Path to Greener Flight – Part 2

If we are to consider other forms of energy storage we should also explore how it could be put to use. Developments with superconductors are laying the way for very high power to weight electric motors that could be used for aviation with the potential to be lighter than a turbofan based propulsion system, allowing the use of an energy store that does not need to be ejected to create thrust. With the potential development of room-temperature superconductors (currently at 254K or -19 degrees C), this becomes even more appealing by making refrigeration of the motors redundant (another sizeable weight saving).

The turbofan propulsion system used in a Boeing 747 is powered on jet fuel (Kerosene) with an energy density of about 45MJ/kg. Currently only being able to hypothesise on energy conversion efficiencies and weight reductions obtainable above, it would only be realistic to power an aircraft with an energy store with a comparable energy density. EEstor is a battery company claiming to have a device (a form of an ultracapacitor) capable of 1.47 MJ/kg. This claim is not without its sceptics, after all this is three times the energy density of today’s lithium-ion batteries (0.58 MJ/kg). While well suited to automotive applications, this is currently far too low to be used for aviation but progress is progress. Lithium-air batteries offer hope with theoretical energy densities in excess of 5,000 Wh/kg (18 MJ/kg). While battery energy densities may not reach the required levels to allow for all-electric propulsion (or no hydrocarbon fuels), a hybrid generator powering superconductor engines could be the path of the future.

A Boeing 747 has an average power consumption of 140MW. Power delivery is as crucial as energy density for an aircraft. Numbers of this scale are normally associated with power stations. If we look far enough into the future it may be reasonable to put a power station on an aircraft, after all we do have nuclear submarines. Granted, there is no shortage of obstacles when it comes to considering a flying nuclear power station. However, there is a lot of progress being made on nuclear fusion. There is a program being funded by DARPA for naval power generation with the aim of developing a 100MW-1GW fusion reactor for ship propulsion.
IEC Fusion, if successful, would be able to provide a source of nuclear energy generation within a relatively tiny space, producing no nuclear waste and no risk of a runaway nuclear reaction via a proton-Boron fuel (PB11). Updates available on their blog. The ignition and waste products of this reaction are not radioactive, in fact far safer than current aviation fuel. On the other hand, if nuclear fusion would be able to be harnessed on a commercial aircraft I think we would have found a solution to a much larger problem. The final alternative to flight dependent energy storage is none (well, excluding reserve systems and batteries at least). Strictly speaking I am referring to remote energy generation and transmission.

The electrical genius Nikola Tesla had a vision of global wireless power at the turn of the 20th century. This has eventually led to technologies such as electromagnetic resonance and microwave transmission.Witricity is focusing on using short-range energy transmission at home, providing a means to charge devices without wires within several meters. While electromagnetic induction is well suited for domestic applications, microwave appears the only current feasible contender for wireless energy transmission to aircraft. Whilst microwave power transmission has been proved to be very efficient obstacles remain with distance (currently effective up to 1km) and public image. No one wants to be boiled from the inside out on their way to a summer retreat.

Air travel may be seen as indispensable in modern times; however there are possibilities of replacing long-haul flights with a greener alternative. Why do we fly? – To get across vast distances on earth in short periods of time. For shorter distances a dedicated maglev train with speeds reaching over 350 mph would be a possible substitute. If green air travel can be achieved, it will start with shorter distances. The real issue is transatlantic / long-haul flights. A variation of the maglev offers an alternative with an exceptional engineering challenge. The Discovery Channel recently aired an episode of Extreme Engineering called Transatlantic Tunnel which explored this option. Known as a Vactrain, it is merely a maglev train placed within a vacuum tube. The reduced drag from wind resistance and friction offers speeds in excess of 4,000 mph, shortening a trip from London to New York to around one hour. The costs of submerging a transatlantic vacuum-pumped tunnel 300m below sea level for nearly 3,500 miles are staggering (estimated at $1trillion). Of course this would require a clean energy source to be considered green. The good news is that it wouldn’t have to be airborne.

