April 2—(I am back aboard Delta Airlines, this time in Seat 7B, slowly moving up in life…much smoother, too).

As expected, the two-day junket went quickly. Today was mainly a series of briefs from the Department of Energy’s Program Managers (the professional/career DOE staffers that manage the various technology verticals). In many ways, it was much less titillating than wandering around Capitol Hill, but these PMs are the folks who disperse significant money (with more coming from the Stimulus package) and influence grants, program direction, and technology priorities. Programs briefed included Solar, Biomass, Hydrogen/Fuel Cells, Federal Energy Management (efficiency programs), and Industrial Technologies.

A few things to keep in mind when one thinks of DOE. First, it was originally and remains in large part a nuclear agency, with the renewable (Energy Efficiency and Renewable Energy) dimension being just a portion of the overall agency mandate. Second, the dollars flow in support of legislative mandate and are not always as broadly deployed as the technology/start-up community would like, or perhaps it should be.

Take biomass for example (of note, I am on the DOE/USDA Biomass Advisory Council), which is really about leveraging biomass for creating liquid transportation fuels, not for electricity or thermal generation. The biomass team certainly understands the broader play, but their mandate is to make the Renewable Fuel Standard (RFS) numbers of 16 billion-plus gallons of alternative biofuels by 2022. The solar program seems to be making good progress with the goal of grid parity (with incentives) by 2015. Currently that number is ~$3 per installed watt (total system cost), with the current average sitting at ~$5/watt for commercial and ~$6.5/watt for residential. A bit of a ways to go but getting there; as a data point, Bill Davis of Ze-gen (who is sitting next to me on the flight) is installing 10kW of solar panels at his home in Winchester at a cost of $78K, which less an $11K state rebate and a 30 percent tax credit brings the installed cost down to about $5/W. This provides a 7-year payback and does not yet factor in RECs, carbon credits, or the ability to sell excess capacity back to the grid. Pretty cool, thanks Bill…

Two other briefings are worth noting; first is the hydrogen/fuel cell program, which seems to be languishing as compared to the others—largely due to the immense technical hurdles associated with those technologies and difficult commercial deployment obstacles, although there are pockets of success emerging from the space. It will be interesting to see how hydrogen fares in the new Administration as it was moved to the fore again recently as a result of the Bush administration, the reasons for which could be a whole ‘nother discussion it seems. The other is the industrial technologies group, which … Next Page »

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~5pm, April 1—Outside the Library of Congress (it’s raining lightly, and hordes of students are milling about).

A full day of running around Capitol Hill began yesterday with the New England Clean Energy Council masses arriving at the Capitol Building just as it was having a security alert—again, April Fool’s or not? Turned out to be real, but we circumnavigated our way to a cramped briefing room inside the Capitol, where NECEC president Nick D’Arbeloff provided an overview of the Council’s priorities and talking points, which are headlined by the need for a viable “Cap & Invest” Program for Carbon. This item turns out to be very timely; it is the main hot button topic on the Hill right now (in addition to the budget), as the Waxman/Markey Climate Change Bill was introduced yesterday.

The Council priorities and programs also include a push for a Renewable Energy Standard and a set of Energy Innovation Accelerator Programs from early R&D support to commercial deployment and everything in between, both on the funding and policy/permitting sides. There is also a call out for the Invest part of the Cap & Invest program to be focused on efficiency investments and initiatives. The Council Policy Committee has done a nice job of coalescing a broad set of ideas into a cogent set of initiatives and preparing Council members to brief various members of Congress that we all were to meet with this afternoon.

