What can we learn from Solyndra’s failure?

Our national conversation has become so politicized that it’s hard to talk about anything without setting off an argument.

Not the weather. And certainly not the failure of Solyndra, the solar company that went bankrupt after getting a $535 million loan from the Obama administration.

Today’s hearing of the  Republican-led House Committee on Oversight and Government Reform, focusing in part on Solyndra, was more like an inquisition than a fact-finding exercise.

It was titled “How Obama’s Green Energy Agenda is Killing Jobs.” That was before the testimony began.

No matter that chief inquisitor Darrell Issa, who now denounces clean energy subsidies, once sought a loan guarantee for Aptera, an electric car maker that wanted to set up shop in his district. Dan Burton, the No. 2 Republican on the panel, supported a federal guarantee for Abound Solar, a company in his district.

What hypocrisy.

Democrats are little better, particularly as they blather on about green jobs. Sure,  when Washington subsidizes clean energy, jobs may be created. The thing is, when the government subsidize anything (oil exploration, ethanol, high fructose corn syrup, home ownership), you get more of it, and more jobs. Does this mean that market-distorting subsidies are an efficient way to create jobs? The question answers itself.

[By the way, there was some amusing back-and-forth at the hearing about what constitutes a green job. It turns out that bus drivers, whether driving they are driving hybrid buses  or not, are doing “green jobs” because mass transport is greener than driving,  my friend Matthew Wald reports in The Times.]

So what, if anything, can we learn from Solyndra’s failure? Should the government stop financing clean energy, as some Republicans say? Or preserve today’s subsidies, as the industry would like? [click to continue…]

Abu Dhabi’s global green footprint

Masdar, the clean energy company in oil-rich Abu Dhabi, is best known for building a green city in the Arabian desert. But while the zero-carbon city has captured the lion’s share of attention, Masdar as a company is having an impact far from home by investing in clean technology projects and startups in Europe, Asia, Africa and the U.S.

With a reach that extends from Silicon Valley to the Seychelles, two of Masdar’s business units are investing large sums of money overseas. Masdar Power is developing and financing wind and solar energy projects in the UK, Spain, Germany and Egypt, as well as in Abu Dhabi.  Masdar Capital manages more than $500 million in venture capital, a sizable amount in the still-emerging clean tech space. All of Masdar is owned by the Mubadala Development Co., which in turn is owned by the government of Abu Dhabi.

A week or so ago, when visiting Abu Dhabi, I met with Frank Wouters, the director of Masdar Power and Alex O’Cinneide, head of investments for Masdar Capital. Both said their businesses are intended to be for-profit, stand-alone entities. But they are also part of a broad and long-term strategy to transform Abu Dhabi’s economy from one based on oil and gas to a more diversified economy driven by knowledge, innovation and the export of clean technologies. So learning, as well as return on invested capital, shapes their approach. [click to continue…]

Abu Dhabi: oil today, green tomorrow?

Abu Dhabi: not quite "green"

Whatever you think about the rulers of Abu Dhabi, the oil-rich capital of the United Arab Emirates and host of this week’s World Future Energy Summit, you have to give them credit for thinking long-term.

Matter of fact, the most significant word in the name of this global clean energy conference is future.

Because today, Abu Dhabi is awash in oil money and emitting carbon at a furious pace.

An emirate of 1.6 million people, tucked between Oman and Saudi Arabia on the Arabian Gulf, Abu Dhabi looks to a visitor like a vast sprawling, construction site, each luxury development more lavish than the next. Most labor here is performed by workers imported from India, Pakistan and Bangladesh. (Oil flows out, people flow in.) Broad avenues are crowded with cars. Skyscrapers, hotels and palaces are lit all night. There’s nothing “green” about any of that.

Yet the ruling family is investing many millions and perhaps billions of dollars in clean energy, including solar, wind, nuclear, coal capture and sequestration, efficiency, the smart grid and an entirely new, supposedly clean, high-tech new city called Masdar City. The Masdar company is  also investing in clean tech startups around the world, including U.S.-based solar companies Solyndra and HelioVolt; it is building a “solar park” with a local partner in a suburb of Berlin and it is an investor in the big London Array offshore wind project in the UK. [click to continue…]

The hidden costs of solar power

In this sluggish economy, you would think that selling expensive electricity to businesses or homeowners would not be a good business. But the solar-power industry is doing exactly that. Solar power is more expensive that making electricity from natural gas, coal, wind or existing nuclear plants, and yet the business is booming. [See: U.S. solar power: doubling in 2010!]

