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.

“We originally came at this by asking how we can make ourselves a more sustainable company,” Needham told me. But Google executives have come to believe that the company can generate  healthy, long-term returns by investing in wind farms, utility-scale solar plants and even solar photovoltaic panels on the rooftops of homes and businesses. “It’s a way of helping us to diversify our cash, put it into businesses that can earn good returns and that aren’t correlated to other investments,” Needham said.

Rick Needham

Needham, who is 41, has an interesting background. He’s a graduate of the US Naval Academy, has a master’s in aeronautical engineering from MIT and an MBA from Harvard. He spent eight years as a submarine officer, and then worked for Dean Kamen at DEKA Research on a project to develop a cleaner burning combustion engine. He’s been with Google since 2008.

Press reports last fall indicated that Google was dropping its clean-energy initiatives. Wrong. What happened was that the company shut down a small group of engineers who were researching solar power, among other things. The company is still working aggressively on data-center efficiency, procuring clean power for its data centers and investing in clean-energy projects elsewhere, as Needham explained.

These are big investments. Google put $100 million into Shepherd’s Flat, an Oregon wind farm that is expected to be the world’s largest, with 845MW of capacity. The company put $168 million into the Ivanpah Solar Electric Generating System, a solar thermal plant being operated by BrightSource Energy. It has invested in distributed, rooftop solar, through a $280 million project with Solar City and a $75 million fund with Clean Power Finance. Most recently, it invested $94 million, alongside private equity fund KKR, in a portfolio of four solar PV projects being built by Recurrent Energy.

Google isn’t betting on any one kind of renewable power because its executives believe that wind, solar thermal and solar PV all have a role to play in generating electricity. “The source of energy in the future is going to be clean energy,” Needham said, but no single source will dominate. “You wouldn’t put a solar on the windy planes plains of North Dakota if you could put a turbine there,” he noted.

While clean energy deployment still depends on government subsidies, he said: “We’re getting to the place where the technology will allow you to have a low cost of power.
Costs of wind turbine have come down. Costs of PV have dropped, just 40 percent in the last year. It’s amazing how the cost curves have come down.”

All of Google’s large-scale energy investments (as opposed to its smaller, venture-like bets on startup companies) have two things in common. First, they are tied to specific projects which should deliver a steady stream of long-term revenues; utilities, businesses or individuals (in the case of rooftop solar) have agreed to purchase the power that these projects produce for a decade or two. Second, they are tax equity investments, under which the lenders–Google in this case, but typically big financial institutions–invest in renewable energy projects and become eligible for credits that offset their federal corporate tax obligations.

Tax equity investments are important to the future of renewable energy because other federal subsidies, notably a U.S. Treasury cash grant, have expired or are in danger of being phased out. According Bloomberg New Energy Finance, which researched tax equity finance for the Reznick Group, a big accounting and tax firm with a clean energy practice, the wind industry alone will require about $2.4 billion of third-party tax equity financing in 2012. The Bloomberg report [PDF, download] says:

Incorporating other renewable generation sectors, the total tax equity financing need could be more than $7bn. That requirement exceeds the investment appetite of the established tax equity providers, according to a clean energy trade group. Yet there is a vast pool of potential incremental tax equity supply: the 500 largest public companies in the US alone paid $137bn in taxes over the past year.

This is where Google is filling an important financial gap. Other companies could, too. Apple recently reported eye-popping earnings which left it with $97 billion cash and short-term investments (although much of it is parked overseas). GE has $78 billion. Toyota has $48 billion. Microsoft has $43 billion. Here’s a list from the WSJ of the companies with big cash hoards.

Solar panels at a Recurrent Energy project

Interestingly, Google had a partner in its most recent clean energy investment: KKR, the big private equity firm,  formed a new venture called SunTap to invest in US solar projects, including the projects being developed by Recurrent Energy in northern California. That’s because these deals make financial sense, as the Bloomberg New Energy Finance report says:

For relatively good but not necessarily exceptional renewable projects, the internal rates of return (IRR) and net present values (NPV) for most of these structures can meet hurdle rates for both developers and investors.

So why aren’t more companies investing in clean energy? Hard to say. Maybe they’re risk averse, or they find it hard to think outside the box. Maybe they’re saving their cash for acquisitions, or hoping that interest rates will rise.

For his part, Needham says about Google: “We’re lucky to be working at a company that instead of asking why, asks why not?”

Happy New Year! And good riddance to 2011, a year during which we made little or no progress on some of the issues that I care most about: climate change, the long-term federal debt, social mobility (aka the American dream), and our dysfunctional Congress. Yet I remain an optimist.

Texas drought 2011

I could write many words about our woes. Instead, I’ll try to be succinct. On the climate issue, global emissions of carbon dioxide from fossil-fuel burning jumped by the largest amount on record in 2010, we learned recently, and 2011 surely brought further increases.  Concentrations of CO₂ are 39% above where they were at the start of the industrial era and approaching the point when some scientists say it will be nearly impossible to contain global warming, the Guardian reports. Neither the US nor the UN moved closer to regulating CO2. In a discouraging development, Republicans Mitt Romney and Newt Gingrich backed away from their once-sensible support of greenhouse gas regulation, in what can only be seen as shameless pandering to the know-nothing wing of the Republican Party. Discouraging, too, was the Fukushima nuclear disaster, which will slow down the growth of carbon-free nuclear power. So will the failure of Solyndra. Meanwhile, the U.S. suffered massive flooding of the Mississippi and Missouri Rivers, a terrible drought in Texas, record wildfires and at least 2,941 monthly weather records that were broken by extreme events, according to the NRDC.. Coincidence? Uh, no.

