Short term challenges, long term opportunities

No sector is immune to the current financial unrest, and also many cleantech companies will face hard times during the next year or two. And highly leveraged projects, as often is the case with many wind power, may be postponed or cancelled.

Still, there are reasons to believe that the cleantech sector will fare relatively better than other areas. And in the long term, the outlook is still positive. The reasons are several:

• Renewable, domstic energy is a measure to improve national security. It's a long-term necessity independent of the current financial unrest. Public funding will continue to reach the necessary goals.
  

• The possible physical mechanisms behind climate change are indifferent to a Wall Street crisis. Companies who embrace this fact will act accordingly and invest in renewable energy and related technology as a long term strategic resource. Further on, renewable energy will be a priority for public funding.

• Emerging economies will participate in the global emissions market. Sooner or later, giant economies like China and India need to share the burden and reduce the CO2/$ growth ratio.
  
  
• Higher living standards in emerging economies will increase consumer consciousness and the demand for a cleaner near-environment. When you are starving you don't have time to bother about smog or inadequate waste-management, but as conditions improve, these issues will come closer to the top of the agenda. That is good news for companies within these sectors.
  
  
• Energy efficient is more important than ever when times are hard and resources scarse.

In particular, projects and technologies that benefit from public funding will find less problems than others. So will those companies and projects financed by equity rather than debt. The situation is troubling, but there is no need to panic.

Interesting IT solution for fuel efficiency

Swedish company Blueflow Technologies has developed a technology for informing boat operators on fuel combination and speed. With simple additions to the boat, and with a wireless connection, it is possible to display the information on a cell phone or laptop computer.

Using this information it is easier for the boat owner to choose speeds with higher fuel efficiency. With soaring oil prices, investments in technology like these pay off in even shorter periods. Further on, BlueFlow are sure to find a strong domestic market as well, Sweden is the country with the most leisure boats per capita.

Check it out here

Investments in renewable energy reach USD100 billion per year

Renewable energy investments now amount to USD100bn according to a report by the United Nations.

There is no question about this area being a part of the mainstream investment world. Some types of renewable energy investemts (large scale hydropower projects in particular) have represented an important part in the portfolio of energy companies since decades or even longer. Other kinds, such as wind power and solar power play an important role since more recently.

And a higher demand for energy, increasing oil prices, an increasing world population and the fear of climate change is going to keep the importance of this area growing. Cleantech is one of the fastest growing investment sectors in the US, increasing by 18% during the first quarter of this year - despite the current financial unrest. And as I predicted, energy efficiency plays an increasingly important part. It is the fastest growing segment in cleantech, with capital invested in Power and Efficiency Management Services increasing 454% from last year.

According to the National Academy of Engineering, of the 14 greatest engineering challenges for humanity, almost half are related to renewable energy and cleantech. If that tells us something about the future, the cleantech and renewable energy share of investments will keep growing.

Ann Arbor pioneer in using LED for street lighting

Ann Arbor, Michigan will be the first city in the United States, and to my knowledge, in the world, to only use 100% LED lights for their street lighting. In addition to saving US$100.000 per year in electricity costs, it is estimated that CO2 emissions will be reduced by the equivalent of taking 400 cars out of traffic. Lighting stands for more than 20% of all the power consumed in the United States.

LED lighting has been discussed earlier on this blog, here and here. LED lamps offer several advantages over traditional bulbs, as well as CFL low energy bulbs.

Trade tariffs against cleantech

The European Commission has extended the European import duties on efficient light bulbs. The tariffs are supposed to protect European light bulb producers from their Chinese counter parts. This is problematic from a cleantech trade point of view. It means higher prices for consumers and less incentives to improve domestic and commercial building energy efficiency in Europe. Further on, it is a hinder for the development of the environmental technology industries in emerging economies.

However, perhaps could European LED and OLED lighting producers benefit from this?

