls much further. [click to continue…]

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Accounting for sustainability

December 13, 2010

More evidence that corporate sustainability efforts are advancing, despite goverment inaction: Deloitte, one of the Big Four accounting and consulting firms, said today that it has acquired two sustainability consulting firms, ClearCarbon Consulting and Domani Sustainability Consulting.

ClearCarbon and its principal, Kyle Tanger, have focused on measuring and mitigating greenhouse gas footprints, while Domani and its founder and CEO, Will Sarni, have focused on water, energy and resource reduction. Will’s been a moderator and speaker at FORTUNE’s Brainstorm Green.

I spoke this morning with Chris Park, a principal at Deloitte Consulting who leads the firm’s sustainability services. He told me that clients are asking for more help in dealing with sustainability issues, and that demand has perked up particularly during the last 90 to 120 days as companies emerge from the recession.

Sustainability is “one of our top growth areas,” Park said. He’s seeing demand across industry sectors, including the federal government, consumer products, retailers and traditional oil, gas, utility and energy companies. “Sustainability will be a major driver of business transformation in upcoming years,” he said.

Deloitte will add 30 to 40 professionals to its staff as a result of the acquisition. Clear Carbon was based in Arlington, Va., while Domani was based in Denver.

Sustainability consulting is becoming a crowded business. Ernst & Young, PriceWaterhouseCoopers and KPMG are all building practices around sustainability and climate change, and traditional consulting firms McKinsey, Boston Consulting Group and Accenture see sustainability as a growth business as well.

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COP16 Cancun: Progress, or false hopes?

December 12, 2010

Imagine that you and your poor, growing family are crowded into a tiny apartment that is entirely inadequate for your needs. A very large but contentious collection of your friends and relatives decide to build you a home, but before doing so, they need to agree on what the house will look like, who will build it and who will pay for construction. Many years go by, and the most they have been able to accomplish is to sketch some very rough plans and clear away a few trees. Is that progress? Or might you try to devise another way to get the house you need?

This is admittedly an imperfect analogy, but it seems fitting because I saw so many references to “laying the groundwork” and “building a foundation” in the  post-game analysis from NGO experts and the media of the 16th edition of Conference of the Parties of the United Nations Framework Convention on Climate Change (COP) that just concluded in Cancun, Mexico.

Writing today the The Times, John Broder got it mostly right:

The agreement fell well short of the broad changes scientists say are needed to avoid dangerous climate change in coming decades. But it lays the groundwork for stronger measures in the future, if nations are able to overcome the emotional arguments that have crippled climate change negotiations in recent years.

Well, sure. You could also say:  The negotiators didn’t accomplish much but they might someday if all the reasons why they failed so far simply disappear. [click to continue…]

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The Power of One: Coca-Cola

December 9, 2010

“The Power of One” is a series of stories about people who have helped their companies become more sustainable. (See earlier stories on UL Environment, eBay, and Union Pacific.) They can’t do it alone, of course. But by coming up with a good idea, enlisting the help of others and making persuasive arguments, one person can change a company and, sometimes, more. Today’s story — the last in the series, at least for now — is about a manager at Coca-Cola who knows what it feels  like to have the weight of the world on his shoulders.

Meet Bryan Jacob. Back in 1990, when he made the cover of Weightlifting USA, he was a 21-year-old  student at Georgia Tech, hoping to represent the United States in Olympic Games. He did so, twice–in Barcelona in 1992, when he finished 18th in the Featherweight division and in Atlanta in 1996, when he finished 8th in the  Bantamweight  competition. He was the top U.S. performer in his weight class both times. He’s still fit–with a firm handshake.

It’s a good thing that Bryan is accustomed to heavy lifting  because his current job, as energy and climate protection manager for Coca-Cola, is a big one: He leads Coke’s global effort to reduce the greenhouse gases that are emitted from the 10 million–yes, 10 million!–vending machines and coolers that are part of Coke’s global bottling system. The company and its bottling partners have begun to replace coolers that use the  most common refrigerants, hydrofluorocarbons (HFCs), which are also called   fluorinated gases (F-gases), with so-called natural refrigerants such as CO2, propane or isobutane.

Last year, the company and its bottling partners said they expected

that 100 percent of their new vending machines and coolers will be HFC-free by 2015. We’re hopeful our aggregate demand will encourage supply as a means of accelerating the transition to HFC-free refrigeration equipment. This announcement is a direct result of work with Greenpeace that began in 2000.

