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2011 clean economy roadmap

  2. 2. Table of ContentsIntroduction by Jeff Anderson 1Executive Director of the Clean Economy Network Education FundThe Clean Economy Roadmap Introduction 1 Transportation and Infrastructure 5 Deployment, Manufacturing and Commercialization 11 Electricity 19 Clean Economy Markets 25Clean Economy Network Education Foundation 32board of directors and staffAcknowledgments Inside back cover
  3. 3. INTRODUCTION CLEAN ECONOMY ROADMAP The Journey Begins Here JEFF ANDERSON, Executive Director, Clean Economy Network Education Fund What would happen if you put clean economy business leaders in a room with policy makers from the Hill and Administration, and asked them to discuss some of the burning questions facing this community with no media present? What if you told them there would be no PowerPoints, no speeches, and no presentations? What if you gave policy makers the opportunity to listen to the unfiltered experience of business leaders who are trying to deal with federal, state and local policies and programs? What if you gave business leaders the opportunity to hear directly from policy makers about the challenges of developing innovative policies to support the clean economy? What would happen? I’ll tell you what would happen—rich, thoughtful conversation, dialogue and sharing of ideas. All that, and much more, took place at CENEF’s inaugural Clean Economy Summit in Washington, DC on January 24-25, 2011. The conversations that took place about transportation and infrastructure, deployment, manufacturing and commercialization, electricity and clean economy markets have been captured and summarized here in the Clean Economy Roadmap. The Roadmap is not a set of specific policy prescriptions for the clean economy. Every journey needs a starting point, a point of departure. This inaugural Roadmap is just that. It sets the stage and lays the groundwork for further discussion and exploration of policy issues. I encourage you to use this Roadmap as a starting point for your own path to policy development and formulation. I hope you will share with us your thoughts and experiences as we move forward so that at next year’s Summit, we can look back at where we started and continue to chart a course—a map, if you will—to a clean economy future.INTRODUCTIONOn January 24-25, 2011 in Washington DC, the CleanEconomy Network Education Fund (CENEF) held thefirst annual Clean Economy Summit, an invitation-onlyconvening of the existing and emerging leadership ofthe clean economy business community from acrossthe nation. Over the course of two days, the Summitengaged these leaders in a structured dialogue withtop policymakers, opinion leaders and issue experts.From their facilitated conversations on a strategic setof issues, CENEF has begun to map some of the mostcritical policy pathways for the rapid expansion of aclean economy, which has been captured in this CleanEconomy Roadmap.CLEAN ECONOMY ROADMAP • www.ceneducationfund.org/clean-economy-summit 1
  4. 4. INTRODUCTION THE CLEAN ECONOMY SUMMIT: subject area in order to ensure knowledgeable facilitation Unleashing innovation, economic of each session. The participants brainstormed ideas, growth and job creation then evaluated and prioritized the potential policy and The creation of a clean economy requires long-term and program solutions that emerged. consistent public policy, which is essential to the creation of market clarity and certainty. Implementation of such consistent policies requires sustained engagement by THE CLEAN ECONOMY ROADMAP: the clean economy business community in the policy Charting a course for the growth development and political process. To that end, CENEF of the clean economy launched the annual Clean Economy Summit in order to The main themes, issues and topics that surfaced explore this intersection between business and policy during the conversations at the Summit have been and the impact each has on the other. summarized below in the Clean Economy Roadmap. While by no means comprehensive, the Roadmap To be effective, this examination required high level identifies four critical sets of policy issues impacting interaction among opinion leaders, policy-makers, the clean economy that correspond to the four tracks business leaders and other thought leaders who have at the Summit. To ensure continuity, CENEF intends to demonstrated the substantive expertise necessary use these same categories of issues as the basis for to drive the clean economy sector forward. Business subsequent Summits and the resulting Clean Economy community participants in the 2011 Summit came from Roadmap documents. The issue areas were: CEN’s Leadership Council (which includes the CEOs of CEN’s corporate members), CEN executive members, Transportation and CEN chapter steering committee members, CEOs of Infrastructure allied organizations, and the CEN and CENEF boards of The availability of cheap oil has defined directors. Their partners in the ensuing policy dialogue and shaped America’s transportation were key federal legislative, administration, and agency policy. From hybrid and electric cars and trucks to staff. advanced fuels and efficiency technologies, new and underutilized technologies are already available to The primary goal of the Summit was to surface and greatly reduce our dependence on oil. The global race is prioritize those policy proposals with the greatest on to bring these technologies to the marketplace, and, potential to unleash innovation, economic growth and job if America does not attempt to compete, we will fall even creation. Taking advantage of the political reset of a new further behind. A revitalization of the declining US Congress, the Summit used the opportunity to evaluate transportation industry, a major domestic employer, the landscape that lies ahead, both in terms of business could come about if government would move quickly opportunities and policy possibilities. By integrating to implement policies that stimulate demand for and business and political perspectives and drawing on the encourage investment in cleaner forms of transportation, rich expertise of both communities, Summit participants thereby creating jobs, spurring the economy, and identified key challenges and issues impacting the clean reducing our dependence on oil. economy and began to investigate the possible pathway to solutions. Deployment, Manufacturing and On the first day of the Summit, clean economy leaders Commercialization met for a facilitated interactive dialogue aiming to surface The innovation cycle is a complex web critical policy themes and ideas. Participants were of actors and investments that all play a critical role divided into four systems-based tracks that brought in each stage of a technology’s development, from together business leaders, leading NGOs, key Hill and concept through deployment and commercialization. agency staff, and other thought leaders with expertise in Each step of the process comes with a set of risks an assigned topic area. The resulting conversations were and challenges that public policies can influence, both moderated by a career professional familiar with the positively and negatively. If correctly formulated, policy 2 CLEAN ECONOMY NETWORK EDUCATION FUND • www.ceneducationfund.org
