60 Minutes took on the enviros in a segment yesterday titled “The Cleantech Crash.” There’s already pushback on the piece from the usual voices, but I thought it was a pretty accurate description of what has gone wrong and why. Here’s the opener:
About a decade ago, the smart people who funded the Internet turned their attention to the energy sector, rallying tech engineers to invent ways to get us off fossil fuels, devise powerful solar panels, clean cars, and futuristic batteries. The idea got a catchy name: “Cleantech.”
Silicon Valley got Washington excited about it. President Bush was an early supporter, but the federal purse strings truly loosened under President Obama. Hoping to create innovation and jobs, he committed north of a $100 billion in loans, grants and tax breaks to Cleantech. But instead of breakthroughs, the sector suffered a string of expensive tax-funded flops. Suddenly Cleantech was a dirty word.
Investor Vinod Khosla, known as the father of the Cleantech revolution, has poured over a billion dollars of his own money into some 50 energy startups. He took us to one in Columbus, Miss. KiOR is a biofuel company that’s replacing oil drilling with oil making.
Vinod Khosla: Nature takes a million years to produce our crude oil. KiOR can produce it in seconds.
The company took over this old paper mill, where logs are picked up by a giant claw, dropped into a shredder and pulverized into woodchips.
Vinod Khosla: And we take that, add this magic catalyst-
Lesley Stahl: This is the secret sauce?
Vinod Khosla: Yeah.
Lesley Stahl: You throw that on top of the chips?
Vinod Khosla: And then, out comes something that looks that looks just like crude oil.
The crude is created through a thermo-chemical reaction in seconds. And by using wood instead of corn, this biofuel doesn’t raise food prices which was a concern with ethanol.
Vinod Khosla: It smells like crude, it works like crude except it’s 100 percent renewable.
Then it’s distilled onsite into…
Lesley Stahl: Clean gasoline?
Vinod Khosla: Clean green gasoline.
Lesley Stahl: This goes right into the tank, right? You don’t have to build a new infrastructure?
Vinod Khosla: Absolutely.
Lesley Stahl: You make it sound almost – sorry – too good to be true. There must be a downside.
Vinod Khosla: There is no downside.
Well there is: first off, his clean green gasoline costs much more than what you pay at the pump. And despite hundreds of millions of dollars invested – including 165 million of Khosla’s own money, KiOR is still in the red, and the manufacturing is so complex, it is riddled with delays.
The Left doesn’t consider price a “downside” because their goal is to add taxes to the cost of other fuels which would make Khosla’s ”secret sauce” profitable. If something needs a tax to work, that’s a huge risk factor in the viability of the venture, no? Future Congresses can always end a tax.
The rest of the transcript here. Video:
I also wanted to point out this piece on Gigaom, which lists what they think was right and wrong with the 60 Minutes segment. Here’s one of their examples from the wrong category (emphasis mine):
As Michael Grunwald has pointed out in his book The New New Deal, government support — from the Department of Energy through the stimulus — has created a large amount of jobs over the years. Beyond the stimulus, solar panels and wind power have reached record levels in the U.S. in the last year and that’s also thanks to U.S. government support. Even within the loan program, there were more wins than the 60 Minutes piece let on, like the Ivanpah solar farm that created a lot of jobs outside of Las Vegas. The U.S. government needs to give more support to next-generation energy technologies, not less.
Actually, the DOE investment in Ivanpah is a different problem altogether: it’s a project that didn’t need to use taxpayer dollars in the first place.
The $1.6 billion of taxpayer money is basically guaranteed by utilities that have already agreed to purchase the electricity. We have questioned in the past why a company like BrightSource, the developer behind Ivanpah, needs taxpayer financing for this type of project. Here are the details via the DOE website:
The project includes solar fields containing over 173,000 dual-mirror heliostats. Brightsource’s proprietary technology controls the mirrors to follow the sun, capturing a greater percentage of solar energy than other solar thermal technologies. Electricity from the project will be sold under long-term power purchase agreements with Pacific Gas & Electric and Southern California Edison Company (SCE). The project will be interconnected to the electricity grid via an upgraded SCE transmission line.
Along with these purchase agreements in place, BrightSource has A-ist investors. Here’s the partial list from their 115 million C-round in 2008:
Investors included Google.org, the philanthropic arm of Google, as well as VantagePoint Venture Partners, BP Alternative Energy, Statoil Hydro Venture, and Cargill subsidiary Black River. Existing investors DBL Investors, Draper Fisher Jurvetson, and Chevron Technology Ventures
The Chevron-Google-BP-Cargill-DFJ-backed company with contracts in place couldn’t go to a bank for the money? Not likely. Doubtless, money from the DOE cheaper than the alternatives, and that’s why they went that route.
As for future job-creating projects in the U.S. from BrightHouse now that they’ve used taxpayer money to get to the next level: Don’t count on it. The Company’s CEO, John Woolard, stepped down in June and BrightSource is looking internationally for growth:
BrightSource’s flagship project is the 377-megawatt Ivanpah Solar Electric Generating System, currently under construction on federal land in California’s Mojave Desert. The massive solar power plant, which faced opposition from environmentalists because of its impact on desert tortoise habitat, is nearing completion. When fully online this year, Ivanpah will generate enough electricity for about 140,000 California homes.
[. . .]
In a blog post Thursday, the company announced it is “evolving from being a U.S. project developer to becoming a global technology provider.”
“As we actively pursue international markets, we will continue to align with partners to emphasize our role as a provider of best-in-class technology and related services into projects that are developed, financed and owned by others,” it said.
There are two more things Gigaom got wrong in their Ivnapah conclusion, “. . .like the Ivanpah solar farm that created a lot of jobs outside of Las Vegas. The U.S. government needs to give more support to next-generation energy technologies, not less.”
One, via the DOE, Ivanpah will only create 86 permanent jobs. That’s “a lot” to Gigaom? And two, there’s nothing “next-generation” about Ivanpah technology. It’s just a big solar-farm using technology currently employed around the world. Additionally, BrightSource had to pull their 2012 IPO because the cost of natural gas has fallen so dramatically, making future solar projects in the U.S. not cost effective.
Finally, as a bonus, there’s this: some environmentalists still hate Ivanpah as its sun-death-ray has already started killing birds.