Like the atmospheric concentrations of CO2, the federal budget deficit has been growing.That’s no coincidence either. We’re living beyond our means, whether by burning fossil fuels or taxpayer dollars, and sticking future generations with the cleanup bill. Just last week, the White House asked for a $1.2 trillion increase in the federal debt limit, raising it to about $16.4 trillion. According to Marketplace Radio, that amounts to about $52,000 for every American. For a typical  family of four, that’s bigger than the mortgage.

Social mobility is harder to measure than income inequality (and more important, methinks), but indications are that it’s more difficult to climb the economic ladder in the U.S. than in other western democracies. The Economic Mobility Project, a  bipartisan effort to study the issue, reported recently on a study of 10 western nations that concluded: “In the United States, there is a stronger link between parental education and children’s economic, educational, and socio-emotional outcomes than in any other country investigated.” The sluggish U.S. economy in 2011 didn’t make life easier for those on the bottom who want to work hard and better themselves.

And yet.

As I wrote a year ago (see my blogpost, China, cappuccino and cell phones: reasons to cheer!),  life on this planet is getting better all the time. We humans are richer, healthier and and more peaceful than ever. It’s easiest to forget that, especially if you focus too much on the day-to-day headlines.

Here are several reasons to feel good about the year ahead:

Western economies are slumping, but the rest of the world is growing robustly. The most urgent problem facing mankind isn’t climate change: It’s the human misery that’s caused by poverty. There’s less of that today than there was a year ago, and there will be less on Jan 1, 2013, I’d bet. China’s GDP grew by about 10% in 2010 and by an estimated 9% in 2011. India grew by 6 to 7 percent last year.

A Nairobi street

Then there’s Africa. As Forbes reported last week, in the middle of the 2009 global economic recession, Africa was the only region apart from Asia that grew positively, at about 2%. The continent’s growth has been on an upward trajectory ever since then- 4.5% in 2010 and 5.0% in 2011.

Reliable statistics are hard to come by, but you can be sure that this means that many millions of people are living longer and healthier lives, and that their children have a better shot at an education. This is good  for all of us because the global economy is not a zero-sum game. An expanding pie means a safer world, and more markets for U.S. goods. And there’s even reason to hope believe that the US economy is due for a rebound. See what Matthew Yglesias writes in Slate that Happy Days Are Here Again.

Corporations are taking a more expansive view of their responsibilities: One reason why I write about business is that I believe that corporations can be a powerful force for good. Many are not, but I found reason in 2011 to applaud changes at Walmart (Have I Fallen in Love with Walmart?), McDonald’s (Mainstreaming Sustainability? ), Smithfield Foods (Sustainable pork?), Office Depot (No tree hugging, please), Shaw Carpets (This carpet has moral fiber), Unilever (CEO Paul Polman: Don’t stay on the sidelines), Starbucks (We are indivisible), Marks & Spencer (Sustainability, profits and a carbon-neutral bra),  TD Bank (America’s greenest bank?) and GE (How GE learned to think small and serve the poor). My most popular post of the year, by far, was about Patagonia (Maybe the best retail ad ever).

These companies are responding to rising expectations–from advocacy groups, consumers, a handful of shareholder activists and especially from their own workers. The changes they are making aren’t big enough, and they aren’t happening fast enough, but the forces driving companies to become more sustainable are getting stronger all the time.

Protesters in Egypt

Citizens’ movements are growing here and abroad. Whatever you think of Occupy Wall Street, they got one thing right–the deck is stacked in the US in favor of the well-to-do and the powerful, not just the 1% but the 10 or 20 or 30%, and it’s stacked against those at the bottom of the income ladder. So many laws and cultural practices that we take for granted–from the mortgage interest deduction to the dismal quality of the public education system in our big cities and poorest rural areas–serve the interests of the rich and powerful. Wall Street got bailed out. Main Street got left behind. Thank goodness for people didn’t take that lying down. Thanks, too, to the Tea Party, which is wrong about most things but right about the fact that the federal government can’t keep spending money that it doesn’t have.

Of course, Occupy Wall Street was largely inspired by citizens uprising in Tunisia and Egypt, which in turn seem to inspired people in Russia and even in China to demand more of a voice in their own affairs. This is all to the good, and it should be a reminder to those of us here in the U.S. not to take our freedoms for granted and to exercise our rights as citizens. A big job ahead is to convince Congress to act like adults and treat us that way, understanding that they were elected to solve big problems, even if that requires. We can’t have big government, generous services and low taxes. Or cheap energy without climate risk. Or affordable, unlimited health care for all.