Yes, that’s right–Coke’s key partner on its journey to natural refrigeration is Greenpeace, which is better known for civil disobedience than corporate partnerships. “The Greenpeace relationship went from very confrontational to one of the most collaborative we have,” Bryan says.

Bryan, in fact, says he’s learned that NGO partners can deliver a lot of value when you are trying to ,spark change in a sprawling company like Coca-Cola. He’s worked with Greenpeace, WWF, the World Resources Institute and even Dr. Rajendra K. Pauchari, the sometimes-controversial chairman of the Intergovernmental Panel on Climate Change. Bryan once brought “Pachy,” as he’s called, to speak with a convention of Coke bottlers in Boca Raton.

Like politics, the environmental movement can create strange bedfellows.

I emailed Amy Larkin, who leads business partnerships for Greenpeace, to ask about her work with Bryan and Coca-Cola. She replied:

Bryan Jacob is the kind of colleague everyone wishes they had.  He is determined, indefatigable and inventive.  Bryan is also open to new ideas — even big crazy ideas that will require a huge amount of work to make real.  Maybe those are his favorite ideas…….not sure.

Greenpeace has worked with Bryan for many years on HFC-free refrigeration and some of our meetings were rather difficult.  Bryan’s entire demeanor and way of working always encourage constructive engagement and he is a central ingredient in our successful outcome with Coca-Cola.

As it happens, Bryan is not one of those environmentalists who grew up green. He figured that he’d one day build dams, bridges, highways and airports, as he worked towards a degree in civil engineering. (“Most of the time, I’m civil,” he jokes, “but when I get agitated I can get hostile.”) Instead, he took a job during college with an environmental consulting firm, got excited about the field and then found his way to Coca-Cola. [click to continue…]

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The smart grid’s killer app? Electric cars

December 8, 2010

Let me clue you in to a little journalistic secret: few topics on the business/sustainability beat as inherently uninteresting (ok, boring) than the smart grid.

Have you ever struck up a conversation with anyone, outside of work, about the smart grid? I didn’t think so. I mean, this diagram of the smart grid (double-click to enlarge it) from the Consumer Energy Report explains it well but it won’t get many hearts racing with desire.

This is not merely a problem from journalists like me who are occasionally feel obligated to write about the smart grid. It’s a problem for advocates as well–because if people don’t know what the smart grid can do, or they don’t care, or they find the subject so boring they can’t even be bothered to learn,  they aren’t likely to support the idea. And since building a smart grid isn’t free–it’ll cost billions of dollars–building it will require people to pay either through their tax dollars or utility bills. So idea will ultimately need some popular support.

The best way to generate interest in the smart grid is, I think, by talking about electric cars. Electric cars are cool. The Nissan Leaf and Chevy Volt are going on sale soon. But to get full value of electric cars, we need a smart grid.

I made this argument in a story for News@Cisco, a technology website run by the networking giant. I’m an occasional contributor to the Cisco site; although it’s a corporate site (and Cisco has a strong interest in the smart grid), I’ve been promised by Cisco that I can write what I want on the site, so long as my stories are related to technology. So far they’ve kept that promise. Here’s how my story begins:

If American consumers are going to pay the costs of building a smart electricity grid—an endeavor that will cost billions of dollars—they will want an answer to the question: What’s in it for me?

Right now, most have no clue. Most, in fact, don’t know or care about the smart grid. It’s not a topic of barroom or cocktail chatter—except in a handful of places where smart meters are being blamed, unfairly, for rising electricity costs.

That will likely change with the arrival of plug-in electric cars from automakers including General Motors, Ford and Nissan, which last week announced that its Leaf, will arrive in U.S. and Japanese showrooms this month. Those owners, along with owners of the Chevy Volt and Ford’s Focus EV, set to arrive in showrooms in the next few months, will become advocates for the smart grid for a simple reason—their cool new vehicles will need a smarter grid to operate at maximum efficiency.

Smart Grid Success

The electric car is “the killer app for the smart grid,” says Robbie Diamond, the president and CEO of the Electrification Coalition, a business-backed group that lobbies for the mass deployment of electric cars. A smart grid overlays today’s electricity grid with two-way data communication that allows utilities to better manage the grid and consumers to better understand and control their electricity use.

“Over time, a smart grid is going to be essential if we want to realize the full value of electric cars,” Diamond says.

You can read the rest of the story here.

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