I approached the 2006 MIT Energy Conference with a bit of skepticism; all of the recent talk about energy is indicative of what I call the "Titanic Syndrome"; in a crisis, people rush to the side of the boat where everyone else is heading(ostensibly for the lifeboats), tipping the ship in the process. With respect to energy, it seems as if it's suddenly the flavor of the month and everyone is jumping on board, creating a bit of a bubble.
That being said, the day started with a sobering keynote. Joe Romm, an MIT-trained scientist who is a former Asst. Secy at DOE, laid out a bit of a chilling forecast for global climate change. Net Net, if we consider on the same path, in 10 years Greenland will lose 7 meters of ice, and in 20 years, 20m of ice will melt in the Antarctic. The result will be 4-5 Katrina-class super hurricanes per year, a 1m rise in oceans by 2050, and a 2m rise by 2100.
For the first time, I got it that there is a point of no return, where the ice that melts can't refreeze/reform, and the tundra lost creates sinkholes. All of this is without the impact of the 150 Coal -fired plants China has on line to complete by 2010, and the additional 168 China plans by 2020. It also struck me that this will affect things such as security policy; as opposed to our historical pattern of starting wars to get access to resources, we may see a world where wars are started to prevent the use of resources because of that impact on the environment. More on this later after I circle up with the MIT Security Studies people.
Dr. Romm also had a few other key points:
1. Coal-fired electricity plants are a real threat, especially in the developing world. There is a real need to replace coal with renewables. and coal/biomass blending
2. Big need for low-CO2 producing fuels; the best fuels minimize new infrastructure. This is an important point; a lot of strategies/technologies assume that the existing gas station and distribution architecture will take on the cost burdens of a migration. The regional gas distributor getting low double-digit margins is NOT going to take on extensive capital cost.
3. We MUST stop building coal plants to deliver domestic electricity. This opens the door to wind power(if financially viable), nuclear, hydro, etc. 2000GW of wind turbines and 700GW of new nuclear capacity(about 880 new reactors, or double the 440 worldwide today)
4. There is a huge problem with a number of oil-producing substitutes; Tar Sands, Coal-to-Oil, Enhanced Oil Recovery, and Shale conversion...they all create CO2 in their own right, not to mention the energy expended in order to harvest these sources.
5. Dr. Romm's position is that Hydrogen is over-hyped. In effect, by the time Hydrogen technologies are fully matured, we'll have already passed several of the critical points of no return. In the case of autos, that means that the more pragmatic approach is to look at some sort of plug-in hybrid approach combing electricity and flex fuel cars using a gas/ethanol mix. This is a critical point, that the rate of technology absorption is much slower than the growth in emissions and the impact on climate change. So, Hydrogen sounds great, but at current rates of adoption we'll be way past the trouble point by the time the technology is mature.
At the networking break, I met up with Bob Metcalfe of 3COM fame. My pressing question was whether he saw Energy 2.0 through the prism of IT, or was this "something different". In Mr. Metcalfe's opinion, one needs to look at Energy 2.0 deals standalone, the skill sets of areas like software, networking, IT, etc don't map into this space. The best strategy, as is pretty common sense, is to find the people who've been heads down doing this for years.
Given that as a backdrop, we both attended the next session, which was the Nuclear Track. I was amazed to see how packed it was. In short, I think a lot of people are considering Nuclear as an option for providing alternatives to coal for electric utilities(see point about China above); unfortunately the dynamics of the industry still haven't changed. Duke and Florida Power and Light have 6 multi billion $ projects pending in the southeast, but are still waiting for NRC permission. Nuclear overseas is moving much faster, especially in France/Spain. There still seems to be a bit of a logjam domestically though, so I view this as a market where the main action is going to be in Europe and Asia for the next 5 years, and the US is going to continue to lag. A Lehman Brothers MD presented a variety of interesting financing alternatives for nuclear plants; there has been considerable innovation in terms of payment structures such that once the regulatory logjam breaks, these projects will be easier to finance than before.
The technology opportunity, independent of the regulatory issues, is how to reduce the $300-$500M/per plant FOAKE(First Of A Kind Engineering, or Non Recoverable Engineering) costs. Right now, reactors still aren't built on a black-box model where the work is replicable.AREVA and other French companies seem to be heading down this road. The other opportunity is to improve the efficiency beyond the 90-91(of 100) capacity level, though better heat exchange, water management, waste management. The elephant in the room of waste storage wasn't effectively addressed, but is another gating issue.