Hardly a day goes by without good news for the solar industry. For example:

BrightSource Energy, Inc. just announced that power generation company NRG Energy will invest up to $300 million to become the biggest owner of the  Ivanpah Solar Electric Generating System, the largest solar thermal system in the world, just beginning construction in California’s Mojave Desert. Gov. Schwarzenegger and Interior Secy Ken Salazar joined in a groundbreaking today. That’s a mock-up of the Ivanpah plant, above.

And:

SunRun, a California-based home solar company, said this week it received an additional commitment of tax equity from an affiliate of U.S. Bancorp to develop 1,900 residential solar installations. Given that the typicalinstallation costs about $35,000, that’s roughly a $65 million investment. SunRun has now raised more than  $300 million in project financing.

Recently, I visited a solar PV manufacturer,  Solyndra, at its headquarters in Fremont, CA. While Solyndra is worried about competition from low-cost manufacturers in China, it is still selling all of the photovoltaic panels it manufacturers. Recently:

It announced deals to installs its cylindrical solar panels on the roof of a Frito-Lay manufacturing plant and on rooftops in the Los Angeles area that will supply 16.2 MW of power to Southern California Edison.

None of this comes cheap, although calculating the cost of solar power is not simple–it depends on the kind of system in place, its location and the costs of financing, since “fuel” from the sun is free. Solarbuzz, a respected source, says that:

Solar Electricity Prices are today, around 30 cents/kWh, which is 2-5 times average Residential electricity tariffs.

According to the Energy Information Administration, the average residential price for electricity in June was 12 cents/kWh, the  average commercial retail price was 10.70 cents/kWh and the  average industrial retail price was 7.31 cents/kWh.

So why do the economics of solar power work for the industry? The answer, you won’t be surprised to learn, is generous government subsidies. [click to continue…]

Solar’s China problem (and mine)

Today I met Terry Wang, the CFO of Trina Solar, a fast-growing company that has come out of nowhere to become a player in the solar power industry. Launched in 1997, Trina Solar is the world’s second-biggest solar power company (behind First Solar), as measured by its market capitalization of about $4.3 billion. Revenues were $301 million in 2007, $831 million in 2008, $845 million in 2009 (a bad year for everyone because of the global recession) and about $700 million for the first six months of 2010.

Terry grew up in China, went to college at Brown and earned an MBA at the University of Wisconsin, after which he took a series of jobs in Silicon Valley. Today, he divides his time between Trina Solar’s headquarters near Shanghai and Fremont, CA. He needs to spend time in this country, he said,  because Trina wants to be part of the growing U.S. solar market and because its shares are traded on the New York Stock Exchange. On a panel I moderated at the Solar Power International conference in Los Angeles, Terry said that Trina Solar will consider setting up a manufacturing plant here if the U.S. market, which doubled in size in 2010, continues to grow.

Terry also acknowledged — not that he had any choice — that Trina Solar has benefited mightily from support from the Chinese government, including a whopping $4.4 billion line of credit from the China Development Bank.

So here’s the question: Should environmentalists, and others who want to see the solar industry thrive, be cheering the success of Trina Solar?

After all, companies like Trina Solar — as well as other big Chinese PV manufacturers, such as Suntech Power and Yingli Solar — are part of the solution to the climate crisis. Every new solar panel generates low-carbon electricity. Low-cost panels made in China lead to wider adoption of the technology.

Trina Solar panels on a roof...in Atlantic City, NJ

Trina Solar, for example,  is a key supplier to Solar City, which is installing panels on 30 Walmart stores. Trina is also a supplier to Standard Solar, whose CEO, Tony Clifford, also spoke on the SPI panel. Trina’s modules could find their way onto a 300-megawatt (i.e., big) solar facility that Standard Solar is developing in Ohio. (It’s essentially replacing a proposed new coal plant which was blocked by environmental opposition.)  If I were to call Tony Clifford, whose firm is based in Rockville, Md., and ask him to put solar on my house in Bethesda (unlikely because we get very little sun), I might wind up with a Trina Solar panel on my roof.

So what’s not to like? Well, there’s the fact that manufacturing jobs in solar (as well as  wind) are growing a lot faster in China than they are in the United States. The United Steelworkers union last month filed a complaint with the Obama administration, charging that China unfairly subsidizes its clean energy industries, in violation of World Trade Organization rules.

