Obama’s New Green Stimulus Means New Business Opportunities

A snowy egret in Golden Gate Park, San Francisco
A snowy egret in Golden Gate Park, San Francisco

On one of the bulletin boards I monitor, David Hodgson asked “What strategic opportunities do you think the incoming Obama administration will provide for the ‘GreenMBA?'”

The intersection between the unfolding economic and ecological crisis places a program such as the GreenMBA [at Dominican University in San Rafael, California] at the heart of the changes occurring in the world. The Obama administration has signaled that the idea of a Green New Deal is a way to simultaneously address both of these issues.

What opportunities do you think this will this provide, and how can we best strategically place ourselves to take advantage of them?

I took up the challenge with a short answer as well (reprinted below, slightly edited). I’m interested to hear your thoughts on this topic as well. I said:

I’ve explored some ideas in some recent posts here (e.g., Economic Stimulus Via Renewable Energy Transmission Grid, for example).

Basically, I’m coming from the perspective that the transition to green energy (including efficiency) will be profitable both for businesses and for consumers, but there are barriers to achieving those profits. The barriers range from perverse incentives, to misaligned interests, to subsidies for the wrong things, to just plain old psychological barriers (“isn’t it more expensive to be more efficient?”). So the “Green New Deal” is less about government investment in businesses than in government incentives to guide or “nudge” businesses to do the right thing.

For example, in the current credit crunch, many of the green energy projects we were so excited about earlier this year are now on hold due to uncertainties about the availability of credit and customers. This is a perfect opportunity for the Feds to step in and guarantee loans and credit for these projects so they can continue – it’s low risk, and helps keep the wheels turning on the transition that we have to make. I guess one way to think about this is that Obama needs to “bailout” the green energy projects (which actually will be profitable and must be done) as much as he needs to help the automakers (which may never be profitable again and are taking us the wrong direction anyway).

With Obama’s commitment on Saturday to a huge stimulus packaged organized around sustainability, green energy, etc., it’s now time for us (the Green MBA types) to create the opportunities. Obama wants this stimulus to be “market-based” – focused more on breaking down existing barriers to realizing the profits that sustainability and conservation and new technologies will drive than on simply throwing money at inefficient industries to keep them afloat (Big Auto bailout, anyone?).

What do you think should be done with Obama’s $150 stimulus to the green economy and sustainable energy?

By the way, David’s own suggestions for Obama (eight of them) are here, on his blog Free Range Ape, including:

2. Give the Ecosystem a Cabinet Voice. Appoint a secretary of the environment. The environment needs to have a voice at the table that is equal to that of the treasury. It is, after all, a consideration that really needs to be present in the discussion of all things. And it is needed to help drive many of these issues.

and

7. Shift from a payroll tax to a carbon tax. My sense of the debate is that carbon taxes are a more effective policy solution than a cap + trade mechanism. Offsetting the carbon tax with a reduction of payroll taxes does two things. It reduces the cost of employment of an individual, thus helping us get the US working again, whilse decarbonizing our economy quickly.

Amory Lovins Named A World’s Best Leader By U.S. News

Amory Lovins
Amory Lovins

Amory Lovins is one of my true heros, and I’m thrilled to hear that U.S New has named him one of World’s Best Leaders in their report this week. Lovins has inspired multitudes (and this blog) with his vision of “getting off oil at a profit” and “drilling for negabarrels under Detroit.” The Rocky Mountain Institute, a “think and do” tank that he founded 26 years ago, takes this vision and makes it happen for Fortune 1000 companies, the military, and governments around the world (including Portola Valley, just up the street from me, where he spoke a few weeks ago).

Lovins argues that, contrary to the common belief, efficiency is much cheaper than energy use. Especially when pursued with a technique he calls “integrative design,’ doing efficiency right results in lower energy use, lower costs in the first place, and better productivity. The last point is critical – efficiency improves not only the bottom line by reducing costs, it also improves the top line by increasing productivity and profits.

So why aren’t we pursuing energy efficency faster, if it has so many benefits? Many companies are doing so, getting benefits that go directly to their bottom line and give them a competitive advantage, like Dupont. And Intel. And Wal-Mart.

In 2006, for example, RMI partnered with Wal-Mart to boost the fuel efficiency of the retailer’s truck fleet. “When Wal-Mart came to us,” he says, “we had a lot of internal discussion, because they have big issues,” notably the company’s history of labor problems. “But we decided if we worked only with perfect companies, we wouldn’t get anything done.” The collaboration has proved fruitful. Wal-Mart is now working to retrofit its 6,800 trucks with designs developed by RMI that should allow its fleet to go from getting 6 miles a gallon to between 16 and 18 miles a gallon by 2015, saving about $500 million annually.

