Navigant Research Blog

LightSail Catches Funding Breeze

— November 14, 2012

Defying the reports of cleantech funding’s demise, LightSail Energy, a California-based maker of modular compressed air energy storage (CAES) systems, has raised $37.3 million in a series D round of funding.

Materials-based energy storage systems store energy using air or water, materials that are either easy to come by or free.  These technologies typically provide good value for money in terms of energy (dollars per kilowatt-hour), making them suitable for long-duration applications such as load-leveling, peak-shifting, integrating wind assets, and optimizing grid assets such as power plants.

However, these types of systems are typically large – pumped storage systems can clock in at 1,000 megawatts (MW) or larger, and the two existing CAES installations are 290 MW and 110 MW, respectively.  The price tags for such installations are also high.  The logic behind these oversized projects is that the marginal cost of an additional unit of storage is very, very low.  Both of these technologies are also limited by geography, and they frequently deal with extended permitting cycles that can take up to 2 years to complete.

What makes LightSail’s technology distinctive is that it’s flexible and modular, has a low marginal cost of energy, can store energy over a long period of time, and, because it’s a mechanical system, it should benefit from a long lifetime (20-25 years).  LightSail, which plans to ship its first systems around the end of 2013, is targeting its systems for bulk storage for wind and solar integration, targeting grid operators seeking to shape wind and solar generation to match load.

The opportunity for next-generation CAES companies, such as LightSail, SustainX, and Bright Energy Storage, lies in targeting customers that are looking for a geographically flexible, high-value energy storage solution.  These customers include power plant operators who would rather run their plants at a consistent output instead of cycling up and down, industrial customers sensitive to increases in their retail electricity rates, wind farm operators who want to take advantage of higher prices for energy supplied during peak load, and others.


Where the Green Jobs Are

— November 9, 2012

Now that the dancing and denials of reality are over, for the moment, it is time to look ahead at the task of creating a sustainable economy for the 21st century.  In the last 2 years, the notion of the “cleantech bust”  has overtaken earlier projections that the clean energy sector can act as an economic engine.  It would be good, moving into Barack Obama’s second term, to have some clear data on the relation between the cleantech sector and job creation.

And, as a matter of fact, there are copious studies and reports available on the topic.  Unfortunately they are often confusing or conflicting.

The Labor Department has produced four reports on green jobs in the last year: two from the department’s inspector general’s office and two from the department’s Bureau of Labor Statistics (BLS).  They paint a discouraging picture.

Last month the department’s inspector general, in a report titled “Recovery Act: Green Jobs Program Reports Limited Success in Meeting Employment and Retention Goals as of June 30, 2012,” stated that federal funded local training programs designed to fill green jobs have mostly been jokes: Half the trainees received 5 or fewer days of training, the number of trainees who found green jobs was less than 40% of the target, and the agencies couldn’t even document the outcomes for around a third of those who completed the program.

In an earlier report, “Employment in Green Goods and Services—2010,” the Bureau of Labor Statistics provided a more encouraging overview: The United States had 3.1 million green jobs in 2010.  That number, though, was based on a bureaucrat’s definition of a “green job. ” “For instance, according to the report, there were 33 times as many green jobs in the septic tank and portable toilet servicing industry as there are in solar electricity utilities,” noted the Heritage Foundation, acidly, “and more green jobs selling used merchandise (think the Salvation Army store) than in engineering services.”

Define ‘Cleantech’

It’s not hard to find contrary evidence.  In July 2011, the centrist Brookings Institution released a report (“Sizing the Clean Economy: A National and Regional Green Jobs Assessment”) that concluded, “The clean economy, which employs some 2.7 million workers, encompasses a significant number of jobs in establishments spread across a diverse group of industries.”  Cleantech employs more workers than the fossil fuel or bioscience industries, the study concluded.  The same caveat, though, applies: It depends on your definition of cleantech.  “Most clean economy jobs reside in mature segments that cover a wide swath of activities including manufacturing and the provision of public services such as wastewater and mass transit.”

So, if you don’t count hotel housekeepers and garbagemen as “cleantech jobs,” then things look pretty grim.  Right?  Umm, not quite.  “The clean energy sector in particular is growing very quickly,” reported Bryan Walsh in Time, citing the Brookings study.  “It grew by 8.3% between 2003 and 2010, nearly twice as fast as the overall economy during those years.”

What’s more, those mythical high-tech jobs in renewable energy are materializing, as well: The pace of job growth in solar power is 5 times as fast as that of the broader economy, reported the Solar Foundation in a jobs survey released last month.  Solar industry employment increased from about 105,000 to 119,000 in the last 12 months, a 13% jump.

Outside the Bubble

The realities of the cleantech economy are invisible to politicians inside the D.C. bubble, according to the authors of “Red, White and Green: The True Colors of America’s Clean Tech Jobs,” a report from DBL Investors, a socially conscious investment firm based in San Francisco.

“Outside of the capital, where governors (and mayors) are more concerned with creating jobs than scoring debate points, there is no controversy about the impact of cleantech. It is almost universally appreciated as the important engine for job development and economic growth that it is. Disregarding the partisan bickering in Washington, these local officials are using clean tech to bring high-quality jobs to their states, in the process reviving communities and winning the support of local voters in both parties.”

