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By Robert Rapier on Sep 15, 2011 with 56 responses

Thiel vs. Khosla on Cleantech: Who is Right?

Battle Over the Definition of Success in the ‘Cleantech’ Industry

This past week PayPal co-founder Peter Thiel — who was also an early investor in Facebook — made headlines when he declared that “Cleantech is an increasingly large disaster that people in Silicon Valley aren’t even talking about any more. The failure in energy and transportation points to a larger failure in clean energy — we aren’t moving any faster, literally, than we were when modern airplanes first came out.”

Those comments ruffled the feathers of Cleantech VC Vinod Khosla, who responded “Cleantech is not a disaster.” So who is correct? It depends entirely upon how one defines success:

Over the last 12 months, Khosla has generated more than $1 billion in profits from three IPOs and will “probably” see six more IPOs over the next 12 to 18 months, if the markets hold up, he said. “That $1 billion in profits over the last year is way more than most venture funds have done in IT in the last ten years cumulatively,” Khosla said. “I challenge anybody to claim clean-tech done right is a disaster.”

It is clear that these two are talking about entirely different metrics for success. Thiel’s metric seems to be the actual production of cost-competitive energy. Thiel noted that investment dollars in Cleantech are falling — and yet even after billions in investments these companies are still not producing cost-competitive energy. Thus, Thiel is correct with respect to the metric he is using to measure the industry.

But Khosla points out that his investors have made money. By his metric, he claims that the industry is a success. So which metric should we use?

Making Money, or Producing Energy and Displacing Oil?

I asked Khosla five years ago about his objectives. I wanted to know whether his primary objective was to make money, or whether his primary objective was to produce sustainable energy — which it seemed to be from all of the interviews he had done. He told me that he was in this out of concern over global warming and our dependence on fossil fuels, and that his primary objective was to displace oil. Clearly he wants to make money in the process, but by his own admission his metric for success was closer to Thiel’s.

And quite frankly, if the measure is whether people made money, then Range Fuels was a success even though they never delivered. But some people made money on Range Fuels. Solyndra — much in the news the past two weeks because taxpayers are going to be stuck with a $500+ million bill — made some people some money. Their CEO had a base salary of $400,000 a year, so he made money. The people hired to build their factory made money. But investors — and mostly taxpayers — lost a ton of money.

I simply don’t think that the fact that one can talk up a company and then IPO it at a profit is the proper metric for success. Some of those companies that have been IPO’d are grossly overvalued. Many of them won’t be around for long. (In fact, I wrestled hard this week with a decision to short one of them; I ultimately decided not to — but not because I don’t think the company is grossly overvalued). So is a company that is IPO’d, makes initial investors some money, and then ultimately goes bankrupt without producing energy a success? Not for the general public it isn’t. Those “successes” do not help wean us off of oil.

I would also question whether Khosla is counting up the losses when he claims to have made $1 billion in profits. We know investors lost a lot of money in Range Fuels. In fact, I was told this week by someone in Silicon Valley that the actual number is quite a bit higher than what has been publicized because the stake of the initial investors was never made public. The amount I was told is unconfirmed, so I won’t repeat it. But it is a fact that the overall investment in Range Fuels has never been published (to my knowledge); all we know is that the publicly announced funding was more than $300 million.

Conclusion: Clean Tech Has Not Delivered

So, by the measures that matter to most people: Increased energy security, more supplies of clean energy, displacement of oil — Thiel is correct. Clean Tech has not delivered. And for that matter, energy companies have never been high flying investments. They are in a very competitive, low-margin business, and their low PE ratios reflect that. So I don’t believe that Clean Tech stocks can be expected to behave like technology stocks in the long term. They aim to sell commodities, and that just isn’t a high growth business.

If I look at Vinod Khosla’s portfolio, I am unaware of any of those companies that are selling commercial volumes of competitive products. Of course there are sectors of his investments that are unfamiliar to me. I don’t know much about the companies he has classified under Electrical Efficiency, Mechanical Efficiency, or Batteries — for example — but I see companies in the liquid fuel portion of his portfolio that will never deliver per the promises they made and will never justify their current market valuation. (In fact I sometimes think I could make a fortune shorting some of the companies in his portfolio — but shorting is a lot more complex than just being 99% certain a company will fail).

Khosla needs to deliver cost-competitive energy to actually address his stated concerns about energy security. Until he does that, Clean Tech can’t be cast as a success, and any attempt to paint it that way is simply spin.

  1. By paul-n on September 15, 2011 at 3:35 am

    I would certainly have to agree with Thiel here – the idea of clean tech is to produce “tech” , and, ultimately, energy.  Profits are also necessary, long term, but they, alone, afre definitely not sufficient.

     

    Of course, the government has a different metric still – theirs is all about “jobs” – they don;t seem to care whether anything gets produced, or whether anyone makes money, or whether the taxpayers get any value – “jobs” can be used to justify anything these days.

     

    For the private companies, ultimately, profitable production of alternative fuels is the only thing that can, long term, displace any real volume of oil.

    We have seen with ethanol that it needs to be subsidised and mandated to dispalce oil, and even so, there is not much margin for the producers – though the corn growers seem to be doing OK.

    Khosla and co are still in model of selling people on the prospect of commercialising an idea, despite that fact that not one of his ideas has become commercialised.  if that is not a disaster then I would like to know what his definition of one is.

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  2. By Douglas Hvistendahl on September 15, 2011 at 7:06 am

    This also depends on what you define as clean tech. For some years I’ve had fans blowing summer air through my basement and into the house. In addition to cheap cooling, my heat bill has improved a little. This summer, the dirt under the house peaked at 74 degF, 3 degF up from last year. Two caveats, by mid last winter it was at 36 degF (at least we no longer have trouble with frozen pipes!), and be sure to use a dehumidifier if you do this.

    I’m using the savings to put in a liquid loop from the attic to under the dirt, wonder how well that will work out?

    Also a passive solar house can now be built (properly designed) for around 5 to 10% less than a standard house of the same size and quality. Don’t use them near Seattle or parts of New England, their winters get too cloudy.

    There are active solar buildings that can be used even there, but there is a cost premium. One contractor even built a totally solar heated house in Fairbanks, Alaska.

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  3. By Walt on September 15, 2011 at 10:53 am

    Robert Rapier said:

    And quite frankly, if the measure is whether people made money, then Range Fuels was a success even though they never delivered. But some people made money on Range Fuels. Solyndra — much in the news the past two weeks because taxpayers are going to be stuck with a $500+ million bill — made some people some money. Their CEO had a base salary of $400,000 a year, so he made money. The people hired to build their factory made money. But investors — and mostly taxpayers — lost a ton of money.


     

    I really hope this investigation is carried through.  Range Fuels has disappeared from the marketplace, and many others will as well.  But, in this political year where corruption reaches the peak every four years, I hope this story will not disappear.

    Solyndra loan “NOT ready for prime time,” ABC News uncovers

    http://www.youtube.com/watch?v…..2J1awtM0xU

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  4. By Takchess on September 15, 2011 at 8:25 am

    Robert,
    Good Post.
    From what I’ve read of your blog and other info on cleantech, it’s clear that clean tech is hard. It’s not a business with an existing infrastructure, like Facebook, where someone can stand up a Server Farm incrementally in a short period of time for somewhat short money.

    I think the following link illustrates the point.

    http://www.nytimes.com/2010/05…..sburg.html

    Big Projects can be killed with anyone of the following:
    Bad Management,
    Bad Design
    Lack of Financing
    Not having community/regulatory support,
    FUD from competitive industries

    One might not know one has a problem until it’s too late.

    I do think that Khosla’s argument is geared toward Thiel comment that VC’s are staying away from this segment. Not that Cleantech companies have made immediate marked improvement.

    I’ll also point out to you that Exxon is doing quite well in a Commodity marketplace.

    Are there any transcripts around regarding Thiel’s talk?

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  5. By Takchess on September 15, 2011 at 8:50 am

    http://www.greentechmedia.com/…..h-mankind/

    additional post on Thiel’s comments

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  6. By Walt on September 15, 2011 at 9:58 am

    Robert Rapier said:

    If I look at Vinod Khosla’s portfolio, I am unaware of any of those companies that are selling commercial volumes of competitive products. Of course there are sectors of his investments that are unfamiliar to me. I don’t know much about the companies he has classified under Electrical Efficiency, Mechanical Efficiency, or Batteries — for example — but I see companies in the liquid fuel portion of his portfolio that will never deliver per the promises they made and will never justify their current market valuation. (In fact I sometimes think I could make a fortune shorting some of the companies in his portfolio — but shorting is a lot more complex than just being 99% certain a company will fail).

    Khosla needs to deliver cost-competitive energy to actually address his stated concerns about energy security. Until he does that, Clean Tech can’t be cast as a success, and any attempt to paint it that way is simply spin.