  5. 5. INTRODUCTIONcan create an environment that drives innovation, efficient domestic markets, it is critical to determine theencourages investment, and ultimately facilitates the best means by which to set the appropriate long-termentry and expansion of clean technologies into the signals and find the correct mix of standards, incentivesdomestic marketplace. Deploying clean technologies in and mandates through policy at the federal, state andturn assists their commercialization, grows a domestic local levels to balance with the needs of a free market.manufacturing base, and supports the expansion ofsuch technologies in domestic and foreign markets. The goal of the Roadmap is to shed light on some of the top policy issues broadly impacting the clean economy Electricity sector through the lens of the experiences of those During the majority of the 20th century, the business leaders who are even now building the new United States had the most sophisticated clean economy. Each track report below includes a full list energy grid and infrastructure in the of the participants in the conversations to demonstrateworld. However, it has failed to evolve to meet the needs the depth and breadth of the expertise, knowledgeof a changing age, and the electricity grid remains the and points of view represented in the conversations.only large-scale analog system in operation in today’s As you will see, what sets the Roadmap apart is thatdigital world. The U.S. must begin to deal with the the participants are overwhelmingly from the businessnumerous structural and policy deficiencies of the community, which helps to provide a more accuratesector, including outdated and inefficient grids, inflexible sense of the issues from the business point of view. Wepricing rules, lack of interconnectivity, and consumer have included in each section a brief profile of two of theeducation. The solution requires a mix of policy changes businesses whose executives participated in the track toand technological innovations at the national, state, and illustrate the innovation and cutting edge technologieslocal levels. that clean economy companies are already bringing into the marketplace. Clean Economy Markets While clean economy markets have been slowly developing for decades, they have HOW TO USE THE ROADMAP yet to fully hit their stride in the U.S. for The Roadmap is designed to foster a bettera variety of reasons, including a lack of commitment by understanding of the complexities we face in buildinggovernment to develop the environment necessary for a clean economy, while simultaneously driving into thelong-term certainty in the marketplace. In order to build policy arena those informed, innovative ideas that areCLEAN ECONOMY ROADMAP • www.ceneducationfund.org/clean-economy-summit 3
  6. 6. INTRODUCTION based upon the actual expertise and knowledge of clean and transcripts of the contemporaneous recordings economy business leaders. However, the contents of made of each session. Each of the sections was peer each of the sections below are not meant to serve as reviewed by the participants themselves to ensure that a comprehensive analysis of every policy issue facing the content, themes and tone of the conversations were the sector. Rather, the Roadmap lays the groundwork for accurately captured and represented. further policy development by exploring specific topics within each area that are the most relevant and current Finally, it is important to note that the sessions were in 2011. Future Roadmaps will undoubtedly address closed to the media in order to facilitate a fully open and other topics in more detail as both business and political honest dialogue. While the participants in each discussion circumstances change over time. session are listed, no observation, recommendation or opinion may be attributed to any specific participant; Each section provides an overview of the discussions neither can any conclusion or idea be deemed one that that actually took place during the 2011 Clean Economy is shared by all of the participants. Summit and presents some of the key outcomes and conclusions articulated by the participants. At the CENEF is publishing this Roadmap so it can be put Summit, each track operated independently from the to good use by those who read it, whether that use is others and the outcomes described below mirror the learning more about the structural barriers faced by the unique dynamic of each discussion in both structure and clean economy business community, formulating policy content. proposals to address those issues, or stimulating your own thinking and innovative ideas. We look forward to From a process standpoint, each section of the continuing the dialogue and working together to unleash Roadmap was created using a combination of notes the vast potential of the clean economy sector to create taken during the discussion by the moderators and staff jobs and economic growth across the nation. 4 CLEAN ECONOMY NETWORK EDUCATION FUND • www.ceneducationfund.org
  7. 7. TRANSPORTATION AND INFRASTRUCTURE: PETROLEUM DISPLACEMENT IN LIGHT DUTY VEHICLES INTRODUCTION America’s appetite for petroleum endangers our national security, exposes our economy to a volatile global oil market, and threatens the sustainability of our environment. The transportation sector consumes 72% of the country’s petroleum supply, a significant portion of which is utilized in light duty vehicles. While government can assist the development of advanced, cleaner vehicle technologies, it is the private sector that will bring those solutions to the marketplace. This section of the Clean Economy Roadmap articulates the state of these technologies and investigates what kinds of policies will best advance their commercial deployment. The following discussion focuses specifically on displacing petroleum use in light duty vehicles. The Clean Economy Network Education Fund has identified vehicle efficiency, electrification, and advanced biofuels as three of the most viable solutions for achieving this goal.CLEAN ECONOMY ROADMAP • www.ceneducationfund.org/clean-economy-summit 5
  8. 8. TRANSPORTATION AND INFRASTRUCTURE TRACK PARTICIPANTS THE PROBLEM Dependence on oil is the problem. Petroleum fuels 95% Laura Lovelace, Co-Founder, Welford Energy Advisors of the energy consumed by the transportation sector. (Moderator) Accordingly, the cost of personal mobility is closely tied Rohit Aggarwala, Advisor, Bloomberg Philanthropies to the cost of petroleum, a price that is determined by a global market characterized by rapid, unpredictable Justin Ashton, Co-Founder & Vice President, XL Hyrbids fluctuations. An increase in the cost of oil drives up the Carrie Atiyeh, Director—Public Affairs, ZeaChem price of gasoline, which adversely impacts American Josh Becker, Founder, New Cycle Capital consumers and the economy. The price of oil also has a ripple effect on the price of other products, such as food Michael Brylawski, Executive Vice President, Bright and consumer goods, that rely upon it for production Automotive and transport. These factors pose a continuing threat to Kelly Carnes, President & CEO, TechVision21 the health of the recovering economy. Aimée Christensen, Founding Principal, Christensen Global Strategies Twelve countries control 80% of world’s proven Robbie Diamond, Founder, President & CEO, Secure oil reserves and 40% of annual production. Those America’s Future Energy (SAFE) countries—Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, Honorable Suzanne Kosmas, former member of the U.S. House of Representatives and Venezuela—are members of the Organization of Petroleum Exporting Countries (OPEC) and together Martin Lagod, Managing Director, Firelake Capital have the ability to influence the price of oil to suit their Jim Lyons, Chief Technology Officer, Novus Energy Partners interests. As the recent violence in Libya illustrates, some Bill Mitchell, Executive Vice President, A123 Systems of these nations are politically unstable or do not share U.S. interests. Therefore, the federal government must Erik Olbeter, Senior Research Analyst—Government devote financial and military resources to discourage Technology, Pacific Crest Securities instability and secure the oil supply, which adds a Sunil Paul, Founding Partner, Spring Ventures significant national security cost to our oil dependence. Graham Richard, Principal, Graham Richard & Associates LLC These two factors—oil’s dominance among Naveen Sikka, CEO, TerViva transportation fuels and OPEC’s near monopoly on oil supply—give foreign nations incredible influence over Luke Tonachel, Senior Policy Analyst, Natural Resources Defense Council (NRDC) America’s economy and national security and expose the nation to unnecessary risk. Jonathan Wolfson, CEO & Co-Founder, Solazyme R. James Woolsey, Chairman, Woolsey Partners LLC & former Director of the CIA 6 CLEAN ECONOMY NETWORK EDUCATION FUND • www.ceneducationfund.org
