Pacific Views

The Greening Market

NY Times had an excellent piece Sunday about the intense interest shown by the Silicon Valley venture capitalists in Green Technology. VC's are seeing that the area is on the cusp of taking off, despite the lack of focus from the government. They are funding some really great technology that could help change the world.

Kleiner received a proposal from a professor at the University of Arizona named K. R. Sridhar, a former NASA scientist, who was working on a solid-oxide fuel cell in his garage in Tucson. Fuel cells are an old technology, dating back more than 150 years; they convert a fuel, like natural gas, into electricity through chemical reaction rather than combustion. Sridhar’s pitch had some novel technological aspects, and his business plan called for making energy generators — essentially, large box-shaped units for a home basement, or an office building — for buyers who either had no access to an electrical grid or wanted to disconnect themselves from one. “You could put natural gas into it and get electricity out,” Aileen Lee, the partner at Kleiner who researched Sridhar’s proposal, told me. “Or it could be fuel-flexible” — meaning the boxes could run on, say, ethanol. At least in theory, the units, which Sridhar called Bloom boxes, would be reliable, quiet and very low in carbon emissions.

...Bloom Energy is a good example of a venture where the chips are now piled high. Though you wouldn’t know it from appearances. Located in a modest, unmarked one-story building with large plate-glass windows off the highway in Sunnyvale, Calif., Bloom is one of the companies in the Kleiner portfolio closest to unveiling a commercial product. Over the past two and a half years, engineers at the University of Tennessee in Chattanooga have been testing a five-kilowatt Bloom box, which looks like a squat refrigerator and produces about as much electricity as a typical home requires. And at this point there seems little doubt that the idea K. R. Sridhar pitched to Kleiner in 2001 has become a high-functioning machine. “We installed one of his first units here to assess its durability and performance, to see if it matched the claims,” Henry McDonald, a professor at Tennessee who is overseeing the Bloom box, says. McDonald ran the box nonstop on natural gas for 6,000 hours, and its performance beat expectations. In everyday terms, the box was twice as efficient as a boiler burning natural gas, and its carbon emissions were 60 percent lower.

Kleiner didn’t invest in Bloom for precisely these reasons. Rather, the firm’s partners say that Bloom could eventually sell hundreds of thousands of boxes, either at the 5-kilowatt size or as larger, 100-kilowatt machines that power buildings or neighborhoods. The company’s ambitions are indeed breathtaking in scope. As Sridhar told me, referring to the world’s population: “Two billion people have no access to electricity. And of the other four billion people with access, probably two billion are actually getting below their demands.” That makes for a lot of potential users of his product. Sridhar also contended that even here, in the developed world, where the grid is reliable and electricity comparatively cheap, Bloom could find willing customers under the right circumstances. He showed me his first Bloom fuel cell, the one he made eight years ago in his garage in Arizona with some colleagues; it resembled a flat, rectangular metal plate, about the size of a pack of Chiclets. Etched across its face was a geometric pattern of tiny equilateral triangles. The prototype produced a couple of watts of electricity, he said, not even enough to power a light bulb. “This is what I showed Kleiner as the proof of concept,” Sridhar recalled. “I said, ‘This is what we can use to power the world and change the world.’ ”

Even so, the VCs want to see government start doing its part too. What they'd like to see government do is to put a price on carbon and to start to build the infrastructure that supports this emerging technology.

If technology cannot provide a safety net for green-tech investments, politics just might. At Kleiner, you rarely go a day without hearing how new federal laws that put a price on carbon emissions, for example, and that mandate levels of renewable electricity production could speed the adoption of green energy. The partners often made the case to me that if our national science budget for renewables and efficiency (about $1 billion annually) were brought in line with that of the National Institutes of Health (about $29 billion), a torrent of projects and jobs would be unleashed. So it’s no surprise, of course, that partners like Doerr, Lane and Denniston have sought meetings with senators and governors, testified before Congress and pushed their message through lobbying channels like the National Venture Capital Association. Kleiner’s partners told me that their portfolio could be very profitable without any public-sector policy changes, but it’s hard to see how that could be the case. A price on carbon could, in one quick stroke, make Ausra’s carbon-free solar electricity even cheaper than coal- or gas-powered electricity, which would both rise in cost because they produce CO2; as a result, there would be virtually no limit to the demand for Ausra power. That’s how you get a green-tech Google.

To be sure, Kleiner is hardly alone in its agitation for new energy policies. Many of this country’s largest corporations — G.E., G.M., Dow Chemical, DuPont — now support cap-and-trade laws on carbon. The presidential candidates’ energy ideas differ in significant ways, yet Obama and McCain both back legislation to control carbon emissions. When I asked Robert Socolow — a physicist at Princeton who helped create an influential framework, known as stabilization wedges, for steadying global carbon emissions — which was more important, new technologies or new policies, he challenged my premise. “You can’t separate the two,” he told me. “The policy elicits the technology. The interactions are fundamental.” Jeffrey Sachs, an economist and the head of Columbia University’s Earth Institute, put it this way: “I think the private-sector investments that are being made are going to make a very big difference, but one can see where the bottlenecks will come if this is only left to private capital.” Sachs notes that putting a price on carbon is a crucial action. But it’s not the only one. The electricity grid, he says, would almost surely need to be rebuilt as the country switched to renewables, a change requiring federal financing and policy action in land use, interstate law and liability.

Getting government to do the right thing is one of the biggest issues that face Americans when they go to the polls next month and the right thing isn't believing we can drill our way out of this existential crisis.

I can hardly wait to see what comes from this greening of Silicon Valley.

Posted by Mary at October 6, 2008 01:00 AM | Energy | Technorati links |