Sure, there’s reason to be gloomy but it always helps to think long term. More people are free today than at any time in human history. More people live comfortably. We’re more tolerant and loving that we used to be. We’ve got an African American president and my daughter, who is gay, will get legally married in June. MLK Jr. had it right: “The arc of the moral universe is long but it bends toward justice.”

Despite policy gridlock (or worse) in Washington, despite cheap abundant natural gas (which threatens the development of renewable energy), despite Solyndra (which highlights the risks of crony capitalism), there is good news in the world of business and sustainability.

Innovation is alive and well in companies big and small.

That’s my takeaway after spending the last 36 hours at the GreenBiz Innovation Forum in San Francisco. I’m a senior writer at GreenBiz and let me tell you, it’s been great to get outside the Beltway bubble this week (and not merely because the weather here in SF is spectacular). Here’s are four reasons why:

Nike goes for gold: While she was tantalizingly skimpy on details, the always dynamic Hannah Jones of Nike made clear that the company’s drive to become more sustainable is causing people inside the company to ask ever bolder questions–including how to generate sales without necessarily making and selling more shoes and apparel.

“How do you think about the world of sport and the athlete and human potential in terms of services?” Jones asked. “Could one create revenue streams that are decoupled from any material?”

“Our mission statement isn’t ‘make lots of stuff,” she said. “It’s ‘inspire and innovate on behalf of the athlete.”

For now, Nike is trying to develop different materials that “regenerative, recyclable, and reusable” but don’t compromise performance. One example? World Cup uniforms made entirely out of recycled plastic bottles. This year (as the sign at right says), Nike will turn 440 million plastic bottles into high-performance gear.

Nike is one of the few companies that manages to make sustainability fun, hip and stylish. If you doubt it, check out Nike Better World.

GE doubles down on EcoMagination: GE’s head of EcoMagination, Mark Vachon, told me that absence of energy policy from the U.S. isn’t stopping from GE from continuing to invest in wind, solar and smart grid businesses. The company has committed $10 billion to investments in EcoMagination products and services over the next five years, twice what it spent during the program’s first phase.

“The U.S. (clean energy) market will slow down,” Vachon said. “Is the reaction, let’s put our pencils down and quit? That’s not in our DNA. Our policy is action.” GE expects the growth of its sprawling EcoMagination portfolio to be greater outside the US, in places like China, Australia and Brazil, than it is here. “China couldn’t be more clear about where they are going,” he said.

GE’s approach to innovation is both to draw upon the 1,500 scientists in its research labs and to open itself to new ideas from outside the company. The company’s EcoMagination Challenge, a crowdsourcing platform, attracted more than 5,000 ideas, and led to investments or other partnerships with more than a dozen companies.

Up on the roof: Innovation requires breaking down barriers. Dow, the world’s largest chemical company, had to collaborate across silos and invite in partners to develop the Dow Powerhouse solar shingle, which integrates solar PV panels into rooftop shingles that protect your home and deliver clean renewable energy.

“We want to redefine the rooftop,” said Kirk Thompson of Dow Solar. “Your rooftop will no longer be a depreciating asset. It will be an asset that delivers value to the homeowner.”

To develop the solar shingle, Dow brought together its expertise in materials science, its building construction business and its manufacturing capability. It will make the solar panels at a new facility in Midland, MI, where it is headquartered. Dow got a $12.8 million U.S. Department of Energy grant in September to support the project.

Privahini Bradoo

Turning waste into gold: Privahini Bradoo, the co-founder of a startup now called Biomine, delivered the most intriguing presentation at the GreenBiz event, although she was purposefully vague about her company, which aims to extract value from the more than 40 million tons (!) of electronic waste discarded annually around the world.  As she noted wryly, waste is a byproduct of the fast-changing electronics business where computers, phones and TVs are outdated almost as soon as they exit the store.

“As you have accelerating innovation, you have accelerating obsolescence,” Bradoo said. “This is the dark side of Moore’s law.”

Roughly 80% of the US consumer’s e-waste goes to landfill, and most of the rest gets shipped to India or China for “recycling” under conditions that should appall. Her company aims to turn this “humanitarian disaster” into an economic opportunity.

The economics sound promising. “A single ton of circuit boards creates the same amounts of high value precious metals as 150 tons of commercial grade ore,” Bradoo said. Depending on commodity prices, those circuit boards could generate up to $26,000 of value.

To capture that value, Biomine will have to find a way to collect enough feedstock and efficiently separate metals like gold and copper and rare earth elements from the rest. Here, Bradoo was vague, explaining, “We’re not able to say very much because we’re in the process of patenting.” An inkling of what she’s up to comes from this account of how Biomine and Bradoo, a 2008 graduate of Harvard Business School, won HBS’s Alumni New Venture contest last spring.

Born in India and raised in Oman, Bradoo has a PhD in neuroscience from the University of Auckland in New Zealand and was a Fulbright scholar at Harvard. She cautioned me after her talk that the company is still “very much in the incubation stage” and in semi-stealth mode. It doesn’t have a website and is in the process of rebranding itself, possibly as “GreenOre.” So why pay attention? The firm’s investors  include Silicon Valley venture firm Kleiner Perkins, where the firm’s three employees are now housed. That suggests that Bradoo and her colleagues may be onto something.

