Obama proclaimed:

If Congress won’t act soon to protect future generations, I will.

Obama attempted to take these types of actions a few years ago when he worked with the Environmental Protection Agency on a controversial plan to attempt to regulate greenhouse gas emissions under the Clean Air Act. Now that Obama is in his second term, and doesn’t have to worry about being voted into another term, he seems to be getting more aggressive on his original campaign goals on clean energy and fighting climate change.

In addition to Obama’s discussion of fighting climate change with market means, the president issued several other promising declarations on energy:

• Make natural gas cleaner: “My Administration will keep cutting red tape and speeding up new oil and gas permits. But I also want to work with this Congress to encourage the research and technology that helps natural gas burn even cleaner and protects our air and water.”
• Create an Energy Security Trust for R&D for non-oil transportation: “I propose we use some of our oil and gas revenues to fund an Energy Security Trust that will drive new research and technology to shift our cars and trucks off oil for good. If a non-partisan coalition of CEOs and retired generals and admirals can get behind this idea, then so can we.”
• Energy efficiency: “I’m also issuing a new goal for America: let’s cut in half the energy wasted by our homes and businesses over the next twenty years. The states with the best ideas to create jobs and lower energy bills by constructing more efficient buildings will receive federal support to help make it happen.”
• Fight power grid cyber attacks: “Earlier today, I signed a new executive order that will strengthen our cyber defenses by increasing information sharing, and developing standards to protect our national security, our jobs, and our privacy. Now, Congress must act as well, by passing legislation to give our government a greater capacity to secure our networks and deter attacks.”

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That’s about the most disingenuous and manipulative piece of advertising I’ve seen in years (about as bad as its Coal Can Do That site). While power grid and utility execs are still looking into what caused the blackout at the Superdome, there are much more likely causes of the blackout than a reduction of coal use including faulty grid architecture (feeder line from an external substation), issues with Superdome power architecture, or even the highly speculative discussions of grid hacking that were ample on Twitter during the blackouts. (Note, Peabody isn’t actually saying the blackout was caused but a reduction of coal use, but just weirdly slaps the two together).

The use of coal for electricity in the U.S. has been reducing and will continue to reduce. Natural gas for electricity is the new hotness — it’s cheap, provides power 24/7, and is cleaner than coal — and wind power was actually the largest source of new generation in the U.S. in 2012. That wind stat was a record, by the way. Of course, having a massive coal business, Peabody doesn’t like this shift in energy generation, so it creates advertising campaigns that look to promote coal.

It’s a sad approach, really. I would say this to Peabody: you can’t turn around a fundamental shift in energy technology by these types of PR methods. The only thing that will shore up the loss of the coal business is investment in new energy technologies.

Yes, you claim to be doing so with “clean coal” technologies, but clean coal tech at this point is far less commercially viable than natural gas, wind, solar and energy efficiency technologies. If you look at the winners and losers throughout the history of the business world, the same type of technology shifts have led to changes like brick and mortar booksellers and video rental companies going out of business in the face of their online counterparts (Borders, Barnes and Nobles, Blockbuster), or telecom companies going under by not embracing wireless technology and the Internet.

No one would argue that coal provides one of the cheapest and most reliable forms of energy. But the environmental ramifications — both greenhouse gas emissions, pollution, and dangerous work conditions — of coal are also well known. Coal is a non-renewable source and many of the coal plants in the U.S. are using very old technology. Natural gas is cleaner and also, like coal, can be used around the clock (wind and solar only provide power at certain times of day). And now with its low cost, it’s not surprising that utilities are turning to it now in droves. (Though, yes natural gas is non-renewable also).

As clean power — truly emissions free — becomes more mainstream, it’ll take over more of that new generation, too. Peabody, please join the modern technology age.

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The downside

So where do we stand now? First of all, the solar market has been deeply affected by the dramatic cost reduction of solar panels due to Chinese manufacturers. While China and the US are disputing trade tariffs, solar modules continue to fall in price, creating a lot of victims among US module manufacturers or emerging startups working on cheaper cells.

Wind Production Tax Credits are also expiring at the end of the month, which will likely dramatically impact the wind market. Last time the PTCs were allowed to expire, at the end of 2003, installations dropped 77 percent the following year. Power Purchase Agreements for wind projects have also never been so low: from $72/MWh in 2009 they decreased to $35/MWh by 2011. The equation might be hard to solve in 2013 for the wind industry.