     

    Again, I need to continue with my argument over the past 3-4 years.  It is not the technology stupid.  The technology has nothing to do with making money in the clean tech space.  Khosla followers know this and that is why he and his investors can go public claiming they have made $1 billion or multiple billions of profits.   If people do not see this scam and fraud I don’t know how to explain it more clearly.

     

    The silicon valley crowd are laughable in my experience.  They pour millions and hundreds of millions into clean tech and claim they are the smartest investors in the world.  If you don’t have VC investors in your company, then the market thinks your technology is worthless, and that your just another has been.  It is extremely frustrating.

     

    The new corporate “clean tech” engineers are the same.  First thing they ask is what VC’s have invested in your company like it is suppose to be the litmus test on the value of the technololgy.  Or, how much government money have you been given as a litmus test to whether you are a viable technology?

     

    I just recently met with one of the world’s largest (if not the largest) gases and methanol technology companies at our site.  No NDA was signed so I did not just open up everything like they wanted to see.  The market is filled with dishonest people and companies who either want to steal what they can for free (if it is a valuable technology) or they want to steal money from the public via IPO or other means to take money for nothing.  Hype the technology through the media, take it public (while producing no serious production), and show how the company has spent tens or hundreds of millions “developing” the technology.  The reality in the market now is “spend and spend and spend” to prove you are doing something to make jobs.  If you can’t steal something from someone, then get some buddies together to go IPO and steal it later.  The market is filled with both VC and corporate vultures looking for fast money and getting something for free or nothing.  Beware…it is not the technology.

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  7. By Observer on September 15, 2011 at 12:53 pm

    Robert, I didn’t realize there was a due date of September, 2011 for whether or not cleantech had succeeded in displacing fossil fuels.

    There are a few more issues at play, I think. One is that the energy and water industries are highly regulated and many functions therein are considered natural monopolies. This means they are incredibly slow moving and resistant to change. A second is that, since true societal and environmental costs are not reflected in our use of fossil fuels, cleantech starts from a disadvantage in price and is therefore adopted more slowly. A third would be that global infrastructure since the 19th century has been built up around our use of fossil fuels, and changing that infrastructure in transportation, our electric grid, buildings, etc. is also a slow process. A fourth would be that we’re in the middle of two large economic downturns, which might precipitate a doubling-down on existing technologies like $4 natural gas, and status quo buildings instead of robust retrofits with energy efficient lighting and building management systems.

    Cleantech is not a fad. It means continuous improvement and realignment of the way we think about our use of natural resources and the impact of our existence on ecosystems. But it happens over time. Bad metaphor, but we’re an oil tanker, not a speed boat. So turning this thing around may take a century or more, not a few decades.

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  8. By rrapier on September 15, 2011 at 1:36 pm

    Takchess said:

    Big Projects can be killed with anyone of the following:

    Bad Management,

    Bad Design

    Lack of Financing

    Not having community/regulatory support,

    FUD from competitive industries


     

    I would also add “Bad Technology.” There are a number of technologies in which commercialization has been attempted far before the technical bugs had been worked out.

    I’ll also point out to you that Exxon is doing quite well in a Commodity marketplace.

    They are one of the best-managed companies in the world, and yet their PE ratio hovers in the low double-digits. This simply isn’t a growth industry. They deliver high overall dollars, but low profit margins.

    Are there any transcripts around regarding Thiel’s talk?

    I have not seen any.

    RR

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  9. By paul-n on September 15, 2011 at 2:01 pm

    Observer wrote:

    There are a few more issues at play, I think.  One is that the energy and water industries are highly regulated and many functions therein are considered natural monopolies. This means they are incredibly slow moving and resistant to change.

    This may be true for the electricity industry, but is certainly not for the oil industry – not all energy is the same.  Even so, for electricity (and water) it is the distribution and retailing that is regulated, not the supply.  anyone can start up a business to produce electricity, and when it comes to soalr, many governments offer very generous subsidies to do so, so Solyndra can’t hide behind any excuses about “regulation”.

     

    A second is that, since true societal and environmental costs are not reflected in our use of fossil fuels, cleantech starts from a disadvantage in price and is therefore adopted more slowly.

    This is true, but in the case of solar, the generous subsidies give the product – electricity – a price advantage.  It ios just the case that Solyndra’s product was too expensive to be competitive, regardless of how “clever” it may have been.

    A third would be that global infrastructure since the 19th century has been built up around our use of fossil fuels, and changing that infrastructure in transportation, our electric grid, buildings, etc. is also a slow process.

    What needs to change with our road and grid systems?  The roads will take vehicles running on any kind of alternative fuel, and the grid will take electricity made from any kind of renewabl;e source.  Having the grid available is a key enabler of renewable electricty systems, and where it is not, or is limited, so is development e.g. wind farms in the prairies.

    A fourth would be that we’re in the middle of two large economic downturns, which might precipitate a doubling-down on existing technologies like $4 natural gas, and status quo buildings instead of robust retrofits with energy efficient lighting and building management systems.

    This is true in many cases ( I have had numerous water saving projects rejected for this reason), but that is just a fact of life.  Companies like 

    Solyndra need to recognise this too.  Theirs was an expensive, proprietary system in a time where people don;t have lots of money for premium pricing, and in a market where you produce a commodity product.  How were they ever going to compete with standard solar systems that are half the price?

     

     

     

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  10. By rrapier on September 15, 2011 at 2:13 pm

    Observer said:

    Robert, I didn’t realize there was a due date of September, 2011 for whether or not cleantech had succeeded in displacing fossil fuels.


     

    Neither is the middle of the semester the due date on whether my kids have passed their classes. But we do get a report card that tells us how things are going. Cleantech has raked in billions over the better part of a decade; I think it is appropriate that we check in on how they are doing (and why things are as they are).

    RR

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  11. By takchess on September 15, 2011 at 2:25 pm

    RR,

    How would you score Bloom Energy?
    http://c0688662.cdn.cloudfiles…..2-2011.pdf

    Is the work they are doing important/trivial? They appear to be getting some orders.

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  12. By paul-n on September 15, 2011 at 9:26 am

    Bloom is getting a few orders, but they are all in the very niche market of on-site mission critical power generartion.  And, at that, all from big companies looking for PR points.

    Their real problem is the capital cost – at about $8k/kW they are an order of magnitude higher than CCGT, and about the same operating efficiency (55-60%, which is very good).

    So where you need critical power on site – which is far too small for gas turbines – and don;t want gas powered ICE’s then they are an option.

    But for widespread application for making an ROI, they are just too expensive.  Which is too bad, as they are ideal for things like landfill gas, gasified biomass, blast furnace gas and all sorts of other low btu gases that need cleanup before an ICE and pre-compression for a GT.

    But unless the electricty value is >20c/kWh, the return just is not there

     

    They also have some maintenance issues – it seems the life of the fuel cell stacks is not that great – less than a well maintained ICE!

     

    http://gigaom.com/cleantech/th…..ll-makers/

     

     

     

     

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  13. By Optimist on September 15, 2011 at 3:52 pm

    Kosla obviously did alright with clean tech, and hopes to keep doing so (thanks Uncle Sam!), so what would you expect him to say?

    Sure, Observer, clean tech will eventually deliver. It would sure help if Uncle Sam left the building so that the players mostly play with their own money. That by itself would cut down the bulk of the hype.

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  14. By rrapier on September 15, 2011 at 4:23 pm

    takchess said:

    RR,

    How would you score Bloom Energy?

    http://c0688662.cdn.cloudfiles…..2-2011.pdf

    Is the work they are doing important/trivial? They appear to be getting some orders.


     

    I don’t know enough about that particular area to say for sure, but I have read a few things. From what I have read, the technology is still quite expensive, and Bloom’s technology doesn’t have any specific advantage over competitors. They have just been better at grabbing publicity.

    RR

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  15. By takchess on September 15, 2011 at 5:10 pm

    Paul N,

    Interesting link and info. It will be interesting where it will go with the future generations of the Bloom Box.

    Thanks.
    Jim

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  16. By Anon on September 15, 2011 at 8:32 pm

    takchess said:

    Paul N,

    Interesting link and info. It will be interesting where it will go with the future generations of the Bloom Box.

    Thanks.

    Jim


     

    With over $550 million in investment, and a nearly $3 Billion valuation, they are a rising star in clean tech.  Nobody even comes close!

     

    Last month I wrote
    about how I’d heard that fuel cell maker Bloom Energy had raised yet
    another round of $150 million in funding, which would bring its funding raised to over $550 million. Back in January, VentureWire, too, reported that Bloom had quietly raised at least $100 million more in equity. On Thursday, Fortune’s Dan Primack confirms that Bloom has raised this $150 million in new VC funds, and adds that the round is at a $2.7 billion pre-money valuation.

    http://gigaom.com/cleantech/re…..almost-3b/

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  17. By paul-n on September 15, 2011 at 11:34 pm

    is this “anon” Katie F. from GigaOm?  If so, why don’t you post under your name?

