Smart Office Energy Solutions, based in Houston, is the only Texas company going on to compete in the CleanTech Open nationals, held in San Jose in November.
Bryan Hassin, CEO of Smart Office Energy Solutions, says the company’s software, hardware and services package can reduce a building’s energy consumption by 25 percent. Smart Office Energy Solutions is testing the prototype of its product with customers currently and plans to launch commercially next year.
Tag: Clean Energy Venture Summit 2011
Bob Metcalfe, left, talks with audience members at the Clean Energy Venture Summit 2011 in Austin, following his speech
A network of entrepreneurs will solve the energy crisis.
That’s the belief of Bob Metcalfe, professor of innovation at the University of Texas at Austin, founder of 3Com and co-inventor of Ethernet, a networking standard which links computers.
“The biggest lesson of the Internet that applies to energy is it was not built by incumbents but by startups fiercely competing,” Metcalfe told 400 people attending the Clean Energy Venture Summit 2011 Thursday afternoon.
“We have an ecology in which startups live,” Metcalfe said.
He dubs the current environment, the Doriot ecology, after the late George F. Doriot, a Harvard business school professor and one the first American venture capitalists.
The startup Doriot ecology contains six “major species,” including research professors, students, scaling entrepreneurs, venture capitalists, strategic partners and early adopters, Metcalfe said.
This semester, Metcalfe started a new program at the University of Texas called One-Semester Startup with 70 undergraduate students launching 20 companies. He is teaching them “how to use the machinery of free enterprise.” Out of the 20 companies, three of them are energy companies. One is Zilkermotors, which wants to create a 100 mile per gallon automobile.
“We’re not going to change venture capital to suit the requirements of energy,” Metcalfe said. “But we can change energy to meet the requirements of venture capital.”
Startup companies need to play within “this Doriot ecology,” he said.
One of the problems is that the energy startups are at the mercy of the turbulent energy marketplace.
“These poor startups in energy get slaughtered when the price of oil or solar goes down,” Metcalfe said. “In the last five years, the energy market has been disrupted by the discovery of vast amounts of natural gas. It’s cheap. It continues the de-carbonization of energy. So gas could damage startup innovation in energy.”
Also, the collapse and bankruptcy of Solyndra is a catastrophe for the “taxpayers and the government officers and the solar companies that are getting guilt by association,” Metcalfe said. In 2009, Solyndra received a $535 million loan guarantee from the Federal government to build a plant to make its solar photovoltaic panels. The company received millions more from venture capitalists and other investors.
“But it’s an inevitable catastrophe,” Metcalfe said. “I’m afraid we are learning the wrong lessons from Solyndra.”
Some people are saying that it is a really bad idea to manufacture anything in the U.S. in the wake of the Solyndra collapse. But that is “a bad lesson for us to learn from Solyndra,” Metcalfe said. The U.S. should be manufacturing solar panels, he said. Unfortunately, Solyndra’s bankruptcy has led to “the criminalization of entrepreneurial failure,” Metcalfe said. “That is a blow to our innovation system.”
The core lesson from Solyndra is “premature scaling,” Metcalfe said. The company faced enormous pressure to expand quickly and solve the environmental crisis and create jobs, he said. So it expanded its operations too quickly.
“Startups face lots of pressures to scale,” Metcalfe said. “You need to resist those pressures.”
Metcalfe has put his money in several clean tech companies. He has invested in five energy startups including Zigbee, which makes software for smart meters for the home. He also invested in Infinite Power Solutions, which makes the world’s smallest batteries and Sun Catalytix, an energy storage and renewable fuels technology company. Silicon wafer manufacturer, 1366 Technologies, another of his investments, has also received a $150 million loan guarantee from the Federal government. It is building a 10 megawatt plant to make sure the company’s technology can scale properly, Metcalfe said. The company has been damaged by the failure of Solyndra, he said. He also invests in SiOnyx, which makes black silicon used to enhance the response of photovoltaic cells.