IPO attempts in the cleantech sector have not been so successful either. Several companies ditched their IPO plans in 2012, such as solar thermal company Brightsource, waste fuel company Enerkem and electric vehicle company Smith Electric. In addition to SolarCity, Enphase is one of the only companies that made out this year. VCs are now stepping out of the industry as some have put heavy investments into development and manufacturing and have seen few returns.

The upside

However, this year could just be a step that eventually delivers market maturation rather than a “crisis”. Low cost Chinese manufacturers actually enabled a dramatic increase in solar panel installations, particularly in the U.S. With a more than 100 percent year-over-year increase in mid-2012, the US market has been booming this year and grid parity is on good track.

The focus has now shifted beyond module manufacturing and to new financing mechanisms such as leasing or crowd-funding. The objective is to make solar projects more accessible by avoiding high upfront costs and enabling the mass-market to participate in this effort.

Venture-capitalists are also not totally out of the game yet. The energy market is a tough one to penetrate with high upfront investments and 20-30 years payback as you build a new power plant – a far cry from the quick returns of IT/Internet companies. That is why VCs shifted their attention to what they know best: software.

Call it Green IT, Cleanweb or Cleantech 2.0, these are the application of web business models to cleantech. Focused on software or apps, these products do not need high capex and can generate some revenues fairly quickly. Some people are skeptical about if the cleanweb can be as disruptive as next-gen energy technologies like new solar cells. Nonetheless IT will be a useful tool that will support and promote the cleantech market, and act as a catalyst for breakthrough technologies. In fact, these apps and software could be the trigger to bring renewable energy or electric cars to the mass market.

Ultimately, policies are still decisive for our industry. Obama‘s re-election creates hope regarding the PTCs’ extension. A few game-changers were also introduced this year: the Green Button initiative announced in 2011 really materialized this year through utilities’ adoption and the Apps for Energy challenge. It opened up a new market in terms of energy services and will help entrepreneurs to develop their products without entirely depending on utilities to reach end-customers. More recently, California’s Cap and Trade market finally put a price on CO2 emissions. This will enhance energy efficient systems and promote low-emissions technologies.

In a few words, a lot of money has been spent over the last years within the cleantech industry. 2012 has actually been the witness of a market concentration, where we had to start rationalizing the expenses in order to build a sustainable system. With most of the technologies now in place, we need to modulate and bundle them, so they meet the market’s expectations. Inevitably, cost structures and customer adoption will be decisive for the cleantech to really and sustainably take off.

As an engineer Maud Texier dedicated her efforts towards the energy market. She hails from the oil & gas industry, and started her career working in electricity markets. As an analyst on a power trading desk, she studied the market mechanisms that can develop new demand-response models. Maud is now scouting new technologies such as renewables, storage or energy efficiency, for a large power utility, and analyzing the main trends of this growing market.

Images courtesy of SolarCity, flickr user Tapestry Dude.

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Democrats came out ahead in the November 2012 elections, which has many implications for the renewable-energy sector. Importantly, the production tax credit (PTC) for wind power now has a much better chance of being extended soon. Nevertheless, new government support for the renewable-energy industry will be significantly lower than in the past four years.

Read the rest of his research note on how the outcome of the election will effect cleantech, on GigaOM Pro (subscription required).

Next-generation batteries will be crucial for the proliferation of electric cars, as well as clean power (wind and solar need accompanying storage). GigaOM Pro recently published a 22-page report on the latest in advanced battery technologies. It’s a fascinating read.

In the report, GigaOM Pro contributor, and Pike Research analyst Brittany Gibson, writes:

Despite inherent risk in this industry, the market garners a significant investment from university, government, and private entities at many points along the development cycle, targeting everything from materials science to marketing to project development. Without attention at each point, advanced batteries will continue to suffer from this industry’s slow pace of development. It remains to be seen whether innovation in this industry can accelerate at any other pace.

Read the rest of the report here (subscription required).

And finally, GigaOM Pro cleantech analyst Adam Lesser today writes about the looming question of whether the U.S. should aggressively export natural gas. Non-subscribers and subscribers alike can read that one, here.