Mark Vachon

How’s GE’s ecomagination  going?

I put that question today to Mark Vachon, who is vice president for ecomagination at GE. He replied by talking about natural gas.

“The large macro trend of gas is massive,” he said. “Our oil and gas business will be a huge beneficiary.”

An abundance of shale gas in the U.S., and methane gas reserves in Australia present a wealth of opportunities for GE, which plays all along the supply chain for natural gas.

“We’re a massive player in gas exploration,” Mark said. “We have a water business that can deal with issues in the fracking process.” And, of course, GE sells lots of gas-burning turbines, including a new combined cycle power plant, currently available in Europe, that enables gas to be burned more efficiently and in concert with renewable energy. (See my June blogpost, GE’s big bet on natural gas)

But can you put “ecomagination and shale gas in the same sentence? Yes,” Mark said. GE will focus on making shale gas cleaner, “with technologies like zero-leak valves” and water filtration products like a mobile evaporator that is basically a truck (see below) “designed to enable on-site frac water recycling, reducing the volume of wastewater and fresh water that needs to be hauled to and from the project site.”

Like it or not, natural gas is the big story today in the energy business. This is good for GE. It’s probably good for the U.S., given our domestic supply. Whether it’s good thing for the climate is very much an open question. If cleaner-burning gas plants replaces dirty coal plants, they will bring meaningful but incremental progress towards a climate solution. If cheap, abundant natural gas stalls the development of low-carbon renewable energy, or discourages investment in new clean-energy businesses, that’s a problem. Chances are, it’ll do both.

I met Mark near the U.S. Capitol, where he was headed for meetings on energy security with House leader John Boehner, among others. He has overseen GE’s ecomagination portfolio for Jeff Immelt since last October. Ecomagination products include efficient aircraft engines and locomotives, appliances, and LED and CFL light bulbs as well as GE’s gas, nuclear, renewable energy and smart-grid businesses; they’ll generate $20 billion to $22 billion in revenues this year, Mark estimates. The 52-year-old exec, who has been with GE for 28 years, was previously President & CEO of GE Healthcare’s $9 billion Americas Region. He still lives in Milwaukee, where the healthcare business is based, but because one of his jobs is to make ecomagination more global, he has traveled this year to Abu Dhabi, Dubai, Israel, Europe, Australia and China, and he’s soon headed to Brazil.

So if the gas business is booming, where are the challenges in the ecomagination portfolio?

Nuclear’s an obvious one. The son of a nuclear engineer, Mark believes in the technology but says, post-Fukushima, that “it’s very clear, at least for the moment, that we’re in a hiatus.” But, he added, “the nuclear industry is very good at learning from its mistakes.”

Wind, too, faces short-term issues, he said: “It’s clearly challenged over the next couple of years.” Without clean-energy mandates or tax subsidies, wind struggles to compete with cheap natural gas. And there’s uncertainty about those subsidies, particularly in the U.S. where Congress is looking to manage budget deficits.

This past spring, GE made a major commitment to solar PV, drawing on technology developed at the National Renewable Energy Lab. Mark said the company will site a manufacturing plant in the U.S. to make the panels.

Does GE remain committed to ecomagination despite the gloomy policy environment in the U.S.? After all, Immelt put his reputation on the line by becoming a vocal advocate for climate regulations through the U.S. Climate Action Partnership. That didn’t end well.

“Business has to step up and act,” Mark said, nothing that GE plans to buy 25,000 electric cars for its own fleet.

“We are not going to wait for policy,” he added. Good thing.

Agricultural residents and converted biochar

Would you like to curb or even reverse global warming? Help feed the world? Generate renewable energy?

Biochar is the answer, say its most fervent advocates.

If only life were so simple.

Biochar, alas, isn’t ready yet to be a meaningful solution to the climate crisis, or a way to enhance agricultural productivity at scale. But it’s an intriguing substance that has been around for thousands of years, and the production of biochar may prove to be one of the  technologies that governments and business deploy to deal with the threat of climate change. As, potentially, a carbon negative technology, it’s worth a look.

Biochar, for those of you who haven’t heard of it, is a charcoal-like substance that is created today by pyrolysis of biomass. In layman’s terms, biochar is made by taking organic material, like agricultural waste, heating it to very high temperatures, and allowing it to decompose in the absence of oxygen.

Jonah Levine

To learn about biochar, I met recently in Boulder, Colorado, with Jonah Levine, who is a co-owner of his own small biochar business and, until recently, was an executive with a startup called Biochar Engineering.   Jonah, who is 30 and lives near Boulder, got involved with biochar when a friend asked him to organize a conference on the technology in 2009 at the University of Colorado. A passionate environmentalist, he had previously worked as a wildlife biologist and as an engineer advising utilities on how to incorporate renewable energy into the grid.

Now he’s bullish on biochar.

“I feel like like I’m watching the beginning of an industry,” Jonah says. “Within a  decade, I feel this will be a functional business space.”

He told me that the history of biochar can be traced back to Brazil, where dark soils in the Amazon region are known as “Terra Preta.” No one can be certain about their origin, but some scientists believe they were created as long as 4,500 years ago, and that they helped support a complex, farm-based civilization in the Amazon, despite the region’s poor soil.