    In any case, as RR’s original post started out with the position that making money by high market valuations does not equal clean tech success, so too it is with Bloom Energy.

    The fact that they have had $550m of investment, and are supposedly worth $3bn, does not make them a rising star in clean tech at all, it makes them a rising star in the eyes of speculators and VC’s.

    To be a rising star in clean tech, they need to have their product being adopted widely, and that simply isn’t happening.

    if you look at their customer list, lots of them have put in trial installations of a fex boxes at one or two locations.  But most of these have been in place now for two years, and to date, not one of these customers has decided to deploy them at all their sites.  if they really did achieve a 3-5yr payback, as claimed by bloom, these would be the best investment possible for all of these companies and they would be deploying them, as fast as they could.  but they aren’t, so clearly the numbers just aren;t that good.

    Another large, but completely untapped applicaiton for these would be wellhead gas, (from oil wells) which is often flared. To date, Bloom does not have even a single installation at any installation.  This evemn as places like N. Dakota are starting to have “no flaring” regulations.  Every well site that has associated gas (to be flared) already has road access, and an electrical connection.  The oil folks are a pretty hard nosed bunch that like to make money.  If the $ were there, they would deploying these things too, and they aren’t, so clearly the picture is not as good as Bloom makes out.

    Same applies to biomass, wheer places like British Columbia have half a billion tons of beetle killed trees that they want to turn into energy – that would power a lot of bloom boxes, but to date not one has been deployed in any biomass application anywhere.

    Bloom are a rising star in VC funding, and media coverage, but certainly not in terms of renewable energy production – a pattern which is followed by almost all “clean tech” companies that have any connection to Silicon Valley and their VC crowd.

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  18. By David Lewis on September 16, 2011 at 1:19 pm

    The fact Silicon Valley doesn’t currently see a way to transform the global energy industry with startups merely confirms the long held observation of most who advocate climate action, that fossil fuel users cannot be allowed to continue to use the atmosphere as their garbage dump for free.

    There needs to be a price on emissions of CO2 high enough to change this game.

    Paul Krugman, writing in his introduction to The General Theory by Keynes, said this about fundamental game changing ideas: “I place the highest value on economic theories that transform our perception of the world, so that once people become aware of these theories they see everything differently. Adam Smith did that in The Wealth of Nations: suddenly the economy wasn’t just a collection of people getting and spending, it was a self-regulating system in which each individual “is led by an invisible hand to promote an end which was no part of his intention.”

    A way forward for civilization would be to understand that putting a price on carbon would allow individuals and groups of any size to all be “led by an invisible hand to promote an end which was no part of [their] intention”, that end being conserving the planetary system by stablization the composition of Earth’s atmosphere.

    We would know the carbon price was high enough when Silicon Valley suddenly saw it was possible to completely transform the global energy industry with new technology energy startups.

    Instead of articles about Silicon Valley titans arguing about whether some money can be made or not, we’d be reading about Google sized companies forging ahead deploying decarbonizing technology at global scale.

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  19. By Walt on September 16, 2011 at 4:59 am

    Paul N said:

    is this “anon” Katie F. from GigaOm?  If so, why don’t you post under your name?

    In any case, as RR’s original post started out with the position that making money by high market valuations does not equal clean tech success, so too it is with Bloom Energy.

    The fact that they have had $550m of investment, and are supposedly worth $3bn, does not make them a rising star in clean tech at all, it makes them a rising star in the eyes of speculators and VC’s.

    To be a rising star in clean tech, they need to have their product being adopted widely, and that simply isn’t happening.

    if you look at their customer list, lots of them have put in trial installations of a fex boxes at one or two locations.  But most of these have been in place now for two years, and to date, not one of these customers has decided to deploy them at all their sites.  if they really did achieve a 3-5yr payback, as claimed by bloom, these would be the best investment possible for all of these companies and they would be deploying them, as fast as they could.  but they aren’t, so clearly the numbers just aren;t that good.

    Another large, but completely untapped applicaiton for these would be wellhead gas, (from oil wells) which is often flared. To date, Bloom does not have even a single installation at any installation.  This evemn as places like N. Dakota are starting to have “no flaring” regulations.  Every well site that has associated gas (to be flared) already has road access, and an electrical connection.  The oil folks are a pretty hard nosed bunch that like to make money.  If the $ were there, they would deploying these things too, and they aren’t, so clearly the picture is not as good as Bloom makes out.

    Same applies to biomass, wheer places like British Columbia have half a billion tons of beetle killed trees that they want to turn into energy – that would power a lot of bloom boxes, but to date not one has been deployed in any biomass application anywhere.

    Bloom are a rising star in VC funding, and media coverage, but certainly not in terms of renewable energy production – a pattern which is followed by almost all “clean tech” companies that have any connection to Silicon Valley and their VC crowd.


     

    Paul,

    It was my post…sorry I did not reveal my name using her quote.  Bloom is the most widely recognized methane conversion technology in the market and the one most often used when VC try to compare our technology over the phone or at conferences.  Everyone knows of them as the rising star in gas conversion to “low emissions” power.  I was not aware they raised another $150 million until I saw the post.

     

    Let’s see.  That is $27 million for 1% of the company.  Not bad for a technology that costs $800,000 per unit, uses pre-treated expensive commercial grade natural gas from a pipeline and makes no money.  I did a study on their technology a couple years ago, and know how difficult it is to convert residential or commercial grade/priced natural gas (high OPEX) into cash flows selling electricity.  When I did they study they were getting a California subsidy on the equipment cost, as well as on the electricity sale price.  I don’t know what subsidies they are using now?

     

    The idea they could sell those units into the oil field are laughable.  First, technically they would never work without pre-treatment of the flared gas, or even wellhead natural gas.  You won’t find much wellhead gas that is commercial grade quality Bloom needs to operate a catalytic fuel cell.  Second, when I can take (and do right now with our plant) highly wet natural gas containing 18% nitrogen and convert it to methanol and ethanol with NO pre-treatment, my only competition is standard Cat generators.  If Bloom can get their CAPEX down 60-70% as the article mentions, and can handle standard natural gas without pre-treatment, I think they will compete in the oil sector with other power systems.  I don’t think they will, and pre-treatment of natural gas is NOT CHEAP.  In fact, it is VERY VERY VERY expensive.

     

    Again, with a $2.7 billion valuation, clearly the technology is not the issue as I say over and over.  What is important is the crowd…and the herd mentality of the VC community to follow each other, pump up the hype on a hand full of technologies, and exit those.  Bloom will go public in the future, pump the price up as high as possible so the general public can invest and they can exit with (as Khosla argues) millions of dollars in profits, and the public will get their clock cleaned.  Technology means nothing…never has…never will to the Wall Street marketplace.  In the oil field, there is no way you are going to get Bloom in the field…I don’t care what their CEO said on 60 minutes he will put them in every village in India.  I heard that and thought, “Where is he going to get the high quality pipeline gas to operate these systems?”  It did not matter…at that point it was assumed he already raised $400 million and clearly (above) he needed more at $27 million a point.

     

    When you can convert flared gas to liquids in a single step, in the field, without pre-treatment and have no value because I have no VC investors in my company, that tells you technology is not the issue in clean tech.  I’ve thought this for years listening to the pitch from VC’s on the phone or at the conferences when they ask the questions, but it has now taken me to 2011 to have the evidence.  Smart money is not in VC and DOE funded deals in my opinion.  I recently participated in a World Bank study on gas conversion equipment done by a highly respected oil & gas chemical engineer (he recently retired from one of the majors, but I later found out knows personally my lead scientists).  He wrote me a note after we chatted briefly on the study (which will likely go public next year…I hope):

    ———————-

    It was great talking to you.  I realized that we are close soul mates advocating the beauty and optionality of methanol!!

    I truly value your
    technology and sympathize with the product challenges you have.  People
    are stupid and follow the flavor of the year: hydrogen economy, fuel
    cells, GTL diesel, bio-butanol, etc.  You will need a smart business
    plan and lots of patience (and some innovative fund raising) to achieve
    the success you deserve. 

    My message to the World Bank is that you are one of the few (3) technologies with great promise within the next 3 years.

    ———————

    The smart money is looking at technology, but I think those in industry (the engineers) would rather steal it then support early stage technologies.  You can see this by the new policies to refuse to sign NDA’s and drag out as much disclosure as possible.  The Chinese and Russian mentality on disclosures that has been adopted by VC investors for many years is filtering into all sorts of industries.  Patent laws are now changing and the government only gives you 7 years after disclosure.  The more we see industry changing, the more we see their focus to steal what they can and deal with the legal issues later.  Most companies cannot afford to sue these giants, and who wants to anyway.  Most of us are just interested in doing honest business with honest people.  The VC standard policy to never sign NDA’s is growing worldwide with industry following to insure they can get as much as possible for free.