We then spent an hour on the receiving end of several rapid fire briefs from various New England staffers on their core issues, the budgeting process, the climate change bill, and myriad other topics. Each briefing ended abruptly as the particular staffer hurried off, obviously late for his or her next 10-minute meeting, which seems to be the clock cycle of DC, which I actually quite liked—quick formalities, get to business, highlight action items, and then move on to the next meeting. It’s clear that the budget process, especially appropriations (i.e. earmarks), is the top priority as the deadline is this Friday, so perhaps the mostly mid-20 staffers are more harried than normal, but each was insightful, articulate, and obviously engaged. Key takeaways mirrored my earlier comments, with the added emphasis that it is a long process (start soon for FY 11), and one only needs to walk the halls of the Capital Office Buildings for a few hours to realize that there are many and varied parties vying for the ears of our lawmakers, often with very different agendas.

Next up was Congressman Ed Markey, who was very generous in spending nearly an hour with us, briefing us on his Climate Change Bill and the battle that will ensue over the next several months to make it a reality. The President and Chairwoman Nancy Pelosi have been specific on calling for a Cap & Trade structure, but it seems that there are pockets of Carbon Tax folks who are vocal as well. The Waxman/Markey bill is Cap & Trade and will be flushed out very heavily over the next 4-6 weeks with some fundamental questions and structural issues yet to be worked out. The takeaway is … Next Page »

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Spring has sprung in DC—the Cherry Blossoms are out, and the buses full of students are everywhere.

First stop for the day was Congressman Barney Frank’s office to discuss an initiative to develop a clean energy accelerator park in New Bedford, MA. More on this later, but a few immediate takeaways:

—The prep work for the FY 10 budget is essentially done, the real work now begins behind committee doors to sort out specifics and priorities. FY 11 efforts begin soon…

—Legislators have limited control over flow of stimulus dollars; they can endorse (and you should engage on this), but ARA (stimulus) money will flow through mostly pre-existing channels, which is both good and bad.

—Earmarks may or may not be dead, but it’s clear that they have changed with the notion of competitive bids for any earmark that does make it into a budget. How that will work? Anyone’s guess at this point.

—The Staffers are good, smart, and extremely busy; be prepared, respectful, and get to the point—and, as always, relationships matter.

Extra credit trivia question: How many monuments are there in DC? I don’t know the answer but it’s a big number.

Jim

[Editor's note: This is the second installment of a travelogue written by venture capitalist Jim Matheson, who is in the nation's capitol as part of a DC Fly In organized by the New England Clean Energy Council. You can read his first post here.]

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As I sit here in seat 8B on the 6:40am Delta Shuttle to DC, I am hoping the extraordinarily bumpy ride is not a harbinger of the prospects we face over the next two days as a large group of clean tech industry leaders converge on Washington as part of the DC Fly In organized by the New England Clean Energy Council.

Looking around the partially full plane, there are a number of familiar faces rallying to bring the message of New England’s cleantech leadership to the nation’s capitol—and to forward our collective vision for the best regulatory frameworks to accelerate the US cleantech industry and explore how to bring more federal funding home to MA and to each of our specific concerns.

This trip follows an event we held at Flagship Ventures last evening for our portfolio companies on exploring alternative sources of financing—including stimulus package funds, state and local grants, SBIR grants, and myriad other familiar and esoteric sources of capital that may be available depending on a company’s specific focus, stage, and creativeness. Thinking differently about obtaining financing is certainly in vogue right now, but we believe that given the disruption in the traditional capital markets (private and public), the uncertain future of capital flows, and the highly certain increased role of government in the commercial landscape that understanding, exploring, and leveraging these various avenues is mission critical.

Last night’s discussions included a variety of external panelists (lobbyists, grantors, tax experts, and state officials) and internal panelists (portfolio company leaders who have successfully and creatively obtained alternative sources of financing), along with nearly 50 of Flagship’s portfolio company representatives and Team. A few of the main takeaways for successfully pursuing new sources of funding were:

• Committing resources over a period of time (average minimum exertion was one person year to get real traction) is necessary

• Treating these various parties like a partner and understanding their needs (in many cases, jobs)

• Fomenting a relationship before you really need anything (Sales 101)

• Realizing that some of the outcomes of these efforts are binary and thus to go down the path with your eyes wide open

• Recognizing that startup executives do not have experience with these funding sources, so finding a guide (read lobbyist) is worth examining

• Networking: There are many folks in our portfolio and across the local Boston scene who have been down these paths and are open to sharing their learnings, so it is worth trying to network to get smarter, quickly.

