Renewing Hope: Can Private and Public Sectors Align on Transportation Fuels?

By Dan Pullman, McNamee Lawrence & Co. (MLC)

In his 2007 State of the Union speech, President George W. Bush called on the U.S. to reduce its gasoline consumption by 20 percent over the next decade by tightening fuel economy standards and producing 35 billion gallons of renewable fuel, such as ethanol, by 2017. However, as on any trip, the question is asked: “when will we get there?”

The prevailing opinion in the investment community is that the 20 percent renewable fuel target will be a sizeable challenge to meet given the significant ethanol and/or biodiesel refining capacity increase required. Currently, only 12 million gallons of ethanol production capacity is online or in production against an annual U.S. fuel demand of 180 million gallons. The economics associated with competitive ethanol production (competitive with gasoline) are being challenged by the rising cost of corn, the fundamental inefficiency of corn as a food stock to generate ethanol, and the as yet unproven ability of cellulosic sources (e.g., trees, wood, building materials, switch grass, etc.) to be cost attractive in the U.S.

Furthermore, the transportation costs and infrastructure capacity associated with ethanol and bio-diesel distribution are constrained. Unlike Brazil, the U.S. fuel retail market (i.e., local service stations) is unequipped to sell multiple fuels from a single site with existing infrastructure. Retailers will need to invest in their storage and pump systems to sell multiple fuels. Of the nation’s 170, 000 gas stations, only 2,000 have pumps for ethanol or biodiesel. As well, the transportation industry lacks the capacity necessary to move finished ethanol fuel from plants through refineries to the pumps. Ethanol cannot simply utilize the same pipes used by other fuels. While about 70 percent of current petroleum products is moved through pipelines, ethanol cannot share the same pipelines with other petroleum products for two specific reasons. First, petroleum products can leave deposits in pipelines which would contaminate ethanol. Second, water gets into pipelines and can mix with ethanol requiring re-refinement, but does not mix with petroleum. Unit (or dedicated) pipelines for ethanol cost as much as $2 million per mile and would, therefore, require substantial infrastructure investments. Rail is a delivery alternative, but lacks the capacity to handle potential increases in demand.

The magnitude of the overall challenge around fuel issues in this country demands a strong cooperative partnership between public and private sectors. While the private sector “market” may be best at determining solutions, the public sector (most importantly, the federal government) will have to create economic incentives that stimulate attention and investment. To be clear, such federal incentives will have to stick. Investors will want to know that incentives created today will not be taken away within just a couple of years. Ethanol’s $.51 subsidy has been consistent and has apparently motivated investors to build ethanol refining capacity. However, the volatility of tax incentives and credits in the solar and wind space is directly correlated to the timing of inflows and outflows of capital to those industries. Unpredictability is manifested in higher costs of capital – higher interest rates, bigger discount rates, and/or deferral of funding altogether.

Local and state governments are playing a more active role by imposing higher renewable portfolio standard (RPS) targets. California RPS targets that 20 percent of the state’s electrical retail delivery must come from renewable energy sources: solar, wind, geothermal, and biomass. The RPS target increases to 33 percent by 2020. In effect, California is creating a market for renewable fuels by imposing these requirements.

The private sector, particularly investors, are motivated by economic incentive. Venture investors also look well beyond the tax incentive opportunity and make decisions on technology investments that have economic potential in their own right. In fact, many investors execute their analysis of an investment opportunity knowing that a technology will have lower costs over time through ongoing R&D and ingenuity. Though still reliant on tax incentives, solar technology has become dramatically more efficient in producing kilowatts of energy in its history and will become more efficient in the future and will likely cross over the competitive cost threshold within the next five to 10 years. The same holds true for battery-driven vehicles. The intersection of higher performance, longer distances, and lighter weight batteries is well advanced in many of the large automotive R&D labs. But the industry is still 10 years away from a competitive, mass market, production capable vehicle. Other biotechnologies, such as algae bio-reactors, have strong economic argumentss today for cost-effectively converting carbon dioxide from power plant flue gasses into lower cost ethanol and biodiesel.