Johannes Lehmann, a leading biochar researcher at Cornell University, writes:

Terra preta research inspired the development of a revolutionary technology that can have tremendous impact on rural livelihoods as well as carbon sequestration. It builds on the application of stable organic matter in the form of bio-char (biomass-derived black carbon or charcoal) in conjunction with nutrient additions. This bio-char is very stable, provides and retains nutrients for millenia, as seen in Terra Preta.

As Jonah explained it to me, organic matter—crop waste, wood chips or even sewage—can be turned into biochar by heating the materials to between 300 and 900 degrees C. This generates a synthetic gas that can be converted into liquid fuels, used for  heating or generating electricity, as well as the biochar, which is then worked into soil to improve farm productivity. (The yield of products from pyrolysis varies with the temperature; lower temperatures produce more char, higher temperatures make more syngas.) Proponents claim that the biochar then sequesters carbon in the soil for hundreds to thousands of years—carbon that would otherwise be released into the air if the organic matter were burned or allowed to decompose.

Consider, for example, the vast swaths of pine trees being killed by mountain pine beetles in the Rocky Mountains. Some, I’m told, are being shipped to Europe to be burned as fuel in coal plants. Others are allowed to decompose, emitting CO2. If, instead, the dead trees were turned into biochar through pyrolysis, and the char was then used in agriculture, substantial amounts of CO2 emissions could be avoided even as renewable energy was created.

The business model for biochar is simple: Buy cheap organic waste, process it and then sell energy and biochar to create two streams of revenue. “If you have $150,000 and 90 days, I can sell you a piece of equipment that will make 50 to 100 pounds of char an hour,” Jonah told me. He says the process will also release about 2 million BTU per hour of producer gas.  “We need all the revenue streams we can get, including soil product value, energy value, carbon value, waste mitigation value and more,” he adds. The process, he assures me, requires far less energy than it generates, but the technology for making char isn’t well-developed yet.

James Lovelock, the British scientist who created the Gaia hypothesis, and prominent climate scientist James Hansen are biochar advocates. More than 500 academic papers have been written about biochar, Jonah told me, many of them focusing on its impact on agricultural yields. Research is going on all over the world, including at the USDA’s Agricultural Research Service and at an experimental farm in North Carolina. Here’s a global discussion list with lots of information on biochar research; another good source of information is the International Biochar Initiative, a Washington, D.C.-based nonprofit.

Various companies in Europe, Australia and the U.S. either sell biochar or biochar production units; all are small scale. One of the most intriguing is a startup based in Camarillo, California, called Cool Planet Biofuels that is developing “negative carbon fuels” with biochar as a byproduct. The company website says:

Imagine driving high performance cars and large family safe SUV’s while actually reversing global warming, and without using any foreign oil….the more Negative Carbon “N100″ fuel you use, the more carbon you permanently remove from the atmosphere.

It sounds too good to be true, but investors in Cool Planet Biofuels include Google Ventures, General Electric, NRG Energy and ConocoPhillips.

If they think biochar is worth their attention, it’s probably time for those of us concerned about the climate crisis to take it seriously, too.

[Biochar photo credit: Jonah Levine]

General Electric Co. (GE) is betting big on natural gas.

The $150-billion a year company, whose power plants generate about one-fourth of the world’s electricity, today announced a new natural-gas power plant that it says is more efficient and flexible than any other in the market.

By phone from Paris, where the announcement was made, Steve Bolze, president of GE Power & Water, told me:  “This is about transforming the industry over the next five or 10 years.”

GE says it invested more than $500 million in the new plant development. It will be manufactured in France and sold first in Europe and Asia, and then later in the U.S.

One key selling point of the new plant is its unprecedented flexibility: It can ramp up and down rapidly, and thus be easily combined with wind and solar power plants that generate electricity intermittently.

It’s also efficient enough to work as a generator of baseload power, Bolze said. Here’s a GE webpage describing the plant and its operation.

The new GE plant—dubbed the FlexEfficiency 50–is rated at 510 megawatts and offers fuel efficiency greater than 61 percent.  Competing plants burn natural gas at efficiency rates of 57 or 58 percent, Bolze said. Each percentage point of improved efficiency saves a utility about $2 million a year, he said. Capital costs are projected to be CapitaCosts should be somewhere “north of $450 million.” he said.

What this tells you is that, all other things being equal, natural gas has become the fuel of choice for the global electricity business. Wind and solar power can’t compete with cheap gas without government mandates, subsidies or a price on carbon. Nuclear is expensive and it is deemed riskier than ever, for better or worse, after Fukushima. Coal is low cost but dirty and, as a result, politically unpopular in western Europe and the U.S.

Speaking last week at a conference, GE’s CEO, Jeff Immelt, said : “It appears like we’re entering into a natural-gas cycle.”

GE didn’t announce any customers for the plants. The businesses that comprise GE Energy—GE Power & Water, GE Energy Services and GE Oil & Gas—employ about 90,000 people and generated $38 billion in revenues last year. GE is continuing to invest in wind and solar power, the company said.