Path to Greener Flight – Part 1

Efficiency, King of Power

A recent panel discussion with John Doerr (KPCB), Vinod Khosla (Khosla Ventures) and John Holland (Foundation Capital) in the WSJ caught my attention. The lesser known of the three panelists, John Holland, had a quote I felt trumped his two better known colleagues when asked what is “hot” in the CleanTech sector.

Mr. Holland:  “We’ve focused our efforts around the demand side, around energy efficiency, smart grid, smart materials and so forth. I’m disappointed in, but I’m not surprised by, some of the things that we’ve seen—you know, technology’s trying to drive to sort of a lower cost per watt. That’s just a very, very difficult place to play. You’re making a bet that your set of scientists is going to beat the other 500 sets of scientists that are working on that one particular piece. And then how long is that competitive advantage going to last?”

This quote I believes sums up a remarkable albeit less discussed facet of the CleanTech sector which is that a  efficiency company can trump an energy supply side company anyday, anywhere. Here is why:

Supply side technologies face replacement risk. E.g. a competing solar or wind technology may out engineer or innovate your firm’s basis for existence whereas a consumer will always have a need for a device or system that reduces the need to spend money on electricity so long as the economics are favorable. For example, I can and would purchase multiple technologies such as a smart grid technology, more efficient lighting, windows, and insulation for one place even though some of these products offer better economics than the others. If a newer and more efficient version of these demand reduction products arrives, my existing products are still viable and offer cost savings to me, the consumer.  Contrast this to selling solar panels, where a competitor’s improvement notches you further back on the supply curve if you have higher capital costs or a less productive panel. A consumer has no incentive to buy a less efficient producer of electricity, all else equal, whereas the same is not true for products that reduce consumption/save money.

Consumers seek efficiency even if it is not a market leader, perhaps seeking it at a lower price but still desire the cost savings offered whereas an outdated energy producer might be used until it no longer functions and then scrapped. From the investor’s perspective, you want your investment’s product to be as relevant and attractive as long as possible despite competitive entrants to the market.

The Asymmetry Principle: Reducing consumption of one watt of energy, saves the production of 50 watts of energy. Accounting for the inefficiencies of electricity production, transmission and conversion to light, in this example, it takes 50 watts to receive one watt of work (light.) Thus, reducing the consumption of watts is a much more efficient product than attempting to marginally improve production of watts. For a lightbulb this ratio is 50:1 as noted, for a car it is 6:1 and for many common household products this ratio is somewhere between these two examples.  The Asymmetry Principle heavily weighs the odds in favor of efficiency over production in both cost savings and efficient use of resources. (Credit to Peter Tertzakian, The End of Energy Obesity.)

Credit: Peter Tertzakian

An advantage in efficiency is why it is inevitable that one day electric cars will replace the internal combustion engine as we note here. An improvement in efficiency for existing technologies is easily the most cost “efficient” way to lessen electricity demand and consequently lower emissions as we note here.

With this in mind, no improvements in efficiency will ever wipe out all demand, only lessen it of course. There is and always will clearly be an enormous market for innovation in the power markets (“supply side.”) John Holland’s quote merely helps point out that when comparing the two, one side of the fence is safer, more economic, readily distributed and likely a safer, long term investment.

If you live in the US, check here to see if you are eligible for financing assistance to improve the efficiency of your home or business here. Link to DOE. List of Programs.

Start Ups vs. Large OEMs

Before one can invest in a technology or firm, an investor must first believe in the relevant sector. If this prerequisite is satisfied to a high degree, the next logical step is to decide how to best capture the upside of the sector. In Clean Technology many start up firms hope to be bought out by larger, more established firms. Very few firms will be lucky enough to IPO and establish themselves as an independent player in the market, while many other start ups will unfortunately die a slow, financial bleeding death.