What will motivate the progressive partnership between the public and private sectors to support the acceleration of transportation fuels alternatives and flexibility? Not surprisingly, the price of oil will likely be the major determining factor. Sustained oil prices well above $60 per barrel will motivate whole industries and individual consumers alike to seek alternatives. Geopolitics will also fuel (e.g., Russia’s oil games) increased volatility and unpredictability that will drive up prices. In the U.S., the moral imperative will not be enough of a motivator. In the U.S., economics prevail and will, ultimately drive behavior. The sooner private sector and public sector align to achieve our needed transportation goals, the quicker we will get there.

About the Author

Dan Pullman serves as vice president for international investment bank McNamee Lawrence & Co. (MLC), where he specializes in providing investment banking services to high growth companies within the energy sector. Pullman has more than 25 years of sales, operating and financial experience in emerging growth technology and Fortune 50 companies. He has successfully launched both early stage companies and delivered global expansion for established corporations. www.mlcllc.com

3D Solar Cells Boost Efficiency, Reduce Size

Unique three-dimensional solar cells that capture nearly all of the light that strikes them could boost the efficiency of photovoltaic (PV) systems while reducing their size, weight and mechanical complexity.

The new 3D solar cells capture photons from sunlight using an array of miniature “tower” structures that resemble high-rise buildings in a city street grid. The cells could find near-term applications for powering spacecraft, and by enabling efficiency improvements in photovoltaic coating materials, could also change the way solar cells are designed for a broad range of applications.

“Our goal is to harvest every last photon that is available to our cells,” said Jud Ready, a senior research engineer in the Electro-Optical Systems Laboratory at the Georgia Tech Research Institute (GTRI). “By capturing more of the light in our 3D structures, we can use much smaller photovoltaic arrays. On a satellite or other spacecraft, that would mean less weight and less space taken up with the PV system.”

The 3D design was described in the March 2007 issue of the journal JOM, published by The Minerals, Metals and Materials Society. The research has been sponsored by the Air Force Office of Scientific Research, the Air Force Research Laboratory, NewCyte Inc., and Intellectual Property Partners, LLC. A global patent application has been filed for the technology.

The GTRI photovoltaic cells trap light between their tower structures, which are about 100 microns tall, 40 microns by 40 microns square, 10 microns apart—and built from arrays containing millions of vertically-aligned carbon nanotubes. Conventional flat solar cells reflect a significant portion of the light that strikes them, reducing the amount of energy they absorb.

Because the tower structures can trap and absorb light received from many different angles, the new cells remain efficient even when the sun is not directly overhead. That could allow them to be used on spacecraft without the mechanical aiming systems that maintain a constant orientation to the sun, reducing weight and complexity – and improving reliability.

“The efficiency of our cells increases as the sunlight goes away from perpendicular, so we may not need mechanical arrays to rotate our cells,” Ready noted.

The ability of the 3D cells to absorb virtually all of the light that strikes them could also enable improvements in the efficiency with which the cells convert the photons they absorb into electrical current.

In conventional flat solar cells, the photovoltaic coatings must be thick enough to capture the photons, whose energy then liberates electrons from the photovoltaic materials to create electrical current. However, each mobile electron leaves behind a “hole” in the atomic matrix of the coating. The longer it takes electrons to exit the PV material, the more likely it is that they will recombine with a hole—reducing the electrical current.

Because the 3D cells absorb more of the photons than conventional cells, their coatings can be made thinner, allowing the electrons to exit more quickly, reducing the likelihood that recombination will take place. That boosts the “quantum efficiency” – the rate at which absorbed photons are converted to electrons – of the 3D cells.