  9. 9. TRANSPORTATION AND INFRASTRUCTUREThis dependence derives from the lack of readily warrant further discussion in other forums. Furthermore,available, viable fuel alternatives. A number of factors adoption of alternative transportation and communicationhave prevented the emergence of such technologies. behavior—public transportation, telecommunications,First, the federal government spends significant vehicle sharing—could also drastically decrease theamounts of taxpayer dollars on tax breaks and subsidies need for petroleum.for oil companies. While oil companies argue that theseprograms are necessary to keep the price of oil down, theresult of these interventions is that oil alternatives must STATE OF THE TECHNOLOGIEScompete on an uneven playing field because the price of No “silver bullet” technology will solve our reliancetheir established competitor is kept artificially low. upon oil. Even with the possibility of as-yet unknown technological breakthroughs, it is more likely thatFurthermore, fuel prices don’t reflect the full cost of oil a combination of technologies will reduce U.S. oildependence and consumers lack perfect information consumption. In the current landscape, advancesabout future prices. Market barriers inhibit technology in three areas of technology have great potential toadoption, including consumer acceptance, time displace petroleum use: fuel efficiency, electrification,necessary for technology development, and time and advanced biofuels.required for new technologies to enter the marketplace. Fuel Efficiency1. Consumer acceptance: While “early adopters” While alternative fuel technologies mature, improving have taken to advanced vehicle technologies, such the fuel efficiency of internal combustion engine (ICE) as hybrids (HEVs) and electric vehicles (EVs), many vehicles will play a crucial role in reducing petroleum consumers lack familiarity with new technologies and consumption. Recent advances include more efficient assume that such vehicles will not provide a satisfying internal combustion engines that use high pressure fuel driving experience. Furthermore, consumers lack the injection, downsizing and turbocharging, hybrid-electric information necessary to calculate the full payback drivetrains and lighter, stronger structural materials, such over the lifecycle of the vehicle. as lightweight high-strength steels, magnesium alloy and carbon fiber composites. An additional benefit of2. Technology development: New clean technologies these technologies is that they can carry over to other require significant time to reach the market. While many vehicle applications. ICE improvements can be applied Internet technology companies can commercialize to a vehicle burning non-petroleum fuel, while advanced very quickly, clean economy technologies generally materials can be used for any light duty vehicle. require more time for testing, capital investment, and scaling. Even if the technologies exist now, it may There are tremendous potential gains from efficiency— take years for them to deploy to the marketplace. some estimate that conventional non-hybrid vehicle technologies can nearly double efficiency and cut fuel3. Technology penetration: Deployment is also further consumption by 45% from 2008 levels. Further, these inhibited by the slow turnover of the American technologies result in fuel savings that far exceed their automobile fleet. It takes the national fleet as many cost. And perhaps most importantly, the automobile as 15 years to cycle in new vehicles, which slows the industry is already capitalized and could be ready to adoption of petroleum displacing technologies. make these improvements within a short timeframe, which is not the case with electrification and advancedWhile not discussed in the Roadmap. there are three biofuels.additional possibilities for achieving significant reductionsin petroleum use: use of liquid natural gas (LNG) as an It should also be noted that advanced diesel engines arealternative fuel; the development of new, unpredictable inherently more fuel-efficient than gasoline vehicles andvehicle technologies; and changes in consumer are cost-competitive today. The total cost of ownershipbehavior. LNG and other disruptive technologies have (TCO) for advanced diesel vehicles is currently lowersignificant potential to displace petroleum and certainly than advanced gasoline vehicles at all oil prices.CLEAN ECONOMY ROADMAP • www.ceneducationfund.org/clean-economy-summit 7
  10. 10. TRANSPORTATION AND INFRASTRUCTURE Improvements can also be made petroleum fuels. Lignocellulosic biofuels, in particular, in the 240 million vehicles already have experienced cost declines, and algae-based oil and on the road. New lubricant and syngas have made significant technological advances. tire technologies can greatly increase the fuel efficiency of As a direct substitute for petroleum-based fuels, advanced existing vehicles. Given that many biofuels must be cost competitive with oil. Technological of these vehicles will continue to barriers to competitiveness include the cost of enzymes, be on the road for the near future, feedstock yield and quality, and scalability. Should these efficiency gains will be these technological issues be addressed, there are still crucial to petroleum displacement concerns regarding fueling infrastructure, storage, and and consumer savings in the short combustion engine conversion. term. Electrification THE POLICY LANDSCAPE Decades after they were first proposed for the The federal government has enacted a multitude modern fleet, electrific vehicles (EVs) are entering the of policies to address oil dependence. The U.S. marketplace. In 2010, Chevrolet and Nissan introduced Department of Energy invests in electric vehicle a plug-in hybrid electric and battery electric vehicle technology development, the Department of Agriculture to the American marketplace, and other automobile encourages biofuels from farm-based resources, and manufacturers are poised to do the same. the Environmental Protection Agency and National Highway Transportation Safety Administration oversee The price of batteries remains the single largest obstacle fuel economy standards. This Roadmap seeks to work to the deployment of electric vehicles. While the cost within the Federal government’s policy framework to of batteries for electric vehicles continues to decline, articulate a path forward. significant investment in research and development is still needed to produce smaller, safer, cheaper batteries Above all, the Clean Economy Network Education Fund for electric vehicles. identified three characteristics of a sound petroleum displacement policy: Studies have shown that 60-70% of vehicles on the road today could be electric before new power plants are 1. Long-term in duration required. This is a distinct