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Summary:

No one actively cheers for climate change, air pollution, and extreme weather events, which are all caused, in part, by generating energy from fossil fuels. But no one really wants to another key piece of the solution: the invoice.

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By now, it’s clear to most that accelerating the transition to renewable energy is critical for a variety of climactic and geopolitical reasons. Nobody wants to see continued environmental destruction, and even deaths, from air pollution and increasingly extreme weather, which we must conclude are at least partially caused by the way we currently generate energy. Not to mention, few of us want to keep funding corrupt and violent dictatorial regimes that are enriched by our consumption of oil.

There’s something else that nobody seems to want, too: the invoice.

While state legislatures, under pressure from constituents, have provided utilities with target dates to reach higher levels of renewable energy capabilities, state governments are unlikely to hike taxes that might provide subsidies for the utilities to cover the costs of delivering clean power.  Utilities are also sometimes finding it difficult to get state utility commissions to approve the raising of their rates to be able to fund these projects. That would cost politicians votes and utilities customers.

This same lack of willingness to find a way to foot the bill also discourages voters from being willing to bankroll an improvement in air quality. Everyone is green, in the abstract, as long as it doesn’t demand much of them personally. In most constituents’ minds, renewable energy is something the bloated utility companies ought to be able to spring for. Life is expensive enough these days, they figure.

How, then, can we expect the utilities to be excited about clean energy, when they are the ones who will have to pay for it? Infrastructure change will cost billions of dollars, not to mention the losses on the assets they’ve already invested in.

When enough cheap energy capacity already exists via coal plants (5 times cheaper than solar) and natural gas, and when no related rise in consumption or patronage is promised to them as a future result of their efforts, why should they bother? Why should they lay out capital aimed at new forms of renewable energy generation when consumption is hardly expected to rise? And why should utilities be expected to be greener than either the state government or the utility customers (the voters) are willing to be, in practical, pecuniary terms?

However, utilities can’t say that it’s bad math for them to convert to clean energy. That would be even worse for business (from a PR standpoint at least, seeing that many of these companies are actually monopolies — another problem altogether.)

Instead, utilities invoke “insurmountable” logistics: namely, their inability to run underground transmission lines through the necessary private areas, or the lack of a good utility-scale storage solution (short of a dam, which can’t work just anywhere.) Given the intermittency of solar and wind generated energy –the sun doesn’t shine and the wind doesn’t blow 24/7 — the utilities would be correct in suggesting that these issues are crucial if they are to provide a workable solution.

Citing these issues whenever conversion deadlines (Renewable Portfolio Standards) loom, the utilities have managed to largely avoid the real issue: They aren’t that into it. It doesn’t make sense to them economically.

Other than huge government subsidies from an already deficit-ridden federal budget, the only solution I see emerging successfully is technology. Demand pricing, rate hikes and carbon taxes could do a little. But ultimately, I’m betting on better technology to kill the coal plant, much as VoIP killed the telecom monopolies.

Within the better technology category, I’m staying focused on utility-scale storage.

While I believe that distributive-scale storage is also a possible solution (i.e., an ad hoc solar solution for every home and business), meeting demand and making these devices to price might take several decades. Since transmission lines are indeed a huge hurdle to implement in a democracy where people hold their property values dear, I believe we’re going to have to lay down as few of these as possible, leading out of towns to massive storage facilities.

That means only truly transformative and highly efficient utility-scale storage facilities are going to do the trick of eclipsing coal, not only because it is the right thing to do, but because it becomes easier and relatively inexpensive, as well. We then stand a chance of enthusiastic consumer participation, once doing so is no longer a burden, but feels more like a good choice.

Indeed, today’s best clean tech startups are focusing their energy right there.

Stay tuned.

David Anthony is the Managing Partner of 21Ventures, LLC, a VC management firm that has provided seed, growth, and bridge capital to over 40 technology ventures across the globe, mainly in the cleantech arena. David Anthony is also Adjunct Professor at the New York Academy of Sciences (NYAS) and the NYU Stern School of Business where he began teaching technology entrepreneurship in 2009.

David received his MBA from The Tuck School of Business at Dartmouth College in 1989 and a BA in economics from George Washington University in 1982. He is an entrepreneurship mentor at the Land Center for Entrepreneurship at Columbia University Graduate School of Business. In 2002, David was awarded the Distinguished Mentor of the Year Award from Columbia University.

David blogs at David Anthony VC

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  1. David,

    while I share your enthusiasm on grid level energy storage (let’s talk offline about this), your thesis that cheap energy storage will “kill coal” seems a bit flawed.

    If the cost of renewable energy (RE) power generation is more expensive than conventional alternatives (5x more expensive to quote you), than even FREE storage won’t help. RE will still be more expensive, and therefore, conventional fuels will continue to dominate.

    Innovation is required at the generation level first, and luckily that is taking place.

    However, perhaps the biggest threat now to the nascent RE market in the US is the disruptive amount of cheap natural gas that shale frac ops are producing. If this becomes the focus of utilities for the next 10 years, the US RE market may disappoint.

    The second biggest threat is the “green jobs fallacy fallout”, i.e. the growing awareness among electricity ratepayers, who are being asked to foot the higher RE bills, that the economic benefits of RE are largely being accrued elsewhere (i.e. China).

    On this note, I believe Ontario has the right approach: “we pay, we play”.

    Steve

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