A123Systems, the Watertown, MA-based advanced battery manufacturer that hopes to provide lithium ion batteries for the next generation of electric and hybrid vehicles, today revealed the expected stock price for its initial public offering. The company will seek to sell 25 million shares of its common stock at $8.00 to $9.50 per share, according to regulatory forms filed today. That would bring the company between $200 million and $237.5 million in new working capital.

Individual shareholders, including senior managers at A123, will sell an additional 680,500 shares, potentially netting them $5.4 million and $6.5 million. A date for the IPO has not been announced. Morgan Stanley and Goldman, Sachs are the lead underwriters, and A123 will trade on the NASDAQ exchange under the ticker symbol “AONE.”

There is likely some numerological significance to the timing of the announcement of A123’s IPO terms. As Bob reported last year, A123 deliberately chose to submit its original IPO filing at 8:08 a.m. on August 8, 2008 (8:08 on 08/08/08). A123’s co-founder, MIT material scientist Yet-Ming Chiang, was born in Taiwan, and in Chinese culture the number 8 is considered to be especially lucky, associated with sudden fortune and prosperity.

Today is 09/09/09, and in Chinese numerology, the number 9 is traditionally associated with power, since it is the highest number before 10. In Mandarin (though not Cantonese) the word for 9 is also a homonym for “long-lasting.” Traditionally, the robes of the emperor of China showed nine dragons, and in Chinese mythology, dragons have nine children.

As Chiang wrote in an e-mail after the initial IPO filing: “It was not a coincidence that the ’send’ button was pushed at 8:08am on 8/8/08, although I wasn’t the one who did it!” Today’s filing is probably no coincidence either.

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Thirteen weeks, 123 stories, and about a million cups of Starbucks’ finest later, my internship at Xconomy in Seattle is over. But as a parting gift, I am going to share some of my favorite articles from the summer here. I hope you enjoy reading them (and my other articles) as much as I enjoyed writing them.

—One of the most memorable opportunities I had was to test-drive not one, but two alternative energy vehicles. In June, I test-drove a hydrogen-powered SUV from Fort Lewis to Seattle, a trip made even more interesting because it was a GM vehicle and took place the day GM declared bankruptcy. Just a few weeks ago, I borrowed a modified hybrid electric car for a few days and got to see what it’s like to treat a car like any other electric appliance at the end of the day. Bottom line: both cars are perfectly satisfactory vehicles; the real issues are, how much does it really help the environment to drive one, and does it ultimately save the driver money?

—Concerns about the economy pervaded everything this summer, but I managed to write about some potential bright spots in the current financial gloom. There are alternatives to using dollars, especially here in the Northwest, and the recession gives companies like Dibspace a boost in demonstrating those alternatives. Whether or not the economy is in recovery, it’s nice to know there’s an easy way to exchange goods and services without needing cash.

—No matter how bad the economy gets, people always want entertainment, and covering Casual Connect, the casual video games expo last month, showed me that there’s more demand than ever for games. Venture capitalists are not blind to the trend, even if some think the best video game business model comes straight out of Dante’s Inferno. For gamers looking for a slightly more refined way to play, you can’t go far wrong with Her Interactive, makers of the Nancy Drew computer game series whose capture of the elusive girl gamer market led me to profile the company in June.

—But no story sums up the summer for me better than the dancing, singing, experimenting high school students at the Student BioExpo in May—one of the first stories I wrote, and a great experience all around. Perhaps the best thing I can take away from my time at Xconomy is the advice Nobel Laureate Mario Capecchi gave: “Always dream big.”

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The big news of the week was Microsoft’s sale of Razorfish to Publicis (see directly below), but there were a few other important deals in software, biotech, and energy.

—Microsoft’s online advertising subsidiary, Seattle-based Razorfish, was bought by French marketing firm Publicis for approximately $530 million, as Bob reported. The payment is expected to include cash and Publicis Groupe treasury shares. In addition, Microsoft and Publicis have entered into a five-year strategic alliance whereby Publicis clients can purchase display and search advertising from Microsoft on favorable terms. Microsoft (NASDAQ: MSFT) originally acquired Razorfish in its 2007 purchase of aQuantive.

—Bellevue, WA-based Confirma, a medical imaging software firm, has been acquired by Merge Healthcare, a Milwaukee, WI-based health IT provider, for about $22 million, as Eric reported. Merge will incorporate Confirma’s MRI software into its IT offerings for doctors.

