Navigant Research Blog

The Clean Tech Industry’s Stake in California on November 2nd

— October 29, 2010

The oil and gas interests that are behind Proposition 23 on the November 2nd ballot in California are faltering in the polls. That’s good news for the clean tech sector, but a less well-known ballot measure, Proposition 26, could still help pull the rug out from under California’s efforts to create markets for clean energy and clean transportation systems.

Just as vested special interests protecting the status quo thwarted efforts to pass any meaningful regulations on carbon and/or to promote renewable energy at the federal level this year, Tea Party activists (working with sympathetic apologists for the fossil fuel industry) are trying to roll back California’s climate change regulations through the much maligned ballot initiative process.

The irony is that Silicon Valley and Hollywood are outspending the out-of-state oil companies behind Proposition 23, which would, in effect, undo AB 32, the Global Warming Solutions Act of 2006 requiring the state to reduce greenhouse gas emissions by approximately 25% by 2025. (Since 40% of California’s climate change gases are linked to the transportation sector, this ballot measure could have a crippling impact on emerging markets for plug-in electric vehicles.)

Prop 23 would suspend the nation’s most aggressive climate change law until unemployment (currently standing at above 12%) drops to 5.5% for four consecutive quarters. That low of a level of unemployment has only occurred three times over the last four decades.

Recent reports on campaign spending show that Pacific Gas & Electric (PG&E), which was a prime mover behind AB 32, has pumped $250,000 into the “No on Prop 23” campaign. Another notable financial supporter of this effort to protect environmental regulation is Gordon Moore, the legendary co-founder of Intel, who has contributed $1 million to the same effort.

The prime funding sources behind Prop 23 are Tesoro and Valero, both oil companies hailing from Texas, and the infamous billionaires Charles and David Koch, who own oil refineries in Alaska, Texas and Minnesota. At present, the pro Prop 23 interests are being outspent at a rate of 3-to-1, $30 versus $10 million. Despite the economic doldrums facing the nation and state, recent polls show that 48% of voters oppose Prop 23, while only 37% support it (with the rest still undecided.)

Of course, the battle might not be over on November 2nd. Attorneys general from Alabama, Nebraska, North Dakota and Texas claim they will go to the court if voters reject the measure, basing their legal arguments on the Constitution’s interstate commerce clause. In lawsuits where states are the opposing litigants, the Supreme Court has original jurisdiction. That means a trial would need to take place at the Supreme Court.

While the clean tech sector may be crowing about their seemingly successful effort to beat back Prop 23, Proposition 26 has largely been under the public’s radar. The outcome of this ballot measure is less certain. It would reclassify environmental impact fees as taxes and then require a 2/3 vote in the California Legislature (rather than a simple majority) to impose them.

The two-thirds voting requirement for passing a state budget has mired the state in an annual fiscal crisis due to gridlock between majority Democrats and the minority Republicans. Environmentalists and their clean tech allies fear passage of Prop 26 could cripple efforts to levy fees to implement the variety of programs designed to reduce greenhouse gas emissions.

Interestingly enough, the prime funders behind Prop 26 are California oil companies that have all dissociated themselves from Prop 23. Chevron, ConocoPhillips and Occidental Petroleum have all ponied up on behalf of Prop. 23. Chevron is the largest single contributor at $3.7 million. In this campaign, proponents have been outspending the opponents at a more than 2-to-1 ratio, with over $16 million versus less than $6 million.


Cross Certification in Green Buildings

— October 28, 2010

A few months back I wrote about the relative stringency of different green building certification programs and the difficulty in comparing them on an apples-to-apples basis. The bottom line is that green building certification programs are structured differently from one another, and the best certification system for a particular building project depends largely on the unique priorities of the key stakeholders. A multinational corporation looking to improve its corporate sustainability record might opt for a different certification program from a large property owner aiming for reduced operating costs across its entire portfolio. Given the varying goals achieved by different certification programs, there has been a trend toward “cross-certification” in the green building sector, or buildings boasting more than one certification or label.

Part of the overlap comes from the tendency of green building certification programs to piggyback off one another from a process standpoint. ENERGY STAR, for example, is used as a prerequisite for several certification programs such as the DOE Builders Challenge for new homes. In other cases, one certification program might be used as an optional “pathway” toward certifying a building, thereby reducing the amount of effort required to apply multiple certification programs to a single building. The same steps a building team would have to take to achieve ENERGY STAR might also help them achieve LEED, too.

In other cases, cross-certification is the best way to accomplish multiple green building goals in a single building. This phenomenon is especially prevalent in Europe, where many countries have their own national-scale building programs. (France leads the national certification program race with no fewer than seven homegrown programs.) While national-scale programs such as BREEAM in the UK and HQE in France may help attract local tenants, the internationally recognized LEED program will provide better differentiation for international tenants than national programs. Many property owners and managers report that they use LEED, a national certification program, and even others such as the EU’s Greenbuilding label on a single building just to cover all the bases.

There are additional benefits to cross-certification, too. While it can be more expensive to use LEED overseas (given the fact that it was originally designed more for the U.S. climate and construction norms), national scale certification programs are often better harmonized with a particular country’s situation on-the-ground and can be cheaper to implement. Moreover, many national-scale certification programs are tied to governmental incentives for green building such as grants for efficient equipment and expedited permitting, which can facilitate the certification process overall.