    The world is changing and fast.  Where is the smart money?  It is not in the VC community nor in Washington.  Looking at the banking crisis in Europe ready to pop, and news on the street that the lawsuits building against JP Morgan and Goldman could bring them down, I don’t think it is on Wall Street like I once believed.  Maybe it is in the oil and farming industries?  If you find it, let me know.

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  20. By Benny BND Cole on September 16, 2011 at 1:28 pm

    Excellent post by RR. Of course, some of the failure of clean-tech is the ongoing flatlining of crude oil prices. We are not seeing $147 a barrel anymore. (Oddly enough, if we have a very “steep” demand curve, then the addition of biofuels to the supply could result in a sharp drop in oil prices–and make biofuels unprofitable for a while).

    I wonder if $80-$90 is sustainable, as new supplies come online and conservation and alternatives become more pronounced.

    SoCalGas is doing some natural gas to dimethyl conversion. You can run diesel on that.

    At this price point I think we have roughly reached Peak Demand, although supply could balloon depending on what happens in thug states such as Iraq, Iran, Nigeria, Venezuela, Mexico, Russia, etc.

    This makes the outlook for biofuels iffy.

    Biofuels from palm trees in SE Asia or casava appear competitive, in free markets. Corn I wonder about. Algae is a very long sot.

    BTW, notice no news from Venter and Exxon on algae. Venter and Khosla may have a lot in common. Venter once bragged he would boost palm oil output by 10-fold or more. Nada happened.

    [link]      
  21. By rrapier on September 16, 2011 at 2:05 pm

    David Lewis said:

    We would know the carbon price was high enough when Silicon Valley suddenly saw it was possible to completely transform the global energy industry with new technology energy startups.


     

    Or perhaps it is simply the height of arrogance for Silicon Valley to think they are the ones who will transform the global energy industry in the first place.

    RR

    [link]      
  22. By Optimist on September 16, 2011 at 2:16 pm

    Benny,
    I would hate to see any food source, including palm oil, used for fuel production (or car seats, the so-called green chemistry initiative, another ominous flavor of the month). If you find ways to grow palm trees more efficienctly, use it to lower my food bill. My fuel bill is mostly a luxury I can work around.

    So, once you exclude farm land for fuel (other than byproducts, which IMHO won’t add up to much, in spite of what USDA believes), you’ve got to look at algae, or at least a plant that can be cultivated in the open ocean. We need more primary production, and the only remaining unproductive area on the face of the earth is the open ocean. Personally, I expect macro algae to have the most potential, due to ease of handling and harvesting.

    And Venter is full of it: he’s a great genetic engineer, but genetic engineering is not the answer to every problem faced by mankind.

    [link]      
  23. By paul-n on September 16, 2011 at 2:32 pm

    Or perhaps it is simply the height of arrogance for Silicon Valley to think they are the ones who will transform the global energy industry in the first place.

    I think that about sums it up.  Because they could solve problems in the world of computers and software does not mean they can get around the laws of thermodynamics, no matter how creative they are, or how much VC capital they can suck in.

    They developed lots of computer solutions, with zero/minimal gov support, that have been adopted around the world.  So far, in clean tech, they have used lots of gov money and produced zero solutions that have been adopted around the world, or even locally.  They have failed to deliver on every grand promise, so why should we believe them now?

    As the great physicist Richard Feynman said ” in matters of technology, reality must take precedence over public relations, because Nature cannot be fooled”.

    So far, Silicon Valley and the VC’s are firmly focused on public relations, and have indeed fooled many investors, but they have not been able to improve on Nature in any meaningful/useful way.

     

    [link]      
  24. By Benny BND Cole on September 16, 2011 at 6:29 pm

    Optimist:

    I understand concerns about food to fuel. I confess I don’t have an answer. I will tell you this: Farmers love it. They make money and boost production. (I am talking in Thailand, and free markets. Corn is subsidized and probably an abomination).

    In Thailand, some marginal plots now go to casava, and that is expected as chips to china for ethanol. Thailand is self-sufficient in food.

    I wish the best for algae, but smart people have been trying for 30 years with algae, and are not even close. I mean, not even far away. I mean, if a guy who weighs 125 lbs wants to play in the NFL…..as a lineman….starting….for a championship team…..

    [link]      
  25. By takchess on September 17, 2011 at 10:10 am

    For perspective……

    http://www.greentechmedia.com/…..ondoggles/

    [link]      
  26. By Oxymaven on September 17, 2011 at 10:55 am

    With DoD joining USDA and DoE in becoming a major player in biofuel development this year, it would be nice to see them provide a clear-headed assessment of where we are with the current suite of biofuel technologies, and how far away they are from being truly cost-competitive. That would be far more useful than Khosla’s self-serving claims.

    Interesting that Enerkem is now saying that their Edmonton trash-to-biofuel facility is quite a bit behind schedule (they’d originally planned to be in production by end of this year), and will produce methanol, not ethanol (although they are developing an “ethanol production island” to convert the methanol to ethanol). DoE has offered a loan guarantee for an identical Enerkem plant in MS, but it is beyond my understanding why anyone would want to build a second plant before the first is shown to be viable. That has Solyndra written all over it if it goes through.

    Kior (one of Khosla’s investments) has the same attitude, saying that they will begin construction on their other 4 planned biorefineries as soon as their first MS plant is completed. That sounds just like Khosla.

    [link]      
  27. By takchess on September 17, 2011 at 11:42 am

    http://money.cnn.com/news/news…..n_ipo.html

     

    Perhaps this will be RR’s next post, I have a soft spot for Mascoma as the IP is from NH as a spinoff of Dartmouth. It’s a long shot,I’m sure.

    [link]      
  28. By Kit P on September 17, 2011 at 1:36 pm

    “use it to lower my food bill. ”

     

    Your food bill is high? I heard this same complaint at the yacht club over labor day. The people with the biggest sail boat were complaining about spending over $100 on steaks. He is an elite college professor. Life is hard in America!

     

    “I think that about sums it up. ”

     

    Well Paul how about next week we debate is is more right about energy, Hollywood actors or NYC actors.

     

    Meanwhile we are producing a lot more corn ethanol and electricity with wind than 10 years ago.

    [link]      
  29. By rrapier on September 17, 2011 at 2:52 pm

    Oxymaven said:

    Interesting that Enerkem is now saying that their Edmonton trash-to-biofuel facility is quite a bit behind schedule (they’d originally planned to be in production by end of this year), and will produce methanol, not ethanol (although they are developing an “ethanol production island” to convert the methanol to ethanol).


     

    They are following right in Range Fuels’ footsteps then.

    RR

    [link]      
  30. By paul-n on September 17, 2011 at 3:01 pm

    Except they haven’t got quite as much gov money on the line.

     

    If turning methanol to ethanol was that easy, and worth the cost, then Methanex would be doing it.

     

    [link]      
  31. By Walt on September 17, 2011 at 4:12 pm

    Paul N said:

    Except they haven’t got quite as much gov money on the line.

     

    If turning methanol to ethanol was that easy, and worth the cost, then Methanex would be doing it.

     


     

    Interesting article.  I have seen various press reports on their ethanol production, but I never knew they used a methanol intermediate step.  It is very telling how they are making ethanol from methanol.

    “Labrie said Enerkem’s technology ensures that unfortunate outcome will
    not occur in Edmonton. “Our technology platform has always been based on
    the production of methanol as a chemical building-block from which we
    produce ethanol through well-established catalysts, as opposed to others
    who have tried to develop new catalysts to produce ethanol directly
    from syngas and ended up with mixed products they had not expected,” she
    said, adding that Enerkem’s technology has been tested and validated
    for more than 10 years at its 1.3 MMgy demonstration-scale facility in
    Quebec.”

     

    The same thing used by Celanese in their “natural gas to ethanol” process.

     

    Perhaps there is a marketing edge here that I have not learned over the past 3-4 years.  Why fight the hatred for methanol if it can be avoided by removing it from the headlines, and tossing in ethanol to get people excited?

    [link]      
  32. By paul-n on September 17, 2011 at 6:54 pm

    have tried to develop new catalysts to produce ethanol directly
    from syngas and ended up with mixed products they had not expected

    Sounds like they might as well use Mark’s Envirolene process for making higher mixed alcohols and call it a day.  All this business with ethanol sems to be just chasing subsidies that aren;t available for anything else.

    [link]      
  33. By Walt on September 19, 2011 at 1:09 am

    Paul N said:

    have tried to develop new catalysts to produce ethanol directly

    from syngas and ended up with mixed products they had not expected

    Sounds like they might as well use Mark’s Envirolene process for making higher mixed alcohols and call it a day.  All this business with ethanol sems to be just chasing subsidies that aren;t available for anything else.