The tremendous drive toward clean energy exists because of increased demand for fossil fuels from China and the developing world.
“I’m not a clean energy guy, I’m an energy guy,” said Kevin Skillern, managing director of venture capital for GE Energy Financial Services.
He spoke to several hundred people attending the second day of the Clean Energy Venture Summit 2011, the fifth annual event at the AT&T Executive Education Center in Austin.
Skillern’s key points are a huge need exists for software to drive new energy applications, solar is becoming more affordable and microbes show great promise for providing fuels of the future.
So why is GE interested in the clean energy market? It is the biggest industrial company in the world with a market capitalization of $550 billion. GE is bigger than Exxon plus Wal-Mart plus another company, Skillern said.
“About a third of the world’s power comes from equipment made by GE,” Skillern said. “We’re the biggest company in the renewable industry with wind and solar power.”
GE has backed about 40 renewable energy startup companies since 2005, Skillern said. And about 1,500 business plans come across its desks every year, he said.
In the U.S. people take energy for granted, Skillern said. He has four kids and lives in California. When the power goes out, within two minutes his kids “are going crazy,” he said. But in India, days go by without power, Skillern said.
Fuel and energy is fundamental to our lives and that’s why GE formed Energy Technology Ventures with NRG Energy, an energy retailer, and ConocoPhillips, global energy company. The $300 million joint venture invests in emerging energy technology companies. The venture’s key objectives are to make money, collaborate, gain new technology insights and strengthen relationships.
The current investing environment is challenging, Skillern said. Energy tech stocks were negatively affected in the recent market sell-offs. The clean energy index is down 33 percent year to date. And Solyndra , a solar panel maker in Freemont, Calif. that filed for bankruptcy in Sept. 1 and laid off all its workers, proved one of the biggest venture capital busts ever, he said.
“There are few energy venture capital success stories with real profits yet,” Skillern said.
But on the positive side, the demand for energy innovation is strong and energy remains the largest venture capital segment. An estimated 15 percent of all venture capital dollars are going in energy startups. That’s up from less than one percent 10 years ago.
“The world needs new energy technologies,” Skillern said.
Mature companies and breakthrough technologies are beginning to emerge, he said. And the U.S. remains the most fertile hub of innovation for energy.
Overall, China’s energy consumption will soar in the next decade and that’s driving the need for more energy sources, Skillern said.
“China, in aggregate, consumes as much energy as the U.S.” Skillern said. Seven years ago, it was 40 percent, he said.
In China, the big power source is coal, Skillern said. Twenty years out that trend is not going to go away, he said.
By 2020, the passenger car fleet in China will hit 225 million. Meanwhile the U.S.’s passenger car fleet is shrinking
to an estimated 246 million vehicles, down from an all time high of 250 million a few years ago.
“China will consume the equivalent of all the oil produced in Saudi Arabia,” Skillern said. “That’s a long term trend. But it’s a big, big deal.”
The software industry is driving innovation in the energy industry, Skillern said. He quoted from Netscape founder and Venture Capital Investor Marc Andreessen’s essay in the Wall Street Journal from Aug. 20.
“We are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy,” Andreessen wrote. “Six decades in the computer revolution, four decades since the invention of the microprocessor, and two decades in the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale.”
Today, more than 2 billion people now use the broadband Internet, up from perhaps 50 million a decade ago, according to Skillern’s presentation. And in the next 10 years, at least 5 billion people will own smart phones giving access to full power of the Internet every moment of every day, he said.
“On the back end, programming tools and Internet-based services make it easy to launch new global software power startups,” Skillern said.
For example, in North America one in every six home energy meters is a smart meter, Skillern said. In five years, it’ll be 55 percent, he said. Worldwide smart meter adoption is at 6 percent and it will grow to 19 percent with five years.
“It’s not going to put power plants out of business,” he said.