These companies, and many more, are enjoying an “unfair advantage” due to their pursuit of efficiency. But for many companies, there are mixed up incentives, such as between commercial landlords and their tenants. The landlord has to pay for the efficiency, but the tenant reaps the benefits – their interests are not aligned, and so “business is usual.” In his books and talks, Lovins provides techniques, guidelines, and policy suggestions to help align these incentives.

For more on Lovins, I can recommend his books, Winning The Oil Endgame and Climate: Making Sense and Making Money (both available free for download) and Natural Capitalism, written with Hunter Lovins and Paul Hawken.

You can hear Lovins in numerous talks and interviews available as podcasts, including this outstanding series of five talks at Stanford University in 2007. Download those to your iPod or mp3 player and prepare to be amazed by the possibilities.

Congratulations Amory!

AskNature.org – A New Biomimicry Resource and Social Networking Site

Spider silk has desirable technical properties that manmade materials cannot replicate yet
Spider silk has desirable technical properties that manmade materials cannot replicate yet

I just visited AskNature.org, [url corrected] a new resource and social site for people interested in understanding how nature has solved various design problems – such as energy conservation, water collection, and energy generation – and how we can use those solutions as inspiration for our own technology.

AskNature is a bio-inspiration website where innovators can learn from nature’s solutions, biologists can find a whole new audience for their research, students can be inspired through science, and collaborators from different disciplines can work together to create innovative, sustainable, bio-inspired designs.

Currently on their home page they link to articles on the three topics I mentioned above – conservation, water, and energy generation. The articles feature an overview of the topic and how nature has addressed it, an example organism that’s solved the problem in an interesting way, and then one or more technology solutions that are based on nature’s approach – often contrasted with technologies for the same problem that are not inspired by nature.

Nature solves problems for organisms using evolution, using millions of experiments over tremendous time to optimize the solution under the constraints of very low energy inputs, ability to build the solution from basic materials using a digital program (genes), and only generating waste that can be used by other organisms. When nature’s solutions can be repurposed to solve technological problems, those same constraints are additional benefits – reducing the energy required for the solution, making the process digital, and eliminating waste.

The site is a project of Janine BenyusBiomimicry Institute, a not-for-profit whose mission is to nurture and grow a global community of people who are learning from, emulating, and conserving life’s genius to create a healthier, more sustainable planet.

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Watch Out For Unintended Consequences

Mojave Desert scene in Joshua Tree National Park.
Image via Wikipedia

In their editorial Green Energy vs. Actual “Green” Energy Basin and Range Watch point out that there are lots of opportunities for making a big mess of the environment while trying to save it. The focus of this site is the Mojave and Great Basin Deserts in Nevada and California, the targets of many new solar projects. “There are over one million acres of public land in the six states that are being considered for sacrifice.”

Most of these projects require a lot of water, and all require “clear cutting” the desert to prevent weeds and pests.

How ironic that this so called “green revolution” has taken the irresponsible direction of so much environmental destruction. Why not just use the countless rooftops and vacant space of the millions of developed urban acres in the southwest? Could it be that urban environmental planning is considered too costly? We are baffled by this because it defeats the purpose of green.

As we make the changes to our economy and our energy infrastructure that we have to make, we have to take care of our existing resources, such as the great deserts. For no other reason than we don’t really know everything about them. For example, it’s been learned recently that:

Desert plants and soils store carbon better than most northern forests. Desert plants are masters of storing carbon. CAM (“crassulacean acid metabolism”) plants are plants that use certain special compounds to gather carbon dioxide (CO2) during photosynthesis.

Don’t want to lose that while trying to eliminate carbon from our energy system, do we? We have a lot of carbon already in the atmosphere that needs sucking up. What else is this desert flora and fauna doing for Earth that we haven’t learned yet? Do we want to take the chance of upsetting yet more of the balance? We need to take a lot of care as we move forward with whatever large-scale energy projects we undertake.

I recommend this article, and I’d be interested to hear your thinking about how to avoid bad consequences while achieving energy independence.

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Amory Lovins On Declining Gas Prices

There's a lot of energy to be saved in all sectors
There is lots of opportunity to reduce energy intensity throughout the U.S. economy

In “a few policies to hedge against crashing oil prices,” the latest post on the Rocky Mountain Institute‘s “Environmental Lovin’s” blog, Amory Lovins himself provides some suggestions on how to keep making progress on energy independence despite the recent dip in oil prices. Of course, efficiency is the star of the show:

We now have techniques to save half our oil and gas, and three-quarters of our electricity, at about an eighth of their price. Energy efficiency remains one of the highest-return and lowest-risk investments in the entire economy.