• Think Broadly: Most of these funding sources go far beyond just the stimulus package, which is the most immediate and visible pool of money, but which will be temporary. Many of these programs have existed and will continue to exist long after the current deluge of federal funding.

The agenda for the next two days is jam packed with a variety of meetings across DC, including sessions with a variety of New England-based legislators and their staffs, time with Carol Browner (President Obama’s Assistant for Energy/Climate Change), and briefings from a swath of Department of Energy Program Managers. Also embedded in the agenda is time for the NECEC contingent to compare ideas and experiences, discuss and debate the path forward for New England and the US in cleantech leadership, and hopefully a drink or two.

Looks like we are descending. Hopefully the pilot does not think that hitting more bumps is a good April Fools Day prank. More from the Capitol later today…

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Manchester & Newcastle: Thursday, June 12

Final day on the trip for me—the remainder of the group will spend the final day in Newcastle tomorrow, which I am sorry to miss as it will include a tour of NaREC (New and Renewable Energy Center) and a boat trip out to an off-shore wind farm. Perhaps we can get a report on that excursion from another of my traveling companions.

We left the hotel in Manchester early and jumped in a couple of vans heading west into the English countryside. After a route that made me feel like I was being kidnapped (short of the blindfold, that is), we visited a couple of startups located in places that would seem right at home in Kendall Square (the dodgier parts). It is good to see the frugal nature of startups is a global phenomena.

We spent the better part of the mid-day with EA Technology, which is playing a central role in launching the Capenhurst Energy Innovation Centre (EIC)—which will be a unique new facility designed to enable startup companies to turn innovative ideas into commercially successful products and services for the energy industry. The EIC is supported by a consortium of industry, technology, financial, and startup players focused on bringing to market a wide range of high-value cleantech companies.

This set of discussions prompted our group to explore whether we could use such a facility and mechanism in New England. We are soon to have the newly minted Massachusetts Clean Tech Center (currently more a virtual concept than a physical facility), which when formed will facilitate the Clean Tech Fellows and the Clean Tech Seed Funding Programs. These are innovative and important programs, but there definitely seems to be wisdom in creating a physical place and a defined process to create and facilitate cross-functional teams focused on cleantech innovation. We committed to revisiting this upon our return to Boston.

We then took a train to Newcastle, traversing three hours worth of quaint English towns. Arriving in the city I found one of the coolest river scenes I have ever seen, especially at night when the main footbridge cycles through a set of color schemes (powered by LEDs—more energy efficient, of course). This bridge was the centerpiece of a very unique riverfront worth visiting. The only disappointment I experienced in visiting Newcastle was learning that the locals aren’t so keen for their Brown Ale. In fact, the local nickname for the Ale is “Dog.” I am not sure what that means, except that we are probably paying way too much for it in the U.S; kinda like a Brit paying $5 for a bottle of Rolling Rock in the U.K..

Dinner was with Andrew Mills, CEO of NaREC, a world-class innovation and test facility with particular emphasis on off-shore wind and wave & tidal. Also at dinner were a handful of entrepreneurs and folks heading the various cleantech research centers around the Northeast of England. The U.K.’s cleantech efforts are aligned regionally, with a handful of centers and agencies responsible for managing the intra- and inter-regional efforts. This seems to work pretty well and facilitates a range of interactions for which there does not seem to be an analog in the U.S.. DOE does a pretty good job of centrally managing efforts, but much could be gained by creating an increased dialogue across the various centers of excellence in the U.S. and also by focusing more on international collaboration.

