Low-Carbon: Venture Capital, Policy - at i4Energy

I was a bit disappointed with John Zysman talk at Citris/i4Energy last Friday (2/19/10) at UC Berkeley, entitled:

 "The Transition to a Low Carbon High Efficiency System: Implications for Venture Capital, Policy, and Climate Negotiations"

I am not a venture capitalist, whom I think was his target, and I did not understand some of the language or references.

And Prof. Zysman announced, a little too boldly, that he is not a scientist or engineer, and indeed I thought his talk showed a lack of data or evidence or causality that I would expect.

And at times I thought he was repeating, in a different vocabulary, what is obvious to all of us:  a change to low-carbon high-efficiency economy is going to be a big change, an "system systems transition."

So why write about this talk?

Because it needs to said, in every possible language and to every possible audience: the old rules must change, and this includes financing.

Unlike the IT/semiconductor revolution, which Prof. Zysman seemed to know well and  referenced several times in which VCs profit (or 'bet') on  'incremental' improvements, such as  transistor density or CPU power to an established base, the move to renewables is anything but clear and will be difference from IT.   It will  not be a bet on a specific product, not a bet on a specific technology, but more correctly:   a bet on whole suite of technologies, which won't work if one technology is missing.

He cited electric cars, for example.   Without a recharge grid, electric cars won't take off.   Without a truly smart grid, perhaps renewables can not take off.   And if you bet on wind, and then solar takes off, where does that leave the VC?

So it is more than a carbon price, more than optimizing an old technology in a new form.  (He cited the problems of building a lighter aluminum engine as replacement for internal combustion engine - tried and did not work.)

He mentioned the semiconductor industry road-map and urged a similar carbon road-map.  He stressed the need for policy to drive technology, i.e. choose a 'trajectory' and not discrete technologies alone, so multiple developments are completed correctly, and in parallel.  The old VC model isn't going to cut it.

And he argued, which we all know, that India and China are pursuing systems change and we are just not a player.

I'd like to see Prof.  Zysman rewrite his talk in a form and language non-VC professionals can understand and not use words with ambiguous meanings to laypeople (paradigm shift, transitions, hedge vs. VC models).   Perhaps he could draw more concretely on past energy transitions, wood to coal, which he said took 100 or so years.  

Then we can appreciate what he is trying to tell us, which may be of vital importance.

And what if the VC model fails?  Energy supply and climate change are world problems.   Surely we should consider that huge pools of capital, talent, ideas can be tapped with different rules.


Announcement
http://www.citris-uc.org/events/i4e-Feb19
Video
http://www.youtube.com/watch?v=p_3JMWJQMiI

"Cool Cars" - coming soon to California - Part 2

With "Cool Cars" window glazing 15-day comment period completed and the California Air Resources Board (ARB) staff now finalizing proposed regulations for car window glazing (http://www.arb.ca.gov/cc/cool-cars/cool-cars.htm), this a good time to overview briefly the ARB regulatory process. The ealier "Cool Cars" post is here.

The regulatory process is the intersection of science, goals, industry, government and us - the public. Ultimately, what interests me are questions like:

- Why is California considered a leader in energy, automobile emissions, reducing GHG?

- What can we do insure this continues?

- Is the science being used to achieve maximum effect?

As always, the 'devil is in the details.' ARB's regulatory process seems straight foward. Roughly, after initial notice the ARB has 1 year to complete a 45-day comment period (plus public hearing), then modify the proposed regulation and finally allow a 15-day comment period before preparing final regulations. All of these are transparent process which allow public participation and comments.

Cool Cars is now at this final stage, preparing final regulations, in a timeline that officially began in May 2009, but was actually informally in public discussion before that. Cool Cars is one the ARB's Early Actions, under AB32.

To actually come into effect, a California regulation must go through two more steps. The California Office of Administrative Law (OAL) has 30 days to check the rule. The California Secretary of State then prints the regulation in Code of Regulations and the rule goes into effect 1 year later. All of this is governed by the California Procedures Act. (More info here:

-http://www.arb.ca.gov/regact/2009/coolcars09/coolcars09.htm -http://www.arb.ca.gov/regact/how-to-participate.pdf)

The ARB group studying "Cool Cars" is headed by Dr. Marijke Bekken, who has been helpful in answering questions and pointing me in the right direction.