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If you remember back four years ago — when clean power, cleantech and the potential for carbon policy in the U.S. was hitting a peak — Pickens announced to the world that he planned to kick off the world’s largest wind farm in Texas. It was part of his Pickens Plan to make the U.S. energy independent, and he even bought 500 turbines from GE to build the farm. But then the recession hit hard in late 2008, the Texas wind farm struggled to get the proper transmission lines permitted, and natural gas started on its downward spiral in price, making clean power less attractive to investors.

In the spring of 2010, Picken’s decided to move the planned wind farm up north to Minnesota. The project was originally going to see 334 turbines land in Goodhue, Minnesota, creating a 78 MW wind farm, according to local Minnesota media back then. However, in recent years the wind farm plan had clearly gotten much smaller in scale, and is now reportedly a 50-turbine wind farm, estimated to cost $180 million.

Despite that Pickens has finally sold off his stake in the project, the owner of the wind farm, now called New Era Wind Farm, says he’s still try to get it built. The project is reportedly controversial in the area because of “concerns about potential noise and unpleasant shadows from spinning blades,” as well as “threats to protected eagles and bats that might hit the blades.”

Pickens still seems bullish on natural gas, particularly natural gas for transportation. Last year he was working on a bill that would help provide incentives for natural gas for transportation. Here’s a video interview I did with Pickens back in early 2011, and he told me back then that the wind part of his Pickens Plans was “on the shelf,” because of the low price of natural gas:

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This move, to have clean energy directly power a data center, has always been in the plans. Google’s former green energy czar Bill Weihl (now at Facebook) told me years ago that the ultimate end game was for Google to procure clean energy to use for its data centers. But the search engine giant needed to find the right area, the right utility partner and a new(ish) data center project.

That sweet spot was a data center built in Mayes County, Oklahoma in 2011. Earlier this year Google started working with utility Grand River Dam Authority (GRDA) to buy 48 MW of wind energy from the Canadian Hills Wind Project in Oklahoma. Google says it paid a premium (higher than the basic cheap power it could get elsewhere) to purchase the wind power from the project. As Greenpeace points out, half of Oklahoma’s power grid is run on coal.

Google says the GRDA approached it about buying power from the wind project in early 2012 to sell to Google. The wind project is GRDA’s first clean power project. We need more utilities like this that are willing to work with big customers that want to buy clean power. Most power customers, other than some of the leading Internet companies, aren’t aggressively looking for clean power and willing to pay a premium for it.

Most of the massive Internet companies are building their data centers in locations where power is cheap and reliable. And usually that means fossil fuel power — coal or natural gas — and sometimes means hydro power. The exception is areas like Iceland, which have geothermal and hydro in spades, so can provide cheap, reliable clean power. The Chief Technology Officer of Verne Global, Tate Cantrell, will be speaking at our Structure Europe event next month.

This is one of the first times I’ve heard of a data center operator buying a substantial amount of clean power from a utility project for a premium. So kudos to Google for that.

Greenpeace released a statement about Google’s clean power data center news:

Google’s announcement today shows what the most forward-­‐thinking, successful companies can accomplish when they are serious about powering their operations with clean energy.

Hopefully this is just the first of such announcements from Google.

Google fundamentally believes that it should work with utilities to buy clean power. In contrast other Internet companies like Apple are opting to build their own clean power. Apple is building a massive solar panel farm (through developer SunPower), and a large biogas-powered fuel cell farm (from Bloom Energy), next to its data center in Maiden, North Carolina. Auction site eBay is also building a huge fuel cell farm at one of its data centers.

The leading Internet companies are just starting to dabble in experimenting with clean power. The vast majority are still opting for low cost, reliable power, which usually means going where the grid is powered by fossil fuels. Power and data centers is still controversial — check out the New York Times recent story on that, as well as my opinion on that story. Also read my feature story on the controversial world of clean power and data centers.

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1. In India, there is a drought. This year’s poor monsoon is likely to lead to the third drought in 10 years. But two-thirds of the water India receives is wasted because of inadequate storage and management.
2. India just had a power outage affecting 650 million people, a population twice as large at the U.S.  Most cities in the state of Punjab faced an acute water shortage due to lack of proper co-ordination between the power and the municipal corporations.
3. Water tensions are increasing between countries like India and Pakistan.
4. Before the power grid outage India was “staring at a water drinking shortage.”
5. There is a race to tap India’s coal resources to fuel a whopping 519 GW – nearly 500 power plants – leaving behind massive deforestation and water contamination that could have a ripple effect on the environment and health inside the world’s second most-populous country and neighboring Bangladesh.  Despite places like coal mining in the Jaintia Hills of India being one of the wettest places on earth, much of the water from the Ummutha River that flows through it is no longer drinkable.