A few final observations from a day and week filled with people brandishing fresh ideas and a clear sense of purpose and passion for solving climate change. The technology innovation continues to be interesting and fairly deep; in one case today, the inventor has been working on lighting technology for decades and has created a quite compelling set of LED-based lighting solutions. All these companies have a character cast as the Financial Director (i.e. CFO), who seems to play a much more front and center role than his counterparts play in the U.S.. The crucial role the CEO plays in U.S. companies is less poignant in the U.K. which may help explain the discontinuity in venture capital flows, especially from U.S.-based investors. In addition to the pervasive hunger for venture funding, there is a palpable desire to tackle the North American market. These myriad possible interconnects at the technology, financing, and business levels bode well for a rich set of collaborations with the U.K. and other international centers of excellence moving forward.

The day ended with a ride on a mechanical bull, the second attempt in my life, which was no more successful than the previous one, decades earlier in Oklahoma City. I suppose there is some appropriate metaphor around the importance of getting back in the saddle despite being thrown off, or perhaps more importantly, unlike riding an angry mechanical bull, with global climate change there is no padded landing area if we don’t get it right.

It’s been fun to share this journey, hopefully it was useful to any of you that took the time to read it!

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London, Cambridge, and Manchester: Tuesday and Wednesday, June 10-11 *

I am a day behind, so two days in one entry. We spent Tuesday morning at Imperial College London, then took an hour train ride to Cambridge for an evening event at St. Catherine’s College (one of 39 colleges at Cambridge). Wednesday, we were in Cambridge for the day before heading up to Manchester late in the day. It does not take more than a few hours traveling around England to figure out where nearly every town name in Massachusetts originates—the founders were either very homesick or not very creative. And we have taken to calling Cambridge, MA, “New Cambridge”…

Tuesday morning was focused on the U.S. contingent presenting a series of perspectives to a crowd of more than 100 folks gathered in a lecture hall at Imperial College London. Imperial is lesser known in the U.S. than Cambridge or Oxford, I would suspect, but it is very strong in engineering and science and has a strong cleantech orientation. It felt a bit like MIT in terms of the breadth of research and the commercial nature of the place. The Imperial tech licensing office actually “floated” (went public) on AIM, the Alternative Investment Market, a few years ago to provide capital to seed its more interesting projects, and it has done more than 70 such financings already. I found this very intriguing, but have not explored it enough yet to decide if it makes sense to replicate elsewhere.

Mid-afternoon Tuesday, we hopped the train up to Cambridge and I got to spend an hour or so talking with Tom Burton from Mintz Levin, who started and is leading their cleantech practice globally. I found it quite interesting to learn how he has thought about doing this and how that fits into the overall strategy of their firm. Mintz has a London office along with East and West Coast offices in the U.S., so is well-positioned for the global nature of cleantech. It reminded me how fortunate we are in the U.S. to have so much depth and dimension to our entrepreneurial clusters. This is a frequent observation from our U.K. hosts.

Tom and Patrick Kealy of Mintz were integral in setting up this trip and have done a great job of providing our U.K. hosts with perspectives on the U.S. regulatory and market dynamics. I have been talking about the capital flows and the New England innovation community (e.g., the New England Clean Energy Council) and Greg Watson & Karl Jessen have been laying out Massachusetts’s policies and initiatives to make it a world-class center of excellence in cleantech. Noel Brown, newly minted executive director of the MIT/Fraunhoffer Center was also with us until today when he headed over to Germany.

The day finished with a very special dinner at St. Catherine’s College dining hall with a large contingent of Cambridge University’s professors, tech transfer folks, and other U.K.-based cleantech leaders and government officials. The food was pretty good, but the setting and service were the highlights. We had an army of tuxedo-clad servers taking care of us in an obviously ancient dining room, and I found myself wishing I had worn a tie…

We then did some pub crawling … Next Page »

