Profitable, but Clean
AE's Duncan pushes for a new power paradigm
By Daniel Mottola, Fri., May 25, 2007
You could tell by the sleek and stylish recycled-cardboard binder that housed the conference's program and materials that last week's Austin Clean Energy Venture Summit was no business-as-usual venture capital conference. Indeed, it showcased two revolutionary concepts: "clean tech," a burgeoning industry addressing a range of energy needs by tapping new, innovative technology to create products and services that compete favorably on price and performance while reducing environmental impacts, as well as "the utility of the future," a concept nurtured by Austin Energy that brings into harmony green building, an increasingly electrified transportation grid (think plug-in hybrid cars), and an information-technology-rich, fluidly communicating, "smart" grid of power lines. The purported spoils of this revolution are clean, reliable electricity; diminished pollution; less dependence on foreign oil; and a dynamic new industrial economy. The summits' planners hope that visiting conferees representing some of the nation's most powerful venture capital firms, industry-spanning established companies, and hopeful start-ups would agree that Austin is ideally suited to host such a revolution.
The development of the clean-tech industry and the emergence of the utility of the future are interrelated, with the former facilitating the latter. Roger Duncan, Austin Energy's deputy general manager, is one of the intellectual forefathers of the future utility concept. He explained that, for the short term, beginning to unify the formerly independent power, construction, and vehicle industries will result in smarter use of the energy sources we have, as nearly 60% of generated power is lost in our outdated electric grid. A smart grid can send energy-use data to customers and smart appliances, helping to reduce peak energy demand. But Duncan is most emphatic about the energy-storage possibilities presented as more automobiles can be plugged in to the electric grid. The abundant battery capacity of plug-in hybrid autos ideally fueled with renewable energy and even on-site wind or solar generators can not only achieve extended zero-emissions driving, but also power one's home once plugged in, or help support the overall grid, Duncan said (see "AE & Plug-In Hybrids," p.35). As more small-scale, decentralized energy sources emerge, and with the inclusion of broadband-communication capability on power lines, he said, the electric system will ultimately be three times as reliable. In the meantime, he said, the green-building industry must goose up home efficiency levels. To meet the city's 2015 zero-energy homes goal, new homes must become 65% more efficient than current codes require. With 30% of air conditioning now lost to leaky ducts and substantial energy savings potential in new LED (light emitting diode) lighting, opportunities abound.
Speaking to the uncertainties of the plan, Duncan said, "I'm not sure the utility industry as a whole or the environmental community is planning for success when it comes to energy conservation and renewables." The future utility concept involves a paradigm shift away from the traditional utility business model and toward one in which people are supplying some or all of their own energy and even selling it back to the utility. Under the current relationship between the power company and the city, that's a money-loser for Austin AE's electricity sales are a primary revenue generator for City Hall. Unresolved, he said, "We could have libraries close or potholes go unrepaired." But he sees the shift as an inevitability, even for big, investor-owned utilities. "Technological advances will force utilities not as progressive as AE to move to the utility of the future, as it becomes cheaper to produce energy on-site than at a power plant."
An electrifying luncheon speech by former CIA Director James Woolsey, favoring plug-in hybrids, slapped many attendees out of a jargon-induced lull. After describing a recently foiled terrorist plot to truck-bomb the Saudi Arabian oil infrastructure, which he said would've sent prices as high as $100 per barrel for more than a year, Woolsey declared that Iran is, in fact, developing nuclear weapons both situations that, if true, expose our vast, oil-dependence-related vulnerability. Correlating our overreliance on Mideast oil to the allegiances of many Saudi families to the Wahhabi branch of Islam often tied to terrorist groups he told the crowd, "Next time you're at the filling station, turn your rearview mirror toward yourself so you can look into the eyes of the person funding this teaching of hate."
Woolsey estimated that if plug-in vehicles became widely used, electricity for propulsion would average 2 cents per mile, vs. 10 cents for gasoline (at current prices) not a tough sell, he said. Woolsey added that plug-ins were "something the hawks and the granola crunchers could agree on."
While it's unclear within which category venture capitalists fall, the 400 or so summit attendees would suggest that at least a few VCs are noticing clean tech. Matthew Nordan of Lux Research, which tracks clean-tech start-ups, said $48 billion was invested in clean-tech research and development worldwide last year. "Solving the world's energy challenges will be immensely profitable," said David Wells of Kleiner Perkins Caufield & Byers, the clean-tech-friendly venture capital firm that helped launch Google. With the proper policies in place, Wells said, he could envision Texas emerging as a clean-energy exporter. Investor Mike Walkinshaw with Chrysalix Energy of Vancouver predicted huge growth in solar energy, especially in the South. He said he was eyeing spin-offs from university projects and people who have left larger tech firms, both seemingly plentiful in Austin.
Conference organizer Joel Serface, director of Austin's Clean Energy Incubator (www.cleanenergyincubator.org) a UT offshoot that works to accelerate the emergence of local renewable-energy start-ups appears to have succeeded in his goal of bringing outside venture capital investors to Austin, at least for a few days. A former clean-tech VC man himself, Serface explained that while Austin is endowed with tech know-how, a progressive utility willing to test clean-tech innovations, a groundbreaking municipal climate-protection plan, and ideal regional renewable resources, capital for clean tech in Austin and elsewhere statewide is absent. "Texas is all production and no reduction," he said, noting that Texas invests less than half as much as California in energy-saving, clean-tech applications. He went on to stress the need to build a base level of bidirectional broadband communication into power lines to connect the branches of the aforementioned future utility. And, like many at the conference, he called for policy reforms to stimulate Texas' clean-tech industry. "We're missing huge economic and job opportunities in this state by not creating the same incentives [for clean tech] we've created for wind and fossil fuels." If Serface has his way, the discussion driven by the clean-tech summit, not to mention the CEI's monthly clean-tech forums, will result in a sustained local clean-tech discourse, followed by the sustained growth of Austin's clean-tech empire and a futuristic utility.
During the conference's closing discussion, Austin local and nationally renowned sci-fi writer, tech guru, and futurist Bruce Sterling rhetorically asked attendees, "How are you going to know when you're done?" He answered, "When no one uses the term clean energy; clean is what there is, and the rest is the filthy, old, and vile. ... When there's no more sustainability; it's simply a world that is actually being sustained the stuff that isn't is the stuff that didn't work, hazardous, defunct, dead dog."
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