     

    Paul,

    I am really starting to see this big picture now with methanol vs. ethanol.  I’ve not really followed the Enerkem technology because I always assumed it was a gasification process to ethanol.  I never knew they used a methanol intermediate step until I saw that release above.

     

    What is interesting is that Methanex is now partnering with them in Canada for the distribution of their methanol and you can be nearly 100% sure that will be exported to America where Methanex controls ~ 75% or so of the USA market by its imports.  It is politically correct to build a plant in Canada for methanol out of waste using traditional syngas processing, and export the methanol to USA.  This is safe…nobody will get upset in my view as it will just find its way into the Methanex distribution channels.

     

    What I’m really going to watch now is if Enerkem takes the $50 million dollar DOE grant they received, and the $80 million loan guarantee from the USDA and makes methanol for Methanex in the USA. 

    ——————

    Enerkem being a Canadian company doesn’t seem to impact its ability to
    get financial support from the U.S. government. Montreal-based Enerkem,
    on top of an earlier $50 million loan guarantee from the U.S. Department
    of Energy, has just received another $80 million in loan guarantees, this time from the U.S. Department of Agriculture. It was one of only three biofuel companies to get this support — the others were Coskata and INEOS New Planet Bioenergy.

    http://www.cleanbreak.ca/2011/…..riculture/

    ——————

    I know they CLAIM they are going to make ETHANOL, but there is something more to this story than meets the eye in my opinion that will not fully come to light.  I don’t understand why they took their Edmonton plant and are selling methanol to Methanex when they can make ethanol and sell it in Canada.  I know the numbers well.  If you can get rack pricing for methanol and ethanol, nobody would sell methanol.  I’m fighting right now to sell methanol for $1.30 per gallon.  The ethanol prices are up to $2.75-$3.00 per gallon.  I wish I could make a lot more ethanol from my methanol.  Why would you sell Methanex methanol for $1.30 (or less) per gallon when you can sell Ethanol for $2.75 per gallon?

     

    Again, it is not the technology…it is the end product and government support.  Without government support, the ethanol industry would crash in my view as there is no way that methanol is that less of a product than ethanol.  I would agree that Mark’s mixed alcohols will be a finer solution than methanol or ethanol, but I am not convinced entirely that ethanol deserves such a high market premium.

     

    Here is another couple “green fuels” plays where methanol is the intermediate, but very silently mentioned in the background.  You have to dig (like with Enerkem) to know methanol is even involved to get to “green fuels” and all sorts of government money.

    http://cenblog.org/the-chemica…..vestments/

    http://biofuels.cleantechnolog…..els-120711

     

    Unless I change my marketing approach, I will have to temporarily close operations to focus on my other business to make money.  It is not possible to continue to fund this development myself making methanol in a marketplace that has to compete with cheap Methanex imports.  I accept that the “superstars” in the ethanol business claim to be able to make ethanol for $1-2.00 per gallon and then get lots of funding and government support.  Before you know it Chesapeake will “soon announce” they are making gasoline for less than $2.00 per gallon by making syngas, then methanol and then gasoline using “cheap” natural gas and biomass.  They won’t mention the government subsidies!  It’s crazy talk, but it does attract money and does attract press attention for more government support.

     

    [link]      
  34. By carbonbridge on September 19, 2011 at 2:12 pm

    Paul N said:

    Sounds like they might as well use Mark’s Envirolene process for making higher mixed alcohols and call it a day.  All this business with ethanol sems to be just chasing subsidies that aren;t available for anything else.


     

    Paul and Walt,

    Thanks for the nods to ENVIROLENE®.  As you both well realize, MeOH has been purposefully kept out of American automobile and pickup fuel tanks for the past century.  If C1 MeOH could easily be high-graded into C2 EtOH – then folks would accomplish this in a heartbeat as the wholesale rack price of C2 is typically more than double that of C1.

    Instead, MeOH is utilized to produce plastics, paints, more plastics, varnishes, more plastics, thinners and even more poly-plastic stuff.  We’ve had previous discussions on this blog concerning the volume of disinformation around methanol, the simplest alcohol produced 24×7 continuously.

    Methanol is an antifreeze/water grabber/solvent/simple clean fuel/and it becomes a biodegradable free lunch when diluted in water for microbes, bugs and all green living plants and trees to eat.

    Those that struggle to catalytically produce higher mixed alcohols (THE TARGET C1-C5 or C1-C8 or C1-C10 linear, normal alcohols with a few percentage points of methyl and ethyl acetates mixed in) via GTL synthesis in ‘direct competition’ with Fischer-Tropsch float-on-water synthetic oils — quite often cannot get enough of the C1 methanol produced in this ‘methanation catalytic GTL’ process to initially combine into C2 and then begin forming the declining chain of higher, normal alcohols all the way up to C10.

    When this GTL reaction kinetic is properly run, a blend of 90,400 BTU ENVIROLENE® higher mixed alcohols is produced at about twice the ‘assembly line efficiency’ as C1 methanol is produced globally for the past 95 years.  And this specific blend plus a wide range of volume percentages around this blend is well-covered by formula and usage patents owned by the Standard Alcohol Company of America, Inc.  This mixed alcohol blend is about 20% stronger BTU than is C2 Ethanol and 60% stronger than neat C1 Methanol – featuring 30 more octane points than either of these two lower alcohols.

    Anyone with too much C1 MeOH remaining within a synthetic blend of higher mixed alcohols OR anyone who has to first produce neat methanol and then further react it with different catalysts in subsequent reactor vessels into higher alcohols – really doesn’t know what they are doing.

    There are several firms struggling with this same catalytic synthesis equation and it all adds up to efficiency factors dovetailing directly into profitability.  After reading the recent quote by Enerkem’s PR lady – it sounds like Enerkem is operating a two-reactor system in order to get some of their end product out as C2 synthetic ethanol, plus other green chemicals, bio-acetates, and some higher alcohols.

    Thus Enerkem’s “ethanol and other green chemicals” explanation starts coming into play.  This is a public discussion so I’ll limit further speculation.  Perhaps they’ll come back and publicly discuss what it is that they are actually producing and what U.S. grants and loan guarantees will be used for to assist this Canadian company to qualify for U.S. Federal RFS benefits and tax credits?  Yet I doubt it.

    Enerkem has been all over the map during the past ten years regarding what it is that they may have been producing in their 1.3 mgpy demonstration-scale pilot plant in Montreal, Quebec.  Publicly, nobody really knows what biofuel that Enerkem is producing or will produce in Edmonton, Alberta, or next down near Pontotoc, Mississippi.

    -Mark

     

    [link]      
  35. By Walt on September 19, 2011 at 4:21 pm

    CarbonBridge said:

    Anyone with too much C1 MeOH remaining within a synthetic blend of higher mixed alcohols OR anyone who has to first produce neat methanol and then further react it with different catalysts in subsequent reactor vessels into higher alcohols – really doesn’t know what they are doing.

    Enerkem has been all over the map during the past ten years regarding what it is that they may have been producing in their 1.3 mgpy demonstration-scale pilot plant in Montreal, Quebec.  Publicly, nobody really knows what biofuel that Enerkem is producing or will produce in Edmonton, Alberta, or next down near Pontotoc, Mississippi.

    -Mark


     

    Mark,

    Your first comment takes me back to my belief that it is not the technology that matters in the current goverment model for funding “advanced biofuels” (e.g., ethanol from garbage).   My growing belief is that RR is getting closer and closer to outlining a model that will focus on the merits of the technologies (which would help both your company and mine) to actually receive some sort of commitment based upon success of production.  When someone is handed a $50 million dollar DOE grant, and an $80 million dollar loan guarantee to produce ethanol, and then less than a year later announces they signed a partnership in Canada to produce methanol (not ethanol) something is really messed up.

     

    What I wonder if they actually already got the $50 million dollars or is that something only coming later?  Even if it comes later, it sure does look good on one’s books that $50 million is coming down the road, and another $80 is guaranteed by American tax payers…even if the technology does not work, and they need to sell methanol in Canada just to get started.  It just seems odd to me if I were the CEO of Enerkem, but of course I’m not so I’m sure there is some method to the strategy to sell cheap methanol rather than high priced ethanol.

     

    The more I think about the RR plan, the more I believe that is does focus on the technology merits and puts the incentive at the end of the carrot to get the money.  If someone said, “If you can produce Grade A methanol and fuel grade ethanol, delivered to ABC location, we will give you $2.00 per gallon credit”, I would take the risk.  It is a major money maker for those who succeed.  If they limited it to only biomass feedstock, it would still be possible, although I would prefer associated flared gas or landfill gas.  Although biogas and biomethane are great sources of feedstock for us, we can say that right now there is an abundance of wasted flared gas and why not target what is ready now and wasted?

