A Visit to the Capitol Markets (Part 4—Final Installment)

4/3/09Follow @jmatheson

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 paints a broad swath across a variety of domains including food processing, chemicals, steel, etc., and which represents a massive opportunity for energy and resource efficiency gains. Not immediately as sexy as some of the other arenas, but one that I think will get increased attention as we really dig more deeply into the carbon equation and look to uncover more “Nega-watts”.

We then grabbed lunch while enjoying a high speed, super intriguing briefing by Gerry Waldron, who serves as the Staff Director and Chief Counsel for the Select Committee on Energy Independence and Global Warming (which is the select committee that Congressman Markey chairs, and which is at the center of the climate change and Renewable Energy Standard, or RES, bill previously discussed). Gerry’s talk was like a graduate version of that old School House Rock cartoon, I’m Just a Bill, with real life players, drama, and very real consequences.

Gerry described the history of climate change regulation and the last two years of evolution that brought us to this point where this Bill is now a real deal working its way through subcommittee to committee and eventually to a full House vote, and then….well, then comes the Senate. As Gerry explained, in the House, work gets done in committees; in the Senate, it gets done on the Floor. The goal is for a dense set of hearings after Easter recess, with the aim of filling in the missing gaps (which are significant, not the least of which is allocation) and having it leave the subcommittee by the end of April and committee by Memorial Day. An admittedly hugely ambitious agenda, but these guys are working it…there are issues from both Democrats and Republicans that need to get worked out, but given the partisan dynamics, they do not expect to get much support from Republicans regardless of how much they morph it.

Gerry was very thoughtful in describing how combining the Climate Change Bill with the RES and efficiency legislation provided both a more complete, practical solution for the market, and also more maneuvering room politically. He also described the relationship and sequencing of the climate change legislation efforts with President Obama’s planned trip to the Copenhagen Climate Council in December. The high-level notion is that the President would like to go to Copenhagen with significant progress made on the legislation so he can show that the U.S. is moving aggressively, but not a completed law as otherwise there would be no room for maneuvering on either piece. Makes good sense once you think about it, but a lot of moving parts to be put in place for the President to be sitting in a good perch come December.

All in all, a very informative and fascinating lesson in high-level lawmaking and the myriad dimensions of this important piece of legislation, again highlighting that we have some very capable folks in DC working these issues, but that there are many sides to every issue and the political “sausage making process” is necessarily a messy one.

Overall, I think the trip was well worth taking; it showed New England’s leadership in the arena, got CEOs and investors closer to the legislators, opened up channels for follow-on dialogue and impact, and allowed time for the Community leaders to spend time together and expand their networks. There is obviously so much more depth and breadth to these issues than I was able to provide here, and thus I plan to ask my fellow travelers to add their thoughts and perspectives on the trip. Perhaps we can expand this discussion to follow the progress of some of these important regulatory and financial initiatives that I have breezed over, but which will be critical to defining the playing field for so many businesses (and our lives) over the coming decades. And this is just the energy & climate change vector; the same level of effort, process, and tension exists around healthcare reform, which is just starting to crank up but which will have the same impact, and require the same involvement from New England’s Innovation Community.

[Editor's note: This is the fourth and final 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 find links to his other three articles in the Related Posts section of this piece.]

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