advantage of electrification— 2. Technology agnostic the energy infrastructure already exists. That being 3. Outcome-driven said, access to the grid remains a point of concern, and significant charging station infrastructure needs to be These requirements are crucial to ensuring efficient installed to give consumers confidence about having outcomes and investment in innovative technologies. adequate access to vehicle charging opportunities. Long-term Duration At this point in time, plug-in hybrid electric vehicles Policy certainty encourages investment. As shown by the (PHEVs) are technologically promising and stand experience of E.U. countries, long-term fuel economy to benefit from many vehicle technology advances, standards and oil taxes can unlock significant financing including electrification (batteries), fuel efficiency for advanced vehicle technologies. American auto (advanced structural materials), and advanced biofuels manufacturers are now taking similar actions, mainly (burned in the ICE). due to increasingly higher U.S. fuel efficiency standards they must meet. Fuel economy standards in Europe Advanced Biofuels and the U.S. have long time horizons, providing auto 2010 saw the opening of the first commercial advanced manufacturers and investors sufficient time to invest in biofuels plant, and other advanced biofuels are steadily innovative technologies that will enable them to meet moving down the cost curve to be competitive with those standards. 8 CLEAN ECONOMY NETWORK EDUCATION FUND • www.ceneducationfund.org
  11. 11. Technology Agnostic SOLAZYME, INC. COMPANY PROFILE • SOLAZYMEGovernment is frequently criticized for picking technology www.solazyme.comwinners. The Synthetic Fuels Corporation, establishedby Congress in response to the 1970s oil crises, ended Founded in 2003 and headquartered in South Sanin bankruptcy. Corn ethanol and hydrogen fuel were Francisco, Solazyme is a privately held industrialpolitically popular at different points during the last biotechnology company producing renewable oils anddecade but have not yielded anticipated results despite bioproducts using microalgae.relatively large subsidies in the case of corn ethanol.Most recently, the Federal government has provided Solazyme’s renewable oil production technology allowssignificant tax incentives to promote the purchase of them to do in a matter of days what it took nature millionselectric vehicles. of years to do. The company renewably fabricates a wide range of products quickly, cleanly, cost effectively, and atThe most technologically agnostic approach is to large scale standard fermentation facilities. It offers fuels,address the price of oil. All clean vehicle technologies including microbial-derived jet fuels, bio-diesels, andcompete with it, and the higher the price of oil, the more renewable diesels. They also offer marine and microaquaticviable investments in those technologies become. While compounds for health and wellness products.no one policy alone can resolve the problem, there are avariety of policies that undertaken together can address Its products are used for biofuel production, replacementsprice volatility and increase investor confidence. These for fossil petroleum, and plant oils in various productspolicies include lowering subsidies and tax breaks for ranging from green household cleaning supplies tothe petroleum industry, setting a price floor on the cost cosmetics and foods. The company serves renewableof oil, and taxing oil consumption. While Congress has energy and industrial chemicals markets, as well asspurned such polices in the past, these policies are specialty ingredients markets in cosmetic, nutritional, andtechnology-neutral and allow the market to determine pharmaceutical products.which technologies to pursue. Solazyme’s oils and fuels provide compelling solutions toFurthermore, government incentives should encourage increasingly complex issues of fuel scarcity, energy security and environmental impact while fitting cleanly into the pre-the development, deployment, and consumer purchase existing multi-trillion dollar fuel infrastructure.of the most fuel-efficient transportation solutions,regardless of their technology platform. For example, Co-founders Jonathan Wolfson and Dr. Harrison Dilloninstead of providing a tax credit only to newly-purchased started Solazyme in Palo Alto at a time when few in Siliconelectric vehicles, the credit could be applied to all Valley had heard of the concept of biofuels. Mr. Wolfsonadvanced technology vehicles that dramatically increase is the Chief Executive Officer, Chief Operating Officer andfuel efficiency and pro-rated so that the most efficient Director, where he oversees the management and strategicvehicles receive the greatest credit. direction of the company. Dr. Dillon serves as the President, Chief Technology Officer and Director.Outcome-drivenLegislation that tells the private sector how to innovate—in other words, means-driven policy—will not be assuccessful as policy that is ends-driven and focused onoutcomes. Currently, there are a multitude of laws thataim to displace petroleum but do so by encouragingdifferent, and often competitive, technologies. Whileends-driven, technology neutral policy will motivateprivate sector innovation, the Federal government shouldnot skew markets with carve-outs and quotas to satisfyspecial interests or with incentives that favor a particulartechnology solution.CLEAN ECONOMY ROADMAP • www.ceneducationfund.org/clean-economy-summit 9
  12. 12. A123 SYSTEMS, INC. A better, more market friendly means by which to achieveCOMPANY PROFILE • A123 SYSTEMS, INC. www.a123systems.com that end is to set a performance standard, such as one based on efficiency and/or greenhouse gas emissions A123 Systems (NASDAQ: AONE) develops and manufactures reductions, and require the private sector to meet it. advanced Nanophosphate® lithium ion batteries and A long-term, performance-based vehicle standard energy storage systems for the transportation, electric that does not pick technology winners will unleash the grid and commercial market. The company was founded greatest innovation and achieve the greatest reductions in 2001 based on novel nanoscale technology initially in petroleum use. developed at the Massachusetts Institute of Technology and currently employs more than 2,200 people globally. CONCLUSION A123’s high-performance Nanophosphate lithium ion Leadership from policy makers is necessary to implement battery technology delivers high power and energy density these recommendations. It is crucial that the President, combined with excellent safety performance and extensive Members of Congress, and other thought leaders use life cycling in a lighter-weight, compact package. The their bully pulpit to advance petroleum displacement. Not company’s solutions have low capacity loss and impedance only is this essential for improving policy, it is necessary growth over time, allowing customer applications to meet for cultivating support among the American public for end-of-life power and energy requirements with minimal new technologies, which is crucial to their adoption. pack oversizing. The economic and national security threats of continued A123’s growing list of blue-chip customers in the reliance upon petroleum should compel the US automotive market includes leading passenger car makers government to incorporate these principles into existing (including Fisker Automotive, BMW, GM and SAIC, the and new policies. As gas prices rise and instability in oil- largest automaker in China) as well as companies focused producing regions persists, it is important—now more on the truck/bus market (including Eaton, Navistar and