But it does provide low costs and easy savings for consumers and allows them greater information about energy consumption and control, Skillern said.
Skillern said his household pays 35 cents per kilowatt hour for electricity, compared to 10 cents nationally. Software will allow consumers to cut their consumption, he said. Smart meters lead to a 10 percent to 15 percent reduction in their bills.
Consert has a major deployment underway with CPS Energy in San Antonio. Energy efficiency savings from 140,000 homes generates 250 megawatts to create a virtual power plant with the potential to double. The rollout starts in mid-2012 and will be completed over the following three years.
After his keynote, Kevin Skillern with GE visits with people attending the Clean Energy Venture Summit
Already, Consert has hired 20 people in San Antonio since June and it plans to hire eight to ten more by the end of 2011 and more than 150 during the next three years.
Another big trend is making solar energy more affordable. Solar energy costs 30 cents per kilowatt hour, compared with an average of 10 cents nationwide for traditional energy sources. The idea is to make solar a “grid parity” technology which means it can be produced at or less than the cost of delivered grid power without subsidies. Right now, California, New Jersey and Massachusetts have achieved grid parity with government subsidies.
The fluctuation in price of solar energy has to do with location, Skillern said. In Hawaii, solar power is just 9 cents.
“The economics of solar have gotten better by 54 percent in the last three years,” Skillern said. Solar energy is a $70 billion industry today. GE has invested in Solar Edge.
The last big trend is microbes, Skillern said. Some types of algae and other microbes offer potential fuel sources for the future.
“Energy represents one of great societal challenges of our time,” Skillern said. “Breakthrough energy technologies are an essential part of the solution.”
At the Clean Energy Venture Summit 2011, the Greater Austin Chamber of Commerce Director for Clean Energy, Jose Beceiro says Austin has more than 200 companies involved in the clean technology industry. It’s a growing area and more companies are relocating to the city all the time, he said.
In fact, Complete Energy Systems, based in Boca Raton, just signed an agreement with Pflugerville City Council to move into a new energy park. The company, which only has eight employees, says it plans to hire up to 200 employees by 2014.
Austin Mayor Lee Leffingwell declared the city the clean energy capital of the world at a reception for the Clean Energy Venture Summit 2011 at city hall Wednesday night.
The city’s goal is to have 35 percent of its energy come from renewable sources by 2020 and it’s well on its way to achieving that goal, he said.
In the last few weeks, the city has signed wind contracts that will put it at 30 percent of its energy coming from renewables by the end of next year, Leffingwell said.
Austin has a very mature high-tech industry that provides a support base to nurture clean energy business that continue to grow, Leffingwell said.
Several years ago, Austin declared itself the live music capital of the world and no one has ever challenged that, Leffingwell said. So he expects the clean energy capital of the world slogan to stick as well.
The changes started at city hall, which is the only city hall that is a national wildlife habitat, it has all kinds of renewable features including solar panels, Leffingwell said.
In 1999, the Texas legislature passed a law to mandate the state diversify its energy resources.
The legislation, dubbed the Texas Renewable Portfolio Standard, required all electricity providers to collectively generate 2,000 megawatts of additional renewable energy by 2009. The state estimates that 2,000 megawatts of renewable energy generates enough electricity to power more than 800,000 homes.
The 2005 legislature increased that to nearly 6,000 megawatts by 2015, said Robert J. King with Good Company. He moderated a utilities futures panel at the Clean Energy Venture Summit 2011 in Austin Wednesday afternoon.
“We’ve blown past that,” King said in an interview following the panel. “We’re already at 9,000 megawatts.”
That shift to renewable energy has kept the power flowing in Texas despite a huge demand for air-conditioning power from a sweltering hot summer. Renewable energy from coastal winds prevented a blackout on Aug. 4, King said. An additional 2,000 megawatts from coastal wind farms, combined with conservation prevented outages, he said.