More worrisome is the possibility that China’s subsidized solar companies will choke off innovative U.S. competitors. Todd Woody, my former colleague at FORTUNE, had an excellent story today in The New York Times describing how thin-film solar companies like Solyndra, Nanosolar and MiaSole, which raised vast amounts of money from venture capital firms, are now finding that their plans for low-cost solar technology may be undermined by lower-cost competition from China. He reports that a startup called Innovalight abandoned its manufacturing plans altogether, and instead licensed its technology to the Chinese:

“How do you fight against enormous subsidies, low-interest loans, cheap labor and scale and a government strategy to make you No. 1 in solar?” said Conrad Burke, Innovalight’s chief. “Innovation will be the heart of the U.S. strategy, and although it might not create the same scale, we’re exporting well-protected technology to China and creating well-paying jobs here.”

All of this is more complicated than it seems at first glance. On the jobs issue,  Standard Solar will hire more installers if Chinese efficiency (and subsidies) drive down the costs of solar. You can’t outsource the jobs of people who put their boots on the roof. What’s more, the Chinese firm Suntech opened a small manufacturing plant just last week in Goodyear, Arizona. It’s expected to employ 150 people by the end of next year.

And, China isn’t the only country to subsidize its  solar industry. The Japanese, German and Spanish solar industries grew up because those countries created solar-friendly regulatory regimes. Solyndra, one of the company featured today in The Times, got a $535 million loan guarantee from the U.S. government. California and New Jersey subsidize rooftop solar.

I’m not sure what to make of all this. Since I’m not running for office, I’m not particularly concerned if China, rather than the U.S., creates clean-energy manufacturing jobs; it’s still a poor country, after all. If China wants to subsidize solar panels that wind up on Walmart’s roofs, or mine, great.

On the other hand, true competition and innovation in clean-energy requires free trade and fair markets. Innovative U.S. clean tech firms should be able to sell their products in China and protect their intellectual property. Right now they can’t do either. I wish I knew what could be done to remedy that.

Your thoughts?

Awaiting clean tech’s “Netscape moment”

John Doerr

John Doerr

John Doerr, the brilliant and hard-charging venture capitalist, has told me several times that clean tech is still awaiting its “Netscape moment.”

What he means, I think, is that  investors will get excited about start-up companies across a range of so-called clean technologies — solar, wind, biofuels, energy efficiency, green chemistry, lighting — when one of them has an attention-grabbing initial public offering like Netscape’s in 1995 which, by some accounts, set off the Internet investing craze.

I don’t see a “Netscape moment” on the immediate horizon for clean tech but, of course, no one knew that the Internet browser company would take off before its IPO. But if we are to get the clean-energy transformation we need, enormous amounts of capital will be required. So any evidence that investors are warming to clean tech companies is welcome. I’ve seen several encouraging signs lately. [click to continue…]

Solar power’s dirty secrets

Maybe we should banish the term “clean energy.” Growing corn for ethanol requires fertilizers and pesticides. Producing and shipping small-scale wind turbines for urban areas generates more CO2 than they save. Production of polysilicon for solar panels leaves a trail of toxic waste in China, as The Washington Post reported back in 2008.

Solar_PanelsNow a survey and scorecard that ranks solar energy firms points to potential environmental, health and safety issues associated with the production and disposal of solar photovoltaic panels–as well as the reluctance of some well-known industry players even to talk about their practices.

The survey comes from the Silicon Valley Toxics Coalition, an activist group that has produced similar scorecards of the computer and TV industries, designed the shame the laggards into reform. (In the argot of environmental activists, this tactic is known as “rank ‘em and spank ‘em.“)  SVTC is calling for mandatory takeback and responsible recycling by solar companies as a step toward reducing the solar industry’s environmental footprint.

Maybe the most striking thing about the survey was how many solar companies felt free to ignore it. Only 14 companies replied, representing about 25% of the industry’s module production in 2008, according to the SVTC. Well-known companies that did not respond include California-based Solyndra–which has been offered a $535-million loan guarantee by the U.S. Department of Energy–and venture-backed startups Miasole, Nanosolar and Konarka. Other companies that did not respond to the SVTC include Silicon Valley-based SunPower; Suntech, the Chinese solar giant that plans to open a plant in Arizona; and Japanese electronics firm Sharp.

Sheila Davis, the executive director of the activist group, told me she wasn’t surprised at the lack of response.

