An Intro to ‘Green’ Chemicals

Marketing Intelligence & Strategy recently assessed market opportunities in the US and Western Europe for selected commodity industrial chemicals made by a new biology-based process. Key conclusions included:

1. In both the US and Europe, users of large volume commodity chemicals and solvents are eager to learn about and purchase ‘greener’ alternatives.
2. There is widespread acknowledgement that claims about the ‘green-ness’ of materials and processes are difficult to verify and thus difficult to accept as the basis for important business decisions.
3. Most industry figures would welcome a consistent, comprehensive way to assess cradle-to-grave carbon footprint of incumbent materials and ‘greener’ alternatives.
4. New REACh regulations being implemented in Europe represent a substantial hurdle, especially for smaller manufacturers, particularly those not already established in the Europe and marketplace.

For more highlights from this study, visit The Market Intelligence Blog
Read our ‘Green’ Chemicals Whitepaper

Growing a Solar Business

A specialty subcontractor, who installs residential solar–electric systems as an adjunct to his primary line of business, engaged Marketing Intelligence & Strategy to develop and help execute a business plan to dramatically grow his solar energy business.

MISA research presented a comprehensive portrait of the local residential and commercial building marketplace through interviews with homeowners and commercial building operators, architects, residential and commercial builders, and electrical and plumbing subcontractors. Key insights (which likely apply in many localities) include:

– While a handful of the region’s architects and builders have significant appreciation for the possibilities of alternative energy systems, the large majority lack sufficient expertise to effectively advocate for, or help their customers fairly evaluate, solar alternatives.
– The initial costs of PhotoVoltaic PV systems are high enough (even with subsidies), and Return on Investment ROI predictions sufficiently uncertain, so as to discourage most homeowners who are not committed solar enthusiasts.
– Particularly for homeowners who do not have a natural gas fired hot water option, both the initial investment and the projected ROI for a solar-thermal domestic hot water system can be much more attractive.

Building on these insights, MISA created a business development plan which the Client:

– Pro-actively meets with an ever increasing circle of important architects, builders, and plumbing and electrical contractors to broaden the awareness and appreciation within the builder community of solar energy opportunities, and to establish the Client as the regional ‘go-to’ expert.
– Regularly addresses local civic groups, church groups, etc, and regularly engages in community activities, to educate a broader cross-section of the community about the benefits of alternative energy – and of the locally available expertise.
– MISA prepared news releases, and assisted the client in placing them in newspapers and local magazines.

The Client has earned increasing recognition and respect within the building and construction community as the leading authority on solar energy design and installation in the region. The Client has recently been awarded a contract to install solar electric plus solar hot water systems in a major new building at a local educational institution.

A Fatal Flaw

I try hard to keep politics out of my editorials about the energy world, but the major energy story today is the continuing oil spill in the Gulf of Mexico, and the really consequential parts of that story are all about politics.

The political philosophy which has reigned over the past 30 years says “Any regulation that restricts the oil industry’s freedom to operate is bad – doubly bad, if it comes from Washington. Accidents or mistakes? Don’t worry – market forces will incentivize companies to do the right thing.” On its surface, it’s an appealing policy. It has enabled the ‘can do’ attitude of great innovation in oilfield technology which has kept oil flowing to our gas tanks and factories. On a philosophical level, it satisfies our urge for personal freedom and the ability to earn great reward for great success.

Appealing as this philosophy might be, the way it has been implemented these past 30 years is fatally flawed. In this case, BP gambled big – perhaps by stretching its technology beyond its limits, perhaps by cutting safety corners – with little prudence or restraint. While BP will pay some of the costs of their mistakes, most of the assets they gambled with – the homes and livelihood of Gulf coast residents, the barrier islands which provide protection from hurricanes, the shrimp and oyster fisheries, and Gulf and Caribbean environment – weren’t theirs to wager.

The bottom line problem – it’s a problem that runs to the very core of American society – is that over the past 30 years, politicians of both parties have designed the rules so that the big and powerful can gain great rewards, while the government and society in general are there to back-stop their great failures. As the BP case illustrates, there’s no one sitting at the regulatory table who represents the interests of the average American people, making sure the Big Boys are not playing fast and loose with our assets.

As columnist David Brooks, certainly no friend of big government, said in a recent editorial:
If this disaster teaches anything, it is that we are a venturesome, entrepreneurial society. We rely on corporations like BP to bring us energy. At the same time, it is clear that even well-meaning corporations sometimes take shortcuts when it comes to controlling pollution and protecting worker safety.
So we want government to regulate business. We want regulation to be strong enough to reduce risk but not so strong as to stifle innovation. We want regulators to work cooperatively but not be captured by those they monitor.
We have known, for a long time, that regulation is about balance. The proper regulatory regime has to be set case by case and year by year.