According to Andrew Revkin, The New York Times blogger: “It’d be great to think that renewable energy sources and distributed electricity generation could solve such problems, and they’re great where they work. (And India is ramping up an ambitious effort to expand solar energy.) But the reality is that grids and central power plants are a mainstay of increasingly urbanized economies. In India, that means coal will be an economic keystone for decades.”

Leaving aside the flat out failure of grid extension in India, let’s focus on a more stark reality.  The World Bank estimates that 21 percent of communicable diseases in India are water related. In India, diarrhea alone causes more than 1,600 deaths daily.

So, India’s power outage underscores a larger problem facing us.  If you had to choose between power and water, what would you choose?

Revkin’s blog might suggest he chooses power. I would choose water. But, instead, can’t we deploy solutions where we have both?

Albert Einstein said, “We can’t solve problems by using the same kind of thinking we used when we created them.”

Power grid Old Delhi

The most amazing part of the Indian blackout story is that the country’s infrastructure did not grind to a halt. A key reason is that most of India’s most important infrastructure is backed up by diesel generators – at a cost of over US$0.45/kWh (4X what most Indian’s pay for electricity). This is by definition distributed generation. India citizens depend upon diesel because the Indian central grid is a failure. The added problem is that diesel-distributed generation is very expensive, noisy, and bad for people’s health.  Most importantly diesel subsidies in India are expected to cost the country over $24 billion this year.

This choice for distributed generation is simply the only solution that individual consumers can choose without relying on the oft-maligned Indian bureaucracy.  In the past, Indian consumers chose diesel because of their low upfront costs.   But today, the improvements in financing are allowing consumers to switch to clean energy –  gasified biomass, wind, solar and other distributed approaches at a 50 percent discount to the cost of diesel.

Regarding coal as a solution, it was reported this year that India has overtaken China as the World’s largest importer of coal.  India is building coal generation facilities as fast as it can.   But, if history is any guide, India never meets its goals on coal generation.  This is not because Indians don’t know how to build coal or because they can’t afford new coal (though costs are skyrocketing); it’s because building large new infrastructure is hard in India based on topography alone. So Andrew Revkin and others insist on poking India in the eye when they suggest that India’s solution to the recent blackouts are new coal plants.

But clearly, Revkin also misses the point on water. Water is literally killing India.

The power grid in Old Delhi

In India, like in the United States, the power sector is the single largest user of water – more than agriculture. Presuming that India could solve its problems and build more coal, they would run out of fresh water even faster.

Ten years from now, writers like Revkin will be publishing an article about how climate change and coal led to water shortages in India.  As a result, India needs to buy expensive desalinization plants. In fact, today, The World Resources Institute has a report on growing water scarcity and declining water quality, on thermal and hydroelectric power generation plants in Asia.

The sad reality is that “Utility 1.0” is more than 100 years old.  The model was a good one and gave us the economy that we enjoy today, but it has its problems. Coal is much more expensive today than it was 20 years ago, so much so that Ratan Tata, chairman of the Tata companies, recently admitted that new coal power from the proposed Tata Mundra project is coming in at roughly the same cost as new solar today in India.

Worse the Tata Mundra project is in such bad shape financially from skyrocketing coal costs, he has described it as a ‘non performing asset.’ Plus, practically speaking, India simply cannot afford to pay for the infrastructure necessary to provide 100 percent household electrification using the command and control practices of the last 100 years.

Revkin is using 20^th century thinking to solve 21^st century problems. If India, and other industrialized countries had a comprehensive energy plan that included installing the least cost renewables, perhaps our choice will not come down to water or electricity.  I think we could have water and electricity – but that is not that plan that is being executed.  Others are suggesting that India execute a plan that could execute itself.

Jigar Shah is CEO of Jigar Shah Consulting and a partner with Inerjys. Shah founded SunEdison in 2003 with a new business model, the solar power services agreement business (SPSA). SunEdison now has more solar energy systems and megawatts under management than any other company.