—Vancouver, BC-based Tekmira (TSX: TKM) formed a two-year partnership with Cambridge, MA-based Alnylam Pharmaceuticals to develop new particles to deliver RNA-interference drugs to diseased cells deep in the body, as Ryan reported. Financial terms of the deal weren’t given. Alnylam is funding the research effort and has exclusive rights to new discoveries, while Tekmira can use the discoveries for some of its own RNAi treatment programs.

—Seattle-based EnerG2 won $21.3 million in federal stimulus funding from the U.S. Department of Energy to build a new manufacturing plant in Albany, OR. The University of Washington energy-storage spinout is developing nano-scale materials to make better ultracapacitors for electric and hybrid vehicles and other applications.

—A few more terms of the Microsoft-Yahoo search deal, in which Yahoo will use Bing as its search engine and will control ad sales for five years, were spelled out in a filing with the SEC. Microsoft (NASDAQ: MSFT) will pay Yahoo $50 million a year for three years to cover transition and implementation costs. It will also hire 400 Yahoo employees, plus another 150 to assist with the transition. Yahoo (NASDAQ: YHOO) can opt out of the deal if it isn’t approved within a year, or if Microsoft and Yahoo’s combined share of the search market dips below an undisclosed percentage.

—Seattle-based Oncothyreon (NASDAQ: ONTY), a developer of cancer drugs, raised $15 million by securing commitments from investors to buy new shares and warrants, as Luke reported. Last week, the company said a small group of lung cancer patients showed long-lasting responses after taking Stimuvax, the immune-boosting vaccine therapy Oncothyreon is co-developing with Germany-based Merck KGaA.

—Seattle-based WatchGuard Technologies, a network security company, acquired Toronto-based BorderWare Technologies, an e-mail and Web security firm, as Eric reported. Financial terms were not given. WatchGuard plans to use BorderWare’s technology to make its security software more comprehensive and competitive.

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A lot of people modify their cars, but the alterations to the hybrid Toyota Prius I was test-driving last week were more than just a fancy paint job or cool rims. In addition to the standard regenerative braking battery, I was packing an A123 Systems Hymotion L5 lithium ion battery that charged by plugging into a wall socket. The Prius had been modified and lent to me for a few days by Bellevue, WA-based Green Car Company.

The mechanics at Green Car Company had installed the Hymotion battery in the trunk of the car, right behind the socket where the power cord to charge the car plugs in. The Green Car Company rents and sells a variety of environmentally friendly cars and bikes, including biodiesel vehicles. It also performs maintenance and modification for those cars, such as the plug-in module for the Hymotion battery.

Hybrid cars are growing more popular all the time, and many companies are competing to develop the best possible battery—long-lasting, easily recharged, and cheap. The L5 battery has a longer life than the standard Prius battery, though it requires a power grid to charge. It also makes the gas engine of the car more efficient, improving the overall energy efficiency of the car compared to standard hybrids. A 2009 modified Prius at Green Car Company costs $41,999, while a standard Prius costs $22,516, according to Kelley Blue Book. Toyota is developing a plug-in version of the Prius, but according to Green Car Company, that version will actually cost more than modifying the current, standard Prius.

The main idea of installing the plug-in battery is that drivers will be able to travel 100 miles or more on every gallon of gasoline, with a range of 30 to 40 miles on just the battery itself. One of the nicer points for me was that even if the battery did deplete all the way, the car would then become a standard Prius hybrid and use its factory-installed battery.

The plug-in battery maker, A123 Systems, based in Watertown, MA, acquired Toronto-based Hymotion and Hymotion’s plug-in hybrid modules in May 2007. A123 developed the nanophosphate lithium ion battery, which has a longer life and charging ability than standard lithium batteries. Hymotion used these A123 batteries in its conversion kits even before being acquired. Last Wednesday, A123 announced it had received $249 million in grant money from the U.S. Department of Energy, part of the $2.4 billion in federal grants given out for companies working on technology for electric vehicles. A123 plans on using the money to expand and improve its lithium ion battery manufacturing capabilities in the U.S.