The energy utility futures panel at Clean Energy Venture Summit 2011
“Wind is a competitive resource,” said Cris Eugster, executive vice president and chief sustainability officer with CPS Energy, San Antonio’s utility company. Wind energy costs just 5 cents per kilowatt, he said. That compares to 11 cents per kilowatt for nuclear, 4 cents for gas, 5 cents for coal and 15 to 30 cents for solar, according to the Pure Energy Systems Wiki.
Wind energy will play an even bigger part in the state’s future. King estimates that energy generated from wind will double to 18,000 megawatts within three to four years. Texas is spending $6.7 billion to put in new energy transmission lines in the next four to five years, King said. That’s nearly $2 billion a year statewide to upgrade the energy infrastructure system, he said. That presents huge opportunities for entrepreneurs and innovation in Texas, he said.
CPS Energy plans to generate 20 percent of its energy portfolio from energy efficiencies and renewables by 2020, Eugster said. It’s halfway there with wind energy making up 97 percent of its renewable sources, he said. But CPS also sees growth coming from solar. It runs that state’s largest solar farm, located on the south side of San Antonio, generating 16 megawatts of energy.
CPS also gets 250 megawatts of energy from 140,000 households participating in its energy efficiency program, Eugster said. And it has hundreds of customers enrolled in its home-based solar program, he said.
What’s starting to hook everyone together is the idea of the smart grid, according to panel members.
“Some entities out there think that having their own energy at hand, and not being dependent on the grid, is a good idea,” said Mark Carpenter, chief technology officer of Oncor.
Advanced meter legislation in Texas requires that utility companies install smart meters or digital readers inside people’s homes, King said.
“We have $3 billion being spent in the next couple of years on advanced meter infrastructure in Texas,” King said. That is a huge opportunity, he said.
Innovation in the last 18 months has been incredible, said William Clayton, vice president of customer care with NRG Reliant Energy.
“It seems like every day something new is coming out.” Clayton said.
Jon Shapiro, founder of the Texas Institute, told the audience that while energy companies focus on saving pennies they should be focused more on Cybersecurity.
“It’s really going to be the loss of power that is going to be a big win for smaller companies that diversify their energy sources,” Shapiro said.
Could a cyber-terrorist or hacker kid take down the energy grid?
“The systems were designed for straightforward communications and some of the equipment has been sitting in the fields since the 70s,” Shapiro said. “Many of these devices have a high degree of susceptibility to hacking. As you bring on more devices you have more vulnerability. The smarter you get the grid, the more entry points there are for hackers,” Shapiro said. He didn’t think a hacker or terrorist would take down the grid, but they could cause lots of painful problems and outages in parts of the system.
“100 percent of the customers want reliability,” said Larry Weis, general manager of Austin Energy, the nation’s ninth largest publicly-owned utility serving more than 410,000 customers.
Yet residential customers think about energy just six minutes a year, he said.
“I’m fascinated with all the things we can do,” Weis said. “I just hope the customers want it.”
Richard D. Williams, director of corporate development with Energy Future Holdings, based in Dallas, says the company has been trying to put solar panels on customers roofs for a long time.
But the cost to install solar panels from $10,000 to $30,000 has been prohibitive for many customers, he said. So the energy company went to a lease model and now it’s over-subscribed for its solar program, he said.
“Change the business model and attract more customers,” he said.
The leased program costs just $50 a month with no upfront costs, he said.
A lot of customers want a renewable energy package but they just don’t want to pay for it, he said.
During a question and answer session at the end of the panel discussion, an audience member asked about Algae as an energy-generating resource. King said the
Williams with Energy Future Holdings said the science behind Algae energy production is still about five years away from mass production.
Another audience member asked about the safety of smart meters in the home. She said a lot of California city governments have already banned them because of concerns about safety. The panel members said there is always concern when it comes to utility companies putting technology into customers’ homes, but the safety concerns are unwarranted.