than ever—to achieve petroleum displacement. BAE Systems). A123 is also the leading producer of lithium ion battery energy storage solutions for the electric power grid, where its technology is helping to make ancillary services more efficient and cost-effective while also addressing enabling the increased penetration of renewable energy by addressing the variability of wind and solar power. Customers include AES, Southern California Edison, DTE Energy and Vestas. Led by President and CEO David Vieau, A123 Systems is headquartered in Waltham, MA and operates manufacturing facilities in Massachusetts, Michigan, China and Korea, as well as offices in St. Louis, Germany and Japan. In September 2010, A123 opened the largest lithium-ion battery manufacturing plant in North America in Livonia, Michigan, which has the potential to supply systems to the equivalent of 30,000 battery electric vehicles when the plant is fully operational. With this facility and A123’s additional planned expansion, the company expects to have 760MWh of global manufacturing capacity in place by early 2012 to meet increasing demand for its Nanophosphate lithium ion battery technology across its target markets.10 CLEAN ECONOMY NETWORK EDUCATION FUND • www.ceneducationfund.org
  13. 13. DEPLOYMENT, MANUFACTURING, AND COMMERCIALIZATION: FINANCING THE COMMERCIALIZATION GAP INTRODUCTION Deploying innovative clean technologies at commercial scale in the United States faces numerous barriers that slow job creation, investment, and innovation. The global economic downturn has reduced capital investment across the board, hitting young companies and new technologies hardest. Failure to pass any form of comprehensive climate and energy legislation has increased uncertainty in energy markets, and fostered confusion for investors about the longevity and stability of clean economy markets. Capital availability for project finance has been hurt by the collapse of tax equity markets that accompanied the banking crisis and mortgage industry meltdown. Stronger policy support for clean energy products and services in Europe and Asia attract the limited dollars available for manufacturing of advanced technologies. At the same time, a host of information failures, misaligned incentives, and structural barriers in U.S. markets for both electricity and real estate have continued unabated, slowing commercial adoption of otherwise economically viable clean technologies.CLEAN ECONOMY ROADMAP • www.ceneducationfund.org/clean-economy-summit 11
  14. 14. DEPLOYMENT, MANUFACTURING, AND COMMERCIALIZATION Overcoming these barriers to deployment, manufacturing, TRACK PARTICIPANTS and commercialization of clean technology in the United States will require a coordinated strategy by technology Bracken Hendricks, Senior Fellow, Center for American Progress (Moderator) companies, financial investors, and policy makers. Such a shared blueprint for a sustained national commitment Benjamin Abram, Lorax Capital will drive new investment and strengthen American Jason Anderson, CleanTECH San Diego competitiveness, job creation, and long-term prosperity. Carter Bales, Chairman and Founding Partner, New World Capital; Chair, CEN Leadership Council The Deployment, Manufacturing, and Commercialization (DMC) track focused specifically on addressing these Chris Chafe, Executive Director, Clean Economy Development Center cross-cutting challenges, which are fundamental to the mass adoption of innovative business models and clean Will Coleman, Partner, Mohr Davidow Ventures technologies at a large scale across the entire economy. Marc Cummings, Director of Policy and External Affairs, For purposes of the roundtable discussions, each term Battelle/PNNL was defined as follows: Luka Erceg, President and CEO, Simbol Materials • Deployment describes the task of moving beyond Mark Fulton, Climate Change Strategist, Deustsche Bank basic science and early phase research to building Ashok Gupta, Natural Resources Defense Council markets and promoting the widespread adoption of Monty Humble, Cavallo Energy proven tools. Reed Hundt, CEO, Coalition for Green Capital • Manufacturing is central to extending the innovation Danny Kennedy, CEO, Sungevity process beyond the lab. It includes the development Erich Klawuhn, Vice President of Business Development, of intellectual property and engineering practices Soladigm that increase the efficiency of production, drive down Steve Miles, Partner and Energy Sector Chair, Baker Botts LLP costs, and sustain market growth. John Mizroch, Of Counsel, Wilson Sonsini Goodrich and Rosati • Commercialization describes the process of building Marc Porat, Chairman and CEO, GreenCube strong profitable companies, scaled production of Brian Sager, Co-founder and Vice President of Corporate new products, and commercially viable business Development, Nanosolar models, to serve both emerging U.S. and growing Joel Serface, Founder, Clean Range Ventures global demand. Shannon Smith, Founder and President, Abundant Power Group Silda Wall Spitzer, Managing Director, Metropolitan Capital Advisors 12 CLEAN ECONOMY NETWORK EDUCATION FUND • www.ceneducationfund.org
  15. 15. DEPLOYMENT, MANUFACTURING, AND COMMERCIALIZATIONDEVELOPING A ROADMAP FORCLEAN ENERGY DEPLOYMENT,MANUFACTURING ANDCOMMERCIALIZATIONThe discussion within this track strongly emphasizedthe connection between clean technology and jobs,American competitiveness, and economic recovery. Itidentified commercial scale deployment of a domesticindustry as the key challenge for broadening markets,developing new products, and fostering the growth ofproductive new companies.The goals of the DMC session were:1. To identify key policy needs for building a strong domestic clean economy industry and increasing penetration of clean technologies in energy markets,2. To begin the development of a shared blueprint and technology industry faces significant market barriers to common priorities for unlocking greater flows of both achieving broad deployment, including: public and private capital investment to scale the industry, and • Insufficient capitalization of early stage companies as they try to cross the ‘valley of death’ combined with3. To bring together clean economy business leaders, frozen debt markets have slowed capital investment relevant thought leaders, and key Congressional, in projects Administration and Agency staff to explore strategies for more effective public outreach and deeper • Artificially high perception of policy, technology, and alliances. lack of operating history risks have increased the cost of capital and created a barrier to investmentParticipants in the DMC discussion stressed the closeconnection between overcoming market barriers and • Transparency, longevity and certainty in bothstrong economic performance for the industry. They economic incentives and market rules is neededidentified a range of strategies for overcoming these to demonstrate sustained demand for projects andbarriers, seeking to find opportunities both for direct attract needed investmentsaction by companies and investors requiring no newpolicy, as well as for opportunities to use new policy at • Lack of sustained demand for clean energy due tothe federal, state and local level. the absence of market-creating policies such as a national renewable or clean energy standard or stronger incentives in utility policySPECIFIC BARRIERS TODEPLOYMENT OF • The sun-setting of effective ARRA (AmericanCLEAN TECHNOLOGIES Recovery and Reinvestment Act) funding programsThe commercial adoption of clean technologies— and threats to other public investment programsemerging from laboratories, breaking into existingmarkets, and competing with traditional energy sources • The failure of the clean technology industries toat scale—has been slower in recent years than is create a unified and strong policy and political voicewarranted on a technical or economic basis. While this is that rivals that of existing energy producersnot the case for every technology or company, the cleanCLEAN ECONOMY ROADMAP • www.ceneducationfund.org/clean-economy-summit 13