GE is good at big: It makes big wind turbines, big jet engines, big locomotives. These businesses require lots of technology, they have high barriers to entry, and they are capital intensive.

But to generate growth in emerging economies, which have fewer resources, GE is learning to think small.

Recently, the global manufacturing giant (2010 revenues: $149 billion) gave its imprimatur to the Sunspring, a small, solar-powered, water purification machine that serves the global poor, costs just $25,000 and was invented by a self-taught engineer who owns a small business in small-town Colorado.

Interestingly, it was not just the business of GE that made the connection to Jack Barker, the 48-year-0ld inventor of the Sunspring, but the GE Foundation, which last year asked him to help with disaster relief in Haiti. It’s an example of how the company’s charitable endeavors can have an unexpected payback.

Bob Corcoran, who runs GE Foundation, told me the other day that its work has exposed GE to “different thinking about how we can adapt our technology and our products for an increasingly important market,” namely places in the global south that lack clean water and reliable electric power.

Jack Barker and his wife, Carmen, have been in the water business for years, providing maintenance and support to small water systems in Colorado. “It’s always been a passion of mine, drinking water,” he told me. About four years ago, Barker got the local distributorship for the GE Homespring, which uses thousands of tiny, fibre membrane strands to block out contaminants like bacteria, parasites and viruses. He thought: “Wouldn’t it be neat to get this technology to places in the world that need it the most?”

Easier said than done. Costs were one issue, he knew, and the availability of parts and technicians was another. What’s more, places that lack safe drinking water often also lack electricity.

It was then that Barker decided to design and build the Sunspring, which incorporates GE’s technology, but runs on solar power. “It’s probably 96% assembled when you get it,” he says. “From crate to making water takes about two hours.” Surplus electricity can even be used to charge a mobile phone.

Barker shipped the first Sunspring to an orphanage in  India. He  built another for an nonprofit group in Haiti in 2009, and he had a couple of more that were ready to go to Haiti when the earthquake hit in January 2010. The GE Foundation, which has been doing disaster relief since the 2004 tsunami in Indonesia, then approached him, to ask if he could supply 10 Sunsprings to Haiti.

He flew down to install a machine at a tent hospital near the Port au Prince airport. “It was total chaos, the worst of the worst I’ve ever seen,” he said.

Barker wound up spending 140 days in Haiti last year.

His wife would call and say: “I can’t believe you’re still there.”

“I can’t believe I’m leaving,” he’d reply. “There’s so much to do.”

Barker’s company, Innovative Water Technologies,  has deployed about 20 Sunsprings in Haiti. He says they should last 10 years and can purify up to 5,000 gallons of water a day, at a cost as low as $.0013 per gallon.

“It’s one of the most cost-effective water treatment systems in the world,”  he says.

Working with a third-party consulting firm called Oxford Analytica, GE has just validated the Sunspring as a GE Healthymagination product, which essentially assures potential customers that the product does what it claims to do.That could help spur sales of the machine and, of course, the sales of the GE technology inside. If Barker gets more orders for Sunsprings–Haiti along could use 1,000, he says–manufacturing costs will come down. Most customers are nonprofits and governments.

Corcoran, meanwhile, says that partnerships with companies like Barker’s can help GE deliver health-related and energy-related solutions that are small-scale and distributed.

He asks: “How do you think about power in a distributed way? How do you think about health in a distributed way? How do think about water in a distributed way?” Good questions. Now all GE has to do is come up with more answers.

A Sunspring in Haiti

“It was a tough year for the environment, and a tough year for environmentalists, especially in the U.S.”

So said Jonathan Lash, the CEO of the World Resources Institute, one of Washington’s most respected environmental groups, as he began his annual look at the state of the environment in the new year.

2010 was indeed a dismal year–marked as it was by record warm temperatures, natural disasters linked to climate change, the BP Deepwater oil spill, the Massey mine disaster and, most importantly, the defeat of  climate-change legislation in Congress.

Given today’s political realities, it was hard for Lash to summon much optimism about 2011,  at least when it comes to U.S. policy. But he was able to identify pockets of progress in the business world and elsewhere–particularly in China–that could, over time, drive the decarbonization of the global economy required to curb climate change.

Policy will be needed–specifically a price on carbon, in some form–but if and when governments finally manage to peenalize companies for their emissions,  they will  set off “an avalanche, a shift that will go much faster than policy requires” as businesses compete in a low-carbon world.

“My premise has always been that once we begin the process of decarbonization, there will be business and economic incentives” that will drive rapid change, Lash said.

But that carbon price is nowhere on the near term horizon in the U.S. So, for now, environmentalists will have to look to the private sector and overseas if they want to find reasons for hope.

Here are some highlights from Lash’s talk. His presentation is available on this WRI website.

Why EPA won’t solve the climate problem. EPA is in the process of regulating CO2 emissions from big power plants, as well as emissions of toxics; together, those programs have the potential to force the retirement of aging coal plants.

But, Lash acknowledged:  “There is a thunderous chorus from much of industry demanding that these regulations be blocked.”