The basic argument is that no matter how low oil prices go, efficiency remains more cost effective than almost any other investment. His specific suggestions, such as “fee-bates” to encourage purchasing more efficient cars, rewarding utilities for cutting energy use (as we do in California), and implementing policies that get older less efficient cars off the road faster, are covered in much more detail in RMI’s two books Winning The Oil Endgame and Climate: Making Sense and Making Money (both free for download).

Efficiency investments pay for themselves twice over – saving money on energy usage, while reaping numerous benefits as side effects – improved productivity in businesses, faster learning in schools, better sales in shops. As Lovins concludes:

Conscientiously pursued, this … approach would solve the oil, climate, and proliferation problems at a profit, over a few decades, totaling trillions of dollars.

There have been calls already for President-elect Obama to bring Lovins into the cabinet to help drive us to energy independence. He won’t do it (he wants to remain independent), but hopefully Obama and his team will at least take the advice – it will definitely pay off for all of us – and help us out of the recession to boot.

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Climate Change In Extremistan

The Black Swan (book)
Taleb's The Black Swan. Image via Wikipedia

In his Edge Magazine essay Life Is Not A Casino, Nassim Nicholas Taleb, the trader and author (of The Black Swan and Fooled By Randomness) discusses why he no longer thinks that using statistics and probability to make decisions is wise. The problem, he says, is that:

When it comes to low odds, decision making no longer depends on the probability alone. It is the pair, probability times payoff (or a series of payoffs), the expectation, that matters. On occasion, the potential payoff can be so vast that it dwarfs the probability—and these are usually real-world situations in which probability is not computable.

Taleb is a very interesting speaker. I highly recommend a couple of his talks which are available as podcasts. He spoke to the Long Now Foundation in February on “The Future Has Always Been Crazier Than We Thought” (mp3, summary), and at PopTech in 2007 (mp3, description).

Bringing us back to our usual topic of energy and climate change, he makes this observation at the end of the essay:

Correspondents keep asking me if the climate worriers are basing their claims on shoddy science and whether, owing to nonlinearities, their forecasts are marred with such a possible error that we should ignore them. Now, even if I agreed that it was shoddy science; even if I agreed with the statement that the climate folks were most probably wrong, I would still opt for the most ecologically conservative stance. Leave Planet Earth the way we found it. Consider the consequences of the very remote possibility that they may be right—or, worse, the even more remote possibility that they may be extremely right.

“Extremely right,” for Taleb, means that climate change will be much worse than we thought, or much faster, or have a much larger impact than expected. The danger of that, despite its low probability, making it a “black swan” in his parlance, means that investing to prevent it is worth it, even if costly. (Of course, I argue elsewhere that it could be profitable, not costly.)

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Michael Pollan Advises Obama on Food and Agriculture

Otis wasn't sure if it was really a crashed spaceship or not
Otis wasn't sure if it was really a crashed spaceship or not!

Michael Pollan (The Omnivore’s Dilemma, In Defense of Food) gave some advice to the next president (Obama, as it turns out) in the NY Times October 12 Sunday Magazine. If he didn’t know already, Pollan warned him that food policy is going to be a big issue, and provides some advice on what to do about it.

It may surprise you to learn that among the issues that will occupy much of your time in the coming years is one you barely mentioned during the campaign: food.

Modern U.S. agriculture (especially as embodied in “The Farm Bill”) is not only a giant user of fossil fuels, but also arguably the major contributor to health crises like obesity and diabetes.

Agriculture in the U.S. uses a surprisingly large amount of fossil fuels (about 14% of the total), and actually generates proportionally more potent greenhouse gases than other uses of the same feedstock. The green revolution was all about fossil fuel-based fertilizers, pesticides and herbicides, and monoculture. Furthermore, the incentives are perverse, especially in the U.S., anti-health and anti-family farm.

Summarizing Pollan’s article, the key recommendation is the “resolarization” of American agriculture:

Right now, the government actively discourages the farmers it subsidizes from growing healthful, fresh food: farmers receiving crop subsidies are prohibited from growing “specialty crops” — farm-bill speak for fruits and vegetables. … Commodity farmers should instead be encouraged to grow as many different crops — including animals — as possible. Why? Because the greater the diversity of crops on a farm, the less the need for both fertilizers and pesticides.

Pollan was also on Fresh Air on October 20, a fantastic interview following up on this article, which you can hear at http://freshair.npr.org. I have the mp3 of the show if you want to listen to it on your pod-player (let me know – I’ll make it available for download).