So your view of the cleantech sector’s potential for job growth largely depends on which lens you choose to look through.  A few points are inarguable, though:

  • Cleantech jobs are growing, just not in the places you might look first
  • Federal job training programs for mythical “green jobs” are largely ineffective
  • That money is better spent on R&D and bringing promising technologies to market
  • It’s time to shift from grandiose high-tech schemes to more grounded, affordable, and realistic green technologies and business models
  • Cleantech will never fully thrive without a coherent and publicly supported national energy policy

The Brookings authors summed up that final obstacle: “The fact that significant policy uncertainties and gaps are weakening market demand for clean economy goods and services, chilling finance, and raising questions about the clean innovation pipeline reinforces the need for engagement and reform.  Not only are other nations bidding to secure global production and the jobs that come with it, but the United States currently risks failing to exploit growing world demand.”


Why Getting to the Moon was Easier than Shifting the Energy Paradigm

— November 7, 2012

It is time to retire the “moonshot” analogy.  This is one of the most popular analogies used by politicians and clean energy advocates, so you’ve probably heard it before.  The argument goes: “If the U.S. just applies the same commitment, funding, and determination that enabled us to reach the moon just 8 years after President Kennedy launched the Apollo program, we can certainly … put 1 million EVs on the road by 2015, create the hydrogen economy, or achieve energy independence.”  Presidents, environmental groups, technology advocates, and startups have all used this comparison to suggest that we should be able to achieve the clean energy transformation if we just have the will, and the dollars, to do it.

But what all these references to the Apollo program really do is highlight the unpleasant reality that changing energy markets is much, much harder than getting to the moon.  Getting to the moon was largely a technological challenge, not a societal one.  It required getting people to work together to develop the technology and to manage the missions, as well as securing ongoing support from Congress and the American people.  It didn’t, however, involve changing the everyday habits of millions of Americans or changing millions of decisions made independently through the free market.  The Apollo program also was not exactly price-sensitive, whereas the auto market, for example, most definitely is.  So, while the government can speed the rate of clean car technology development with massive investments, the technologies still have to meet very demanding price targets and be amenable to mass production and use by non-technical experts (i.e. the driving public).

We actually have a rather nice test case that demonstrates this difference.  One man has tried both to get to the moon – or at least into outer space – and to re-make the U.S. automotive sector.  That would be Elon Musk.  Let’s recap his progress so far:

SpaceX: Founded in 2002, completed first successful commercial space mission in 2012.

Tesla: Founded in 2003, sales of EVs probably under 5,000 as of mid-2012.

This is not to suggest Tesla is a failure.  As my Smart Transportation colleagues have noted, Tesla can be largely credited for re-igniting interest in EVs in the United States with the high-performance Roadster.  The company has continued to set very high standards with its Model S, but sales have been slow to date, due in part to the price tag – a base price of over $55,000.

The problem with the Apollo analogy is that helps drive the boom-and-bust cycle of technology development.  Politicians start talking about moonshots and the next thing they do is make unrealistic projections about how quickly we can meet clean technology goals.  When the lofty goals aren’t met, people grow disillusioned and start looking to the next great solution.  Even Elon Musk, who says that EVs will someday make up half of auto production, thinks it will take 20 years to get there.  We’ve seen real progress in the development of clean technology over the past 10 years, and it shouldn’t be counted as a failure if we haven’t yet reached the moon.


Fuel Cell Providers Act Locally

— November 7, 2012

With the election over, the economy and job growth remain the key issues for most Americans.  Energy policy is often promoted as an employment plan – but I’m skeptical that energy policy can be designed to drive large-scale employment.  This may be another political myth like the promise of “energy independence”.  Nevertheless, our research into the growth of the fuel cell market over the past few years, and our assessment of where it’s going, suggest that a counterintuitive approach to job creation may be in order.  In short, if governments want to promote job creation in the fuel cell sector, they should promote domestic demand for fuel cell products.

How do they do that? First, Pike Research has tracked shipments of all fuel cell applications from companies around the globe, and where those shipments are going, from 2008 to today.  This database was used for our analysis of the state of the industry in the Fuel Cell Annual Report 2012.  The vast majority of fuel cell systems from 2009 to 2011 were shipped to the manufacturer’s home market.  This is indicative of the fuel cell industry as still a fledgling market.  Before going commercial, companies will have made enormous investments in their technology, and then invested even more in making a product that can be sold commercially, and yet again in marketing and sales.  In the early phase of commercial sales, companies have to limit their target markets, and it makes most sense to first go after their local market.  For example, providers of stationary fuel cell systems must develop products with the right power rating and certification for their local or regional market, as well as the capability to reform domestic fuels – such as city gas, a fuel supply particular to Japan.  Once the local market is established, the company can move to other regions.  This oversimplifies the strategy a bit – there are companies that are targeting more than one market – but overall this is the state of the fuel cell industry today.

There is a second trend that shows how domestic demand can drive localized manufacturing.  In our recent webinar on the Fuel Cell Industry in 2012, we showed the following graph of revenue by region from 2009 to 2011.

Fuel Cell Systems Revenue by Region, World Markets: 2009-2011

(Source: Pike Research)


Notice that the Asia Pacific is the only region to see consistent growth.  This reflects the dramatic growth from Japan’s Ene-farm program promoting residential CHP and Korea’s promotion of stationary fuel cell power.  It is also the result of companies shifting operations to the actual market where they will be selling.  One notable example of that has been U.S. company FuelCell Power, which announced a long-term deal with Korea’s POSCO Power in March.  The deal includes a licensing commitment that provides for manufacturing based in South Korea.  We can see this happening with other companies that are targeting overseas markets and moving a portion of their manufacturing to those regions, making them, in essence, “domestic” markets.

So for governments that want to promote jobs in the fuel cell industry, at this early stage of commercial sales, it may make the most sense to support the domestic demand for fuel cells that will allow companies to build for their home market – and hire the workers to do so.


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