The problem is that today, the balance between entrepreneurial freedom and the public interest is badly out of whack. Whether it’s the oil industry, Wall Street, or mortgage bankers, the existing regulations – and the way the regulators apply them – all too often allow the rich and powerful to get richer and more powerful, while the rest of us pick up their tab.

“Drill, baby …” Oops, Never Mind

Not long ago, I wrote – pretty favorably – about Pres Obama’s decision to open up some offshore areas to more drilling and petroleum development. I said then that decades of technology improvements have substantially reduced the risks of accidents and spills.

Well, that statement was certainly factually true when I made it, and it’s no less true today. But the BP disaster off Louisiana shows that the risk isn’t ZERO. We don’t know yet just where the system failed – equipment malfunction, poor design, or human error – but there was a failure point, and it is within our ability to identify it, along with the culprits.

Oil producers and drillers have lots of incentive to avoid these disasters. It will cost BP many times more in clean-up costs and bad publicity than they could ever have saved by cutting safety and environmental corners. But even if a company has the best of intentions – and it’s pretty clear now that planning for potential spills by BP, Halliburton, et al was dreadfully negligent – familiarity always breeds complacency, and it’s easy to become lax when you’re policing your own behavior.

Better oversight and regulation – by an independent organization that doesn’t have a direct stake in getting oil out of the ground – must be a major part of the response to this mess. Taking $$$ out of the hide of unfortunate or negligent offenders is satisfying, but bancrupting BP isn’t going to clean up the mess in the Gulf, bring back the dead fish, birds and turtles, or replace the lost tourism and fishing revenues.

Energy development is vital to our individual economic health and to our country’s basic security. But debacles like the BP mess underscore the urgency of developing alternative sources, along with more effective and reliable regulation of oil and coal resources.

And the fact that our near term energy mix will have to include a fair amount of oil that’s not from the Middle East as a bridge to a non-fossil fuel future underscores the urgent need for an independent regulatory body with the resources and teeth to make sure industry doesn’t cut corners when it comes to safety and the environment.

Unfair Subsidies for Big Oil?

Don B commented on my “Making Clean Energy Cheap” on the Linked-In group Management Consulting Jobs, asking for “… specifics of the tax and regulatory provisions that contribute to tilting the market in favor of fossil fuels.” Don’s is a fair and reasonable question that deserves a reasonable, rational answer.

First, there are direct subsidies. Perhaps the best example relates to ‘royalties’, the payments oil producers are obligated to make to owners of the land (technically, the owner to the rights to minerals below the surface) where the oil is found. Typical royalties paid to private owners in the US Gulf Coast area are in the range of 20-25% of the value of the oil. Royalties on oil from Federal lands and most offshore oil – resources that are owned by you and me and every other American – are only about 12-17%. That subsidy is worth about $8-10 per barrel at current crude oil prices. Beyond that, the government often allows collection of these royalties to be delayed or forgiven altogether. (See more here and here.)

Second – Only a fraction of the true cost of petroleum is reflected in crude oil prices or the price of gasoline and diesel we pay at the pump. The rest is borne by you and me and every other US taxpayer, resulting in a not-quite free ride for the oil industry, but a substantial discount paid out of your pocket and mine. What are some of these indirect costs of our oil appetite?

– The oil industry certainly invests a lot (and for the most part, very effectively) in reducing the environmental footprint of their direct operations, but the vast majority of environmental liabilities from burning fossil fuels are borne by society in general – either in public $$$ spent for clean up and remediation or in deteriorating health and quality of life.
– The oil industry thrives on crude oil imported from some of the world’s most remote and dangerous places. We the taxpayers pay for the military and diplomatic security that makes it possible for the oil companies to continue conducting their lucrative overseas business.
– Depreciation is an accounting tool that allows companies to, in a sense, put aside a little money today, tomorrow and the next day to reinvest – to replace the valuable assets that will eventually be used up. Oil-in-the-ground is our major energy asset, and the energy producers and users should be putting aside $$$ to replace the energy resources we use up.

Since it took God and geology 300 million years to make the oil we’re using now, replacing it in-kind is not an option. Prudence and good business says the oil companies and society ought to be reinvesting in new energy sources, but we aren’t. Everyone – consumers and energy companies alike are taking a free ride at the expense of the next generation.

There are, of course, many ways to look at and account for these hidden costs, and legitimate difference of opinion about who should bear them. See for example “The True Cost of Oil: $65 Trillion a Year?” and “True Cost of Oil” by G.R. Morton.

But the fact is that none of these direct or indirect subsidies are factored into the prices we pay at the gas pump or for electricity to our homes and businesses. And it matters because the new, cleaner and more geopolitically secure alternative energy technologies that are struggling to emerge must compete against these heavily subsidized incumbents.

