Economics

Why Google invests in clean energy

February 1, 2012

Last year, Google invested more than $915 million in clean energy projects–solar, wind and transmission.

That’s a lot of money, even for Google, which had $38 billion in revenues in 2011. The investments don’t appear to be core to the company’s mission of organizing information, and they have attracted criticism, as well as some careless reporting, implying that the Internet giant is exiting the alternative energy business.

Does Google have an energy policy? Does it need one?

To find out,  I recently went to see Rick Needham, Google’s director of green business operations, at the company’s fabled headquarters (well, fabled for a 13-year-old company, anyway) in Mountain View, CA.

I came away not merely persuaded that Google’s energy investments make sense, but thinking that other companies that consume lots of electricity and have a pile of cash on their balance sheets  — Apple, Microsoft and GE come to mind — should consider deploying some of their cash in the clean energy sector.

Clean-energy investing isn’t philanthropy for Google. It’s business. In fact, it’s a classic double-bottom line investment, one that is intended to deliver environmental as well as financial benefits.

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Ratings, rankings and the world’s most sustainable company

January 26, 2012

I’m skeptical about efforts to rank and rate green or sustainable companies, and I have been for a time. [See 100 Best Corporate Citizens? What a CROck!] It’s terribly difficult to compare big and small companies, retailers with manufacturers, software firms with oil companies, etc. We once tried at FORTUNE, and gave up because we decided it couldn’t be done right.

Having said that, I’m impressed with the rigor and methodology used by a Canadian magazine called Corporate Knights to produce its 8th annual list of Global 100 Most Sustainable Companies, which it calls “the most extensive data-driven corporate sustainability assessment in existence.” The ratings are transparent and they encompass social as well as environmental metrics, among them energy, carbon, waste and water productivity, diversity and employee turnover, safety and, interestingly, the ratio between CEO and average worker pay–a revealing metric that most such rankings do not include. Disclousre: While I played no part in putting the list together, I did write a profile of Novo Nordisk, the top-ranked company, for Corporate Knights.

A couple of things to note about the list. First, US companies perform poorly. There’s not one US-based company in the top 10. Intel (No. 18) Life Technologies (No. 15) is the highest ranked US-based firm, followed by Intel (18), Agilent (59), Johnson Controls (64), Procter & Gamble (66) and IBM (69). Lest you suspect a Canadian bias, our neighbors to the north did no better. The top-ranked Canadian firm was Suncor (48), which calls itself an “oil sands pioneer. Go figure.

Of the 22 countries with companies that made the list,  the UK led the way with 16 Global 100 companies, followed by Japan with 11 and France and the US with eight. Northern European countries (Denmark, Netherlands, Norway, Sweden) punched above their weight, which isn’t surprising.

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Pennies down the drain

January 15, 2012

Imagine if you had to put a quarter in a slot every time you took a shower at home. Or 50 cents to run the dishwasher. Or $2 to water the grass.

You’d think about water differently, wouldn’t you?

A San Francisco startup called WaterSmart Software wants to remind people that wasting water is wasting money, and to show consumers how to conserve both.

“People don’t have a mental image of pennies going down the drain,” says Peter Yolles, a founder and CEO of WaterSmart Software, which is based in San Francisco.

But they should.

“We’re helping the consumer save money,” Yolles says. “And we’re helping the utility save money.”

WaterSmart is a small company–just six people–that wants to help tackle a very big problem: Fresh, clean water is a finite resource. As populations grow, incomes grow and the planet warms, water scarcity will create business opportunities.

If you’re like me (and I hope you’re not in this instance), you know very little about your water use. I just checked my quarterly bills for the past 12 months and found that I paid $994.21 for water, or $82.85 per month. That’s higher than I thought and, unfortunately, quite a bit higher than the average bill for US households of about $50 month, according to WaterSmart.

What’s more, Yolles tells me, the water bill is “the fastest growing bill in your home,” faster then the electricity or even the cable bill.