More important, industry opponents are getting their way with Congress. In an op-ed in The Wall Street Journal, Fred Upton, the new chairman of the House Energy and Commerce Committee, teamed up with Tim Phillips, head of an industry group called Americans for Prosperity, to describe EPA’s plans to regulation global warming pollution as “an unconstitutional power grab” that will “kill millions of jobs.” Upton was once a more-or-less moderate voice on climate;  his rush to the right is a sign of how the political climate has changed, as the NRDC’s Pete Altman reported today.

Even under a best-case scenario, Lash said, there’s scant hope that current U.S. policies will enable President Obama to keep his promise, made at the Copenhagen climate talks, to reduce U.S. emissions by 17% by 2020. Getting there would not only require that all current laws be strongly enforced, but that other agencies, like the agriculture and interior departments, take aggressive action to mitigate emissions. (Click on the chart below for more detail.)

What’s more, as Lash acknowledged: “The science says we should be doing way more than what was agreed to in Copenhagen.” The reluctance of the U.S. to enact a strong climate policy is “the biggest restraint” right now when it comes to reaching a global accord. That’s depressing.

Now the good news.

Electric cars: They’re arriving in the U.S. market in small numbers, but have the potential to become mainstream. Lash, who advises GE on its EcoMagination efforts, noted that the company has promised to buy 25,000 electric cars. “Basically, their whole sales force will be driving electric vehicles.” Currently, the cars are expensive, but if gas prices rise and fleet sales drive down the manufacturing costs, they could appeal to many more drivers.

China: WRI now has more than a dozen people based in China, and Lash said the move to clean energy there is rapid and real. One example: High speed rail. China is investing $120 billion in the next two years, he said, and soon will have more high speed rail corridors–where trains travel more than 200 miles an hour and soon will go faster–than the rest of the world combined. “This is a spectacular new technology,” Lash said. China still burns lots of coal, of course, but it also intends to export solar and wind technology globally.

Green advertising: Even as the political winds seem to shifting against climate policy and environmental action, Lash notes, big companies are talking more and doing more about their environmental efforts. “Why is it that the politics are going one way, and the corporate advertising and commitments are going another?” he asked. Business executives tell him that “their customers care about whether companies are environmentally sensitive and products are environmentally preferable.”

This isn’t trivial. It’s a message that a clean environment can go hand in hand with  healthy businesses, jobs and  economic growth.

Take the creativity of countless startups, the heft of a big corporation, $200 million in prize money, savvy venture capitalists, the power of digital media and the wisdom of crowds.

Put them together and you have the ingredients of GE’s Ecomagination Challenge, a promising way to speed innovation towards a smart grid, clean energy and eco-friendly homes, buildings and cars.

Promising…because we won’t see results for a while.

Unveiled with fanfare by GE chief Jeff Immelt in Silicon Valley in July, the Ecomagination Challenge has generated more than 3,000 entries and 60,000 comments and votes. This week, GE will announce the top vote-getters and next month it will announce the winners, which are selected by a panel of expert judges.

GE and its four venture capital partners–Emerald Technology Ventures, Foundation Capital, KPCB and Rockport Capital Partners–have said they will invest $200 million into the most promising startups and ideas. Grants could range from $100,000, to further research a new idea, up to significant equity investments in existing startups, which would also get marketing and manufacturing support from GE. GE already has significant investments in clean tech companies like A123 Systems, which makes batteries, and Southwest Windpower, which makes small-scale wind turbines. This is an effort to find more.

How’s it going? Some of the ideas seem, to put in kindly, long shots. An electric generator powered by garlic? (See it on video here.) Rotating houses? A “Wind Turbine Electricity Generation Without the Wind.” What’s next: solar panels that don’t need sunshine?

Amidst the thousands of entries, several caught my attention, and the attention of voters:

Julie and Scott Brusaw

One is Solar Roadways, the  brainchild of a mom-and-pop couple in Idaho. Scott Brusaw is an electrical engineer, a former sergeant in the Marine Corps and a former Boy Scout scoutmaster, and his wife Julie Brusaw is a marriage and family counselor. They want to make roads out of solar panels, protected by a material similar to that used in the “black boxes” in airplanes. LEDs could be added to light up roads at night, and heating elements could be installed to melt snow, all powered by the sun. They’re even talking about putting sensors in the roads to warn drivers if animals are crossing. The Brusaws got a contract from the Federal Highway Administration to build a prototype in 2009, and he was invited to give an entertaining TEDx talk last spring in Sacramento.

Interesting, too, is Welectricity, which is described as “a social network that promotes household energy efficiency through behavioral nudges.” Think Facebook meets your utility bill. Electricity users could set up profiles, and their bills would be graphed and compared to one another. (You could send a boastful tweet when your bill is lower than your neighbors!) The idea comes from Herbert Samuel, an energy consultant from the Caribbean island of St. Vincent.

I was also struck by an entry called From Net Zero to Waste Zero which uses a combination of solar PV, wind and geothermal energy to design a low-cost house that lives off renewable power. (That’s an image of the house, above.) The idea comes from Sam Qin, a Canadian entrepreneur who coordinated the design of a zero net-energy house for the Canadian government during the 2008 Beijing Olympics.