Fabrication of the cells begins with a silicon wafer, which can also serve as the solar cell’s bottom junction. The researchers first coat the wafer with a thin layer of iron using a photolithography process that can create a wide variety of patterns. The patterned wafer is then placed into a furnace heated to 780 degrees Celsius. Hydrocarbon gases are then flowed into furnace, where the carbon and hydrogen separate. In a process known as chemical vapor deposition, the carbon grows arrays of multi-walled carbon nanotubes atop the iron patterns.

Once the carbon nanotube towers have been grown, the researchers use a process known as molecular beam epitaxy to coat them with cadmium telluride (CdTe) and cadmium sulfide (CdS) which serve as the p-type and n-type photovoltaic layers. Atop that, a thin coating of indium tin oxide, a clear conducting material, is added to serve as the cell’s top electrode.

In the finished cells, the carbon nanotube arrays serve both as support for the 3D arrays and as a conductor connecting the photovoltaic materials to the silicon wafer.

The researchers chose to make their prototypes cells from the cadmium materials because they were familiar with them from other research. However, a broad range of other photovoltaic materials could also be used, and selecting the best material for specific applications will be a goal of future research.

Ready also wants to study the optimal heights and spacing for the towers, and to determine the trade-offs between spacing and the angle at which the light hits the structures.

The new cells face several hurdles before they can be commercially produced. Testing must verify their ability to survive launch and operation in space, for instance. And production techniques will have to scaled up from the current two-inch laboratory prototypes.

“We have demonstrated that we can extract electrons using this approach,” Ready said. “Now we need to get a good baseline to see where we compare to existing materials, how to optimize this and what’s needed to advance this technology.”

Intellectual Property Partners of Atlanta holds the rights to the 3D solar cell design and is seeking partners to commercialize the technology.

Another commercialization path is being followed by an Ohio company, NewCyte, which is partnering with GTRI to use the 3D approach for terrestrial solar cells. The Air Force Office of Scientific Research has awarded the company a Small Business Technology Transfer (STTR) grant to develop the technology.

“NewCyte has patent pending, low cost technology for depositing semiconductor layers directly on individual fullerenes,” explained Dennis J. Flood, NewCyte’s president and CTO. “We are using our technology to grow the same semiconductor layers on the carbon nanotube towers that GTRI has already demonstrated. Our goal is to achieve performance and cost levels that will make solar cells using the GTRI 3D cell structure competitive in the broader terrestrial solar cell market.”

BioKing Green Energy NV Develops Photo-Bioreactor to Produce Biodiesel from Algae

BioKing Green Energy NV has developed new, high performance and continuous photo-bioreactors for algae for the purpose of producing biodiesel. BioKing Green Energy NV is a recently formed subsidiary, fully owned by BioKing Inc. It will engage in research and development of algae cultivation as an energy source for the production of biodiesel, which is an economically feasible and eco-friendly alternative to petroleum-based fuels. The production facilities for algae bio fuels will be based in the Netherlands, Spain and Portugal.

Hans and Marco van de Ven, founders of BioKing states: “With the increasing interest in biodiesel as an alternative to petrodiesel, many have looked at the possibility of growing even more oilseed crops as a solution to the problem of peak oil. However, there are two problems with this approach. Firstly, cultivation of even more oilseed crops will usurp valuable space needed to grow food crops to feed mankind. And secondly, traditional oilseed crops are not the most productive or efficient source of vegetable oil. Micro-algae have the highest potential of energy yield in vegetable oil crops. Some species of algae are ideally suited for biodiesel production due to their high oil content, some as much as 50 percent, and their extremely fast growth rates. They can grow in adverse conditions like deserts and saline water. That is why algae are the crop of the future.”

BioKing Inc. is a developer of scalable photo-bioreactors for the production of biodiesel developed with patented technology. They also produce other valuable bio-commodities produced from algae oil. This technology has the potential to dramatically improve biodiesel yields from algae oil.

