Between the Lines: Today’s New York Times and Cleantech

Posted on 14 July 2009

Today’s New York Times was heavily tilted to renewable energy, both purposely and not:

Debate on Clean Energy Leads to Regional Divide: The lack of a national grid is a common complaint/refrain for renewable power developers: optimal generating sites are located far from end users. This is an interesting scoop, then, from Matt Wald on the East/West conflict that has Eastern state governors and power executives lobbying against a national transmission system for fear of losing the jobs and perks of locally generated power. New England, in particular, has been a region highly prone to a NIMBY posture (Not In My Back Yard) on energy issues; could this be the advent of a new OIMBY (Only In My Back Yard) era?

Quake Fears Stall Energy Extraction Project: The Times is back at Geothermal startup and Google backed AltaRock with a victory lap of sorts. Back in June, James Glanz broke a cover page story on the risk of earthquakes from the hydrofracturing process involved in Engineered Geothermal Systems (EGS). The article focuses on the 2006 attempt by Geothermal Explorers International Ltd. to drill and fracture an EGS system in Basel, Switzerland. The project was abandoned after triggering a series of low grade earthquakes.

Glanz then made the dubious leap from the Swiss, chalets shaking, to Sonoma County, California, where AltraRock now plans to use a newly awarded DOE grant to test their EGS technology on terrified residents of wine country, specifically the geothermal hot bed known as The Geysers. Granted, the risk of earthquakes from EGS is real but so are the numerous benefits, something Glanz completely ignores. He also misses the mistakes made by the Basel operators, something AltaRock is positioned to avoid, given their advanced technology. We’ve done a significant amount of analysis on the Geothermal industry, particularly Ormat Technologies, and are bullish on the growth prospects for the industry.

Now Glanz is back to update us that the project has been halted by the Interior Department until a new study can be conducted to see what the lessons learned from Basel meant for the Geysers. AltaRock says it won’t affect their timetable.

Interesting to see two things: First, why James Glanz and geothermal? He is the Baghdad Bureau chief (emphasis ours) and his work is Iraq coverage. Now he’s front and center on EGS earthquakes in California without a word about the actual renewable power element. It doesn’t add up when the Times has a veteran cleantech reporter, Matt Wald (whose Regional Divide story is, ironically, on the same page as this one and quotes ardent EGS supporter and AltaRock investor Dan Richer from Google.org). It would be interesting to know more about “[the] community organization in Anderson Springs, Calif., a small town two miles from the AltaRock project” that is quoted in the article because they seem to have a highly sophisticated PR machine to pull this off.

Second, given that two very prominent VC backers, Vinod Khosla and Trae Vassallo of Kleiner Perkins behind AltaRock (who are surely now annoyed by the enhanced cash burn they will encounter while the rig sits on site waiting for the BLM to issue a permit) what kind of leverage will they employ to get the project moving again?

Airlines, Already Suffering, Brace for More Woes: The “airlines-in-trouble” article “reveals” (ok, if readers have been in a cave for the last three years it might be news to them) that people are flying less because of the economic downturn, especially business travelers who subsidize the regular people. So even with oil prices down, the airlines are struggling to stay profitable and cutting flights. Being a newspaper that reports on the past, the NYT has no real duty to look ahead at what will happen when triple digit oil prices return (as we expect). The NYT simply says that if people fly again the airlines will be fine.

We expect airlines to suffer even more when people do start flying again because when they fly more the economy will be doing better and oil prices will head back up. Airlines are not technically in the cleantech space, but we consider the sector a fruitful place to find short ideas, along with any other sectors that are heavily dependent on cheap oil. We recently read Jeff Rubin’s book, “Why Your World is About to Get A Whole Lot Smaller–Oil and the End of Globalization”, which we recommend. He discusses how airlines are going to be shrinking even more than most industries.  We don’t endorse everything Rubin says, but knowing him from his CIBC days, he’s one of the more entertaining speakers and writers we’ve encountered.

Exxon to Invest Millions to Make Fuel from Algae: ExxonMobil is investing $600 million in a biotech venture doing research on making oil from algae. In striking contrast to the airlines-in-trouble article, this one actually has some content that may be new to readers. We have long considered algae to be one of the most promising long-term solutions to the peak oil and climate change threats: (a) it’s scalable without a large land commitment, (b) it produces lipid oil that can be refined to substitute, rather than supplement petroleum products, (c) it does not require fresh water or fertilizer input, and (d) it does not create direct or indirect food competition. For ethanol, a huge disaster, you have the inverse of the points.

What is interesting about this investment is, first, that it is Exxon, a noted peak oil skeptic and climate change skeptic. Second, that it comes on the heels of BP’s surrender in alternative energy (see our previous post) and third, that it is an oil company making an investment that one would think properly belongs with a venture capital firm.

The oil industry has a checkered history of investing in clean tech (Shell too has been pulling out of renewable recently and Chevron, while probably the most advanced of the Supermajors, is still very low key.) There is no business reason that oil companies should be investing in alternative energy, which is quite a different business. Environmentalists have always said they wanted to see oil companies invest in renewable energy and the article does quote a Greenpeace spokesperson along those lines, but this is flawed thinking in our view.

We would insert a footnote here though, that a case could be made for oil and gas exploration companies to look more closely at becoming more active in the geothermal energy industry where their geologists and deep-drilling expertise would seem well-suited to the need to discover underground hot spots with water. (Chevron, given their Unocal experience in the Philippines , and geothermal drilling come to mind.)

China Builds High Wall to Guard Energy Industry: this article falls somewhere in between the two others in terms of news value. Secretaries Chu of Energy and Locke of Commerce are in China to talk about renewable energy. It seems that the Chinese are being very protectionist about their wind and solar industries, favoring domestic factories as suppliers of massive wind and solar energy investments.

Here we have an article that should be read by the “climate change doubters” folk who are arguing against the US implementing a “cap-and-trade” program. One of their key arguments is that it won’t do any good, even if the emissions of harmless carbon dioxide we all exhale were to be reduced because the Chinese would not go along with reducing their emissions. The Chinese have far worse environmental problems than the US does, and indeed are doing a great deal to shift to low-carbon energy as the article makes clear. But they also see it as a good business, something that escaped the thinking of the Bush administration, but not the Obama administration.

The problem of how to encourage the Chinese and Indians to participate in fighting global climate change is not as impossible as it seems to the doubters. A “carbon tariff” is the stick in the closet. (We are again reminded of Rubin’s book, recommended above, which devotes considerable attention to carbon tariffs.) The House’s Waxman-Markey bill included it explicitly. The Senate bill is likely to take it out. The Chinese and Indian protests to the Waxman-Markey inclusion were a clear confirmation that it would be effective. Now is not the time to bring out that weapon, however. Addressing climate change is going to take decades, and require more research as well as a huge amount of work setting up incentive systems. Carbon tariffs are sort of like nuclear weapons. The owners of the weapons really do not want to have to use them.