Whether any of this is truly new–and, more important, scalable–is very much an open question. If we lived in a perfectly efficient economy, where any entrepreneurs could get a hearing at venture capital firms, and the best ideas would get funded, we wouldn’t need a competition like this. But we don’t, and that’s why new models for innovation–like the automotive X-Prize--are worth trying. If nothing else, GE’s challenge has spurred a lot of online conversation and positive buzz for GE.

“Responsible business,” says Bob Corcoran, “is good business.”

And what’s responsible business? “Make money, make it ethically and make a difference.”

Bob Corcoran

Bob is vice president for corporate citizenship at GE, a 30-year company veteran, and a good guy. We met in 2o04 when we traveled together in Ghana while I was reporting a story on GE’s values for FORTUNE. (See Money and Morals at GE.)  Recently we spoke about GE’s 2009 citizenship report, and about what GE has learned in the past five years from its corporate citizenship efforts, including its high-profile campaign around Ecomagination, which focuses the company, and its marketing, on products and services that help solve the world’s big environment problems.

Inside GE, Ecomagination is deemed a success, so much so that it has spawned a sister initiative (if you can spawn a sister) called Healthymagination, focused on profitably creating better health for more people. GE says that it expects Ecomagination product revenues to grow at twice the rate of GE’s overall revenue between now and 2015.

The logic behind both initiatives is simple, Bob noted. Big global problems demand big solutions from big companies. GE prides itself on “tackling the world’s most complex and pressing problems,” as chief executive Jeff Immelt writes in the report.

The trouble is, the payoff for GE’s shareholders have been disappointing. I didn’t realize just how disappointing until I put together this chart comparing GE’s stock-price performance to the S&P500 and to a couple of its conglomerate competitors, Siemens and United Technologies.

In the past five years, here’s how the numbers look:

GE: -54%

S&P500: -10%

Siemens: +25.3%

United Technologies: +39%

Yikes.

Now, there are a lot of explanations for this. Perhaps the biggest is that  GE, unlike its peers, has been in a couple of business that have suffered in the last five years–GE Capital, its finance operation, and NBC Universal, its TV, cable and Hollywood unit, which is now being spun off into a joint venture with Comcast. Their problems mean that GE’s fundamentals look only a bit better than its stock price: Revenues have grown from $72 billion  (2004) to $157 billion (2009), profits have slid from $16.3 billion (2004) to $11 billion (2009). Profits are back up again this year, and Bob says the company is poised to grow.

In any event, there’s no doubt that GE takes its corporate responsibilities seriously. This citizenship report is thoughtful and detailed, reporting on everything from the company’s greenhouse gas emissions (down by 22% from 2004) and water usage (down by 30% from 2006) to its illness and injury rate (down by 16% in a year) to the number of employees fired (118) as a result of ethics complaints filed with about 700 GE ombudspersons (their word, not mine) around the world. There’s much, much more here.

Behind the numbers are compelling stories. GE writes about reverse innovation–the idea that along with developing high-end products for the US or Europe, the company will create low-cost products in poor countries and then distribute them globally. For example:

In countries like India and China, where per capita incomes are smaller, customers often prefer decent performance at an ultralow cost. This insight led a GE Healthcare team in China to develop a U.S. $1,000 handheld electrocardiogram device and a U.S. $15,000 portable ultrasound — each a fraction of the respective technology’s typical price. Given these markets’ infrastructure challenges and high rural populations, such products have helped meet critical human needs — and demand has followed.

Insights gleaned from China and India can then be used to help deliver health care in the west at lower cost.

Another example: Many environmental NGOs worry about how people will adapt to the impacts of global warming–higher temperatures, water shortages, disease, flooding of low-lying areas and who knows what else–but this isn’t, as far as I know, a mainstream business issue, except perhaps for the insurance industry. To its credit, GE convened a group of sustainability experts last year to discuss the threat and figure out if GE’s businesses could help vulnerable communities prepare.

GE has gotten much better at listening to critics and outside voices, and in working with them. Just this week,  GE said it will expand a partnership with the Environmental Defense Fund to help cities, hospitals and universities save energy by using its “Treasure Hunt” program. GE’s citizenship report includes a commentary by a panel of outside experts, including such CSR gurus as Simon Zadek and Jane Nelson. They write: “Undoubtedly, GE continues to demonstrate leadership in vision, aspiration, strategy and practice on the ground.”

But not leadership in financial performance, alas. After I ran the numbers, I emailed Bob for a comment. Here’s what he had to say:

The company is always managing through a number of factors — product launches, regulation, pension expense, things like that. So we have positives and negatives. But…we are positioned for attractive earnings growth in 2011.

GE is focused on value creation (evident in our second quarter earnings). We’ve repositioned GE Capital for significant profit growth and competitive advantage, our Infrastructure businesses are benefiting from a strong global position and continued R& D investment, we’re focused on process excellence (the foundation of a strong CSR strategy), and our strong cash position gives us lots of flexibility in capital allocation decisions to create long-term shareholder value.

I think as more things come into focus on GE Capital returning to earnings growth, financial regulatory reform, this just gives us tremendous flexibility from a cash standpoint in terms of where we invest and how we grow. Building expertise and value around process excellence. Our margins are good. Our cash flow from operating activities are good. Our risk management has held strong. So I think investors should feel good about that.