  16. 16. DEPLOYMENT, MANUFACTURING, AND COMMERCIALIZATION d. Federally backed warranty insurance products that could increase developer investment by reducing perceived risk, including the lack of operating history of clean technologies. e. Promoting standard offer contracts or CLEAN Contracts that address the cost of capital by increasing transparency, longevity, and certainty. 2. Regulatory Tools Can help send market signals, drive demand, and enhance predictability. Participants suggested: a. Passing a national Renewable Energy Standard (RES). Many but not all participants supported expanding RECOMMENDATIONS FOR the concept of a renewable energy standard to OVERCOMING MARKET BARRIERS include nuclear and other forms of low carbon energy, AND SCALING INDUSTRY potentially through a broader Clean Energy Standard Participants discussed various solutions to the above (CES). barriers. Their recommendations clustered around six areas. These included three specific federal policy issues: b. Raising national energy efficiency building codes and 1) finance policies, 2) regulatory tools, and 3) tax reform, establishing a national energy efficiency resource as well as three major cross-cutting themes, including: 4) standard. communications and messaging to shape public opinion and build public will, 5) re-engaging the issue of industrial c. Adopting stronger national appliance standards for policy, and 6) regionally based economic development energy efficiency that would also drive markets for strategies. Their suggestions were as follows: advanced manufactured products. 1. Finance Policies d. Pursuing utility reform measures that would better Can lower the cost of capital, reduce perceived risk, align incentives for utilities to act as partners and encourage investments in clean technologies, and create better reward shareholders for reducing load and market demand for new projects and new technologies. deploying renewable energy sources. Specific policies could include: e. Continuing the implementation of stricter emission a. A federally chartered financial mechanism, such as standards to encourage decommissioning of the a Clean Energy Deployment Administration (CEDA), most inefficient plants and to promote greater energy that can address commercialization challenges faced diversity. by early phase technologies as they begin to scale. 3. Tax reforms b. An Energy Independence Trust that can offer low Can encourage private capital investment in clean cost capital for deployment at low or zero cost to the technologies while leveling the playing field with existing Treasury. Such federal backing can also be offered to energy interests. encourage the development of state green banks. a. Extend the availability of Master Limited Partnerships c. Aligning capital market structures to match project (MLP) to renewable energy and efficiency projects to finance mechanisms needed by clean technology greatly increase the pool of potential investors that industries. will finance the growth of clean technologies. 14 CLEAN ECONOMY NETWORK EDUCATION FUND • www.ceneducationfund.org
  17. 17. b. Connect energy saving behaviors to personal SIMBOL MATERIALS COMPANY PROFILE • SIMBOL MATERIALS economic incentives. (For example, linking certain www.simbolmaterials.com financial instruments related to the clean energy economy to IRAs and 529 plans.) Simbol Materials (formerly Simbol Mining) is a US-based company focused on producing critical materials, such asc. Eliminate wait time on tax credits and other lithium and manganese, for the next generation of energy enhancements to allow small companies to sell storage technologies, by co-producing from the brines credits and drive tax benefits more deeply into the of geothermal power plants. Their co-founder, President, economy. and CEO, Luka Erceg has 12 years of experience in the energy space. Prior to founding Simbol Materials, he wasd. Investigate a partial tax holiday targeted to clean largely involved in private transactions related to power economy investment that would allow large development and generation, natural gas gathering and corporations to repatriate billions of dollars distribution, and oil and gas field telemetry. domestically in profits from overseas operations. Simbol Materials will produce lithium, manganese, zinc ande. Expand the accelerated depreciation schedule for other key compounds using clean, zero waste production clean energy. processes in the United States. As geothermal power plants pump geothermal brines and effluent streams from4. Communications and Messaging 10,000 feet below the earth’s surface, Simbol MaterialsCan shape public opinion and build political will. There uses proprietary processes to extract the valuablewas general consensus that the industry needs a forceful, minerals and metals from the water for use in EV batteries,expansive, and well-funded messaging campaign to consumer electronics, agriculture and other industrial cleaneducate opinion leaders, policy makers and the general technology applications.public. Specific recommendations included: Lithium has become an increasingly valuable commoditya. Develop a central vision and accompanying narrative due to the increased market for rechargeable batteries that focuses on the many advantages of the clean in consumer electronics, tools, and electric vehicles. economy, including job creation, competitiveness, Most electric vehicles and electricity storage devices are innovation, entrepreneurship, nationalism and designed to use batteries built with lithium and manganese. national security. Simbol Materials seeks to create a supply chain that sustainably supports the entire electronics industry and is on track to be a leading supplier of lithium carbonate, lithium hydroxide, and manganese compounds. The process Simbol Materials employs will ensure the company is the lowest-cost producer of lithium in the world, bringing a vital part of the EV battery supply chain to the U.S. Simbol Materials is a late stage venture capital funded company. Their funders include Mohr-Davidow Ventures, Itochu Corporation, and Firelake Capital Management.CLEAN ECONOMY ROADMAP • www.ceneducationfund.org/clean-economy-summit 15