Here’s a chart showing typical household water use:

You may be surprised, as I was, to see how much usage comes from leaks and the toilet as opposed to say, the dishwasher, which doesn’t merit its own slice of the chart. (This is from a 1999 study.)

WatersSmart software aims to give people, first, more information about their water use and then, second, advice on how to use water more efficiently. Using billing information from water utilities, along with real estate, climate and geographic data, WaterSmart will compare a household’s water use with the neighbors in a friendly, easy-to-use format, on line and in print. It’s similar in concept to a fast-growing startup called OPower which promotes energy conservation. [See my 2010 blogpost, Opower, peer presssure and climate change.) [click to continue…]

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Which side are you on? The solar trade wars

January 8, 2012

Should we worry about Chinese government subsidies to its solar industry? Or send the Chinese a thank-you note?

A group of seven US-based manufacturers of solar panels is alarmed. These manufacturers, led by Solar World, a German firm with a plant in Oregon, filed a complaint with the United States International Trade Commission, which reached a preliminary conclusion in December that US companies were, in fact, being harmed by subsidized imports. If the Commerce Department goes on to find that Chinese firms have been dumping solar panels on the US market at prices below their costs, it could impose steep tariffs of 50 to 250% on Chinese panels, according to this report in The Times by Matt Wald. The Chinese government provides billions of dollars of low-cost financing and free or cheap land to Chinese solar firms.

Jigar Shah

But much of the solar industry–led by Jigar Shah, the founder of Sun Edison, entrepreneur and environmental advocate–thinks this complaint is a terrible idea. Tariffs  would raise the costs of solar power to US business and consumers, at a time when those are coming down; they could also set off a solar trade war that would harm other US solar companies.

As it happens, the U.S. had a trade surplus of nearly $1.9 billion in the solar sector with China in 2010, as exports of raw material and factory equipment more than offset imports of finished solar panels, according to the Solar Electric Industries Association,. What’s more, Jigar says, most of the 100,000 or so jobs in the US solar industry — he says as much as 97-98% — are downstream of the manufacturing business in project development, logistics, construction and installation.

“SolarWorld’s petition will do far more damage than good to the U.S. solar industry as a whole,” Jigar wrote in this letter to Gordon Brinser of Solar World. “Every morning, thousands of hard-working Americans put on their tool belts and go build solar power plants. Our country needs more of those jobs, not fewer.”

What got me thinking about this brouhaha was an email the other day from a California company called Solar Power Inc., or SPI, that underscored for me just how committed the Chinese are to getting their solar panels onto rooftops in the US.  SPI said it had secured construction financing worth $44 million from the state-owned China Development Bank to fund construction of solar projects in New Jersey. [click to continue…]

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Climate, insurance and the next financial meltdown

January 4, 2012

Miami Beach oceanfront properties

Well-to-do Brazilians are buying up luxury condos on the beach in Miami, The Times reported last week. “They are taking Miami by storm,” one real estate executive declared.

It’s an unfortunate metaphor.

That’s because, sooner or later, storms will likely damage or destroy much of the property on the Florida shoreline. And, while a beachfront real estate revival may be welcomed by developers who, according to the Times, are “starting or restarting ambitious condo projects,” the risks are being borne not by the developers or by the condo buyers or even by private insurance companies but, for the most part, by a state-run, not-for-profit, tax-exempt corporation called the Citizens Property Insurance Company. Citizens has become the biggest insurance company in Florida since it was created in 2002, and many of its policies ($232 billion worth, according to a 2009 story in the Miami Herald, referenced here) are written on riskier, coastal properties. As a government-sponsored entity, Citizens has the implicit backing of Florida taxpayers who, you can be sure, will turn to the rest of us for help if the big one hits.

“Who’s on the hook when a wall of water hits the coast of south Florida? You and me,” says Sharlene Leurig, senior manager of the insurance program at Ceres, a nonprofit alliance of investors and environmental groups. Her  job is to raise awareness of climate risk within the insurance industry, and to prod the industry to respond.