Several years ago I spoke to a Senior Executive for Exxon Corporation. The gentleman I spoke with, while agreeing with much of what I said about the need for Exxon to hedge its position in oil with at least a few of the upcoming alternatives told me that Exxon, in 2003 anyways, had absolutely no desire nor immediate plans to get involved with Clean Technology. After an awkward pause on the call he said, “Why should we risk money and waste time developing something when we have enough cash to just buy whatever we want once it becomes established?” Wow, how could I argue with that- he did have a valid point. Which brings us to 2010:

This blog often profiles technology developments from the investor’s perspective. Many of the VC firms we discuss invest in small start ups in sectors like biofuels, solar, wind and energy storage. But there’s another way to capture these sectors if you want to participate- investing in the large OEM. In fact, Exxon later on did invest $600MM in a biofuel firm called Synthetic Genomics and is “prepared to invest billions more to scale up the technology.”

While we won’t perform an individual investment analysis of each sector and firm here, we can highlight some key options as well as investment pros and risks.

Investing in the large, diversified OEM Pros:
Limited Downside, Economies of Scale/Faster route to mass market, more established vertical infrastructure and brand name recognition
Cons: Limited Upside/No IPO potential, less nimble & dynamic management team & the fact that you are also investing in many other sectors or technologies you may like/dislike.

Flip all of the above pros/cons when investing in the Start Up Firm. Now- a brief look at investment options:

The Start Up vs. the Large, Diversified OEMs!

Energy Storage
A123, Ener1, EEStor, PowerGenix Panasonic Sanyo, Bosch, Samsung, LG Chem

Wind

Vestas, FloDesign, Ramco GE Wind, Samsung, FPL

Water

Statkraft, Saltworks, Pentair, Israeli Start Ups Zenon (GE Water)

Biofuels

Joule, Cereplast Exxon, BP, Shell

Clean Invest Poll

(Check all that apply)

Cap and Rebate

As a health care bill has exhausted both Americans and bi-partisanship simultaneously in the States- we hope 2010 turns its attention towards energy matters. More specifically, a Cap and Trade bill as mentioned by President Obama and the Democrats is scheduled to take front stage on the political arena. The bill, if passed, would affect the CleanTech sector largely as it would encourage the development of cleaner generation, efficiency plays and would affect energy prices in the largest fossil fuel market in the world.

While Cap and Trade’s prospects are currently shaky at best- a new bill introduced this December may circumvent both the flaws of C&T as well as the partisan warfare already surrounding it. Senators Maria Cantwell (D) and Susan Collins (R) introduced a Cap and Rebate bill- where 75% of the proceeds will be returned to the American people, with 25% going to fund clean energy research and development, efficiency programs and related regional assistance to reduce fossil fuel intensity. The average American family would receive $1,1oo throughout the year, with 80% of Americans receiving a net increase in funds accounting for increased energy expenses.

Why is this bill better? It puts energy use decisions in the hands of the public- who can choose to use their funds to increase the efficiency of their homes and businesses, reduce consumption or to procure renewable energy directly. Giving consumers both the direct price signal (increased prices) as well as the proceeds is very important both economically and politically. The bill avoids a carbon trading scheme involving the investment banks- who are politically cancerous at the moment. Carbon offsets are not permitted- avoiding any possible fraud or gaming of the system. And most importantly, it will reduce carbon emissions 20% by 2020 and 83% by 2050.

It is estimated that $16-$46 billion could be funneled to clean technologies (the 25% portion) by 2020.  The investment by both the government mandated fund as well as from the American public ($48-$138B) could have amazing effects for companies in the relevant clean energy and efficiency sectors!

Sharper PV cells hit 35.8% Conversion Rate

Sharp Corporation just announced a confirmed conversion rate of 35.8% for solar rays into electricity for their compound solar cell. Unlike silicon based PV, compound solar cells use photo-absorption layers made from compounds such as gallium and indium. No word was given in the release regarding the price or date to obtain the higher efficiency cells.

Sharp Image

Achieved with Triple-Junction Compound Solar Cell

The solar industry has several competing technologies that produce electricity- however these technologies seem to fall into two categories. There are producers who can produce a high percentage of their solar rays into electricity (concentrated, compound) and there are those who can produce a PV cell at a low cost (thin film.) Thin film cells can have conversion rates of approximately 10-15% but can cost less than half of competing technologies. Currently there is an inverse relationship between cost to manufacture and ability to convert electricity, both issues of course affecting the economics of solar significantly.