Wow! Didn’t See that Coming

President Obama shocked just about everyone with his intention to lift the ban on offshore drilling along much of the East Coast, Alaska and the eastern Gulf of Mexico. But perhaps he’s doing something right. The New York Times offers some praise, tempered with an environmental admonition. Even in the reddest of the Red States, an editorial in The Daily Oklahoman has some good things to say about Obama’s plan, and executives in the reddest of Oklahoma’s industries are grudgingly optimistic.

No one, obviously, is entirely happy – the Left and environmentalist feel betrayed; many Repubs say he didn’t go far enough, chanting the predictable ‘too many taxes’ mantra.

Getting beyond the rhetoric, a rational assessment of the new policy must revolve around three questions:

Is it GOOD energy policy? Yes, it is good energy policy (and good economic and national security policy, too) provided that it supports, not substitutes for, an aggressive program to nurture and encourage non-fossil energy alternatives – wind, solar, bio-mass, etc, as well as nuclear. As I’ve argued before, the only practical route to a non-fossil energy future is through a prudent and responsible (and declining) use of natural gas, oil and coal.

Is it BAD environmental policy? No, probably not. Half a century of offshore drilling and production technology development have minimized the safety and environmental liabilities, and a half century of experience off the Texas and Louisiana coast has, on the whole, been good for residents, tourists and fishermen. And for those worried about the view, most of it will be too far offshore to see, the rest a faint structure on the edge of the horizon.

Is it good politics? Probably not, but the answer will depend on how successfully the Obama administration can sell the first two propositions. They’ll likely invoke the analogy of Pres Nixon opening up relations with Communist China 40 years ago. Obama’s problem is that, unlike Nixon (who had a long history of stringent anti-communism) he lacks a solid track record on the environment to cement his green credentials and protect his back with the Democratic base.

Bottom line – The new offshore drilling policy will be a clear winner, IF is part of a comprehensive, aggressive plan to transition from fossil fuels to greener energy sources. Stand-alone, however, it looks like a cynical (but not significantly detrimental) sellout to Big Oil politics.

Making Clean Energy Cheap

Jesse Jenkins, at the Breakthrough Institute, eloquently proclaims one of the major themes of my Alternative Energy Page: “The urgent challenge of our century … is to make clean energy cheap.”

Without Affordable Clean Alternatives, South Africa Turns to Coal
Breakthrough Institute – Jesse Jenkins on March 23, 2010
Until clean and cheap energy sources are available for deployment on a massive scale, developing nations like South Africa will remain stuck in the Development Trap: forced to either sacrifice climate and ecological security in the name of development and poverty alleviation or to condemn countless millions of citizens to energy poverty in the name of climate protection. Breaking out of this untenable position is the urgent challenge of the century. It’s time to make clean energy cheap.
http://thebreakthrough.org/blog/2010/03/without_affordable_clean_alter.shtml

Jenkins’ article goes beyond the geopolitical, economic and environmental arguments for greener energy future in America, putting a human face on the cruel reality that faces much of the developing world – environment-friendly energy development often means continuing poverty (an abject, crushing sort of poverty not seen in the US for 80 years).

The problem is that, even in the developed world, we have not yet learned an answer to Jenkins’ plea to “make clean energy cheap.” As I’ve written on numerous occasions (here, here, and here, for example), getting to a clean energy future will not be cheap, nor will it come easily or quickly.

Basic science poses few of the hurdles to a green energy future, and the technology and engineering hurdles are largely ones of economy and scale. The problems, rather, relate to the political will of people and governments in the developed world to:

1. Create an investment climate in which private capital can confidently invest Billion$ in demonstration plants and start-ups. Alternative energy project will not thrive in an environment where oil bounces from $20 to $150 to $40 to $80 in just a few years.
2. Provide government and private leadership, encouragement and incentives for developing the business infrastructure and pool of trained and talented people to rapidly build alternative energy capacity.
3. Assure access to development and start-up capital during the early, uncertain stages of development

Electricity in a Box: Bloom Energy Servers

Lots of publicity over the past few days about the new BLOOM BOX ‘Energy Server’ – an on-site source of electricity powered by a natural gas burning fuel cell. Details are awfully sketchy, but Bloom Energy CEO K.R. Sridhar paints a tantalizing vision of an off-grid future built around his energy server concept. A couple of things seem clear:

1. The Bloom Box appears to be a Solid Oxide Fuel Cell, technology that has been in the commercial sphere for close to a decade. A number of companies claim some commercial SOFC expertise; WIKI has a good intro to SOFC.

Sridhar implies the Bloom version of SOFC makes substantial improvements over current products, but here the details from Bloom fade out. Have they achieved a breakthrough in conversion efficiencies and waste heat recovery? In manufacturing costs? In maintenance and longevity?