It’s not just a problem in Florida–many states are assuming the risk of natural disasters, despite the rising costs of extreme weather events, which are more frequent and more severe because of climate change, scientists say. So is the federal government: The National Flood Insurance Program (NFIP) has $1 trillion in exposure, according to Ceres, and it’s $20 billion in debt. Although no individual storm can be attributed to climate change, the rising prevalence and intensity of storms, floods, droughts and wildfires are consistent with what scientists say can be expected as global temperatures rise.

Sharlene Leurig

Today, I’m devoting the first of two blogposts to the insurance business and climate change. Have another cup of coffee if you must, but this is important. According to Leurig and a September 2011 report from Ceres, the insurance industry has yet to fully recognize the risks posed by climate change. This isn’t just their problem. It’s ours because what Ceres describes as he industry’s “sluggish and uneven response to the ever-increasing ripples from global climate change” threatens not just the insurance business but the stability of the global economy.

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Making sense out of Durban

December 12, 2011

So what the heck happened in Durban? Is the world closer to dealing with the problem of global warming? Or not?

If, like me, you aren’t a devotee of the UN climate negotiations, reading the headlines isn’t much help.

From the glass-half-full crowd: Progress at end of Durban Cop17 climate talks (LA Times). Reason to smile about Durban climate conference (Eugene Robinson in the WPost). Climate deal salvaged after marathon talks (The Guardian).

From the pessimists: How the world failed to address climate change–again (Michael Levi at The Atlantic.com). The Durban climate deal failed to meet the needs of the developing world (The Guardian, again). COP out (South Africa’s Cape Times).

COP out strikes me as about right. To gain some insight in what happened, and why, I called David Victor, a political scientist at the University of California, San Diego, the author of an excellent new book called Global Warming Gridlock and one of the smartest people I know when it comes to understanding global climate politics. David has followed the UN process closely since its beginnings in the early 1990s, and he has become convinced that it is the wrong way to deal with the climate threat.

David Victor

Durban didn’t change his mind.

“In terms of substance, they have not really achieved much,” David says. “They’ve agreed to have negotiations about what they might agree to in the future.” [click to continue…]

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Have I fallen in love with Walmart?

December 4, 2011

In 2006, I wrote a cover story for FORTUNE with the headline: Wal-Mart Saves the Planet. Since then, I’ve written dozens of stories about the retail giant. I’ve reported on Walmart’s impact on the gold mining industry (Green Gold in FORTUNE), its efforts to protect child laborers in Uzbekistan and salmon fisherman in Alaska (Walmart: A bully benefactor on Fortune.com), the launch of a path-breaking sustainability index (Inside Walmart’s sustainability index at GreenBiz), LED lights in Walmart parking lots, the company’s CSR reports, etc. I’ve been critical at times–pointing to Walmart’s BIG problem: climate change and writing that Walmart CEO (Mike Duke) has a problem with gays–but most of my coverage of the company’s sustainability effort has been laundatory.

Now here comes Stacy Mitchell, a smart reporter, with a six-part series in Grist called Walmart’s Greenwash: Why the retail giant is still unsustainable. She assails Walmart for promoting suburban sprawl, making only token efforts to buy renewable energy and selling cheap throwaway stuff. She also faults mainstream environmental groups for focusing “on the small bits of good that Walmart could do—reduce PVC in packaging, for example—while ignoring the much larger consequences of its ever-expanding business model.” She also says that she has been “shocked by just how much of a public relations boost the media have given the company and how little public accountability they have demanded in return.”

These are serious criticisms that deserve a responses. Stacy highlights some important points. Fundamentally, though, we disagree about Walmart, and this post (it’s necessarily longer than most) is an attempt to explain why. Some of our differences are probably a result of what psychologists called confirmation bias, which describes the way all of us seek out, sift through and read evidence in ways that confirm our preconceptions. Confirmation bias is a problem in journalism, politics, economics and even in the so-called hard sciences.

