Research is vital to Sacramento region's green-tech growth

Research is vital to region's green-tech growth

Brainpower at universities could fuel product development, industry

Sacramento Business Journal - August 24, 2007

by Melanie Turner

Staff Writer

Dennis McCoy | Sacramento Business Journal
Ingrid Rosten is executive director of CleanStart, an incubator for renewable energy businesses.

Any attempt to turn Greater Sacramento into a green-technology hub would require a solid foundation of research into new approaches to reducing waste and conserving energy.

Local universities are working on it, from pure research on raw materials to practical applications for new technology. Most notably, the University of California Davis is recognized as a top research institution in the green-tech sector, exploring aspects of energy efficiency, advanced transportation technology and policy, wind energy and many other areas. California State University Sacramento is newer to the field, but pushing ahead, and other players, from major corporations to the Sacramento Municipal Utility District, also are active.

Andy Hargadon, director of UC Davis' centers for entrepreneurship and energy efficiency, said research is a necessary ingredient for any community striving to breed a particular industry. Cutting-edge technology clusters, such as Silicon Valley and a computer technology hub in Boston, all had major universities nearby, he said.

Even more important than the research itself, he said, is the "intellectual capital" that research universities generate -- well-informed people who create products and work in the industry.

"You've got to start with the research before you can make product, so it's vital," said Ingrid Rosten, executive director of CleanStart, a renewable-energy business incubator that's an initiative of McClellan Technology Incubator and the Sacramento Area Regional Technology Alliance.

Most of the funding for local green-tech research comes from federal and state agencies such as the U.S. Department of Energy and the California Energy Commission. Funding also comes from nonprofits, industry groups and private industry, such as $5 million from the energy commission to study consumer attitudes about plug-in hybrid electric vehicles at UC Davis.

In September, Chevron Corp. pledged up to $25 million over five years for UC Davis research on developing transportation fuels from "cellulosic biomass," such as rice straw or other crop residues. The company hopes the research will lead to a small production plant demonstrating a commercially viable method of making biofuels, said Chevron spokesman Alex Yelland.

Chevron expects to spend $2.5 billion over the next couple of years on renewable-energy and energy-efficiency projects, and has similar biofuel projects with other schools, the U.S. Department of Energy's National Renewable Energy Laboratory and forest products company Weyerhaeuser Co. (NYSE: WY).

Concentrated knowledge

Chevron selected UC Davis because of its expertise in alternative transportation research, Yelland said. "UC Davis has a top research and teaching program on hydrogen and biofuels."

The Davis school is home to a variety of other "clean-tech" research:

• The university received a $1 million grant from the California Clean Energy Fund and $500,000 from Pacific Gas and Electric Co. last year to establish an Energy Efficiency Center, which studies methods for cutting energy use in buildings, agriculture, food processing and transportation. "They're trying to revolutionize the way we cool our large retail centers, like Wal-Mart or Target," said Sylvia Wright of UC Davis News Service.
• UC Davis' Institute of Transportation Studies is an internationally recognized program with more than 60 affiliated faculty and researchers, 80 graduate students and a $6 million annual budget. The institute examines topics from studying ways to make tires more efficient to drafting California's new low-carbon fuel standard.
• The Biogas Energy Project, launched last year, is the country's first large-scale demonstration of a technology developed by a UC Davis professor that diverts food waste and yard clippings away from landfills and into the energy grid. The technology has been licensed from the university by Davis firm Onsite Power Systems Inc. and adapted for commercial use.
• UC Davis is one of few universities in the country where researchers are studying ways to make wind turbines more cost-effective. Companies across the country and the U.S. Department of Energy are taking notice, but UC Davis is still a "very small player" when compared to research in the field taking place in Denmark and the Netherlands, said C.P. "Case" van Dam, director of the university's five-year-old California Wind Energy Collaborative.

Between 70 percent and 90 percent of the program's roughly $400,000-a-year in funding comes from the state and federal government. Funding also comes from individual companies, such as Clipper Windpower Inc. near Santa Barbara and General Electric Co. Private research dollars are the toughest to get in all clean-tech fields, he said. "You run into patent and intellectual property rights."

• The California Lighting Technology Center works on ways to turn laboratory discoveries into energy-saving products, such as night lights with motion sensors. The center is working with a Bay Area lighting manufacturer to develop research into commercial production of more energy-efficient office lights.

Companies have emerged as result of research at the university. UC Davis has licensed several alternative-energy technologies to small companies often started by university researchers who created the inventions.

Those include:

• West Sacramento-based Q1 Nanosystems Corp., working on tiny "nanotubes" to increase the efficiency of solar power cells.
• HyPhase Energy of Davis, which is trying to raise money to commercialize a polymer material for fuel cells.
• SynapSense Corp., a Folsom startup developing technologies that could cut energy use in data centers. The company is in a pilot project with International Business Machines Corp., has raised $2 million in venture capital and is expected to close a third round of financing soon.
• High Merit Thermoelectrics Inc. of Sacramento, which is raising money to develop a material that helps convert heat to electricity. "We believe with energy costs increasing there will be more applications for our new devices," said Geoff Jennings, co-founder of the startup.

Jennings said the device could tap heat from the exhaust in catalytic converters on large trucks. "We believe we can increase truck fuel efficiency by about 15 percent," he said.

Other research

While UC Davis has been conducting environmental research for decades, for the past year Sacramento State has been working to develop courses in biofuels, solar and wind power, said Emir Macari, dean of the College of Engineering and Computer Science. The university is tapping into resources at UC Davis, and is united with SARTA and the Sacramento Metropolitan Chamber of Commerce in efforts to create a thriving clean-tech sector here, he said.

Research in solar, biofuels and wind energy is taking place at Sacramento State's Center for Clean Energy, launched early this year. The university also hopes to land a $5 million federal grant next year, to be split between SARTA, the university and Los Rios Community College District. The money would help develop an educational system focused on clean-tech. Plans include an associate degree in clean energy at Los Rios, he said.

The Center for Clean Energy, which so far is funded with seed money from the university, also aims to work with green-tech startups to help them get established here.