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Economic Stimulus Via Renewable Energy Transmission Grid

Let’s hope Obama focuses the stimulus package on things we know we need to do anyway. In particular, a modern transmission grid. The current grid is obsolete even for conventional power, and is completely unsuitable for handling big wind energy and solar energy projects that require efficient long-haul capabilities. What can the Feds do? I’m not an economist, but here’s the basics for one initiative.

Arizona sunset
Arizona sunset

Al Gore and I are in agreement that Obama can kill two birds with one stone by structuring his economic stimulus plan around improving the U.S.’s energy posture – which everyone agrees we need to do, both to achieve energy independence and to mitigate climate change. In his op-ed in today’s New York Times he said:

Here’s what we can do — now: we can make an immediate and large strategic investment to put people to work replacing 19th-century energy technologies that depend on dangerous and expensive carbon-based fuels with 21st-century technologies that use fuel that is free forever: the sun, the wind and the natural heat of the earth.

So, following up on my post from Friday, let’s focus the stimulus package on things we know need doing anyway. In particular, a modern transmission grid. The current grid is obsolete even for conventional power, and is completely unsuitable for handling big wind and solar projects that require efficient long-haul capabilities. What can the Feds do? I’m not an economist, but here’s the basics for one initiative: Solicit the top five or ten proposals for new grid projects (a lot of organizations have already put these together), have a six month vetting process, and for the ones that pass the vetting process, provide substantial incentives for investing in those projects, or guarantee the first $100 million of financing for each.

It’s important that the incentives are given to worthy projects, hence the vetting process, but time is clearly of the essence in getting these projects started, hence the six month window. Who does the vetting? Could be a “blue ribbon panel” (assembled very swiftly), or could be an existing industry group that volunteers (again, in response to an incentive of some kind if necessary).

The idea here is that new grid is likely to be cost-effective and pay for itself (that is, investors will get their money back) but in the current financial market and given the curent set of regulations covering conventional energy it’s difficult to actually raise that money. So the Feds can step in and help make sure that these projects, that are desirable for the economy and the nation in the long-term, are able to get off the ground in the short term. You want to avoid the Feds from “choosing the winners” – that will still be done by the market. But you also need to give the market a nudge along the lines of “we’ll give you some incentives to invest in this rather than in a non-productive financial instrument or in conventional energy.”

There are lots of legitimate fears out there about economic stimulus programs – they’re expensive, they’ll have to be paid back eventually, and they solve the wrong problems. So what does Obama and his brain trust need to make sure we avoid?

  • Assuming they can “choose the winners”
  • Funding something that only benefits the already wealthy and doesn’t create jobs (Paulson bailout, anyone?) or improve the country and its opportunities structurally
  • A set of incentives that are too localized

Al’s and my proposals, I think, address all of these concerns:

  • My vetting process allows the market to choose the winners
  • The project will be of benefit to all of us – we need a new grid, and it will enable new kinds of business opportunities for both large and small entrepreneurs. And the projects demand a huge range of skills, from the electrical engineers who design the grid, to the mechanical engineers and technicians who design the transmission lines, to the blue collar workers who manufacture the equipment and build the grid itself
  • The nature of the transmission grid, and in particular the types of problems this grid needs to solve, are inherently non-local – the electricity has to get from rural areas like Arizona and Wyoming to urban centers like San Francisco, Atlanta, and Chicago

I’d love to hear your feedback on this idea, and also your ideas for the initiatives Obama could pursue to address the financial crisis and the energy independence crisis at the same time.

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Obama’s Green Opportunity

US Senator Barack Obama campaigning in New Ham...
Image via Wikipedia

On Wednesday, the Freakonomics blog asked:

If you had a seat at one of the tables where Obama will be meeting over the next days and weeks, what would be some of your suggestions for how he should shape his administration, address the economic mess, consider the energy future, engage the global community, and so on and so forth?

My suggestions for the president-elect:

  1. Energy independence is the biggest lever you have – it generates jobs (including lots in the red states for solar and wind farms and transmission lines as well as high tech jobs in the blue states), technological leadership, economic growth due to new global industries that should be based here in the States, a “sending a man to the moon” type of national goal, and the potential to change the political calculus with the Middle East, Russia, and Venezuela. Yes, we want a market-based approach, but you have a great opportunity to accelerate the revolution through good policies and emphatic “nudges.”
  2. Quick action to start rebuilding relationships with the rest of the world, especially the parts that are not already our close friends – we really need friends everywhere, not just in Europe. Many options here, from driving worldwide action on climate change to a dignified drawdown in Iraq to, yes, drawing Iran, Cuba and some of our other “enemies” into the world community to reduce their threat to us.

At this critical juncture for the U.S. and the world, and with the world-changing potential of a new administration, energy and sustainability are the common thread leading to a desirable outcome.

In the comments, please let me know your thoughts on Obama’s next steps.

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