Wired: Why the Clean Tech Boom Went Bust

Russ Steele

Juliet Eilperin has written a long a detailed article on why the clean technology bubble has burst HERE.

Here is couple of the money quotes from the article:

 In 2005, VC investment in clean tech measured in the hundreds of millions of dollars. The following year, it ballooned to $1.75 billion, according to the National Venture Capital Association. By 2008, the year after Doerr’s speech, it had leaped to $4.1 billion. And the federal government followed. Through a mix of loans, subsidies, and tax breaks, it directed roughly $44.5 billion into the sector between late 2009 and late 2011. Avarice, altruism, and policy had aligned to fuel a spectacular boom.

Anyone who has heard the name Solyndra knows how this all panned out. Due to a confluence of factors—including fluctuating silicon prices, newly cheap natural gas, the 2008 financial crisis, China’s ascendant solar industry, and certain technological realities—the clean-tech bubble has burst, leaving us with a traditional energy infrastructure still overwhelmingly reliant on fossil fuels. The fallout has hit almost every niche in the clean-tech sector—wind, biofuels, electric cars, and fuel cells—but none more dramatically than solar.

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Perhaps the biggest force working against not just Solyndra but clean energy in general is this: Because natural gas has gotten so cheap, there is no longer a financial incentive to go with renewables. Technical advances in natural gas extraction from shale—including the controversial practice of hydraulic fracturing, or fracking—have opened up reserves so massive that the US has surpassed Russia as the world’s largest natural gas supplier.

The price of natural gas peaked at nearly $13 per thousand cubic feet in 2008. It now stands at around $3. A decade ago, shale gas accounted for less than 2 percent of America’s natural gas supply; it is now approaching one-third, and industry officials predict that the total reserves will last a century. Because 24 percent of electricity comes from power plants that run on natural gas, that has helped keep costs down to just 10 cents per kilowatt-hour—and from a source that creates only half the CO2 pollution of coal. Put all that together and you’ve undone some of the financial models that say it makes sense to shift to wind and solar. And in a time of economic uncertainty, the relatively modest carbon footprint of natural gas gets close enough on the environmental front for a lot of people to feel just fine turning up the air-conditioning.

The most insightful part of the article are these reality checks by Rachel Swaby.

Power Struggles

For each unique green-tech sector, a unique set of challenges.—Rachel Swaby

Solar

Promise: Enough sunlight hits Earth in one hour to power the world for a year. In 2010, the solar industry predicted that as many as 500,000 people would be directly or indirectly employed in the US solar sector by 2016.

Reality: As we head into 2012, the number is more like 100,000. Prices for conventional solar cells have fallen 40 percent in the past year, due largely to a flood of panels from Chinese manufacturers, which have benefited from plunging silicon prices and government support. The price drop has eviscerated the US solar manufacturing industry.

Outlook: China’s 54 percent share of the global panel-making market will grow, and we’ll remain locked into older technology. But cheap panels mean more of them on rooftops, which is good.

Wind

Promise: The US has the potential to generate enough wind energy to meet the nation’s total consumption 12 times over.

Reality: At $35 a megawatt-hour, wind looked like a good deal back in 2007, when wholesale electric prices ranged between $45 and $85 per megawatt-hour. But the natural gas boom, plus the 2008 recession, drove prices under $30 by 2009, eliminating wind’s financial edge. Also, NIMBY protests have made getting approval for a wind farm in the US as difficult as getting it for a coal-fired plant.

Outlook: Cheaper prices for turbines should result in lower costs for wind power by 2014. Though growth has slowed since 2008, this sector is still expected to cover about a third of any increased energy consumption in the US between now and 2035.

Algae

Promise: Algae is, by some measures, up to 30 times more energy-dense than other biofuel crops. It ought to yield cheaper fuel, saving huge swaths of arable land.

Reality: A recent Department of Energy road map includes a 33-item list of R&D challenges—from assessing environmental risks to creating efficient conversion methods—that must be overcome for algae to be viable. In fact, researchers still aren’t able to cultivate the stuff on a large scale.

Outlook: In 2010, the DOE cautioned that “many years of both basic and applied science and engineering will likely be needed to achieve affordable, scalable, and sustainable algae-based fuels.”

Fuel Cells

Promise: Zero-emission energy for everything from laptops to cars to power stations, all fueled by the most abundant element in the universe, hydrogen.

Reality: To compete with fossil fuels, the electricity from fuel cells needs to sell for around $30 per kilowatt. Right now, that figure is about $49. Also, there are only about 60 hydrogen refueling stations in the country, serving around 200 small vehicles and 15 buses. Industry leader FuelCell Energy lost $56.3 million in 2010 and has never turned a profit.

Outlook: Even if fuel cells become cheaper and more reliable, a workable hydrogen infrastructure is still decades away.

Batteries

Promise: Zero-emission vehicles (assuming that the power for recharging the batteries comes from zero-emission sources).

Reality: The federal government injected $2.4 billion into the battery industry in 2009, under the American Recovery and Reinvestment Act, with the stated goal of getting more electric cars on the road. But expensive materials means that advanced lithium-ion batteries still cost about $650 per kilowatt-hour of usable energy. At that level, the 24-kWh battery pack for a Nissan Leaf costs more than some cars.

Outlook: Despite a White House call to get battery prices down to $100 per kWh by 2020, the rosiest predictions foresee nothing cheaper than $300 per kWh over the next decade.

Cellulosic Biofuel

Promise: Biodiesel derived from stalks, trunks, stems, and leaves—rather than plant oils or the edible parts of crops—would supply cheap renewable energy without hitting the food supply.

Reality: In 2010, the US produced 88 million gallons of cellulosic biofuel—less than a year’s output from a single corn ethanol plant. Large-scale commercialization is still not viable, because the sugars in biomass are harder to tease out than those in corn. Building a cellulosic ethanol plant costs up to four times as much as building a first-gen biofuel plant.

Outlook: In 2007, the government set a target of 100 million gallons of cellulosic biofuel reaching pumps annually. In 2010, that target was revised down to just 6.6 million gallons.

Smart Meters

Promise: Replace analog meters with digital devices that provide real-time feedback to both customers and utilities, which would help build more efficiency and stability into the grid.

Reality: Smart meters are being widely deployed. But fringe groups have voiced concerns about privacy and health that have slowed or canceled rollouts in several communities. And faulty meters that led to higher bills have caused several local governments to require independent reviews of the systems.

Outlook: Smart meters are the linchpin of the smart grid—computer-based automation of electricity delivery. None of these early glitches are likely to get in the way for long. Analysts predict 250 million smart meters will be installed worldwide by 2015.

Charging Stations

Promise: A network of 240- and 480-volt charging-station kiosks could dot roadsides and parking lots, like ATMs for electric cars.

Reality: The fastest charge for a Nissan Leaf takes about 30 minutes at 480 volts. Unless we could suddenly install enough stations to guarantee no waiting (there are currently only 1,800 nationwide), the time commitment means that recharging on the go just isn’t feasible. For the most part, electric-car owners are limited to as much driving as they can get from a single at-home charge.

Outlook: The cost of kiosks (up to $35,000 each) plus relatively low demand means they’ll be limited to metropolitan areas for years to come.

 

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About Russ Steele
Freelance writer and climate change blogger. Russ spent twenty years in the Air Force as a navigator specializing in electronics warfare and digital systems. After his service he was employed for sixteen years as concept developer for TRW, an aerospace and automotive company, and then was CEO of a non-profit Internet provider for 18 months. Russ's articles have appeared in Comstock's Business, Capitol Journal, Trailer Life, Monitoring Times, and Idaho Magazine.

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