  18. 18. b. Produce concrete empirical data to document theCOMPANY PROFILE • SUNGEVITY SUNGEVITY successes already achieved within the sector, and www.sungevity.com outline the potential growth of the sector that would result from the implementation of specific policy Founded in 2007 by Danny Kennedy, a former activist, recommendations. Andrew Birch, a photovoltaic economics expert, and Alec Guttel, a serial entrepreneur, Sungevity uses an internet- c. Create broader alliances based on common interests based approach to make the transition to solar power with other industries and sectors, including nuclear as simple as possible. At its inception, Sungevity’s team energy, natural gas, utilities, and energy intensive concluded the high initial cost of solar panel sales and manufacturing industries. installation is the major deterrent to homeowners. Using the power of the Internet—satellite-powered maps 5. Industrial Policy There was a strong consensus in the DMC session and algorithms to determine household energy output—the that America needs to clean up its tangle of existing Remote Solar Design Team at Sungevity can put together contradictory industrial policies and formulate a an iQuote at no cost to the customer. Customers receive comprehensive industrial and manufacturing strategy designs of fully realized virtual arrays and can choose whatever system best fits their needs. The company that focuses on performance metrics such as emission explains it as being the Netflix of home solar, tapping into reductions and efficiency. Key features of such a strategy the convenience of the Internet to serve up solar savings. should include the following: Although Sungevity is located in the Bay Area of California a. U.S. industrial policies should not operate in a and its market has been mostly in the Southwestern vacuum, but should take into account the market United States (CA, AZ, CO), the company is focused on conditions created by the policies of other countries, expansion. In December 2010, Sungevity announced a $15 such as the recent Chinese five-year plan for clean million round of financing that has allowed the company to energy, as well as industrial policies in Germany, expand to five north eastern states—MA, NY, NJ, MD, DE. Japan, and South Korea. In their first year, 2008, the company sold 164 systems and b. A comprehensive strategy should be designed in October 2010 did the same number with 1 megawatt of to create long-term stability, include domestic solar deals. In May 2010, Sungevity partnered with US Bank content requirements, and address cars, fuels, to offer a 10 year Solar Lease, which allows homeowners electricity generation, and building efficiency as key to install solar arrays for no money down. Sungevity more manufacturing and industrial sectors. than tripled its staff in 2010 and is expecting to grow to 175 full-time employees by late 2011. Sungevity also ran a campaign to install solar panels on the White House. At a White House Earth Day event, Danny Kennedy made the offer in person to President Obama. The White House recently announced that they would indeed install solar panels in 2011. In the meantime, Sungevity has expanded its offer to include other world leaders. In October 2011, the team installed a solar array on the home of President Mohamed Nasheed of the Maldives. Despite its incredible growth, Sungevity is an early stage company.16 CLEAN ECONOMY NETWORK EDUCATION FUND • www.ceneducationfund.org
  19. 19. DEPLOYMENT, MANUFACTURING, AND COMMERCIALIZATIONc. It should include the finance, tax, and regulatory of clean energy deployment in order to align existing policies outlined above. For example, a CES can incentives and financial resources at the federal, state determine incentives for developing domestic supply and local levels. chains. b. Track participants expressed concern aboutd. Industrial strategy should not be based on specific fragmented electricity markets, and supported the technologies, but on the various stages of the development of regionally based strategies for market commercialization process. In particular, industry and regulatory reform. and government should target policies to address the special challenges in moving from innovation to c. Productive partnerships could be established deployment. through working directly with state regulators, as well as by identifying and working with state and locale. Many existing policy tools, like manufacturing governments with similar or complementary plans. extensions, small business lending, workforce investment, and other forms of economic d. A federal CES should incorporate regional differences development, should be included and systematically in clean energy targets and credit regionally expanded to cover the clean economy sector. appropriate clean energy resources in order to build interest and support for its enactment at the federal6. Regional Innovation level.Strategies can help promote clean technologydeployment on a regional, state and local basis. e. Strategies should encourage regional competition on tax and land policy, and through existing economica. “Race to the top” approaches that have worked in the development subsidy programs, to encourage more area of education should be applied to the challenge domestic clean tech manufacturing.CLEAN ECONOMY ROADMAP • www.ceneducationfund.org/clean-economy-summit 17
  20. 20. DEPLOYMENT, MANUFACTURING, AND COMMERCIALIZATION CONCLUSION The DMC track successfully engaged a diverse group The specific recommendations offer an initial pathway of decision-makers from across the clean technology and framework for the clean economy sector in shaping industries. The discussion identified critical challenges a shared agenda with clearly articulated priorities. that the industry must overcome to scale production The barriers to deployment, commercialization, and and penetrate mainstream energy markets, through a manufacturing remain significant. As evidenced in the combination of private sector action and public policy discussion, the ideas already emerging from within the measures. While there was not unanimous agreement clean economy community offer a strong starting point on these specific suggestions, a general consensus for developing a detailed roadmap for market-based did emerge from this diverse group, emphasizing the mechanisms for the rapid adoption of clean technologies need for a comprehensive messaging campaign, and and the transition of the entire economy to run on clean a renewed focus on promoting innovative policies to and efficient energy. reduce regulatory barriers and the cost of capital. 18 CLEAN ECONOMY NETWORK EDUCATION FUND • www.ceneducationfund.org
  21. 21. ELECTRICITY: REGULATORY INNOVATION INTRODUCTION One of the greatest barriers the clean economy sector faces in achieving higher levels of market penetration is an outdated electricity infrastructure and regulatory framework. While virtually every other sector of the American economy has evolved to meet the needs of the 21st century, the electricity grid remains the world’s largest analog system. In a world of rapid change, the electricity system has stood virtually still. Much stands in the way of clean energy increasing its share of America’s power. For example, current regulatory rules do not require the incorporation of public policy concerns when planning transmission lines, nor do they mandate cost allocation formulae to decide how such projects will be financed. Additionally, the scheduling of power is not rapid enough to effectively include intermittent resources like solar or wind. While the Federal Energy Regulatory Commission (FERC) has proposed rules to address these problems, the existing system harms our global competitiveness and hobbles a potential engine of job and wealth creation. As the clean economy grows and business and consumer energy needs become more complex, the country needs a new approach to energy generation, use, and distribution. The U.S. must address the structural and policy deficiencies of our electricity sector—including an outdated grid, overly complex rules, and lack of incentives for utilities to adopt more stringent efficiency standards or diversify their energy portfolio. Doing so requires a robust mix of new technologies, business models and policy innovation at the federal, state and local levels.CLEAN ECONOMY ROADMAP • www.ceneducationfund.org/clean-economy-summit 19