If you assume that the 100kW unit spec’d on the Bloom Energy website is the same as the $800k commercial unit they discuss, then the per-kW installed cost of the Energy Server system would be more expensive (but not too far out of the same ballpark) as a fully installed, grid-integrated (but much smaller) residential solar electric system. Not bad for the first shot out of the box, but still a long way to go before Energy Servers will replace your local electric company.

2. Bloom’s primary energy source is a hydrocarbon gas – natural gas in the demonstration cases, but LPG, syn gas or their bio-derived equivalents would also do. In any case, it’s a 2-step chemical process:
– Catalytically ‘burning’ the gas with atmospheric oxygen to produce Hydrogen and CO2
– Electrolytically combining the hydrogen with more oxygen to produce electricity and water
One potential but real advantage of Bloom’s modular SOFC approach is its ability to conveniently recover waste heat, at a usefully high temperature.

The inconvenient detail that prevents this from being a totally green technology is, of course, CO2, the unavoidable result of using a carbon based primary fuel. Hydrogen fuel cells provide the dream-world answer, but until we have a huge, economically viable of source of Hydrogen that doesn’t depend on a carbon-based source, the hydrogen economy will remain just that – a pleasant day dream.

3. Bloom Energy and its venture capital backers have lined up an impressive array of corporate demonstration projects and high profile supporters, and they’re orchestrating an effective publicity blitz – which will surely boost an IPO somewhere (probably not too far) down the road.

They deserve some applause: Bloom, along with the rest of the SOFC community, have been working at the this for a decade, and the R&D cycle is beginning to yield results that the marketplace can put through the economic feasibility wringer.

But they deserve some skepticism, too. We will need a lot more experience – and a lot more solid data from Bloom – before we can start to sort the real story from the hype.

So the best advice is patience. Even if we assume that Bloom truly has made some startling breakthroughs in cost, efficiency and practicality, moving the technology from gee-whiz demonstrations to day-in day-out commodity will not be a quick or easy exercise.

NOTE: Most of the current news stories – including the CBS 60 Minutes clip – have a flavor of ‘Hey, guys, look at this cool press release!’ Here are a couple that dig a little deeper – the Guardian article is especially good.

http://www.guardian.co.uk/environment/2010/feb/25/bloom-box-innovation
http://brainstormtech.blogs.fortune.cnn.com/2010/02/19/is-k-r-sridhars-magic-box-ready-for-prime-time/

Bio-Diesel from Algae – Good Idea or Bad Dream?

Bio-diesel from algae – sounds like a winner! But not so fast —

Researchers from the University of Virginia’s Department of Civil and Environmental Engineering have found there are significant environmental hurdles to overcome before [algae-based] fuel production ramps up …. The U.Va. research, just published in the journal Environmental Science and Technology, demonstrates that algae production consumes more energy, has higher greenhouse gas emissions and uses more water than other biofuel sources, such as switchgrass, canola and corn.

The devil, as they say, is in the details, and the details are far from clear. Using waste water (say sewage treatment plant effluent) may reduce overall water consumption and improve effluent quality. And growing algae in a pond or tank doesn’t coopt farmland that could be used for food crops.

Check the ScienceDaily article for details.

A Greener PVC?

It’s not quite alternative energy but making PVC (aka ‘vinyl’, ‘polyvinyl chloride’) plastic more environmentally benign should be big news to anyone interested in greener energy or materials.

Because it’s versatile and inexpensive, PVC is used in a great variety of end uses, from plastic sewer pipe and siding for your house, to shower curtains, blood transfusion bags, and automobile upholstery. PVC, however, has a bad reputation in health / safety / environmental quarters – largely because of phthalate plasticizers, which manufacturers add to the excessively brittle PVC to make it stronger, softer and more flexible.

The problem is that, over time, many conventional plasticizers migrate out of the PVC article and into the environment. Fugitive plasticizers are a big component of that ‘new car smell’ or the unmistakable odor of a new shower curtain – and the major reason environmentalists don’t like PVC.

Now, the Institute of Polymer Science and Technlogy in Madrid has discovered a way to permanently lock-in the plasticizer, by making it an integral part of the PVC polymer molecule. If the discovery proves practical and economic, look for revolutionary changes in large segments of the plastics and chemical industries.

Here’s the citation:
Rodrigo Navarro, Mnica Prez Perrino, Myriam Gmez Tardajos and Helmut Reinecke*
Institute of Polymer Science and Technology (ICTP-CSIC), Juan de la Cierva 3, E-28006 Madrid, Spain
Macromolecules
DOI: 10.1021/ma902740t
Publication Date (Web): January 21, 2010