Despite the regulatory hassle the benefit of Nuclear is that a license, once granted, lasts for 40 Years with a one time guaranteed 20 Year extension. So, a license creates a regional monopoly of a sorts.
The next panel I attended was on Clean Carbon, and what technologies exist to augment/modify fossil fuel technology. Most of the discussion centered on IGCC (Integrated Gasification Combined Cycles), whereby clean gas is created from carbon sources; largely liquid natural gas Here's a great block diagram of the process: Download IGCC.gif
The simple fact of the matter is that there are NO new IGCC plants being built in the US. So, this is an example of another technology where China is really where everyone is looking for adoption.China however, is looking to the US to create a reference plant first. US manufacturers won't build it without guarantees that the Chinese won't steal the technology. So, there is a chicken/egg issue. A number of interesting questions were raised by David Wells of Kleiner Perkins(an EIR I guess) as to what technology opportunities exist with IGCC; the only one raised was a better means of CO2 storage.
The next major panel was a view of Transportation in 2020, attended by members of Shell, GM, as well as A123 systems(a battery startup founded by Ric Fulop, another MIT Sloan Fellow). Terry Pritchett of GM spoke at length about GM's commitment to E85 Ethanol vehicles. GM appears to be migrating a variety of vehicles to Ethanol. Despite that, the A123 team believes that plug in hybrids are the future(perhaps with flex fuels using ethanol). Dr. Lionel Clarke of Shell's Future Strategies team laid out a very diversified approach that Shell plans to take in the foreseeable future. From a portfolio management strategy, that's a good road map; invest along a continuum of technologies using everything from bio fuels to batteries and take a Markowitz approach.
A key point that was raised in this startup was another of the unspoken issues; that it takes $80-100M to build an energy startup, or create a new technology inititative within a larger company. That's significant for seed and early stage investors; deals in this space will require much more capital set aside to deal with later rounds of financing. This number was confirmed in a later breakout session by Harry Hanson, Partner with Choate Hall and Stewart.
The afternoon keynote was Vinod Khosla, ex of KP now of Khosla Ventures. In terms of the movie "The Graduate", one can sum up his presentation thus: "Ethanol". Download Biofuels.Apr2006.ppt
Mr. Khosla's view is the Brazilian experience with ethanol production and car conversion can replicated easily and cost effectively in the US, and that ethanol based transportation is a near-term feasible platform. During the all too short Q&A session, I asked if he was seeing the same experiment in India and China; surprisingly not as much. So, as far as we know, Brazil really is the one compelling case for ethanol. With the amount of biomass/cane sugar in Brazil, it's an open question as to whether this can be replicated in the US.
There was a short Technology Showcase afterward. Interesting people who presented were Prof. Don Sadoway of the MIT Materials Science group(I actually took a class with him years ago), as well as Prof> Greg Stephanopolous of the Chemical Engineering Division. Dr. Sadoway is working on a Lithium Solid Polymer battery that would enable "caching the grid" in the event of a distributed, electric car network.
Prof. Stephanopolous is working on Metabolic Engineering, the conversion of Biomass to Biofuels. His thesis is that Biomass of 1.3B tons/year can be converted to 40% of the US Fuel Budget. This is now feasible because the cost of enzymes for conversion has dropped 5-10x in the last several years.
I also had the opportunity to meet/speak with a number of interesting entrepreneurs:
1. Anna Halpern-Lande, Principal of San Francisco Biodiesel: Anna is already speaking with Erik Straser; I spent some time coaching her on how to focus in on the technical leverage her team brings to the table and how to present that in 10 slides or less in 45 minutes or less.
2. Jeff Altman, CEO of Hy9 Corporation. Again, Erik has already vetted this company. They've raised an A round, but Jeff and I are going to keep in touch.
3. Sudhir Nunes, President of Orca Energy: Sudhir started a company to package fuel cells for maritime recharging of super yachts. It sounds like a niche business, but it's an area where there isn't much price sensitivity and this segment is growing rapidly.
In summary, there are 3 areas where MIT seems to be focusing
1. Enabling technology: Solar, bio fuels, batteries
2. Improving existing Energy Systems: Fossil Fuels, Nuke, IGCC
3. Climate Change research
Overall, it was a great conference and very eye opening as to the outcomes of not applying new technology to energy consumption worldwide. This was one of the better conferences I've attended, especially given the fact that it was student led, the week before finals.
Recent Comments