Of course, the primary responsibility of ARB is to regulate. But I can not help puzzle over what roles the following play:

• teach (or inform) us of the latest science and options
• focus our attention on problems requiring a solution
• provide a more independent complement to legislative process, i.e. political

Overview of the regulatory agency process and how to participate:

http://www.arb.ca.gov/html/decisions.htm

http://www.arb.ca.gov/regact/how-to-participate.pdf

Real-time feedback for consumers

An engineering dean at San Jose State University Engineering Dept, Ms. Belle Wei, recently wrote a clear, organized article on the benefits of real-time 'feedback' when we purchase or use electronic appliances equipment or video games. (Or, drive.)

Knowing what things cost, over the full lifestyle, can guide us to more informed choices, i.e. usually lower cost, presumably energy-efficient selections that do not sacrifice features and, in effect, create demand (a market) for greener devices. This is the "cold beer, hot shower" theory of human behavior: if we can get what we want and pay less for it, we'll go for it.

A similar argument works for Sacramento's electric utility (SMUD) and others: simply giving consumers a monthly report on how they are doing relative to the neighbors can reduce overall electric demand. This is also called 'social norms', or roughly peer pressure.

It does work, but is also a form of 'market knows best'.

However, I think at least two more ingredients might help push along consumer behavior

• carbon price
• regulations

In particular, Dean Wei, sites benefits of more efficient appliances as a first step. And I am sure she knows the benefit to China's clear, color-coded refrigerator efficiency labeling - regulations - in its domestic market. (She is also a founder of China-US Green Energy Council.)

The California Energy Commission (CEC) in fact helped push the refrigerator market years ago (and now TV market) by requiring innovation. It worked in the US and brought down the price of refrigerators and increased their efficiency. (The problems begin when we start to buy larger refrigerators and ALSO keep the old ones.) It is no coincidence that China has refrigerator labeling (more in another post).

Industry, like we've seen with recent TV regulations, starts out by saying it can't be done.

Bottom line, we need everything going for us to reduce American energy use per capita and bring anywhere close to the Europeans.

• feedback to consumer, social norms, etc.
• regulations
• carbon price

Article in San Jose Mercury:

http://www.mercurynews.com/search/ci_14249925

More about Dean Wei

http://www.engr.sjsu.edu/dean/

"Cool Cars" - coming soon to California

California cars are a step closer to running 'cooler' (and use less fuel) with plans to have automobile windows transmit less then 40% of the sun's energy (including visible, UV and infrared), thereby reducing interior temperatures on hot, sunny days and the air conditioning load. [By law, automobile windshields must transmit 70% or more of visible light.]

The California Air Resources Board (CARB, a division of California EPA) estimates this measure will remove almost 1 million tonnes of CO2 per year by 2020. The measure (09-41) approved last June 25, 2009 is now in a 15-day comment period on the draft regulation (i.e. the proposed law) which is expected to be phased-in with 2012 cars and fully functional by 2016.

With solar energy of roughly 600 watts falling on each square meter, we all know how hot the interior of a parked car be. The measure should reduce the temperature by more than 10 degrees (Fahrenheit) 2016 model year cars.

Under AB32, CARB is responsible for determining policies to achieve AB32 (reducing GHG to 1990 levels by 2020). A list of CARB's plans, by economic sector, is here; "Cool Cars" is under Transportation.

CARB issued a Scoping Plan in December 2008 and in addition identified numerous "discrete early action greenhouse gas reduction measures” - the lowest hanging fruit (more details). An example of "discrete early action" is ruling on do-it-yourself mobile air conditioning fluids, which took effect this past January 1.

What's not in "Cool Cars"?

Regulations, as I am learning, seem a bit like old-fashioned pin-ball machines. Ideas come and go, dates change and the actual path, like the pinball, can not be predicted.

The measure started as "Cool Paints", meaning the use of special paint coatings to increase the reflection of solar energy. Perhaps we'll see that in the future. For now, you can still buy a black car.


How to Participate http://www.arb.ca.gov/html/decisions.htm

Current Draft of Cool Cars
draft regulation

FAQs
http://www.arb.ca.gov/html/coolcarsfaq.pdf

ARB|CC|Cool-Cars

http://www.arb.ca.gov/cc/cool-cars/cool-cars.htm

Other thoughts on regulations
http://envsissue.blogspot.com/2009/11/californias-cool-cars.html