  22. 22. ELECTRICITY TRACK PARTICIPANTS This track discussion explored the issues with current regulatory policies that hinder clean energy growth, Michael Moynihan, Director, Green Project, NDN (Moderator) identified the problems, proposed some solutions and Clare Giesen, Director, Electricity 2.0 Initiative, NDN began to develop strategies to effect change. (Moderator) Warren Belmar, Capitol Counsel Group FRAMING THE CONVERSATION Cameron Brooks, Senior Director of Market Development The United States’ fragmented regulatory structure and Policy Strategy, Tendril is the central challenge to modernizing the electricity Dan Carol, Senior Fellow, New Policy Institute, NDN grid. Building an electricity infrastructure that can drive Shelley Cohen, Senior Project Developer, Ameresco 21st century economic prosperity is no easy task, and it is further complicated by a regulatory system that Chris Cook, Keyes & Fox, LLP distorts rather than clarifies information, incentives, and Stephen Cowell, Founder, Chairman & CEO, Conservation implementation strategies for a diverse spectrum of Services Group stakeholders. These stakeholders include but are not Cynthia Curtis, VP & Chief Sustainability Officer, CA Technologies limited to: regulatory bodies at the federal, state, and local levels; political actors; power generators; public Bob Dolin, System Architect, Echelon power, investor-owned, cooperative, and federal utilities; Andrew Friendly, Principal, Advanced Technology Ventures non-utility businesses; and consumers. Each of these Donald Gilligan, President, National Association of Energy groups has different and often even competing priorities Service Companies (NAESCO) when it comes to designing and developing a modern Katherine Hamilton, Director of Clean Energy & Environment, electricity grid. Quinn Gillespie & Associates Arno Harris, CEO, Recurrent Energy There is no “silver bullet” solution to these problems. Indeed, it was difficult for the participants in this Steve Hauser, VP, Grid Integration Program, National discussion to even agree on how to begin the long-term Renewable Energy Laboratory process of modernization. Much of the frustration is Paul Hudson, Founder & Principal, Stratus Energy Group, LLC rooted in the fact that the electricity grid is unequipped to John King, Executive VP, LS Power Development, LLC incorporate renewable energy sources, and the relevant actors are largely unmotivated and lack the incentive to Maria Kingery, Co-Founder & Director of Cultural Development, Southern Energy Management make necessary changes. These dynamics are hindering the growth of a robust clean energy market here at home. Jennifer Layke, Director, Institute for Building Efficiency, Johnson Controls In addressing these challenges, participants agreed on Craig Lewis, Executive Director, CLEAN Coalition one central goal: fostering innovation. It is clear that the Steve Melink, Founder, Owner & President, Melink Corporation clean economy business community must capitalize on Lesa Mitchell, Vice President, Kauffman Foundation Commissioner John Norris, Federal Energy Regulatory Commission (FERC) Tom Osdoba, Managing Director, Center for Sustainable Business Practices, University of Oregon Doug Payne, Co-Founder & Executive Director, SolarTech Jeff Ross, Executive VP of Business Development, GridPoint Michael Sachse, VP, Regulatory Affairs & General Counsel, OPOWER Richard Stuebi, Founder, NextWave Energy, Inc. Michael Terrell, Policy Counsel, Google Kathrin Winkler, VP, Corporate Sustainability, EMC2 Corp. 20 CLEAN ECONOMY NETWORK EDUCATION FUND • www.ceneducationfund.org
  23. 23. ELECTRICITYthe market opportunities these technologies represent, By enabling real-time, two-way communication betweenand utilities have demonstrated that they are unwilling, utilities and consumers, there is hope that changes inand in some cases, unable to lead the way. While there both generation and end-use behavior will occur, aswas not consensus on how best to address the issues consumers will be more empowered to make smarterthat currently impede innovation, the discussion focused choices. Additionally, this information will create moreon the problem of limited access to information and to opportunities for non-utility businesses to provide energythe grid, which makes it difficult to identify ways to drive management services.innovation forward. Not every participant agreed withthis focus, and their concerns are noted in the following While lack of information access is a sizable problem,sections. it is disingenuous to suggest that merely making information available to consumers and businessesFostering large, open platforms—both within and will solve the challenges at hand. Many proponents ofoutside of the utility structure—is a way to support viable smart grid platforms have treated information as theentry points to the energy market without necessitating end goal. In doing so, they fail to recognize that makinga complete overhaul of the United States’ regulatory information available is necessary but not sufficient tostructure. Such platforms include smart grid technologies, meet greater long-term goals like energy efficiency,home energy networks, enterprise networks, microgrids, bringing more renewable energy online, or fosteringand distributed generation/storage. While platforms new market development. The challenge is far morelike smart grid will complement existing infrastructure, complex: first, how to standardize mechanisms thatothers—like distributed generation—represent a marked make this information readily accessible, and second,departure from the current system. The characteristic how to encourage structural and behavioral changesthat connects them is an emphasis on innovation: how that effectively utilize this information. In this frame,best to provide information and the corresponding information is an intermediate goal, but ultimately onlystructural incentives to relevant actors so they can a means to an end. Ideas about what precisely that endimplement changes to our electricity system. goal entails, and how valuable smart grid-generated information is in achieving that goal, vary considerablyThe benefits of open platforms can be examined through among stakeholders.the lens of the information, incentive, and implementationproblems presented by the current regulatory system. The potential for smart grid technologies to change theWhile these issues are certainly interconnected, electricity grid has been demonstrated in pilot programsaddressing them separately allows for more concrete across the country. However, realizing the promise ofrecommendations, tailored to acknowledge and smart grid is dependent on the clean economy communityincorporate specific stakeholder priorities. clearly articulating the goals of these technologies at each stage of energy generation, distribution, and use. Important questions remain unanswered, including:INFORMATIONOne of the electricity system’s shortcomings is the almost For consumers:total control regulators and utilities have on information • What policies are needed to guarantee consumers’related to energy generation, distribution, and use. Open right to access smart grid data?platforms, specifically smart grid technologies, are • What policies are required to protect consumer privacy?heralded as the future of modern electricity infrastructure • Under what circumstances will consumers bebecause they fundamentally change which actors have interested in changing their behavior based on thisaccess to such information. Furthermore, smart grid information?devices improve the quality of information, allowingfor quicker response time by generators and utilities in For utilities:maintaining load/demand balance, addressing power • What policies are required to incentivize utilities tooutages, and keeping the grid secure. Smart grid also invest their capital (not ratepayers’ capital) to becomeintroduces the possibility for real-time pricing. more efficient in their distribution of energy?CLEAN ECONOMY ROADMAP • www.ceneducationfund.org/clean-economy-summit 21