     

    Another good thing about RR plan is that it really does remove the criticism people have about all this money being handed out to companies that either do not disclose their CAPEX, OPEX or cost of production in detail to get the money.  I think people (at least me) do find it frustrating when you pour over the IPO documents trying to find out what these processes costs and their efficiencies after they have received government grants and loan guarantees to engage in a “pre-sales cycle” for some production or to introduce their product in the market.  It happened here in Michigan where they are getting over $20 million dollars in support just to build a small demo plant to begin testing the process and try to start seeing if they can meet specs.  That is a lot of money that I would love to see put at the end of a carrot, and see who can get to it first with actual production.  Believe me, I know a core team of extremely hard working people who would reduce salaries to get that money based upon barrels produced rather than promised lowest cost…without any risk of proving those media statements or having to repay if they fail.

     

    If we fail to perform shooting for the $20 million, then we need to either fix the problems, or loose out on the money.  Fair enough.  I can handle that deal.  It is fair across the board for everyone and let the best technology win.  Plus, I don’t need any lobby partner to get the money.  I know I’m not going to get any help from the methanol or ethanol lobby…this I know for certain.  So let’s just let it be about the technology and the ability to deliver barrels to the gate!  I’m in.

    [link]      
  36. By russ on September 19, 2011 at 4:34 pm

    Douglas Hvistendahl said:

    This also depends on what you define as clean tech. For some years I’ve had fans blowing summer air through my basement and into the house. In addition to cheap cooling, my heat bill has improved a little. This summer, the dirt under the house peaked at 74 degF, 3 degF up from last year. Two caveats, by mid last winter it was at 36 degF (at least we no longer have trouble with frozen pipes!), and be sure to use a dehumidifier if you do this.

    I’m using the savings to put in a liquid loop from the attic to under the dirt, wonder how well that will work out?

    Also a passive solar house can now be built (properly designed) for around 5 to 10% less than a standard house of the same size and quality. Don’t use them near Seattle or parts of New England, their winters get too cloudy.

    There are active solar buildings that can be used even there, but there is a cost premium. One contractor even built a totally solar heated house in Fairbanks, Alaska.


     

    The one in Alaska was called an igloo?

    Blowing warm summer air in your basement saved you on your winter heating bill? I don’t know what your line of work is but I don’t think it has anything to do with engineering. There are many reference on the net as regards heat transfer into and out of the ground – it is generally a waste of time.

    You are taking heat from the attic (air) and recirculating the liquid flow through pipes under your house and expect to gain from it?

     

    [link]      
  37. By carbonbridge on September 19, 2011 at 4:45 pm

    Walt said:

    Another good thing about RR plan is that it really does remove the criticism people have about all this money being handed out to companies that either do not disclose their CAPEX, OPEX or cost of production in detail to get the money.  If we fail to perform shooting for the $20 million, then we need to either fix the problems, or loose out on the money.  Fair enough.  I can handle that deal.  It is fair across the board for everyone and let the best technology win.  Plus, I don’t need any lobby partner to get the money.  I know I’m not going to get any help from the methanol or ethanol lobby…this I know for certain.  So let’s just let it be about the technology and the ability to deliver barrels to the gate!  I’m in.


     

    I echo your sentiments Walt.  Let the technology and its efficiency prevail instead of Lobbyist connections to grant givers among hype and hoopla about ‘green chemicals.’  Let’s get specific here. 

    • Just what was it that Range Fuels was attempting to produce? 

    • Why again would Enerkem now switch to a methanol front-end island when they’ve been crowing about producing cellulosic ethanol from landfill waste for a decade? 

    Pretty confusing even for insiders and those doling out grants and loan guarantees are NOT expert engineers who can adequately interpret critical details.  RR has proposed a really good and overdue alternative to using taxpayer biofuels money to better advantage herein.  I supported his earlier rendition of this type of plan – and I’m glad it is now getting further airtime in Forbes and elsewhere.

    -Mark

    [link]      
  38. By Walt on September 19, 2011 at 5:30 pm

    CarbonBridge said:

    Walt said:

    Another good thing about RR plan is that it really does remove the criticism people have about all this money being handed out to companies that either do not disclose their CAPEX, OPEX or cost of production in detail to get the money.  If we fail to perform shooting for the $20 million, then we need to either fix the problems, or loose out on the money.  Fair enough.  I can handle that deal.  It is fair across the board for everyone and let the best technology win.  Plus, I don’t need any lobby partner to get the money.  I know I’m not going to get any help from the methanol or ethanol lobby…this I know for certain.  So let’s just let it be about the technology and the ability to deliver barrels to the gate!  I’m in.


     

    I echo your sentiments Walt.  Let the technology and its efficiency prevail instead of Lobbyist connections to grant givers among hype and hoopla about ‘green chemicals.’  Let’s get specific here. 

    • Just what was it that Range Fuels was attempting to produce? 

    • Why again would Enerkem now switch to a methanol front-end island when they’ve been crowing about producing cellulosic ethanol from landfill waste for a decade? 

    Pretty confusing even for insiders and those doling out grants and loan guarantees are NOT expert engineers who can adequately interpret critical details.  RR has proposed a really good and overdue alternative to using taxpayer biofuels money to better advantage herein.  I supported his earlier rendition of this type of plan – and I’m glad it is now getting further airtime in Forbes and elsewhere.

    -Mark


     

    Mark,

     

    After I posted my message I thought about what you could have done with the $400 million that Range Fuels spent, or the $550 million that Bloom Energy has/is spending to get the bloom box to market commercialization.  It really is an amazing amount of money for anyone to spend in any start-up R&D company.

     

    I really do look forward to seeing with Enerkem and Chesapeake will spend to make ethanol from methanol, and gasoline from methanol.  Chesapeake has the deep pockets.  They just announced (10 hours ago) their new service company to implement all these technologies they are purchasing and that will need servicing.

     

    http://www.thestreet.com/story…..s-llc.html

     

    Could you imagine Chesapeake spending $400 million dollars and not producing ANY liquids or gas, and walking away like the VC backers later annoucing they are making millions of profits off the clean tech sector?  It is just amazing how the Valley has Washington in their hands.  Spend, spend, spend and show little but paper profits and no liquids.

     

    I hope RR plan gets some traction in Washington as I think it is now time for some of us to get our shot at some of the incentives to produce barrels of liquids, and let the best technology win.  I’m so ready my ears are burning every time I think about the current structure handing millions and millions (tens and hundreds) to companies that may never produce anything but expensive pilots, demos and losses when the cost of feed stock goes up in days of hyper-inflation some economists see over the next 5 years.  When cost of energy rises, these guys are going to suffer in my opinion.  The government will need to keep feeding them, or they will need to subordinate their loan position to the investors like we see happened with the recent solar disaster.  The government gave up their position to a few investors who now stand in first position on the assets left over, and the tax payers will get NOTHING in the end.  Just watch that scam unfold.  Not one wrist will be slapped.

     

    Again, imagine $550 million going into some company like Chesapeake and making NO RETURN and no liquid production.  See here:

     

    September 2011 Investor Presentation

    http://www.chk.com/investors/d…..tation.pdf

     

    Some complain about the oil and gas companies getting subsidies and tax breaks.  I guess my question will now be turned around and say, “Well, compared to who?”  I think it is only fair to see what people are doing with $400-550 million…not just temporarily.

    [link]      
  39. By Skip on September 19, 2011 at 10:38 pm

    I am a commuter and love my CNG bi-fuel car. It really only makes financial sense if you drive more than 50-60 miles per day… which is pretty common nowadays. I have cut my fuel bill by over 60%. I had a lot of questions about EPA and emissions issues, and found some good info on http://www.skycng.com. They do not sell anything. Its a good info site for the CNG community. Check it out.

    [link]      
  40. By Kit P on September 19, 2011 at 11:09 pm

    “I have cut my fuel bill by over 60%. ”

     

    Sorry to say this Skip but you sound like a con artist.

     

    RR NOTE: Kit, we are not going to refer to our guests as con artists. The rest of your post has been deleted.

    RR

    [link]      
  41. By Chad on September 23, 2011 at 9:40 am

    It’s pretty hard to be “competive” against Chinese solar, with more than ten times the subsidy, and coal, which externalizes hundreds of billions of damage per year, and nuclear which recieved far bigger subsidies back in the days the plants were actually constructed. The only fossil fuel that would be truly competitive with renewables in a fair market where polluters were required to pay is natural gas, but that would only last until the inevitable price spike in gas after the coal plants all shut down the day after they were required to pay for all the death and destruction they cause.

    [link]      
  42. By Kit P on September 23, 2011 at 11:26 am

    Chad where do live?

     

    “nuclear which recieved far bigger subsidies back in the days the plants were actually constructed. ”

     

    In the US, nuke plants were built by regulated utilities and not subsidized per se. If your utility did a good job of building it, nukes were very economical. As coal coats have increased, nukes are economical. The commercial nuke industry pays a lot of taxes and currently receives not subsidies.

