Oil is running out, maybe sooner than later. Can alternatives supply a solution? There are bright spots on the horizon.
Last Chance for Gas
|Oil is running out, maybe sooner than later. Can alternatives supply a solution? There are bright spots on the horizon.|
Mainstream forecasters estimate we'll reach "peak oil"--the point at which global petroleum production maxes out--sometime in the next 10 to 30 years.
Others are less optimistic. Matthew Simmons, chairman of Houston-based energy investment bank Simmons & Co. International, has attracted a fair amount of attention lately by claiming that oil is already in far shorter supply than producers want to admit. He says the peak is now and that the price of oil could reach $100 a barrel by this winter.
While predictions may differ, the problem is definite. We use four times as much petroleum as we discover. Global discovery of oil topped out in the 1960s, and has been in decline since. What about reserves? Simmons says Saudi Arabia, with by far the world's largest oil reserves, may be able to pump enough to satisfy rising demand for only the next few years.
Meanwhile, alternative-energy technologies are nowhere near advanced enough to pick up the load if--when--the supply of oil goes slack. There are no magic bullets.
But there is a rather interesting powder, an innovation developed by New York startup SiGNa Chemistry.
The powder is a combination of alkali metal and silica gel. SiGNa Chem claims it can be used to deliver large volumes of cheap, clean hydrogen from water.
Alkali metals have long been seen as a promising avenue of energy research. Immersed in liquid, they readily donate electrons and trigger a useful chemical reaction. But they tend to catch fire when exposed to air or moisture.
SiGNa Chem says it's found a way to tame an alkali metal--in this case sodium--by combining it with silica gel. The resulting powder is easy and cheap to store, transport and handle. Mixed with water, it produces inexpensive, clean hydrogen gas.
SiGNa Chem's powder is not the immediate answer to a global oil drought. Its first application will be in the pharmaceutical and petrochemical fields and, later, in fuel cells. But it is an encouraging example of the sort of alternative-energy innovation that will be necessary--and profitable--when the pipelines start to go dry.
SiGNa's discovery was somewhat lucky. Founder Michael Lefenfeld, a Columbia Ph.D. student in molecular electronics, was actually looking for a better way to spray aerosol fragrances when he hit on the idea of using alkali metals and, later, the idea for his hydrogen-producing powder.
But if there are to be more startups like SiGNa, then more than luck will be required. What's needed is what's usually needed--money--and it remains in short supply. The U.S. Department of Energy plans to cut its renewable-energy budget by 6 percent, to $353 million, in 2006.
On the venture side, the picture is better. U.S. venture investment in alternative energy grew nearly threefold in 2004, to $95 million, and is on track to rise further this year. While the renewables category is still small by comparison to, say, software and biotech, attracting just 6 percent of the $20 billion in total venture dollars spent last year on technology, interest is "surging," says Bill Green, leader of the CleanTech Practice Group at VantagePoint Venture Partners.
"Think about it this way," Green says. "How badly does the world need another enterprise software startup? Now how badly does the world need a company that can solve our dependence on oil?"
But however badly--or how quickly--the world needs alternative energy innovation, Green adds, traditional economics still apply. "The strategy to avoid is putting technology ahead of markets. Someone says, 'This is a better wind turbine design.'"
Problem is, Green says, they don't stop to think that GE has a very strong interest in its own turbine design.
Another hurdle is price, notes Philippe Casas, a partner with venture firm Partech International. "The next challenge is to sell a product at price points near traditional energy."
The picture in that department is improving--wind power is now competitive with oil--and, as a result, investment dollars are flowing in, from VCs, large corporations and state governments.
Dublin-based Airtricity, one of Europe's biggest renewables firms, recently said it will invest $1.5 billion to build wind farms in North America by 2010.
Solar and fuel-cell technologies are also progressing and have been getting venture support. During a two-week period in June, four solar companies and a fuel-cell company received funding totaling $62.5 million. Among the companies attracting big investments were Miasolé, which raised $16 million from Green's VatagePoint, Nanosolar, which raised $8 million, Energy Innovations, with $16.5 million, and HelioVolt, with $8 million.
Protonex, a fuel-cell company in Southborough, Massachusetts, took $11 million in a series B round. PolyFuel, a Mountain View, California-based company that makes fuel-cell membranes, announced its intention to go public on the London Stock Exchange.
In February CalPERS, the California Public Employees' Retirement System, and CalSTRS, the California State Teachers' Retirement System, the largest and third-largest public pension funds in the U.S., with combined assets of more than $270 billion, announced their intention to invest $1.5 billion in cleantech.
"It's likely that all this activity will lead to some very interesting and, more important, very valuable companies," Green says.
It will require patience. But, says Ira Ehrenpreis, a partner at venture firm Technology Partners, "the fact that this market is addressing fundamental problems means it's not going away--because the problems are only likely to get worse."
Officially "peak oil"-the point at which global oil production tops out- won't come for another 10 to 30 years. But a lack of reliable data on oil production leads some experts to estimate we're nearing peak oil now. The chairman of Houston-based energy investment bank Simmons & Co. International, Matthew Simmons, made news last spring by predicting that peak oil is upon us and that the price of oil could hit $100 a barrel by this winter. The possibility of dwindling petroleum supplies coupled with Kyoto Protocol efforts to reduce greenhouse gas emissions is driving demand for renewable energy. If Simmons is correct, then, of course, this drive will accelerate considerably. More conservative forecasters have global renewable energy consumption doubling in the next 25 years, a rate of increase that would keep renewables' growth at pace with overall energy consumption. Europe is the global leader in renewable deployment. By 2030 nonhydroelectric renewable power will account for approximately 17 percent of Europe's power. U.S. consumption of renewables will hold steady at 6 percent of all energy use through 2025, according to the Energy Information Administration. The U.S. Department of Energy cut its renewable-energy budget by 6 percent in 2006.
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