The center is working with one local startup so far -- venture-capital backed Marquiss Wind Power Inc. of Folsom, which is developing a new type of wind turbine. Students and faculty are studying the efficiency and viability of the technology. "That's the idea, for us to be able to provide such services to small startups that don't have huge R&D departments," Macari said.

While municipal utility SMUD does not conduct long-term exploratory research on basic materials or chemicals -- the kind seen on university campuses -- the utility is examining green-tech advances in more than 10 commercial projects in various stages of development, working with private industry.

SMUD worked with two manufacturers on a research and development project to create solar modules that work on concrete tile roofs, for example.

"We couldn't penetrate that market," said Mike DeAngelis, manager of SMUD's Advanced Renewables and Distributed Generation Technologies Program. "The technology didn't work well for new residential roofing."

Today, the interlocking modules that resemble roof tiles are being used throughout California. General Electric owns the technology for the modules.

Among its many current projects, SMUD has a CEC-funded contract with Clipper Windpower, a Carpinteria-based company that's publicly traded on the London Stock Exchange, to test its idea for a new turbine that would use four generators per turbine, instead of one. The hope is that fewer wind turbines would sit idle and maintenance costs would go down.

Staff writer Celia Lamb contributed to this report. melanieturner@bizjournals.com | 916-558-7859

Oakland investment coalition might fund green startups

Oakland investment coalition might fund green startups

East Bay Business Times - August 24, 2007

by Mavis Scanlon

Stephanie Secrest | East Bay Business Times
James Nixon with Sustainable Systems Inc.

Oakland aims to form a green finance network that would invest in startup companies, a move to encourage its emerging clean technology, green building and energy efficiency industries.

The effort is still in the early stages, and the final shape of the network and number of participants is yet to be determined.

The Green Finance Network will line up prospective startup businesses with potential investors.

The network is just one facet of the economic development strategy Oakland is undertaking under the auspices of the Oakland Partnership, a collaboration among government, business, education, labor and the community.

The network's potential members include the more than two dozen investment organizations in Oakland and the Bay Area characterized as green or socially responsible, or that look for a so-called double bottom line that considers profits as important as social and environmental goals.

The idea percolated for at least a year, starting with a conversation between Karen Engel, director of economic development for the Oakland Metropolitan Chamber of Commerce, and James Hurd Nixon, chair of Oakland's Sustainable Systems Inc., a business and economic development firm.

Engel and the chamber commissioned a study by consulting firm McKinsey & Co., released in May, that looked at the burgeoning business clusters Oakland could nurture. Those clusters include green industry, international trade, health care and digital arts.

"In the course of that conversation the proverbial light bulb went off," Nixon said. "There are a whole lot of double-bottom-line investment organizations in Oakland, and we have never convened those organizations and had them look at Oakland in a coordinated way to encourage investing in deals in Oakland," he added.

Nixon has been working with a green finance subgroup of the Oakland Partnership's green industry cluster that includes Peter Liu, a founder and vice chairman of New Resource Bank in San Francisco; Jacob Singer, the CEO of OBDC Small Business Finance in Oakland; Dan Adler, vice president of the California Clean Energy Fund; Paresh Patel, vice president, corporate finance, Shoreline Pacific LLC in San Francisco; David Schecter of Oakland's Community and Economic Development Agency; and Brian Garrett, president and CEO of Oakland's Community Bank of the Bay.

The network would be modeled on the Bay Area Community Investment Network, or BACIN, the San Francisco network of commercial and community financial institutions, investors and funds that invest in low-income neighborhoods. BACIN and the Bay Are Council in San Francisco have agreed to co-sponsor the Green Finance Network.

At an Aug. 16 meeting, Nixon presented an initial business plan that called for twice-annual meetings, at which four to six companies would present their business plans in hopes of securing startup capital. Nixon's firm, Sustainable Systems, would coach the companies in advance to ensure they were well-prepared. At these meetings network companies could also share underwriting criteria in an effort to encourage joint equity or debt investments. Presenting companies would also be advised or directed on the best resources to help them grow.

The network business plan will be presented at the next Oakland Partnership meeting on Sept. 5.

Success will be measured by several criteria, including the number of firms that join the network, the number of Oakland green businesses that receive funding and the amount of capital invested, the number of jobs created and the quality of the semi-annual meetings.

Engel of the Oakland chamber said the network is a visible way for the city to communicate the positive aspects of investing here. "Since we've identified (the green cluster) as a very important sector that's critical," she said.

Nixon "has a lot of experience putting these networks together," said Patel of Shoreline Pacific. Over the last five decades Oakland has not been a strong draw for business, he added, but "if properly positioned and properly used Oakland can draw amazing green businesses. The key is developing a coherent and progressive strategy to do it."

Another key will be targeting the right kinds of companies. Companies in the clean-tech space are more likely to be plugged in to Silicon Valley, where venture capital firms have a well-established lead and plenty of capital to invest.

Green companies outside of tech may actually be a more-interesting space to focus on, said Singer of OBCD, as they are the types of firms that could become more entrenched in the local community. "As community economic development lenders, that's really what's of interest to us." he said, "How do we work with companies that are going to create a variety of jobs?"

The network itself would be "very straightforward" to start, Nixon said. "We know the drill." In the green space, it's not the serial entrepreneur or the later-stage companies that typically need the type of investment he envisions the network making.

Rather, he says, minority entrepreneurs or very young companies need a better understanding of how to access the financial markets. If successful, the network could provide that. Under the theory of cluster-based economic development, in which many businesses going in a similar direction drive additional investment, the network could be a boon for Oakland as well.

mscanlon@bizjournals.com | 925-598-1405

Clean-technology companies that open in the former Sacramento Army Depot could save a little more green

City Council aims to bring clean-tech to town

Sacramento Business Journal - 3:23 PM PDT Wednesday, August 22, 2007

Clean-technology companies that open in the former Sacramento Army Depot could save a little more green -- as in money.