     

    “after they were required to pay for all the death and destruction they cause. ”

     

    Where I live in Virginia, 90% of our electricity comes from coal. There is no death and destruction.

     

    Chad keep in mind that no more electricity is produced than you consume before you call others polluters. You are free to disconnect from the grid and make your own electricity.

     

    [link]      
  43. By Walt on September 23, 2011 at 12:13 pm

    It will be interesting to see how far this study makes into the american media.  I am more convinced California lead in “well-to-wheel” calculations on these biofuels will elminate all the hype about turning thousands of acres of fields/crops into biofuels to reduce carbon emissions.  EU thinks so now.

    ——————————-

    in the context of the debate on greenhouse-gas accounting
    with respect to bioenergy, the Scientific Committee of the European
    Environment
    Agency (EEA) unanimously passed an opinion calling for “a major
    revision of EU
    policies and directives related to bioenergy.” We thought you might
    be
    interested in both the opinion as well as the underlying background
    material,
    both of which can be found at

     

    http://www.eea.europa.eu/about…..nhouse-gas

     

    Major international efforts are under way to replace fossil
    energy with biomass in order to reduce greenhouse gas (GHG)
    emissions. Several
    EU directives encourage bioenergy use based on the premise that
    biomass
    combustion would not add CO2 to the atmosphere. 
    According to the opinion passed by the Scientific Committee
    of the EEA,
    “[t]his mistaken assumption results in a serious accounting error.”

     

    It is widely assumed that biomass combustion would be
    inherently ‘carbon neutral’ because it only releases carbon taken
    from the
    atmosphere during plant growth. However, this assumption is not
    correct and
    results in a form of double-counting, as it ignores the fact that
    using land to
    produce plants for energy typically means that this land is not
    producing
    plants for other purposes, including carbon otherwise sequestered.
    Present EU
    rules do not properly account for indirect land use change in the
    context of
    bioenergy policies and do therefore not consider the full GHG
    effects of
    bioenergy.

     

    The opinion provides an in-depth discussion on this
    accounting error. It concludes that the potential consequences of
    the incorrect
    GHG accounting are ‘immense’ and may even result in increased carbon
    emissions
    when fossil energy is replaced by bioenergy – which would accelerate
    global
    warming. Various degrees of the likely accounting errors are
    identified,
    depending on the source of biomass. The opinion also discusses the
    implications
    of correct GHG accounting for global bioenergy potentials and the
    food vs. fuel
    debate.

     

    Based on our analysis, the Scientific Committee recommends
    that:

    • European Union regulations and policy
      targets should be revised to encourage bioenergy use only from
      additional biomass that reduces greenhouse gas emissions,
      without displacing other ecosystems services such as the
      provision of food and the production of fibre.
    • Accounting standards for GHGs should
      fully reflect all changes in the amount of carbon stored by
      ecosystems and in the uptake and loss of carbon from them that
      result from the production and use of bioenergy.
    • Bioenergy policies should encourage
      energy production from biomass by-products, wastes and residues
      (except if those are needed to sustain soil fertility).
      Bioenergy policies should also promote the integrated production
      of biomass that adds to, rather than displaces, food production.
    • Decision makers and stakeholders
      worldwide should adjust global expectations of bioenergy use to
      levels based on the planet’s capacity to generate additional
      biomass, without jeopardizing natural ecosystems.

     

    Contact

    Helmut Haberl

    helmut.haberl@aau.at

     

    Detlef F. Sprinz

    dsp@pik-potsdam.de

     

     

     

    Sincerely,

         Detlef F. Sprinz

         – Chairman, Scientific Committee, European Environment Agency -

    _____________________________________________________________________________________________

    Detlef
    F. Sprinz, Ph.D.

    Senior Scientist —
     Potsdam
    Institute

    Professor —
     University
    of
    Potsdam

    Chairman
    — Scientific
    Committee, European
    Environment Agency

    PIK – Potsdam Institute for Climate Impact Research

    Transdisciplinary Concepts & Methods (RD IV)

    P.O. Box 60 12 03

    14412 Potsdam, Germany

    Voice:  +49 (331)
    288-2555/-2035 (secr.)

    dsp@pik-potsdam.de

    http://www.sprinz.org

    [link]      
  44. By Kit P on September 23, 2011 at 2:37 pm

    “convinced California lead”

    Well Walt you may want to keep in mind that California is just one state and has some very silly environmental regulations that will not be adopted by the rest of the country.

    First of ghg is not regulated in the US. We really do not care what they are doing in California or the EU. Second the purpose of biofuels is to reduce dependence on foreign by encouraging a small amount be produced from renewable energy sources.

    California is the largest importer of electricity and NG. Places like Wyoming provide that energy. We recently drove through Wyoming on vacation and observed several large coal power plants, coal strip mines, and NG gathering operations.

    What Wyoming does not have is a lot of people so the energy is mostly exported. When California passes a law that says its utilities must buy more expensive NG generation instead of coal, it does not mean less coal is burned. It just means others buy the cheaper generation.

    To suggest that power contracts are a lot of smoke and mirrors is an understatement. You young people should know the money is in the legal profession not in engineering. I just read where SMUD sold the right to the wind farm they wanted build and will buy the power back instead. Since SMUD is a PUD, they can not get stimulus money.

    Don’t get me wrong it is a good place for the wind farm. I think the concept of ‘green jobs’ is great but I just wonder how wonder if stimulus money is going to a slush fund for previous (and future) campaign organizers who only experience with energy is organizing the base.

    So Walt when California tells you they are doing something you may want to check the details to see if it meets your idea of ‘green’.

    [link]      
  45. By rrapier on September 23, 2011 at 2:54 pm

    Kit P said:

    “nuclear which recieved far bigger subsidies back in the days the plants were actually constructed. ”

    In the US, nuke plants were built by regulated utilities and not subsidized per se. If your utility did a good job of building it, nukes were very economical. As coal coats have increased, nukes are economical. The commercial nuke industry pays a lot of taxes and currently receives not subsidies.


     

    The Washington Post actually has something up on this very topic today: Energy Subsidies are as Old as the Republic.

    “Back in the 1950s, nuclear power received support worth $3.3 billion per year in today’s dollars — or a full 1 percent of the federal budget — for its first 15 years. Oil and gas got an average of $1.8 billion, or 0.5 percent of the budget in its early days.”

    [link]      
  46. By Kit P on September 23, 2011 at 4:44 pm

    “Back in the 1950s,”

    Part of the problem with the subsidy debate is that the term ‘subsidy’ is so broadly defined. For example, I looked at the line items that a CBO recent listed for nuclear. A lot of money but the biggest part looks like some slush fund that really does not have anything to do with the power industry.

    R&D is certainly something government should support. Back in the ‘50s, the government had built prototypes by companies like Westinghouse & GE. Shippingport and Peach Bottom come to mind but we only remember ideas that evolved to PWR & BWR designs adopted around the world. Back when the US had a positive trade deficit, selling nuke plants to the world was a money maker.

    Currently some of the R&D is for high temperature gas cooled reactors and small modulator reactors that would be suited for places like Hawaii.

    I think that wind, biomass, and solar projects that are still producing in 20 years will be examples of success. We also learn from failure. We should have learned from Carter era renewable energy that just throwing money at is good way to fail. Much cheaper is not funding it all and then stealing the designs from China for a change.

    [link]      
  47. By Kit P on September 23, 2011 at 5:00 pm

    Just saw this.

    “Obama’s Tax Plan Raises Price of Nuclear Energy

     

    Although these plants were built in the 1940s and 1950s to support national security activities, they were also used later to provide enriched uranium for commercial purposes.”

    http://blog.heritage.org/2011/…..ar-energy/ 

    One of the marvels of government is to tax industry for a service that it paid for at the time and the government does not do very well. Then the line item for that service is called a ‘subsidy’.

    [link]      
  48. By Walt on September 23, 2011 at 7:56 pm

    Kit P said:

    “convinced California lead”

    Well Walt you may want to keep in mind that California is just one state and has some very silly environmental regulations that will not be adopted by the rest of the country.

    First of ghg is not regulated in the US. We really do not care what they are doing in California or the EU. Second the purpose of biofuels is to reduce dependence on foreign by encouraging a small amount be produced from renewable energy sources.

    So Walt when California tells you they are doing something you may want to check the details to see if it meets your idea of ‘green’.


     

    I am looking at it from a ten thousand foot view worldwide.  The carbon economy is coming during the next 10 years in my opinion unless there is some sort of major dramatic economic disaster that effects the world…and then it will be hammered through faster.  What is missing now is how to price carbon and create a global market.  Cap and Trade does not work in EU yet and it will struggle in California, but I understand there is already some trades ongoing and it is picking up once 3 main lawsuits are settled or litigated through to the supreme court.  Nothing moves forward in any new market that is not first defined in the courts, and even then it can collapse without government mandates/support.