Prediction of the Cleantech Market: Looking into the Crystal Ball (II)

I have in a recent post written about my predictions for the cleantech market. In that post, I suggested that energy efficiency would be the sector that will get the most attention in the near future from investors. In this post, I will develop the issue, including suggestions of the companies that would benefit from such attention.

Energy efficiency is low-hanging fruit when trying to reduce GHG emissions. Both in industrial and domestic sectors, there are huge gains to be made/wastes (naturally, the cost of capital may vary). In many cases, it is easier to implement these measures than that to replace fossil fuel sources with renewables as a way to reduce CO2 emissions. There is a large potential for companies that provide energy efficiency a key issue in their product offer and perform well, since the concept is yet to take off on a grand scale. Considering that potential, some of them might be undervalued today. Further on, as the world economy grows, and new groups adapt to Western consumption patterns and standards, the need for energy efficiency will increase.
Good performance in the EE area may not show in the stock price however, if energy efficiency is a small part of the companies activities.

Some of the companies and sectors suggested in this post might not be thought of as "energy efficient" at a first glance, but they will profit from providing efficient products and services. Citing Tom Konrad, there is no Vestas of energy efficiency. Energy efficiency isn't a clearly defined sector, but rather a philosophy that spans across several sectors. A common characteristic however, is technology. Through technology the use of energy will diminish: power technology, engine technology, building & infrastructure technology, information technology and so forth. Energy efficiency is about making components and appliances lighter yet stronger, wasting less energy and resources.

Power monitoring and regulation
It is quite obvious that companies that work directly with energy efficiency are bound to benefit from an energy efficiency wave. Especially companies for monitoring and regulating power at a large scale are interesting. These companies may be found in the software, microelectronics & power engineering sectors.
Example of companies in these sectors:
enerNoc: Energy and power management for utilities
Energy connect: Supply and demand based power management
Comverge: Power management & Metering

IT, data management & computing efficiency
Stationary and server computers waste a lot of energy in the form of heat. In addition, because of this heat the computers need to be cooled to avoid break-downs, causing further energy consumption. With ever increasing server parks, this is becoming a significant factor. Google has together with Intel launched a program for increasing energy efficiency in computing, and setting performance targets. The initiative includes tech heavyweights such as Dell and eBay. In addition to improved management, using innovative materials may reduce power consumption. Information technology obviously also offers opportunities for reducing energy consumption, such as remote working, video conferencing etcetera.
IBM: processing data for peak-hours calculation, server management software
Google: efficient information management
Norstel: low energy semi-conductor materials
Cisco & WebEx: remote office solutions
Western Digital: a new line of energy efficient hard drives

Lighting
Increasing the use of LED for lighting will reduce energy consumption drastically, according to Peter Svensson, energy consumption from lightning represents 22%, and with a higher use of LED lighting that consumption could be reduced by 50%. They are already more efficient than CFL bulbs ("low energy bulbs"). Further on, CFL bulbs contain mercury. Still they seem to be the mainstream choice for years to come. More countries are bound to follow in the footsteps of South Africa, Brazil and Australia to phase out incandescent in favour of CFL bulbs. LED lighting would probably need larger cost reductions before making a real break-through.
LED & CFL bulb producers:
Lighting Science Group Corp
Philips

Infrastructure & construction
The have we construct and maintain buildings and infrastructure has an important impact on the energy consumption. Companies that can deliver “green buildings”, or that provides parts that lower energy consumption will benefit from this. Further on, consultants refurbishing existing buildings and infrastructure will have a busy schedule.
Johnson Controls: building energy efficiency
HySSIL Pty Ltd: light weight, high-strength concrete
Chromogenics: energy saving, "intelligent" windows
ITT Flygt: pump systems awarded for their efficiency

Efficient power generation, transformation & operation
General Electric & Sensicast Systems: remote motor management through wireless networks
Power Efficiency Corp: technology for managing electrical motors & increasing efficiency
ABB: a large number of products & services increasing efficiency

Energy efficiency is not only for the philantropic investor, it is a necessary measure and as such a sound investment opportunity.

