The Business of Energy OR The Business of Changing
Description: The Business of Energy OR The Business of Changing How Much Energy We Use Martha Amram, Ph.D CEO, Ennovationz Senior Fellow, The Milken Institute December 3, 2010 Overview More than Energy is Changing Capitalism -- The Invisible Green Hand
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slide1. The Business of Energy OR The Business of Changing How Much Energy We Use Martha Amram, Ph.D
CEO, Ennovationz
Senior Fellow, The Milken Institute
December 3, 2010<br>
slide2. Overview More than Energy is Changing
Capitalism -- The Invisible Green Hand
We Consume – But Demand is Unpredictable
We Innovate – But Its Risky
We Miss Our Robust Capital Markets!
We Arrive -- The Post-Carbon World 2<br>
slide3. More than Energy…. 50% $800B 25% 2.8B 3<br>
slide4. Who You Gonna Call? Legislative policy
Clear winners and losers; Small scale; EX: Cash for Clunkers
Regulatory policy
Captive regulators; Reactive; EX: Off-shore drilling moratorium
Non-profits/NGOs
Loss of funding; Lack of persistence; EX: Community development
Capitalism: Foresight, persistence, scalable
The Invisible Green Hand – No master plan 4<br>
slide5. Unintended Consumption http://oee.nrcan.gc.ca/corporate/statistics/neud/dpa/data_e/CAMA03/chapter1.cfm?attr=0 5 Avg size of fridge (cubic feet) kWh per cubic foot<br>
slide6. Weak Price Signals Daily electricity use (kWh) Price of
Electricity
(cents per kWh) 42¢ 12¢ 35¢ 25¢ 13¢ PG&E – Northern California Daily electricity use (kWh) Price of
Electricity
(cents per kWh) 4¢ 8¢ Seattle City Light TOO COMPLEX TOO CHEAP Daily electricity use (kWh) Price of
Electricity
(cents per kWh) 7¢ 8¢ DTE (Detroit) TOO FLAT Daily electricity use (kWh) Price of
Electricity
(cents per kWh) 8¢ 5¢ Cedar Falls, IA DECLINING WITH USE 6<br>
slide7. Consumers Buy Embedded Energy Efficiency… Or Not 7 6% of electricity in CA
Quiet sells At 25¢ 20% penetration
CA: No more subsidies 1 TV = 1 Fridge<br>
slide8. Successful Solar is a Combo Product 8 Source: Solar City: California Solar Initiative Program Database<br>
slide9. Two Styles of Venture Investing 9 $1.3B
Technology Risk Only $2.4B
Market Risk Only IDEA DEVELOP
TECHNOLOGY LAUNCH
PRODUCT DRIVE
TO SCALE “Chindia Price” “It’s the Biz Model”<br>
slide10. Disruptive & Cool Seldom Succeeds C-Crete Technologies 10 GreenFuel Technologies<br>
slide11. Capital Market Disconnects 11 Stock Market
No New Entrants/IPOs
High Cost of Transparency Venture Capital
Capital Flight
Huge Funds/Big Deals Debt – Origination
No Credit Risk
Who goes first? Debt – Securitization
Frozen
No Interest In Innovation<br>
slide12. Frozen Secondary Markets 12 New ABS<br>
slide13. We Arrive: The Post-Carbon World Enormously changed facts on the ground
Energy issues imbedded in falling quality of life issues
Carbon policy remains a low priority
Save energy/lower carbon because of higher prices and pressure on the family budget
No quick adoption of disruptive technologies
A world of individual actors moves more slowly than we want, and change is more chaotic than we plan for 13<br>
slide14. The Business of Energy OR The Business of Changing How Much Energy We Use Martha Amram, Ph.D
CEO, Ennovationz
Senior Fellow, The Milken Institute
December 3, 2010 14<br>
slide15. 15<br>
slide16. 1) The frontlines of climate change: water, fish and the trade balance Point: lack of water, lack of protein will lead to mobile, angry and unsettled populations with huge humanitarian needs. Also US trade imbalance will make goods significantly more costly at WalMart (eg Chinese exports will be 40% more expensive) and our standard of living will plummet. We will feel poor. 2) Political unrest and stalemate. Our current political institutions are not designed to be "deciders" when faced with this world-wide humanitarian crisis and with the balance of intertia/action when it comes to the diffuse and long-term benefits of climate change. 3) In this context, the energy transition is swept along the political tides. Huge disruptions in supplies. Rapidly changing and large cost swings create new relative prices. Turmoil in energy markets. 4) From a business perspective -- U.S. only -- , there are three factors I am watching for and engaging in. -- capital markets. We are starved for risk-taking capital (even low levels of risk!) and this has stalled the energy transition. Solutions? Federal action. Local programs don't scale. -- consumer engagement. Ultimately consumers affect all decisions (homes, cars, commercial buildings, supply chains, civic operations) and will vote with their feet. Winners will know how to engage and will leverage. that. Next steps? As a company, prove you can do it. THis probably means a value proposition that is not just energy based, but draws in value from adjacent industries. -- disruptive technologies. Haven't seen them yet, but keep watching. Meanwhile, recognize that major problems -- such as cancer -- have been making progress for hundreds of years based on incremental innovation. So, we have the Khosla investment strategy vs. the Foundation investment strategy vs. the rest of the VCs. (eg shoot for the moon, innovative business models and standard technology, or incremental technology improvements). Watch closely. 5) Post carbon world -- * Reshaped political institutions * Enormously changed facts on the ground * Hard to see energy industry issues leading the way, more likely they get swept along ---- 16<br>
CEO, Ennovationz
Senior Fellow, The Milken Institute
December 3, 2010<br>
slide2. Overview More than Energy is Changing
Capitalism -- The Invisible Green Hand
We Consume – But Demand is Unpredictable
We Innovate – But Its Risky
We Miss Our Robust Capital Markets!