     

    Oh, GHG is regulated and reporting is ongoing.  It has been delayed twice now, but I know every emitter right now is spending lots of money on calculating their inventory for mandatory reporting…with or without delays.  At the present time, California is taking a lead, but the world economy is moving toward “well-to-wheel” even though it was rejected by many the past 4-5 years.  The report above is going to make it that much harder to ignore well-to-wheel calculations for fuels and electricity.  Europe is in a major financial mess right now, but I anticipate (expect) the EU central bank, Russia, China and others will move on a new currency with or without the United States.  China and Russia are certainly not going to let the United States and Britain have all the fun playing with reserve currency markets and interbank lending.  I believe carbon will be a tool to help them underwrite a new global currency to help stablize the global markets within 10 years, maybe sooner with a major crisis.

     

    I’m not looking at the other states in America to be of any significance to the global markets, per se.  California is a large economy and almost a country in GDP by itself.  There is a LOT of ethanol plant production getting ready to converge on California in the fuel markets.  See here:

    http://www.arb.ca.gov/fuels/lc…..222011.pdf

    Tell me that is not competition to get into the California fuels market.  That would make all of the EU itself shocked what one state attracts.

     

    However, the issue of land use is not over yet…we will see how it impacts all the facilities falling over themselves to get into California.

    http://www.arb.ca.gov/fuels/lc…..notice.pdf

    [link]      
  49. By Walt on September 23, 2011 at 8:13 pm

    Kit, I spoke to soon perhaps, this just came out of California in the last 3 minutes to my inbox.  I have not studied it yet, but the draft report looks interesting.  It seems to be a topic now in California and in EU today.  Washington will follow when people start putting money in people’s pockets, and that will not happen until this gets figured out in the EU and California.  UN and Washington will follow with money in campaign coffers.

    ————————

    The California Air Resources Board (ARB) staff posted a GTAP
    model for the September 14, 2011, LCFS public workshop to discuss
    draft revisions of land use change carbon intensity values for
    U.S. corn ethanol, U.S. soy biodiesel, and Brazilian sugarcane
    ethanol.

    We have removed this GTAP model from the ARB website; instead,
    the GTAP model is available at the Purdue University link:
    https://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=3729

    Please note that the GTAP model posted at the Purdue University
    website provides the opportunity to run the experiments for food
    consumption scenarios that are discussed in the Tyner et al
    report.
    http://www.arb.ca.gov/fuels/lc…..report.pdf

    A copy of the GTAP model resides at an ARB computer and is
    available for public use.

    If you have comments or questions, please contact Mr. John
    Courtis at jcourtis@arb.ca.gov, or via telephone at (916)
    323-2661, or Mr. Jim Duffy at jduffy@arb.ca.gov, or via telephone
    at (916) 323-0015.

    General information on the LCFS program can be found at the LCFS
    informational portal: http://www.arb.ca.gov/fuels/lc…..s/lcfs.htm

    The Low Carbon Fuel Standard, a regulation to reduce the carbon
    intensity of fuels sold in California by ten percent by 2020, is
    designed to help clean the air, protect the environment, and
    drive the development of clean, low-carbon fuels to improve
    California?s energy security and energy independence.

    [link]      
  50. By Walt on September 23, 2011 at 8:32 pm

    By the way, does anyone know a company that went public on May 27, 2011 as the most promising sustainable fuel process technology that is going to take sugar and turn it into jet fuel?

    —————

    “Solazyme, which held a public offering
    earlier this year, grows algae by feeding it sugar in fermentation
    tanks. The sugar has always been a sticking point for some because sugar
    means added costs. Many algae companies claim they will be able to grow
    algae by feeding the single-cell bugs a steady diet of free sunlight
    and carbon dioxide. The photosynthetic method, however, requires
    producers to extract their algae from water, a thorny and expensive
    challenge that has vexed researchers since the late ’70s when industrial
    algae research began. Solazyme doesn’t have to worry about water, but
    it does need to keep a tight lid on sugar costs.

     

    Algae oils can be used in a wide variety of products. The company
    currently produces algae-based jet fuel for the U.S. Navy — 283,000
    gallons have been shipped so far under two separate R&D contracts.
    It also sells an anti-aging cream called Algenist. Sephora and The
    Shopping Channel have agreed to distribute it. (That’s algae milk in the
    picture.)

    http://www.greentechmedia.com/…..in-brazil/

    ————–

    I wonder if the calculations on using sugar will impact their sustainable claims as the “food vs. fuel” debate heats up.  It is a good question.

    [link]      
  51. By mac on September 24, 2011 at 12:24 am

    Robert said:

    The Washington Post actually has something up on this very topic today: Energy Subsidies are as Old as the Republic.

    “Back in the 1950s, nuclear power received support worth $3.3
    billion per year in today’s dollars — or a full 1 percent of the federal
    budget — for its first 15 years. Oil and gas got an average of $1.8
    billion, or 0.5 percent of the budget in its early days.”

     

    ——————————————————————————————————————————————————

    Quite a revealing graph.  Someone obviously did some home-work putting this graphic together.  I hope your book will contain a few surprises like this.

     

    - Mac


    [link]      
  52. By Kit P on September 24, 2011 at 10:57 am

    “I am looking at it from a ten thousand foot view worldwide.  ”

     

     

    Walt maybe I have been doing this longer than you Walt so I am more skeptical of what California says it going to do, likes the Picken’s scam designed to sell NG. Places like California and France do not have any coal and would like world-wide regulations to give them an advantage. Not going to happen.

     

    I have some 15 year old business plans where I have a line item for ghg credits. It was purely symbolic and if you check is still purely symbolic.

     

    “There is a LOT of ethanol plant production getting ready to converge on California in the fuel markets.  See here:”

     

    That is not what your link says.

     

    “Tell me that is not competition to get into the California fuels market. ”

     

    I do not have a problem with my E10 being produced at a lower cost with PRB coal-fired boilers.

     

    California wants to tell the rest of the country how to protect the environment but they are very ineffective at anything but self promotion. I do not have a problem with NG but it is not an effective solution to GHG emissions.

     

    [link]      
  53. By Kit P on September 24, 2011 at 1:47 pm

    “Quite a revealing graph.  ”

     

    What is revealing mac? It seems like kind of a stretch to compare support in the 50s for an industry that now provides 20% of our electricity to what happened at Solyndra. Sounds like spin.

     

    “Someone obviously did some home-work putting this graphic together. ”

     

    You can check the source mac but I am not impressed that VC from SF would come up with this spin.

     

    “Even today, new nuclear plants can’t break ground without loan guarantees from the federal government ”

     

    Actually four plant have broken ground without loan guarantees. I do not thinks the plants in South Carolina even bothered to apply for a loan guarantee.

    [link]      
  54. By Anonymous One on September 28, 2011 at 11:48 pm

    Are there any transcripts around regarding Thiel’s talk?

    The video is at
    http://techcrunch.com/2011/09/…..-and-dead/

    A transcript is in the CaptionBox directly under the video.
    The quotation is about 3 minutes into the video.

    [link]      
  55. By moiety on September 29, 2011 at 4:08 am

    mac said:

    ——————————————————————————————————————————————————

    Quite a revealing graph.  Someone obviously did some home-work putting this graphic together.  I hope your book will contain a few surprises like this.

     

    - Mac


     

    What is improtant is that these subsidies are put into context of what they produce i.e. per BTU or per MW or per product. However it does seem that subsidies are heavily weighted towards nuclear.

    [link]      
  56. By Kit P on September 29, 2011 at 4:15 pm

    “However it does seem that subsidies are heavily weighted towards nuclear.”

    That is because the report is contrived to support venture capital investment based in the Silicon Valley.

    “Nancy Pfund is a Managing Partner of DBL Investors, a “double bottom line” venture capital firm based in San Francisco, CA.”

    If you do not look at the logic, the report is interesting reading. The basic theme is that new sources of energy should be promoted by the government. In 1947, fission and fusion offered a potentially limitless source of energy. That is still true today and nuclear pays back government by taxes on the 20% electricity that is produced.

    Renewable energy is the oldest source of energy. Coal replaced wood on steam locomotives. Diesel powers locomotives these days. Petroleum replaced crushing oil seeds for lighting. Producer gas replaced oil lamps. Natural gas via pipelines replaced producer gas. Electric lights replaced gas lights.

    Many long for the good old days. We visit Roman aqueducts and take rides on narrow gage railways. Of course we get there by riding on jet aircraft forgetting in the good days most of us would have been slaves in good times and cannon fodder in bad.

    I certainly advocate using a certain amount of renewable energy. I think it should be provided incentives too. We also need to keep in mind that the goal is to do a better job of producing energy not just making venture capitalist rich.

    [link]      
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