Would an all-black Google have an impact on climate change?

By default, the pixels of your screen are black. Lighting them with bright colours requires more power. Therefore, web sites with white backgrounds, that are used by millions of users (like Google), cause a considerable use of energy. The people behind the page Blacke had that in mind when launching Blackle. The page consists of the Google search engine, but with a mostly black interface. According to Mark Ontkush, if Google would have a black background, energy use of their users would go down by 750MWh. This claim is however valid for old, energy hogging CRT screens - if all screens were to be of the modern LCD type, the numbers would be different. And even if 750MWh would be a correct figure, it is negigible when count per user.

But initiatives like Blackle are interesting, because they highlights the energy use of tech companies. Although the internet society reduces energy use on a macro level through distance work, reduced use of physical materia, etcetera, internet tech companies have come into focus regarding energy use.
With soaring costs for energy use (web giants like Yahoo and Google report yearly 20% to 40% increases in energy costs, not counting the cost for their users), it is going to be interesting to see how companies like Google respond to the impact of their business. As a starter, Google are installing asolar power system at the Googleplex.

Prediction of the Cleantech Market: Looking into the Crystal Ball (I)

For many of us working or studying within the field of renewable energy, the recent boom in renewable energy interest among the general public and the financial sector did not come as a surprise. Scholars, engineers, inventors and environmentalists have for a long time seen and discussed the problems of current energy systems, and invested time, interest and money in alternatives and solutions. Our current energy systems are not sustainable and create high external costs. Reducing these external costs by replacing fossile energy sources with renewable energy is a logical step.

In the same manner, the next phase will come out of logic. Actually, it should be something that should have preceded the interest in renewable energy. The next boom will revolve around energy efficiency. This is not something entirely new; energy efficiency is an issue that has got a lot of attention during the last couple of years, with rising prices, climate change, energy dependence and other problems with the oil economy. Energy efficiency was a hot topic already during the oil crisis of the 70's. Whenever there are output reductions or price peaks, which may be the case with wars and conflicts, energy conservation and efficiency appear as necessary measures. What has not been frequently highlighted is the advantages of energy efficiency when compared to renewable energy. Don't get me wrong, they are two completely different concepts. Both are necessary for fighting climate change and other than on a national level, they mostly don't compete with each other. But when considering in which companies to invest your money, they often do compete. It is easy to understand the benefits of energy efficiency. If we need to reduce the energy generated from fossile sources with 1 TWh in a sustainable manner, we could go for installing more renewable energy capacity. Or, we could implement energy efficient technology. In the case of energy efficiency, we would not need to bother where to find more sources of energy. We would not even need to debate the issues of uncertain profitability and high investment costs of renewable energy production facilities, or deal with the issues with raw materia un-sustainability of ethanol, biogas generation versus incineration. Better than to find replacement sources of energy is to not need to use the energy in the first place. There is an inherent beauty in energy efficiency - earning more by wasting less. That is attractive for most of us conducting business. Thus, because of the logics of energy efficiency, it is a logical step that energy efficiency will be next highlighted cleantech sector. As in the case of renewable energy, this will not be a temporary trend. The problems connected to the oil economy are permanent, as are the problems with energy from other non-sustainable sources.

In a later post, I will highlight which sectors and companies will be the winners in this new wave of cleantech. There are a lot of companies that are rather invisible when thinking of cleantech, but that do work with energy efficiency.

PS. A quick note on energy efficiency vs. energy conservation. Although often used interchangably, they are not necessarily identical. Energy conservation means using less energy by doing less. That could involve sacrificing processes that we would have preferred to keep. Energy efficiency means using less energy by keep doing something, but with less energy input. Energy conservation is to turn off the light, energy efficiency is to change the light bulb to a energy saving one.