The Sacramento City Council on Tuesday unanimously approved an effort to market the area's existing enterprise zone to clean-energy companies and to help develop the Sacramento region as a green-technology hub.

About 80 "clean-tech" companies -- such as Altergy Systems and Jadoo Power Systems Inc. -- operate in the four-county region. City officials and economic leaders are hoping to attract others and become the center for the fast-growing industry.

"Our region is well positioned to become the clean energy capital ...," Michael Faust, senior vice president of public policy and advocacy for the Sacramento Metro Chamber, told the council on Tuesday. "This will be the significant industry of the future."

The area in south Sacramento already has an enterprise zone designation, allowing qualified companies to enjoy tax credits for equipment purchases, sales-tax rebates and the hiring of some workers.

The chamber aims to bring -- or create -- 20,000 direct and indirect clean-energy jobs to the region by 2015.

"Not only do we believe this number is achievable, the Metro Chamber believes it can and will be the bedrock of the next tidal wave of economic development in our region," Faust said.

Analysts say the clean-energy industry is expected to increase from $16 billion in sales this year to more than $100 billion by 2015.

Executing on Cleantech

Executing on Cleantech
Print All Articles Letter to the editor on 15 August 2007, 11:24by Red Herring Staff
When Mitch Mandich left his job as head of worldwide sales at Apple, he thought he was going to retire. Seven years later, he’s building a cellulosic ethanol plant that pumps out 100 million gallons per year.
“I really wanted to do something to make a material difference in the world. I wanted to apply my skills to combat global warming,” says Mr. Mandich, now CEO of Range Fuels, a biofuels startup in Broomfield, Colorado.
He’s hardly alone. Drawn by idealistic notions—and the opportunity to hit the jackpot—business veterans like Mr. Mandich are joining cleantech startups in droves. The nascent sector, considered too risky just a few years ago, has become the hottest area for venture capital investment almost overnight. Several companies have hit the market with successful IPOs, and some are even making money.
“I would describe it as a dramatic change,” says Ira Ehrenpreis, general partner and head of cleantech investing at Technology Partners, a venture firm in Palo Alto, California. “Some of the world’s best entrepreneurs and executives are now focused on trying to be part of the cleantech revolution.”
Until recently, most battery, fuel cell, solar, and biofuels startups were headed by scientists or idealistic save-the-earth types who weren’t that interested in making money from the technologies. David Pearce, CEO of Miasolé, a Santa Clara, California-based thin-film solar manufacturer, says the “tree huggers” he’s used to seeing at solar conferences are now outnumbered by top talent from the semiconductor industry and other tech fields.
He says the expertise he developed at OptCom, a startup devoted to precision thin-film optical filters, is applicable to the photovoltaic solar cells Miasolé now produces. His story is not at all unusual. “You have (cleantech) founders like myself who have been in the IT industry for a long time,” he notes.
A common, and idealistic, refrain heard in cleantech circles is that the people behind the startups want to make a difference in the world. That’s no doubt true, but in terms of getting hard-driving entrepreneurs and executives involved, it certainly helps that they can make a bundle in the process.
That’s because venture capitalists have been sinking billions of dollars into the sector. Last year, venture capital investments in cleantech in the United States totaled $2.4 billion—more than triple the $739 million invested in 2004, according to the Cleantech Venture Group consultancy. To boot, renowned VCs like John Doerr and Vinod Khosla have become cleantech boosters, giving the sector added credibility.
Tangible signs of progress have made the sector all the more attractive. Shares in energy management systems provider Comverge, which reported $34 million in revenue in 2006, have shot up about 55 percent since they began trading in April. Shares in Chinese solar cell makers LDK Solar and SunTech Power have been volatile in recent months, but they continue to rise as the two companies post profits. VeraSun stock has fallen since the company went public, but unlike many of the dotcom startups, the ethanol producer can point to real revenues and earnings.
“There has been an awakening of the sheer magnitude of the cleantech opportunity,” Mr. Ehrenpreis says. “This is now a real business with real revenues and real profits.”
It’s not known exactly how many veteran executives have joined the sector, but a couple of industry observers suggest that about one-third of cleantech startups can now point to an experienced management team. That’s a far cry from even just a few years ago, when cleantech managers were largely scientists and environmentalists who were ill-prepared to run a company of any size.
The influx of executive talent is creating a reservoir of business experience in the sector. Whether it be market knowledge, understanding of industrial production, or simple business basics, seasoned veterans have the skills to help cleantech startups boost their output and bring down costs. They also use their connections to recruit other executives and board members.
And the list of candidates is not limited to Silicon Valley entrepreneurs. High level executives from companies like General Motors, 3M, and General Electric are also getting in on the game, says veteran cleantech investor Maurice Gunderson, senior partner with CMEA Ventures. “The quality of candidates is the highest I have ever seen,” Mr. Gunderson says.
Cleantech is even attracting oil industry executives such as John Melo, who used to run British Petroleum’s U.S. fuels operation. He took over in January as CEO at Amyris Biotechnologies in Emeryville, California, a fast-growing startup that uses engineered microbes to produce a drug for malaria as well as new biofuels. The chance to help the environment as well as build a big company is exciting, says Mr. Melo.
“For me it’s an opportunity to create a whole new industry and to do it in a way that can make a difference in the world from a climate change perspective,” he says. “There are not that many places where you can do both.”
But for all the excitement about clean technologies, there are still many cleantech startups, and their backers, looking for seasoned executives. Mr. Gunderson says the sector still lags other Silicon Valley industries, in which new companies are inevitably launched and run by serial entrepreneurs with several successful startups under their belt.
“Cleantech is not quite there yet,” he says, “but it’s catching up fast.”
Related Topics: Cleantech, Vinod Khosla, Miasolé, Comverge, Technology Partners, John Doerr, Suntech Power, CMEA Ventures, Range Fuels, Amyris Biotechnologies, Cleantech Venture Group, LDK Solar

More ethanol to be added to gasoline in CA

Article:More ethanol to be added to gasoline:/c/a/2007/08/05/BUDKRBMBJ1.DTL

Article:More ethanol to be added to gasoline:/c/a/2007/08/05/BUDKRBMBJ1.DTL

Back to Article

More ethanol to be added to gasoline

David R. Baker, Chronicle Staff Writer

Sunday, August 5, 2007

California regulators have decided to greatly expand the amount of ethanol blended into our gasoline as a way to fight global warming.