We Arrive -- The Post-Carbon World 2<br>
slide3. More than Energy…. 50% $800B 25% 2.8B 3<br>
slide4. Who You Gonna Call? Legislative policy
Clear winners and losers; Small scale; EX: Cash for Clunkers
Regulatory policy
Captive regulators; Reactive; EX: Off-shore drilling moratorium
Non-profits/NGOs
Loss of funding; Lack of persistence; EX: Community development
Capitalism: Foresight, persistence, scalable
The Invisible Green Hand – No master plan 4<br>
slide5. Unintended Consumption http://oee.nrcan.gc.ca/corporate/statistics/neud/dpa/data_e/CAMA03/chapter1.cfm?attr=0 5 Avg size of fridge (cubic feet) kWh per cubic foot<br>
slide6. Weak Price Signals Daily electricity use (kWh) Price of
Electricity
(cents per kWh) 42¢ 12¢ 35¢ 25¢ 13¢ PG&E – Northern California Daily electricity use (kWh) Price of
Electricity
(cents per kWh) 4¢ 8¢ Seattle City Light TOO COMPLEX TOO CHEAP Daily electricity use (kWh) Price of
Electricity
(cents per kWh) 7¢ 8¢ DTE (Detroit) TOO FLAT Daily electricity use (kWh) Price of
Electricity
(cents per kWh) 8¢ 5¢ Cedar Falls, IA DECLINING WITH USE 6<br>
slide7. Consumers Buy Embedded Energy Efficiency… Or Not 7 6% of electricity in CA
Quiet sells At 25¢ 20% penetration
CA: No more subsidies 1 TV = 1 Fridge<br>
slide8. Successful Solar is a Combo Product 8 Source: Solar City: California Solar Initiative Program Database<br>
slide9. Two Styles of Venture Investing 9 $1.3B
Technology Risk Only $2.4B
Market Risk Only IDEA DEVELOP
TECHNOLOGY LAUNCH
PRODUCT DRIVE
TO SCALE “Chindia Price” “It’s the Biz Model”<br>
slide10. Disruptive & Cool Seldom Succeeds C-Crete Technologies 10 GreenFuel Technologies<br>
slide11. Capital Market Disconnects 11 Stock Market
No New Entrants/IPOs
High Cost of Transparency Venture Capital
Capital Flight
Huge Funds/Big Deals Debt – Origination
No Credit Risk
Who goes first? Debt – Securitization
Frozen
No Interest In Innovation<br>
slide12. Frozen Secondary Markets 12 New ABS<br>
slide13. We Arrive: The Post-Carbon World Enormously changed facts on the ground
Energy issues imbedded in falling quality of life issues
Carbon policy remains a low priority
Save energy/lower carbon because of higher prices and pressure on the family budget
No quick adoption of disruptive technologies
A world of individual actors moves more slowly than we want, and change is more chaotic than we plan for 13<br>
slide14. The Business of Energy OR The Business of Changing How Much Energy We Use Martha Amram, Ph.D
CEO, Ennovationz
Senior Fellow, The Milken Institute
December 3, 2010 14<br>
slide15. 15<br>
slide16. 1) The frontlines of climate change: water, fish and the trade balance Point: lack of water, lack of protein will lead to mobile, angry and unsettled populations with huge humanitarian needs. Also US trade imbalance will make goods significantly more costly at WalMart (eg Chinese exports will be 40% more expensive) and our standard of living will plummet. We will feel poor. 2) Political unrest and stalemate. Our current political institutions are not designed to be "deciders" when faced with this world-wide humanitarian crisis and with the balance of intertia/action when it comes to the diffuse and long-term benefits of climate change. 3) In this context, the energy transition is swept along the political tides. Huge disruptions in supplies. Rapidly changing and large cost swings create new relative prices. Turmoil in energy markets. 4) From a business perspective -- U.S. only -- , there are three factors I am watching for and engaging in. -- capital markets. We are starved for risk-taking capital (even low levels of risk!) and this has stalled the energy transition. Solutions? Federal action. Local programs don't scale. -- consumer engagement. Ultimately consumers affect all decisions (homes, cars, commercial buildings, supply chains, civic operations) and will vote with their feet. Winners will know how to engage and will leverage. that. Next steps? As a company, prove you can do it. THis probably means a value proposition that is not just energy based, but draws in value from adjacent industries. -- disruptive technologies. Haven't seen them yet, but keep watching. Meanwhile, recognize that major problems -- such as cancer -- have been making progress for hundreds of years based on incremental innovation. So, we have the Khosla investment strategy vs. the Foundation investment strategy vs. the rest of the VCs. (eg shoot for the moon, innovative business models and standard technology, or incremental technology improvements). Watch closely. 5) Post carbon world -- * Reshaped political institutions * Enormously changed facts on the ground * Hard to see energy industry issues leading the way, more likely they get swept along ---- 16<br>