“We’ve done scorecards in the past, and in the first round, we typically get a low response rate,” she said. “Our experience is after a couple of years, companies are knocking on your door to participate because it becomes a competitive issue.”

The top three scores in the SVTC survey were earned by German manufacturers Calyxo, SolarWorld and Sovello, scoring 90, 88 and 73 respectively. The two U.S.-based respondents scored in the mid range: First Solar in Arizona received a score of 67 and Colorado-based Abound received a 63.

Other key findings:

  • 57% of respondents would support mandatory takeback and recycling programs in the markets where they sell solar panels.
  • 42.8% of companies are setting aside money to finance the collection and disposal of end-of-life panels and 50% said that they provide recycling services free of charge.
  • 50% have undertaken analysis of their supply chain to document the social and environmental impacts associated with different production phases.

The reason why take-back and recycling programs are so important in solar, as they are in other industries, is that when companies understand that they will be responsible for the end-of-life of a product, they have an incentive to rethink their design and materials. “There are hazardous materials and rare metals in solar panels that don’t belong in landfills,” Davis said. “Anytime you have a product that you can’t recycle, that’s waste, and it’s a pollution problem.”

How big a problem? SVTC estimates that announced utility-scale solar panel projects in the state of California alone will generate about 1.5 billion pounds of panel waste.

The good news? Because panels last 20 to 25 years, companies and their customers have time to get a recycling infrastructure together.

Photo courtesy of commons.wikimedia.org

Chu: Scientist, cyclist, energy czar

The Obama administration has unveiled a $2.4-billion grant program to promote plug-in hybrid cars, which will travel 40 miles on a single electricity charge and 100 miles on a gallon of gas. You’ll rarely have to fill the tank if you don’t drive much.

The only drawback, energy secretary Steven Chu indicated, is that if you don’t run the engine much, the battery gets weak, as he learned first hand some years ago. “When I was at Stanford, I rode my bike everywhere,” Chu recalled. “I went through batteries like crazy because I didn’t drive enough.”

How cool is that? The guy in charge of America’s energy department used to get around mostly on his bike. Chu, who is slight, soft-spoken and 61–you can read a brief autobiography here–spoke this afternoon at an energy forum sponsored by the The Washington Post and Siemens. He made clear that he committed to help move the United States away from fossil fuels and towards a low carbon economy, and he argued that “science will supply us with a lot of the answers” about how to get there.

Wind power, solar power, geothermal power—they will all help slow the growth in carbon emissions, jump-start the economy and reduce our dependence on imported oil. But the future of the U.S. depends, above all, on developing its brainpower.

“We have to invest in our intellectual capability, because it is the intellectual horsepower of the country that will create new wealth,” Chu said.

That’s a welcome, if not surprising, point of view. Chu is a brainy, even geeky, physicist who shared the Nobel Prize in 1997. Hee directed the Department of Energy’s Lawrence Berkeley National Lab before coming to Washington. And he spoke passionately about the nine years he spent during his 30s and early 40s at Bell Labs, the storied industrial laboratory run by AT&T.

“When I got to Bell Labs, it was an incredibly eye-opening experience,” Chu said. “They did not hire proven winners. They hired young kids… We all grew up together.” Five of his colleagues went on to win Nobel Prizes. But the story does not have a happy ending. “Sadly, Bell Labs is no more,” Chu said. Today, only a handful of companies—IBM, Microsoft, Intel, GE, United Technologies—operate industrial labs, and they tend to focus on later stage research.

Chu spoke hopefully about a DOE project known as ARPA-E, which will invest government funds in research that could lead to breakthrough findings — but more often will not.

“The plan is to invest in high risk (projects) with a significant potential for failure,” he said. “It’s like venture capital, squared, if you will.”

The trouble is, the energy department has an unimpressive track record when it comes to spurring new technology. It’s famously bureaucratic.

Indeed, Chu made a bit of news at the event when he announced a $535 million loan guarantee to a company called Solyndra, which makes thin-film solar panels. This is a good thing—the company has an impressive technology, it can’t raise private capital in this economy without the guarantee, and its new factory in Fremont, Ca., will create 3,000 construction jobs and 1,000 permanent jobs. But if I understood Chu correctly, this is the first loan guarantee approved under a program adopted back in 2006. He said the program has been been plagued with excessive paperwork that the department is now trying to streamline. “We’re working as hard and as fast as we can,” he said. The DOE is tracking its progress at this website, www.energy.gov/recovery. It may turn out that the department needs a strong administrator and policy person more than it needs a scientist like Chu.