Unfortunately, we don't make much of it. And the type of ethanol California uses - most of it made from corn and imported from the Midwest - has serious drawbacks as a weapon against climate change.

The great boom in ethanol plant construction that swept the nation's farm belt in recent years has barely touched the Golden State. Biorefineries here make only 8.6 percent of all the ethanol California uses. Other states supply the rest, shipped by rail over the Sierra or through the Southern California desert.

The California Air Resources Board this summer decided to raise the amount of ethanol that oil companies can blend into the gasoline they sell here. By 2013 - after the new rules kick in - California's ethanol use is expected to jump more than 78 percent, to 1.7 billion gallons per year.

Ethanol companies will likely build more biorefineries in California to feed that fast-growing market. California has four already, with three more under construction. But the state will still have to import most of its ethanol from elsewhere, much like it already imports oil, gasoline and natural gas.

That doesn't worry many energy experts. So many ethanol plants have been built across the Midwest that California should have ample supplies at reasonable prices, they say.

But here's the rub - importing ethanol into California makes it less useful as a tool to cut greenhouse gas emissions, because the diesel-powered trains and trucks that bring it here belch carbon dioxide. All the same, many experts consider it preferable to relying solely on oil.

"Its problems pale in significance to the problem of dependence on petroleum from the other side of the globe, and dangerous places on the other side of the globe," said James Boyd, vice chairman of the California Energy Commission. "I don't think of the Midwest as dangerous."

The United States had 110 biorefineries in 2006, producing 4.9 billion gallons of ethanol, according to the Renewable Fuels Association, an ethanol industry trade group. Some 73 more plants were under construction by year's end, capable of adding another 6 billion gallons to the country's supply.

Although many Californians don't realize it, they're already driving on ethanol. Gasoline sold in the state contains about 6 percent ethanol, used to help the fuel burn more completely.

Starting in 2010, that portion will increase to about 10 percent, under rules the Air Resources Board adopted in June.

For the companies that make ethanol, the new rules look like an opportunity.

Pacific Ethanol Inc. runs the state's largest ethanol biorefinery, a plant in Madera, near Fresno, that can churn out 40 million gallons per year. The Sacramento company, co-founded by former California Secretary of State Bill Jones, also markets ethanol made by the state's second-largest biorefinery, which produces 31.5 million gallons per year in Goshen (Tulare County).

New Pacific Ethanol plants are under construction in Stockton and Calipatria (Imperial County), which is near the Mexican border. Both will make 50 million gallons of fuel per year.

"It is critically important to have other sources of new fuel, and that's what ethanol represents," said Neil Koehler, the company's chief executive officer. He says that increased use of ethanol could help stabilize California's volatile gasoline prices, because a higher percentage of the gasoline in drivers' tanks will come from a different raw material than petroleum.

"Diversity is a good thing, in terms of price," he said.

That's still a matter of dispute. Past changes to the state's gasoline blend have been responsible for giving California some of the highest pump prices in the country. In addition, a spike in ethanol prices last summer helped push up gasoline prices across the country. The biofuel, in other words, has its own price swings.

There's also disagreement about the kind of ethanol California uses.

Most of it is made from corn, the most common raw material for ethanol made in the United States. Many experts argue that corn-based ethanol has significant drawbacks. Some studies show that corn ethanol takes almost as much energy to produce as it provides as a fuel.

Shipped from the Midwest, it also may not be the most effective weapon against climate change. A recent study for the California Energy Commission looked at the greenhouse gas emissions that come from growing corn in the Midwest, turning it into ethanol and shipping the finished product to California.

With all those factors considered, corn ethanol still produced fewer greenhouse gases than gasoline, but not by much. And if the biorefinery that made the ethanol drew its electricity from a coal-fired power plant, it actually produced more greenhouse gas emissions than regular gasoline.

As a result, many environmentalists and state officials view corn ethanol as a transitional fuel.

They hope it will soon be replaced by cellulosic ethanol. Distilled from a wide variety of plants - including crop waste or switch grass - cellulosic ethanol produces fewer greenhouse gases than corn ethanol. No one has perfected a way to make mass quantities at commercially viable prices, although many researchers and entrepreneurs are trying.

"Cellulosic (ethanol) is going to be happening faster than people think," said Carl Zichella, regional director for the Sierra Club in California. "A lot of the technology exists, but it hasn't been scaled up to commercial size. That's an investment problem, not a technology problem."

Pacific Ethanol is working with several partners to develop cellulosic ethanol. But for now, it relies on corn. The company imports grain, but Koehler expects more California farmers to start growing corn as ethanol production climbs. It's already happening, he said.

"We've seen a huge increase in the amount of corn acreage in the country, and in California, very much so," he said.

That raises its own problems, since land devoted to growing fuel isn't growing food.

"It's a really tough issue, because you're going to have to plant those food crops somewhere," said Patricia Monahan, deputy director of the Clean Vehicles Program at the Union of Concerned Scientists.

E-mail David R. Baker at dbaker@sfchronicle.com.

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BP Funds Berkeley in Biofuels Research

BP Funds Berkeley in Biofuels Research

BP Funds Berkeley in Biofuels Research
By Ines Bebea

FAIRFIELD - Energy giant BP recently gave $500 million to the University of California, Berkeley, with The Lawrence Berkeley National Laboratory and the University of Illinois at Urbana-Champaign, to build a research facility that will develop new sources of energy.

The BP Energy Biosciences Institute will be housed in UC Berkeley and the University of Illinois. Initially, the focus of the institute will be research on biotechnology to produce biofuels - turning plants and plant material into transportation fuels.

The institute's long-term plans will be research into the production of alternative fuels, converting fossil fuels to energy with less environmental damage, maximizing oil extraction from existing wells in environmentally sensitive ways, and finding ways to store or sequester carbon to impede its negative affects to the atmosphere.