“After only 3.5 hours inside the newly designed continuous photo-bioreactor system algae can be collected and processed,” van de Ven states. “ With our fast growing algae and our advanced photo-bioreactor it only takes four days to be in full production and to collect the first algae. And the cost of biodiesel feedstock will only be 5 to 10 cents a liter.”

UPC Wind has secured equity financing for its Mars Hill Wind Farm. Proceeds totaling approximately $44 million were funded by JPMorgan Capital Corporation and WFC Holdings Corporation (affiliates of JPMorgan Chase & Co. and Wells Fargo, respectively) and will be applied to reduce project debt associated with the Mars Hill Wind Farm.

“The Mars Hill Wind Farm is New England’s first utility-scale wind project. This innovative, well-sited project attracted highly reputable equity partners in JPMorgan and Wells Fargo, which underscores the stability and long-term health of our Mars Hill Wind Farm,” said Paul Gaynor, president and CEO of UPC Wind. “This investment is also significant as it demonstrates the financial community’s serious commitment to developing and funding renewable sources of electricity generation.”

The Mars Hill Wind Farm began construction in the first quarter of 2006 and achieved full commercial operations on March 26, 2007. Today, Mars Hill supplies approximately 42 megawatts of clean wind-generated power. The electricity produced from the Mars Hill facility results in a reduction of approximately 65,000 tons of carbon dioxide and over 350 tons of other damaging pollutants every year.

A new solar thermal plant in Spain, the largest of its type in Europe and the first in the world to produce power for a national grid, illustrates how technology innovation can be applied to meet the growing demand for cleaner energy.

Featuring a specially designed steam turbine-generator supplied by GE Oil & Gas, Planta Solar (PS10), an 11-megawatt solar thermal power plant at Sanlúcar in Spain’s Seville province, was inaugurated March 30. Now producing power for Spain’s electricity grid, it is the first solar plant developed in Spain by the Abengoa Group of Seville.

“While similar plants have been developed for experimental use, Planta Solar 10 marks the first time such a solar thermal plant of this size has been connected to a national grid for the production of electricity,” said Claudi Santiago, GE Senior vice president and president and CEO of GE Oil & Gas. “As the first of its type to enter commercial service, this project is a milestone in the development of solar thermal technology. Several other projects ranging from 7 to 50 megawatts and employing similar technology are currently under development in Spain, Portugal and North Africa.”

Planta Solar 10 is based on solar tower technology: flat mirrors reflect the sun’s rays to the top of a tower for heating water and producing pressurized steam. The steam then is expanded through the turbine, which drives the generator to produce electricity for Spanish domestic consumption.

The GE steam turbine-generator was manufactured by GE’s French affiliate, Thermodyn. The design of the GE steam turbine for this project differs from the turbines Thermodyn typically builds for industrial applications such as incineration and biomass projects. The inlet steam conditions of this turbine more closely resemble those of turbines used by the French Navy for electricity generation or the propulsion of nuclear ships, submarines or aircraft carriers.

The inlet steam for the solar plant operation is saturated, which requires the turbine to have a design that prevents blade erosion due to the high humidity ratio of the steam that flows through the various stages. Thermodyn’s experience in building 35 turbines with similar steam conditions for the French Navy was a key factor in the selection of this technology by Abener, the Abengoa subsidiary that developed the Planta Solar project.

Garten Rothkopf has released its study “A Blueprint for Green Energy in the Americas.” Prepared for the Inter-American Development Bank (IDB), the report seeks to cut through the hype surrounding biofuels, and alternative energy writ large, and present an objective, fact-based analysis of the region's global competitive position looking forward to 2020. It includes “The Global Biofuels Outlook 2007”, an extensive study done on the global biofuels market, including a survey of developments in 50 countries on 6 continents.

“A global transformation is underway that is unprecedented in the last century,” said David Rothkopf, president and CEO of Garten Rothkopf, “The global energy paradigm is changing. But like all such changes the revolution in energy choice is misunderstood, there is much hype and many mistakes will be made. Our report is an attempt to provide a global, forward-looking, fact-based analysis of the most important trends impacting the world’s most important markets for ethanol, biodiesel and the biofuels of tomorrow.”