Still, there’s something refreshing when a cabinet secretary comes across more as a professor than as a politician. In his unassuming way, Chu showed a few slides about global warming—pine forests in British Columbia ravaged by beetles, a melting glacier in Greenland—and warned of the “potential for very serious consequences of climate change.” He said we need a World War II-like effort to conserve energy, showing a poster with the headline, “Should Brave Men Die So You Can Drive?” And he ended his talk with the famous photo of the earth taken from Apollo 7.

“There’s nowhere else to go,” Chu noted. “We really have to focus on that.”

Sheikh it up, baby!

“You’ve got one of the oil capitals of the world taking a strong interest in renewable energy,” Tony Blair said. “It’s quite impressive to see.”

Yes, it’s impressive. Blair, the former British prime minister, held a brief news conference before delivering the closing speech at the World Future Energy Summit in Abu Dhabi. Like most of the speakers at the event, which brought 15,000 people to this oil-rich emirate on the Persian Gulf, he called for global regulation of greenhouse gases, investments in solar and wind power and international cooperation to share technology with poor nations.

“It is right now,” Blair said, “at the instant when our thoughts are centered on the economic challenge, that we must not set to one side the challenge of global warming, but instead resolve to meet it and put the world on path to a sustainable future.”

Abu Dhabi’s heading down the path, in a hurry. By now, if you’ve paid any attention (or if you read this front-page story in The Times last week), you’ve heard about the zero-carbon, zero-waste, powered-by-solar Masdar City, which is being built outside of downtown Abu Dhabi.

But did you know that the city will also include the world’s biggest and most sophisticated PRT (personalized rapid transit) system, computer-driven vehicles that will take people exactly where they want to go, nonstop? Here’s what the PRT vehicles will look like:

And did you know that the Masdar Initiative, the parent company for Abu Dhabi’s alternative energy ventures, is going to build what could be the world’s largest carbon-capture and storage operation?

And did you know that Masdar is building a solar panel manufacturing plant in Germany, which will then be duplicated in Abu Dhabi, and quite likely after that in the U.S.?

And did you know that Abu Dhabi also has plans to build as many as 10 nuclear power plants?

Now that’s Beyond Petroleum.

The cost of all this is a cool $22 billion, although the Masdar Iniative, as a for-profit entity, hope to make money back by renting out offices and homes in the city, selling energy to the rest of the Middle East and investing in clean energy businesses. Masdar, for instance, is an investor in Solyndra, a fast-growing solar PV company based in Fremont, Ca., with more than $1.5 billion in orders.

What Abu Dhabi is doing is uncommon in business. Rarely does a company (or, in this case, a country) that is thriving in one industry set out to become a leader in a competing business. Usually companies, or entire industries, are too busy protecting themselves against competition. Think about how the newspaper industry and the music industry missed opportunities on the Internet; if they had been willing to disrupt themselves, some classified ad guy would have started Ebay and craigslist and some music promoter would have invented iTunes.

Certainly Abu Dhabi doesn’t need to expand its operations.  The average net worth for Abu Dhabi’s 420,000 citizens is US$ 17 million, which is why most of the work in the city is done by expatriates from south Asia, Africa and the rest of the Middle East. Nevertheless, the ruling family has decided to use its wealth to diversify, and anticipate the changes to come.

As Masdar CEO Sultan Al-Jaber put it: “The world has reached a tipping point in the acceptance of renewable energy.”

I can’t really tell you why the country has set out in this new direction. When I asked Masdar people, I was essentially told that this was due to the sagacity of the royal family, and specifically to the wisdom of the overseer of Masdar, Sheikh Mohammed bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi and Deputy Supreme Commander of the armed forces. The Sheikh doesn’t do interviews, so I couldn’t ask him directly about his thinking. (Disclosure: The Crown Prince paid for my trip to Abu Dhabi.)

I can tell you that the Sheikh has several things going for him that American CEOs don’t. He doesn’t have to worry about quarterly earnings, so he can invest for the long term. He doesn’t have to answer to shareholders. He doesn’t have to get elected. And no one will tell him publicly that he’s crazy to be spending money on solar power and green buildings because he can’t be criticized in the press.

I also can’t tell you whether the Masdar Initiative will succeed in its many ventures. But I can say that I don’t know of any company, or any country, that is doing more to lead the world to a low-carbon economy.