"With global warming and security implications about the countries where we get our fossil fuel from, this is a way to develop non-polluting sources of fuel," said Robert Sanders, a spokesperson for the University of California, Berkeley. "The center will also boost the economy by creating jobs and placing California at the center of energy research in the United States."

Last June, BP announced that it would invest $500 million over 10 years to fund research aimed at bioscience and applying its findings to the production of new and cleaner energy to be used for transport. BP invited five universities in October to submit plans for an institute to explore sources of energy for the future.

The creation of such a center will have major impact on the biotechnology industry in the Bay Area.

"We need to keep in mind that this is a regional institute," said Michael Amman, president of the Solano Economic Development Corp. "Our expanding research community and our location between the Bay Area and Sacramento positions Solano County to become a major player in the Energy Biosciences Institute's activities."

Reach Ines Bebea at 427-6934 or ibebea@dailyrepublic.net.

Regional Sacramento Energy Strategy

Establish Regional Sacramento as a market leader in technology innovation, sustainable biomass development, and market development for bio-based products. How?

Coordinate research, development, demonstration, and commercialization efforts across counties.

Align existing state agencies regulatory requirements to encourage production and use of biomass and industrial resources.

Facilitate startups and scale up for market entry for new applications of bioenergy including electricity, biogas, biofuels, and other high margin products.

Alternative Energy Grabs Interest but Not Many Investment Dollars

Alternative Energy Grabs Interest but Not Many Investment Dollars
Most U.S. investors see putting money into alternative-energy companies as both potentially lucrative and a way to support the environment. But while many might see opportunity, few are taking it:
Seattle Times

Pick any one of the nation's 170,000 filling stations and there's a 50-50 chance the gasoline contains ethanol. The likelihood is increasing each day. The nation's 124 ethanol plants produce about 6.5 billion gallons a year, and enough new projects and expansions are under way to double that volume in a few years. When that happens, the grain-based fuel will satisfy almost 10 percent of the nation's thirst for gasoline to run cars, pickups and SUVs. "There are going to be some fits and starts, but we're going to get there (to 10 percent)," said Bob Dinneen, president of the Washington-based Renewable Fuels Association. "Beyond that — that's where the uncertainty lies."
St. Louis Post-Dispatch

While much of the nation worries about a slumping real estate market, people in Midwestern farm country are experiencing exactly the opposite. Take, for instance, the farm in this story — nearly 80 acres of corn and soybeans off a gravel road in a universe of corn and soybeans — that sold for $10,000 an acre at auction this spring, a price that astonished even the auctioneer:
New York Times

One ethanol plant, Liquid Resources of Medina, Ohio once touted as the state's only ethanol producer, is out of business. The Medina County company ventured down an environmentally friendly road, using fermentation and distillation processes to recycle sugar waste from products including juice, beer and wine and convert it to ethanol:
Cleveland Plain Dealer

Another, Brookings-based VeraSun Energy Corp reports earnings fell 23 percent in its second quarter on higher corn costs:
Sioux Falls Argus Leader

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Corn, Ethanol And Other Subsidized Stupidities

Corn, Ethanol And Other Subsidized Stupidities

http://www.sacbee.com/110/story/313595.html

House Speaker Nancy Pelosi must welcome the heat she's getting for wobbling on the farm and energy bills. Having caved in to Detroit on fuel economy standards and compromised with Midwest agro-plutocrats on crop subsidies for millionaires, she's shown that she's more a pragmatic Baltimore pol like her father than a knee-jerk San Francisco liberal. That'll serve her well…. Pelosi says she hopes the Senate energy bill, which contains a sharp increase in fuel economy requirements -- from roughly 25 miles per gallon to 35 -- for cars and trucks, will prevail over the House version when the two are reconciled. She said it almost the same day that we learned that for the first time ever foreign models were outselling Detroit. More significant, maybe, is the fact that the farm law -- and agricultural policy generally -- is morphing into an energy program. The bill, HR 2419, which calls itself the "Farm, Nutrition and Bioenergy Act of 2007," has oodles of incentives for the development and transportation of renewable fuels. The link is corn -- already subsidized to the tune of billions…. Since the feds subsidize corn ethanol (a 51 cents tax credit for ! every ga llon of ethanol blended into gas) in addition to the regular multibillion-dollar corn subsidy, and since Congress protects corn ethanol with hefty tariffs to prevent the import of cheaper Brazilian ethanol, ethanol, as Sen. Dianne Feinstein complains, enjoys a triple subsidy. Some $600 million annually comes from highway funds…. Given the fact that most experts believe that the future of bioenergy lies in "cellulosic" technology -- ethanol from biomass, switchgrass and various forms of ag waste -- the cheers for corn ethanol are far more political than they are scientific….

This story is taken from Sacbee / Opinion.

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Peter Schrag: Corn, ethanol and other subsidized stupidities

By Peter Schrag - Bee Columnist
Published 12:00 am PDT Wednesday, August 8, 2007

House Speaker Nancy Pelosi must welcome the heat she's getting for wobbling on the farm and energy bills. Having caved in to Detroit on fuel economy standards and compromised with Midwest agro-plutocrats on crop subsidies for millionaires, she's shown that she's more a pragmatic Baltimore pol like her father than a knee-jerk San Francisco liberal. That'll serve her well.

Both the farm and the energy bills won approval in the House in the past couple of weeks. Both are monuments to waste, stupidity and policy distortions going back generations -- longer in the case of the ag subsidies.

Pelosi says she hopes the Senate energy bill, which contains a sharp increase in fuel economy requirements -- from roughly 25 miles per gallon to 35 -- for cars and trucks, will prevail over the House version when the two are reconciled. She said it almost the same day that we learned that for the first time ever foreign models were outselling Detroit.

More significant, maybe, is the fact that the farm law -- and agricultural policy generally -- is morphing into an energy program. The bill, HR 2419, which calls itself the "Farm, Nutrition and Bioenergy Act of 2007," has oodles of incentives for the development and transportation of renewable fuels.