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London: Monday, June 9th *

Day 1 started strong and stayed that way. A set of briefings and discussions at the U.K. Trade & Investment offices, a startup company pitch, coffee with Bernie Bulkin from Vantage Point Venture Partners, a trip to the House of Commons to watch their debate on the Climate Change Bill (followed by a visit to the Member’s Pub for a pint), and a reception with a variety of U.K. cleantech leaders. And this was only Monday…

I hope to get the various presentations to post here, but here are the take-aways, which are many. The day’s high-level impressions are that the U.K. faces many of the same challenges as the U.S. Or more precisely, we face their same challenges, but we face it on a much larger scale, are behind on the policy front, and do not have the same utility industry dynamics to rely completely on incentives and market mechanisms to solve our infrastructural challenges. So as much as I am surprised to say it, I am increasingly considering the need for more creative government intervention and funding to help drive some of these necessary changes.

The day started with Adam Brown, the U.K. Trade & Investment team’s Global Cleantech Sector Champion, who briefed us on the challenges and opportunities in the U.K. They need to increase renewables to 20 percent by 2020 (they are currently at 5 percent). They rely heavily on coal and gas for electricity production and are significant net importers of both (from Norway, Russia, and South America). Areas of hopeful gain are on- and off-shore wind, wave, tidal, and increasingly, nuclear energy (although this does not figure into the renewables figure). Of note, the U.K. has already deployed over 2 gigawatts of off-shore wind capacity with another 7 gigawatts in various stages of planning. All this while Cape Wind struggles to find support as the first off-shore wind deployment in the U.S. It is also notable that nuclear seems to face a much smoother path towards new deployments than in the U.S. (currently 20 percent of the capacity of U.K. electricity is from nuclear).

Next up was Nicki Pitts from National Grid, which we know well in New England but which is actually a U.K.-based company with its business and resources split evenly between the U.S. and U.K. She described the market dynamics of electricity and gas industries, and it was apparent that the U.K. has more of a free market dynamic as it relates to the production, distribution, and retailing of utilities (and there are rules prohibiting players from being in more than one segment). This puts the onus on the utilities to manage their quality and profitability, and results in choice for the consumer.

This reinforced the need for rate decoupling in New England … Next Page »

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London: Sunday June 8, Noon *

We knew we had arrived when we came out of the underground station at Westminster and looked up at “Big Ben” and Parliament. We really knew we had arrived when traffic from both directions (look right, then left) stopped to let us cross Abingdon Street. Four members of the U.S./U.K. cleantech trade mission team lugging our bags down Abingdon Street towards our hotel, we looked like the Beatles crossing Abbey Road but with less hair and more luggage. We opted to take public transportation so as to fully experience the U.K. ‘s green infrastructure but quickly realized that you need to plan differently if you are going to “ride the tube.” The nice thing is that you can get from inside Heathrow Airport into Center City London very easily, which incents one to do so…

So what are we doing here besides enjoying a rare sunny, blue sky day in London? From my point of view (and that of Flagship Ventures, to extrapolate), cleantech and sustainability are global topics. Energy supply chains, carbon emissions & their impact, and the interconnect of both to economic growth, are inarguably global. Most countries are far ahead of the U.S. in regulatory frameworks, cleantech adoption, and in societal behaviors. So in short, we are here to learn, to create a dialogue with U.K. cleantech leaders, and to come home smarter and more able to forward the cleantech agenda in the U.S..

Keep an eye on this space, where I’ll update you on the ambitious agenda that Kirsten Chambers of the UK Trade & Investment team has put together for us. Over the next five days, we will be in London, Cambridge, Manchester, and Newcastle, all critical nodes for the U.K. cleantech ecosystem. We’ll be meeting U.K. -based investors, policy makers, non-profit leaders, cleantech entrepreneurs, and the top executives energy infrastructure companies.

Now off to lunch and wander about the City…

* Jim Matheson is a general partner with Flagship Ventures in Cambridge, MA. He is part of a small Boston contingent visiting Britain this week on a clean energy fact-finding and information sharing trip organized by UK Trade & Investment. He plans to file regular updates throughout the week.

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