 

Source:  http://www.sharp-world.com/corporate/news/091022.html

What does $1.5 billion buy?

How much would you value a developing technology company with a product you have never seen nor ever tested? $1.5 billion dollars??

That’s what an implied valuation of the company EEStor equates to using their minority shareholder Zenn Motors for the valuation.  Zenn Motors, a Toronto based EV firm, owns 10.7% of EEStor and after recently ceasing operations to produce an electric vehicle seems to be focusing their efforts now solely on supplying EV drive-trains based on EEStor ultra-capacitor batteries. Using the market cap of Zenn at about $169 million, this implies a $1.579 billion valuation of EEStor while giving little value to the other components of Zenn Motors. Zenn is the only publicly available equity for EEStor while Kleiner Perkins and other, unnamed private parties played a key role in the firm’s early development.

Zenn Motor Vehicle

Zenn Motor Vehicle

EEStor is an upstart firm in Austin, USA developing an ultra-capacitor for transportation, military and grid storage applications. “Their (EEStor) unique technology capacitor-based battery, in theory, is far more energy dense and low weight than lithium ion, is cheap to produce out of unlimited natural resources, suffers no degradation, and can be recharged in minutes.” “EEStor says its energy storage technology for vehicles can provide 10 times the energy of lead-acid batteries at one-tenth the weight and half the price, and move a car 400 kilometers after a five-minute charge.”  The company is a legend of sorts with two entire websites dedicated by fans of the company to speculate about company developments(http://theeestory.com/, http://bariumtitanate.blogspot.com/).

Reducing the cost of energy storage, reducing charge times and switching to domestic materials would have a significant effect on the economics of hybrids, electric vehicles, and grid based energy storage used in cooperation with wind energy. It is not often products are enticing firms to more than double their performance and halve their costs. As much as these claims would revolutionize an entire industry or two, they have never been proven nor demonstrated to the public.

Similarly to EEStor, IBM, is currently working on a project called “Battery 500” using lithium air technology. This is not an ultra-capacitor but an advanced variation of lithium batteries with cathodes that use oxygen from the atmosphere (instead of phosphate or manganese) which enable these batteries to have a charge density ten times as dense as the best current standard Lithium Ion technology. Electric vehicles would be able to travel 500 miles on a single charge with a battery that was not dependent on rare Earth metals. However, like EEStor, this project is under works, and may or may not be an eventual success. “IBM estimates that it will take two years to determine if the goals of The Battery 500 Project can be met with lithium-air battery technology.”

The “what if” technologies of EEStor and IBM are vastly superior in performance and cost to the current Lithium Ion technologies being offered by Valence Technologies, LG Chem, A123 Systems and Ener1. However, what these lithium ion producers have that the two emerging technologies don’t are supply agreements, manufacturing and supply infrastructure and a history to prove the technology actually works. Oh, and revenues. (Yes, IBM sells a few other products.)

So, why is EEStor valued at $1.5 billion? Is it a validation of the importance of the energy storage sector? Do some people know that the ultra capacitors actually work? Or is this the result of hype built upon by a community of investors anxious for a technological breakthrough? While few people will doubt the importance and the expected growth of the energy storage sector, watching which particular firms emerge as the winners or losers will certainly be exciting.

1) http://www.allcarselectric.com/blog/1035989_did-eestor-certify-its-eesu-in-september

2) http://earth2tech.com/2009/01/08/john-doerr-mentions-kleiners-stealthy-lithium-ion-battery-startup/

3) http://www.wired.com/autopia/2009/10/eestor/

4) http://taintedgreen.com/batteries/eestor-watch-out-ibm-is-building-a-next-gen-battery-too/000351

5) http://www.smartertechnology.com/c/a/Technology-For-Change/Battery-500-Project-Charged-Up-over-AllElectric-Cars/

Darryl Siry, former Chief Marketing Officer for electric car maker Tesla originally implied this EEStor valuation, shown on source #3, implying that Zenn is worth nothing if EEStor is unsuccessful. Author owns shares of Ener1.