The link is corn -- already subsidized to the tune of billions -- since corn is the source of ethanol, which refiners are now required by federal law to mix into almost everybody's gasoline. The theory is that gas blended with ethanol doesn't emit greenhouse gases in the same concentrations as regular gas, and that it reduces dependence on imported oil. In fact, it does little of either.

Nor does the theory calculate the impact on food prices or the environmental impact of growing the corn and producing the ethanol, not only in greenhouse gas emissions from farm equipment, but from the trucks, ships and trains that haul the ethanol (nearly all of which comes from Midwest corn) for delivery to refineries.

Because of its corrosive qualities, it can't be shipped through pipelines. The farm bill passed the other day contains a string of programs aimed at developing pipelines for ethanol transport. But that may never be economically feasible.

Corn cultivation also requires enormous quantities of water and fertilizer that generate polluting runoff into rivers and groundwater. And while ethanol does reduce greenhouse gas emissions, it also generates smog-producing pollutants such as nitrous oxide (NOX) that have a wide range of health and environmental effects.

Since the feds subsidize corn ethanol (a 51 cents tax credit for every gallon of ethanol blended into gas) in addition to the regular multibillion-dollar corn subsidy, and since Congress protects corn ethanol with hefty tariffs to prevent the import of cheaper Brazilian ethanol, ethanol, as Sen. Dianne Feinstein complains, enjoys a triple subsidy. Some $600 million annually comes from highway funds.

Every major presidential candidate, even John McCain, who once called ethanol "highway robbery," has been to Iowa, the nation's leading producer of corn, to cheer for ethanol. Given the fact that most experts believe that the future of bioenergy lies in "cellulosic" technology -- ethanol from biomass, switchgrass and various forms of ag waste -- the cheers for corn ethanol are far more political than they are scientific.

When California moved its presidential primary to Feb. 5, Gov. Arnold Schwarzenegger saw it as a chance for Californians to challenge candidates on their vows to Iowa voters -- he mentioned ethanol in particular. Most of our political seers seem to believe that rather than diminishing the clout of the traditional early primary and caucus states, the glut of February primaries is likely to increase their influence. Still, it might give Californians a chance to be heard. We're the ones paying the price.

Last week, the University of California energy experts at Berkeley and Davis whom Schwarzenegger commissioned to develop a California "low carbon fuel standard" issued a cautiously optimistic report indicating that California could reduce greenhouse gas emissions from fuel by 10 percent by 2010. The goal, though ambitious, they said, was possible.

But one of the report's two authors, Alex Farrell, director of Berkeley's Transportation Sustainability Research Center, also acknowledged that their assignment was only to look at fuels, not at engine design, fuel economy or broader policy changes.

And it's there -- in improved transit, in tolls and other forms of demand management on roads and bridges, in higher fuel taxes -- that the real possibilities lie. Classic economic liberals, people we call conservatives, argue that if government didn't meddle so much, the market would take care of the problem.

But attaching a cost to depletion of the ozone is virtually impossible. So is costing out the foreign policy consequences of empowering hostile foreign governments with our petrodollars. We all seem to want to check global warming and our energy dependence on Venezuela, Nigeria and the Middle East. The question is: What are we really willing to pay for that, and how soon?

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U.S. incentives for ethanol production totaled a whopping US$5 billion last year

U.S. incentives for ethanol production totaled a whopping US$5 billion last year, and they look like they're going to get a lot higher. But are those hefty ethanol incentives fueling a national boon or a boondoggle?