Stacy Mitchell

I’m sure that my experience with Walmart has left me vulnerable to confirmation bias. I’ve visited Bentonville, gotten to know executives at the firm, and the company has participated in Fortune’s Brainstorm Green conference, which I co-chair;  my career and reputation have been helped by my reporting on the company. I suspect the same is true of Stacy, who wrote a book in 2008 called Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses. She has “advised numerous communities on strategies and policies to limit chain store proliferation and strengthen locally owned businesses,” according to her bio.

So read on (skeptically) as I try to sort through some of the issues she’s raised. [click to continue…]

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An Atlantic wind project: big, bold and risky

December 1, 2011

Building a low-carbon economy requires bold ideas and long-term thinking on a scale that matters.

Ideas like The Atlantic Wind Connection.

The Atlantic Wind Connection,  you may recall, is a company that has embarked on a multi-billion dollar, decade-long project to build an undersea transmission cable stretching about 350 miles from northern New Jersey to southern Virginia. (See my 2010 blogpost, Google’s Atlantic coast wind deal.)

It will bring down the cost of offshore wind projects, create a more reliable electricity grid along the east coast and create thousands of jobs. The Atlantic Ocean is well-suited for offshore winds because its relatively shallow waters extend for miles out to sea, so turbines can take advantage of stronger winds and they are barely visible from land.

“It’s a scalable platform that literally creates a superhighway for offshore wind,” said Michael Terrell, who leads energy policy at Google, a major investor in Atlantic Wind. [click to continue…]

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Crony capitalism at Safeway

November 29, 2011

A beautiful new Safeway opened recently in Bethesda, MD, where I live. It’s  just a couple of blocks from a nearly-new Giant supermarket. To attract shoppers, Safeway sold turkeys before Thanksgiving for 39 cents a pound. Maybe it was 33 cents. In any event, I hope we can all agree that this kind of thing–namely, competition–is what makes America great.

Except, that is, if you live nearby in Washington, D.C., where, as The Washington Post reports today, Safeway poses big hurdle to plan for Southeast Wal-Mart.

Walmart, it so happens, wants to open a new store at a long-neglected shopping center known as Skyland in one of the low-income precincts Washington. The trouble is, a Safeway across the street has a covenant from the 1990s that prevents a competitor from locating in Skyland. Safeway, to its credit, has 15 stores in the district and is one of the city’s biggest employers. But why it was given a promise that no competitor would locate nearby is anybody’s guess.

D.C. Mayor Vincent Gray’s office says hizzoner is trying to work out a compromise with Safeway.

Craig Muckle, Safeway’s manager of public affairs, tells The Post:

We want to be cooperative, but there is a reason that the covenant is in place to protect our interests.

Give him credit for honesty, if not for his faith in markets. He goes on to explain that city neighborhoods, unlike the suburbs, may not have enough buying power to support two big grocery stores.

In the city, with one possible exception, there is no grocery store directly across the street from another grocery store….To have more than one…someone may survive, someone may not.

Quelle horreur! Competition that results in winners and losers is evidently fine when it comes to the Superbowl, political campaigns and even suburban shopping, but not when it comes to buying groceries in your nation’s capital.

 

 

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Climate policy: big ideas are dead

November 16, 2011

Right, left or center, most agree that U.S. climate and energy policy today is, at best, an ineffective and inefficient patchwork.

Better get used to it, said a bipartisan panel of Washington insiders today (Nov. 16) at the Atlantic Green Intelligence Forum.

For now, and for the rest of the Obama administration, when it comes to energy and climate, the White House and Congress will use the tools at hand, and not invent new ones.

“We all agree–big bills are dead,” said Carol Browner, the former White House climate czar and a Democrat.

“I never want to hear the word comprehensive again because once you hear the word comprehensive, you know a bill is never going to pass,” said James Connaughton, the former Bush II White House environmental adviser.

What this means, unfortunately, is that the U.S. won’t get an energy and climate policy that is sufficient to deal with the threat of global warming until 2013 at the earliest, even as greenhouse gas emissions continue to rise rapidly. Just a week ago, the International Energy Agency warned that it will be impossible to hold global warming levels to safe levels without dramatic shifts towards low-carbon energy sources in the next few years. [click to continue…]

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