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The report says that after a rise in cleantech support and clean power installations between 2006 and 2011, tens of billions of dollars will suddenly come to a screeching halt and tax breaks for clean power are also in danger of expiring. As the New York Times noted: “there will be a estimated 75 percent decline in federal clean technology spending by 2014 from a peak of $44.3 billion in 2009.”

The drop in U.S. support is particularly unfortunate as various clean power technologies are still more expensive than fossil fuel-based power, but some are on the brink of grid parity, like solar, with its drop in solar cell prices.

Of course, the fossil fuel industry received decades and billions of support over the years. GigaOM Pro analyst Adam Lesser looks into a report from Roger Bezdek, a 30-year energy consultant, and found that $837 billion (in 2010 dollars) in incentives were expended over the past 60 years with oil, coal and natural gas getting 70 percent of that, or $594 billion. Oil alone was the big winner with $369 billion by itself while renewable energy, defined primarily as solar and wind, has received $74 billion, about what nuclear has received.

Image courtesy of Mike Lehen.

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Kyocera, a long-time solar panel maker, will band tougher with IHI and Mizuho Corporate Bank to work on not only the 70 MW project but also other solar power plants as well. The project is estimated to cost about 25 billion in yen ($309.6 million) and is supposed to go under construction in July this year.

Last August, the Japanese government passed a law to create the incentive program that will require utilities to buy various sources of renewable energy, including solar, wind and geothermal, under long-term contracts. Japan has historically been quite supportive of solar and wind energy development, but in recent years other countries that have offered more generous subsidies have surpassed Japan in clean power installations. The country already has some of the world’s largest solar panel makers, including Panasonic, Sharp and Solar Frontier (part of Showa Shell).

The new incentive program, which will require utilities to buy renewable energy at premium prices, could create quite a boom for solar and wind project developers and manufacturers, said market research firm Bloomberg New Energy Finance. In fact, under the current pricing proposal, solar project developers could get equity returns as high as 44 percent and add 10 GW of new solar power by 2014, the market research firm said last month. The returns could reach as high as 51 percent for wind projects.

Here’d a list of some of the solar projects that have been proposed or completed in Japan in the past year:

Photo courtesy of Solar Frontier

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Kodiak Electric Association built the sizable Pillar Mountain Wind Project in 2009, and at 4.5 MW it currently provides about 10 percent of the utility’s power generation needs. But the utility, which operates its own stand alone grid, plans to expand the wind project to 9 MW, and was worried about grid instability at that scale, with the fluctuating wind climate in its area. Eventually KEA is aiming for 95 percent clean power by 2020 and plans the have Xtreme Power’s battery system up and running by the end of the year.

Xtreme Power is a 8-year-old company with a plan to build large battery farms connected to clean power projects, and then supply its management system to control the storage use. The idea is that when variable solar and wind die down, or fluctuate too high, the battery system can rapidly and dynamically store or release the energy when needed to smooth out the grid. One of Xtreme’s biggest contracts is to build a 10 MW storage system meant to back up a 30 MW wind farm planned for the Hawaiian island of Oahu.

Xtreme describes its PowerCell battery chemistry as a “chemical capacitor” that it says can beat lithium ion batteries in terms of energy storage, efficiency, cycle life and cost. The technology was born out of a 1990′s joint venture between Ford Aerospace and defense contractor Tracor that was shelved after its target market — California’s zero-emissions vehicle fleet — collapsed in the wake of the state’s decision to back off its ZEV mandate.

Xtreme bought the technology in 2004 and put its first 500-kilowatt PowerCell in place at the South Pole Telescope in 2007. Since then, it has also tested a 1.5 MW PowerCell at another 30 MW wind project on the island of Maui, and has been working with the transmission hub project called Tres Amigas.

Xtreme has been quiet on how much its battery tech costs, but Sam Jaffe, analyst at IDC Energy Insights, told us a few years back that Xtreme has been targeting around $500 per kilowatt-hour as a profitable price point for grid storage systems. Xtreme says it has already installed 22 MW of batteries and its management system, and plans another 55 MW by the end of the year.

Xtreme Power is backed by SAIL Ventures, Bessemer Venture Partners, the venture arm of Dow, Fluor, Dominion Power, Spring Ventures, BP, Posco, and Skylake Incuvest.

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