Lending Their Ears: Almost one quarter of the U.S. corn crop now goes to ethanol production plants like the one pictured on the left. Photos: National Renewable Energy Laboratory Ethanol and Incentives: Fueling a Boon or a Boondoggle? Once hailed as a potential panacea, corn-based ethanol is now drawing considerable criticism – and so are the generous subsides supporting production. But ethanol's powerful political mileage virtually ensures even heftier incentives. Corn-ethanol plants like this one are becoming a common site with the U.S. push for alternative fuels. Photos: National Renewable Energy Laboratory by JACK LYNE, Site Selection Executive Editor of Interactive Publishing jack.lyne bounce@conway.com A t first glance, it looked like an idea fairly oozing with potential: Pump corn-based ethanol into the tanks of American autos, and voila! In one fell swoop, the U.S. could slash its toxic emissions and foreign oil dependence, in the bargain boosting the nation's long-suffering farmers. Corn-based ethanol seemed like it would yield a bumper crop of winners all around. Or will it? A number of observers are beginning to question just how good an idea that fuel really is. Unquestionably, it's a very expensive idea. U.S. federal and state subsidies for ethanol in 2006 totaled more than US$5 billion. Total incentives for American-made ethanol – almost all of it corn-based – equal about $1 a gallon. "We are already subsidizing corn ethanol [in the U.S.] with more money than we spend on high-mileage cars or on quality mass transit," says Michael Dworkin, director of the Vermont Law School Institute for Energy and the Environment. "As long as we spend more on subsidizing energy suppliers than we do on investments in energy efficiency, we are on a path to pain." But more spending on ethanol subsidies is apparently looming. When it returns from its month-long recess, the U.S. Congress will likely enact a stiff increase in taxpayers' yearly tab. A compromise committee will review separate Senate and House proposals that could jack up mandated ethanol incentives to somewhere between $131 billion and $205 billion over the next 15 years. Ethanol production already consumes almost 25 percent of the U.S. corn crop. Photo: National Renewable Energy Laboratory King Corn Corn is the overwhelming kingpin in today's U.S. ethanol industry. Ninety-five percent of the five billion gallons (19 billion liters) of the American-made fuel comes from corn, which is fermented, distilled into simple sugars, and then fed to microbes that produce ethanol. Much more production is in the pipeline. Capitalizing on meaty incentives and national mandates, corn ethanol plants are rapidly proliferating (see accompanying "Lend Me Your Ears" chart). By the end of 2007, ethanol capacity is expected to increase to 7.5 billion gallons (28.5 billion liters) a year. Ethanol production already consumes almost 25 percent of the U.S. corn crop – twice the amount used in 2003. So will all those gallons of corn ethanol mean a major cut in America's foreign oil dependence? No, contends Cato Institute Senior Fellow Jerry Taylor. The Cato Institute's Jerry Taylor "The biofuels sector is unlikely to have much impact on foreign oil imports," Taylor says in an e-mail interview from the think tank's Washington, D.C., headquarters. "If all of the corn produced in America last year were dedicated to ethanol, it would only reduce U.S. gasoline consumption by 12 percent." What's more, whatever oil ethanol replaces won't be Middle Eastern, Taylor asserts. "It may very well be that biofuels displace more domestic oil than foreign oil, because foreign oil is cheaper to produce than domestic crude," he says. "So biofuels will displace more expensive sources of crude oil, which come primarily from the U.S. and Canada, not the Persian Gulf." 'All Biofuels Are Not Equal' Ethanol has gained a large core of enthusiastic supporters. And whatever minuses that alternative fuel may have aren't patently obvious – which even the ethanol's doubters acknowledge. "At first glance, ethanol produced from corn seems simple, even patriotic," says The Rush to Ethanol, a research study jointly released on July 20th by Food and Water Watch, "Expansion of the corn ethanol industry will lead to more water and air pollution, and more soil erosion of America's farm belt, while failing to significantly offset fossil fuel use or combat global warming." Network for New Energy Choices Senior Policy Advisor Scott Cullen said while releasing The Rush to Ethanol report. the Network for New Energy Choices, and the Vermont Law School Institute for Energy and the Environment. "The ethanol industry and other proponents of biofuels claim that these new fuels will result in lower tailpipe emissions … revitalize farm economies and promote energy independence. However, upon careful examination of these claims, it becomes clear that biofuels are not the silver bullet solution that some say they will be." That's particularly true, the report notes, with corn. The study labels that crop as "the least sustainable biofuel feedstock of all raw materials commonly used. The capacity of corn ethanol to offset U.S. fossil fuel use is extremely limited." "Rising oil prices, energy security and global warming concerns have led to today's 'go-yellow' hype over corn ethanol," Scott Cullen, senior policy advisor for the Network for New Energy Choices, said at the report's release. "But all biofuels are not equal. Expansion of the corn ethanol industry will lead to more water and air pollution, and more soil erosion of America's farm belt, while failing to significantly offset fossil fuel use or combat global warming." Much of the ethanol debate centers on the issue of "net energy balance" – the ratio of a fuel's energy versus the energy required for production. With corn ethanol, that ratio accounts for a fuel with an energy content about one-third lower than normal gasoline. The Center for American Progress puts corn ethanol's energy balance at 1.34 in the Biofuels 101 report that the Washington-D.C.-based think tank released late last month. In the larger scheme of things, though, Taylor thinks that ethanol could actually damage environmental health. "Increasing ethanol production," he says, "will almost certainly increase greenhouse gas emissions on balance, because increasing ethanol production will mean increasing the amount of land harnessed for corn production. This invariably means migrating from more fertile to less fertile soils. That, in turn, requires more intensive energy inputs into the corn production process, primarily in the form of increased use of fertilizers and irrigation." The United Nations voiced similar environmental concerns in May in its first major study on bioenergy. "Use of large-scale mono-cropping could lead to significant biodiversity loss, soil erosion and nutrient leaching," says the report from U.N.-Energy, Sustainable Bioenergy: A Framework for Decision Makers. Aftershocks in the Grocery Aisles The impact of ethanol also registers in the food chain, the U.N. report points out: "Liquid biofuel production could threaten the availability of adequate food supplies," it says, "by diverting land and other productive Corn ethanol's reverberations extend to grocery prices. resources away from food crops." Corn prices have doubled in the last two years with the acceleration in ethanol production. U.S. food prices during that period have increased as well, since about one-fourth of grocery store items contain corn. Beef and poultry products are also becoming more expensive; corn is dairy farmers' primary feed and makes up about three-fourths of poultry farmers' feed. Corn ethanol production can also affect other fuels' costs. A Massachusetts Institute of Technology study, for example, reports that natural-gas prices are under strain, since that fuel now provides about two-thirds of the energy that's used in U.S. ethanol production. High-profile political figures, however, rarely mention such cautionary facts. Most seem to find alternative fuels made from American corn simply irresistible. That list includes George W. Bush, long criticized by some as a global warming