The study notes that in 40 of the 50 countries surveyed, biofuels promotion legislation has been adopted and that in 27, biofuels mandates have been introduced into law. Most strikingly, the vast majority of these changes have taken place in the past four years.

“A Blueprint for Green Energy in the Americas” is based on the premise that biofuels are not a panacea, but one important choice in an increasing array of energy options, with a significant role to play in the reduction of greenhouse gas emissions from transport and represent an opportunity for the region to build on its natural endowments by establishing world-class centers of innovation and production, developing rural economies, and attracting private sector investment.

The report also focuses on the challenges that lie ahead, from ensuring that the choices made are sustainable in terms of their environmental and social impact, to recognizing that unprecedented investment and innovation will produce new competitive forces that will require all who would lead to adapt or fall behind. By 2010, annual investment in alternative energy is expected to reach $100 billion. The study estimates that for biofuels to meet the demand of a conservative 5 percent of global transport fuel use in 2020 at least $200billion in new investment will be required.

The growth of biofuels will favor countries with long growing seasons, tropical climates, high precipitation levels, low labor costs, low land costs, as well as the planning, human resources, and technological know how to take advantage of them. Latin America and the Caribbean, led by Brazil, already produces 40% of the world's biofuels and is uniquely positioned to take advantage of this growing industry.

To do so requires a strategic approach. Rather than present a cookie cutter formula for countries in the region, the report lays out four pillars critical to the development of a competitive biofuels industry and the identification of projects: innovation, capacity expansion, infrastructure, and building global markets.

Garten Rothkopf is a consultancy that assists investors, corporations and governments worldwide in adapting to the most important transformational trends of our time. Its alternative energy expertise is widely acknowledged and is a centerpiece of its practice.

Evergreen Solar, Inc., a manufacturer of solar power products, and NSTAR, an electric and gas delivery company based in Boston, have made an alliance designed to increase the role of solar power in Eastern Massachusetts. The alliance will leverage Evergreen Solar's unique String Ribbon solar power technology with NSTAR's expertise, capabilities and customer relationships to promote cost-effective solar options for consumers.

"This relationship with a utility can dramatically improve solar market delivery and significantly accelerate closing the gap between solar and conventional energy costs," said Richard M. Feldt, Chairman, president and CEO of Evergreen Solar. "NSTAR has ideal infrastructure to reduce the non-hardware portion of solar system costs. This vision has been central in Evergreen Solar's strategy, and we are very pleased to have NSTAR join in this vision and appreciate very much Governor Deval Patrick's work to help us create this important alliance."

"This program with Evergreen Solar will expand renewable energy choices for our customers by making solar installations more accessible and affordable," said Thomas J. May, NSTAR Chairman, president and CEO. "Customer interest in clean energy options is growing, and we are committed to offering them an increasing number of options to choose from."

NSTAR's goal is to help lower the overall cost of solar energy generation, and increase the awareness of solar for its customers. NSTAR can positively influence the cost of solar installations and service by promoting standardized systems installed by pre-approved solar contractors. The company has years of experience developing and running successful energy efficiency programs and will therefore be the natural contact point for customers interested in installing solar equipment through this and other potential alliances. NSTAR will also bring significant value to related efforts such as market research, marketing and promotion, lead development, sales support, and standardized system development. Customer follow-up, evaluation, and service will also be provided by NSTAR and its contractors.

This alliance will benefit from the announcement today by Massachusetts Governor Deval Patrick of an innovative and expanded solar incentive program for the state comprising a commitment by the Commonwealth to work toward aggressive goals for installed solar power generating capacity - from roughly 2 MW today to 250 MW by the end of 2017 - by strategic use of renewable energy funds and additional regulatory incentives for solar power adoption by residential, commercial, and industrial customers.