The chart above demonstrates the high incidence of cross certification in the United States. Many buildings will receive both the ENERGY STAR commercial buildings label as well as LEED certification; over half of green buildings in the U.S. will have more than one certification by 2015. Cross-certification, therefore, is going to be an increasingly important trend to watch as interest in green building mounts.


Regenerative Breakthrough Could Grow Battery Business

— October 27, 2010

The advanced battery market is about to get much busier thanks to demand from electric vehicles. Additionally, an innovative program to capture energy from subway cars could cause a further surge. The Southeastern Pennsylvania Transportation Authority (SEPTA) won a federal grant to install an energy storage system that can capture regenerative braking energy when the train approaches a station.

SEPTA will use the energy storage system (batteries similar to those used in EVs are a leading contender) to enhance the quality of power at the company’s substation in the Kensington section of Philadelphia. Some of the excess energy will be used at the substation, while other energy will be stored and made available to the wholesale power market for grid services such as frequency regulation.

The $900,000 project is expected to have a three-year payback and if successful, could be spread to most of SEPTA’s 38 subway substations. Most of the substations were built in the 1930s and have ample room for batteries, according to SEPTA’s Erik Johanson. He said that subway cars on the Broad Street and Frankford-Market lines have the capability to capture energy from regenerative braking.
Viridity Energy of Conshohocken will manage the project and has developed software that calculates how energy assets can be optimized to participate in grid services.

Before long, SEPTA could join a growing number of small companies looking to leverage batteries in the power market. According to Ken Huber of PJM, a regional transmission organization (RTO) operating in several eastern states, more than 40 megawatts of batteries are “in the queue” for grid applications in his company’s area.

Frequency regulation is an appropriate market for lithium ion batteries because only a small amount of energy is taken out at a time. This minimizes the impact on battery life when compared to applications that nearly fully charge or discharge a battery, such as powering a vehicle or to store wind energy produced off-peak for later use.

Huber said that a two-year trial using batteries from Altair Nanotechnologies for frequency regulation has shown a less than 1% reduction in the capacity of the batteries.

Vehicle batteries are currently being used for frequency regulation services in a project developed by the University of Delaware. Vehicle fleets maintained by organizations such as the postal service and delivery services are expected to be the first participants making lithium ion batteries available for ancillary services. A successful trial in the Philadelphia subway could prompt other mass transit operators to adopt the technology to generate revenue.

(Correction: The chart in this article was updated to correct an error and to reflect Pike Research’s revised forecast data.)


Electric Motorcycles Supply Growing, Outpacing Demand?

— October 26, 2010

There has been some interesting news on the electric motorcycle front recently. Last week, electric motorcycle start-up, Brammo, announced a new model, the Enertia Plus. The “Plus” represents another 40 miles of range, giving the motorcycle a total of an 80 mile range thanks to a battery pack that goes from 3 kWh to 6 kWh in the Enertia Plus. According to Brammo, they do this without adding any weight to vehicle, which may be the most interesting technical accomplishment. Brammo now has a line of three models, the Enertia, Enertia Plus, and Empulse (a 100+mph and 100 mile range bike).

A few days before Brammo’s announcement, Zongshen announced they will field the first manufacturer team for the TTXGP, the electric motorcycle grand prix circuit. Many in the U.S. may not be familiar with Zongshen, but they are one of the largest motorcycle manufacturers in the world. They currently manufacture motorcycles and scooters both under their own brand, as well as for Piaggio and Harley Davidson. Zongshen has a division in America and is working on their own dealer network. In addition to their own electric motorcycle, they have been trying to become a major stakeholder in Mission Motors, an electric motorcycle start-up from California.

The distribution of electric motorcycles continues to be a major challenge. Zongshen’s electric motorcycle is not yet available in the U.S. However, if they can get a dealer network established, it’s not hard to believe that they will get the 2011 electric motorcycle. Brammo is working with selected Best Buy stores to act as dealers. Other brands, such as Zero Motorcycles, are working with independent dealers.
Distribution aside, there is the question of demand as well. According to webBikeWorld, sales of new traditional gas powered motorcycles have fallen about 15% in the first half of 2010 (240,260 vehicles sold in Q1 and Q2) compared to the first half of 2009. With sales falling for traditional motorcycles, there is no evidence that electric motorcycles have made significant gains. Early this year Pike Research estimated that the U.S. market for electric motorcycles will be about 3,600 units in 2011. These sales will likely be those who are eager for environmental transportation and are motorcycle enthusiasts.

With such a small market, the seven to eight different manufacturers of e-motorcycles may find that there is not enough demand to go around. This raises difficult questions for the e-motorcycle industry: As recharging infrastructure grows for electric cars in the next couple years, will demand for electric motorcycles follow? Will technology catch up such that electric motorcycles will be competitively shopped with gas powered bikes? (We aren’t there at the moment.) The bottom line is whether manufacturers that want a piece of the small U.S. e-motorcycle market are either profitable enough or specialized enough to be sustained over the next several years until demand grows to meet the growing supply.


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