denier. The president backed the 2005 Energy Bill that mandated that U.S. refiners by 2012 blend as much as 7.5 billion gallons (28.5 billion liters) of ethanol with the gas they sell. That same bill increased ethanol subsidies to 51 cents a gallon – almost all of it going to the oil companies that blend it with their gasoline. Bush's ethanol support escalated in his 2007 State of the Union address, where he called for producing 35 billion gallons (133 billion liters) of alternative fuels by 2017. The Politics of Corn Pro-ethanol views are also dominating the discourse in the race to succeed Bush in the White House. And that issue is getting an added shot of high-octane urgency from corn-rich Iowa's prominent role in the 2008 presidential race. The state's political caucuses in mid-January of next year will select the first delegates to both major parties' nominating conventions. The biofuels industry is big in Iowa. Ethanol and biodiesel ventures accounted for 50 percent of the Hawkeye State projects reported during first-quarter 2007 Cargill is investing $267 million in expanding ethanol production at its 1,600-acre (640-hectare) campus in Eddyville, Iowa (pictured). Photo: Iowa State University Dept. of Agricultural and Biosystems Engineering to the New Plant Database that Site Selection utilizes in scoring the race for the coveted Governor's Cup. Iowa's latest expansion is coming from Cargill Inc., which announced on July 19th that it will invest $267 million in expanding ethanol production at its 1,600-acre (640-hectare) campus in Eddyville. Unsurprisingly, seldom is heard a discouraging word about corn-based ethanol out along the Iowa campaign trail. "What you've done with ethanol, you're setting the pace," Hillary Clinton said in a speech in the Hawkeye State last month. That stance is the norm in Iowa, where the candidates' praise for corn ethanol has grown as high as an elephant's eye. "Elected officials are primarily motivated by the hunt for political capital, including campaign contributions but, most importantly, votes," says the Cato Institute's Taylor. "As long as they believe that ethanol subsidies will deliver political capital, they will vote for ethanol subsidies." But that, he adds, is only a reflection of the body politic. "The problem isn't that politicians are wrong-headed about ethanol," says Taylor. "The problem is that voters are wrong-headed about ethanol." Can Cellulosic Fill the Gap? Another biofuel option – cellulosic ethanol – gets much less mention in the political dialogue. That strain of ethanol is produced by using enzymes to break down the cellulose in plant cell walls into sugars. Cellulosic ethanol has far greater potential than its corn-based cousin, many energy Switchgrass and wood chips are two of the feedstocks that can be used in producing cellulosic ethanol. industry insiders think. "Any ethanol funding in the U.S. Farm Bill should focus on research and development of cellulosic ethanol," says The Rush to Ethanol report. "There is sufficient private investment in corn ethanol development and refining already." Supporters of cellulosic ethanol contend that the fuel has a number of advantages. For one thing, it can be made from a wide range of inexpensive and readily available feedstocks, including switchgrass, wood chips and straw. Cellulosic ethanol's net energy balance is also twice as high as corn ethanol's. Moreover, some researchers estimate that cellulosic ethanol has the potential to reduce greenhouse emissions by more than 90 percent – about four and a half times more than corn ethanol. For certain, some biofuel feedstock other than corn will have to be employed if Congress enacts the mandate to produce 35 billion gallons (133 billion liters) of alternative fuel a year by 2017. U.S. corn can, at the uppermost, provide only 15 billion gallons (57 billion liters) of ethanol a year, most agricultural analysts agree. High Costs Slow Progress But cellulosic ethanol technology isn't ready to fill that gap. No commercial plants using cellulosic ethanol have been built. High costs are one of the big reasons. "Cellulosic ethanol is even less economically competitive with gasoline than corn ethanol," says Taylor. "[Energy Information Administration Administrator] Guy Caruso noted in a speech last November that the capital costs associated with cellulosic ethanol production were five times greater than those associated with conventional corn ethanol production. "The USDA estimates that the capital costs associated with corn ethanol production work out to about $1.50 per gallon," he continues. "That suggests that cellulosic ethanol would cost about $7.50 per gallon – before we even consider the price of the feedstock." The U.S. Department of Agriculture is seeking $1.6 billion for cellulosic research and production in the 2007 Farm Bill. "The costs associated with cellulosic ethanol might well come down over time," Taylor allows, "but it is [now] far less economically competitive than any number of gasoline alternatives such as synthetic fuel from coal. Predictions about the 'fuels of the future' have been uniformly wrong over time, and there's little reason to pick cellulosic ethanol rather than any number of gasoline alternatives as our best bet." The alternative fuels scenario, then, Food & Water Watch's Wenonah Hauter is not as full of promise as many would wish. It could be that the world is still waiting for an alternative fuel idea whose time has yet to come. Meanwhile, the world continues to work with the alternative fuel options that are on the table. And in the U.S., it seems inevitable that work is going to mean higher government subsidies – a prospect that doesn't please Taylor and the free-market-championing Cato Institute. "If ethanol made economic sense, it wouldn't need to be mandated or subsidized," Taylor asserts. "The government should not be in the business of promoting any particular industry. If an investment in industry x, y, or z has economic merit, then market actors will make those investments." Even farmers won't profit from current U.S. strategies for alternative fuels, contends Food & Water Watch Executive Director Wenonah Hauter. "Rural communities won't benefit from the Farm Bill becoming a fuel bill," Hauter said on July 20th. "In the long run, family farmers and the environment will be losers, while agribusiness, whose political contributions are fueling the ethanol frenzy, will become the winners." Photo: USDA Lend Me Your Ears New corn ethanol plants have been sprouting up in the U.S. with dizzying frequency with the nation's alternative fuels initiative. Here's a sampling of some of the biggest of those new facilities that have been reported to Site Selection over the past two and a half years, arranged in order of investment. Company Location Investment (in U.S. millions) Archer Daniels Midland Cedar Rapids, Iowa $542 International Bio Energy Virginia Chesapeake, Va. $500 Aventine Renewable Energy Holdings Mount Vernon, Ind. $400 Waverly Ethanol LLC/Robert Johnson Waverly, Ill. $300 Cargill Inc. Eddyville, Iowa $267 Ethanex Energy Inc./SEMO Milling LL Cape Girardeau, Mo. $260 Aura Renewable Energy Beaver Falls, N.Y. $250 Bioenergy International Clearfield County, Pa. $250 Alternative Energy Sources Inc. Kankakee, Ill. $225 Alternative Energy Sources Inc. Greenville, Ill. $220 Council Bluffs Ethanol Council Bluffs, Iowa $214 Lincolnway Energy Nevada, Iowa $214 Red Oak Ethanol Red Oak, Iowa $213 Chief Energy Co. Sioux City, Iowa $210 Global Ethanol Belmond, Iowa $210 Abengoa Bioenergy Corp./Abengoa S.A. Madison, Ill. $200 Agri-Ethanol Products Batesburg, S.C. $200 Altra Inc. Carleton, Neb. $200 E85, Inc. Cumberland County, N.C. $200 Ecron Corp. Sparrows Point, Md. $200 Ethanol Production Co. LLC Kewanee, Ill. $200 Hartford Bio-Energy LLC Hartford City, Ind. $200 Heartland Ethanol LLC Griggsville, Ill. $200 Indeck Energy Services Niles Mich. $200 Mississippi-Ohio River Energy Pulaski Ill. $200 Ripatti Group, Inc. Pike County, Ind. $200 U.S. Ethanol Holdings LLC Wasco, Calif. $200 Voyager Ethanol, LLC/Broin Companies Emmetsburg, Iowa $200 Source: Conway Data's New Plant Database, January 2005-July 2007 TOP OF PAGE