To give people an opportunity to test-drive a car installed with a Hymotion battery, …Next Page »

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Seattle-based EnerG2, an advanced materials startup focused on energy storage, has scored a $21.3 million grant from the U.S. Department of Energy to build a new manufacturing plant in Albany, OR. The funds are part of a total of $2.4 billion in federal stimulus grants announced today to speed up the manufacturing and development of next-generation batteries, energy storage technologies, and electric vehicle components. (Check out the map of all 48 awardees here.)

EnerG2, a University of Washington spinout, is developing novel nano-scale materials to make better ultracapacitors. These are devices that can store and release large amounts of energy much faster than conventional batteries, and with longer lifetimes. Ultracapacitors are typically used in electric and hybrid vehicles, forklifts, and cranes. Their performance depends on the materials used to make their electrodes—and that is where EnerG2 comes in with its unique concoction of synthetic carbon nanomaterials.

The U.S. Department of Energy has great interest in companies like EnerG2 that seek to improve energy storage and efficiency more broadly. That’s partly because as more alternative energy sources come online, they will require technologies that can deal with the natural peaks and valleys of that kind of power generation.

“This is obviously an exciting turn of events for EnerG2,” says Chris Wheaton, the company’s co-founder and chief operating and financial officer. “It’s a great confirmation of the role ultracapacitors can play in the automotive industry, as well as the role that materials science can play in helping the country achieve our energy efficiency goals for the future.”

EnerG2 will work together with Oregon Freeze Dry, one of its manufacturing partners, to build the new plant, which Wheaton says will be the first in the world dedicated to commercial-scale production of high-performance synthetic carbon materials. Wheaton adds that construction is expected to take about 18 months, and the new plant should create 25 to 50 new jobs in Linn County, OR. As for why EnerG2 wants to build the plant in Oregon, he says, “[Oregon Freeze Dry] have both the skills and the land that make it an ideal place to situate this facility. They’re already our partner.”

Better ultracapacitors could potentially have a big impact on electric and hybrid vehicles. EnerG2 co-founder and CEO, Rick Luebbe, told me last fall that ultracapacitors could be used to get 150,000 miles out of a plug-in hybrid car battery. Wheaton says vehicles will use a combination of a battery and an ultracapacitor. The latter is used to accelerate the car and store braking energy, while the battery gives you longer driving range. “The ultracapacitor makes the whole system more efficient,” Wheaton says. “It makes the battery last longer and not need to be as big and expensive.”

EnerG2 is backed by OVP Venture Partners, Firelake Capital, Yaletown Venture Partners, WRF Capital, University of Washington, Washington Technology Center, the Sustainability Investment Fund, Northwest Energy Angels, and the Frontier Angel Fund. Back in October, the company raised $8.5 million led by OVP and Firelake. That funding round was augmented by an additional $2.5 million investment in June, which brought in Vancouver, BC-based Yaletown as a new investor.

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Imagine that after a long day on the road, you drive your new electric car into your garage, the battery almost drained. But you don’t worry about running a cord to the charging station and plugging into your vehicle—the garage takes care of recharging for you, without you doing a thing. When you leave for work the next morning, there is no charging cord to stow—and therefore no danger you’ll back out of the garage without having remembered to detach it (average bill a few grand for damage to the power unit and your car). You just hit the road again fully charged.

That’s the vision Eric Giler, CEO of Watertown, MA-based WiTricity, will be demonstrating this morning (Boston time) at the First German Electric Vehicle Congress in Bonn, Germany. WiTricity is a 19-month-old MIT spinout that has sparked the imaginations of people around the world with demonstrations of firing up laptop computers and charging cell phones through wireless delivery of power. (For company funding, employee count, patent filings, and other stats see fact box on the last page of this article.) But tomorrow morning, Giler will be presenting his vision of what could become a second major market for WiTricity, after consumer electronics: charging electric vehicles.

“You spend $100,000 on a car, and you have a cord to plug it in,” says Giler a bit disdainfully, speaking of the main electric vehicle on the road today, the Tesla Roadster, which starts at $101,500. “[But] imagine if you can just drive in your garage and your car charges—that’s what we’re doing now.”

Giler will be on stage today demonstrating two configurations for how the electric vehicle charging station of the future might look. One is where you drive into a garage and your car is charged from underneath, via something like a mat on the floor. The other is a wall mounted or upright charging station, where you tool up to the unit and power is transferred between it and the car’s bumper.

Whichever one wins out, and maybe both will, WiTricity calls electric vehicles (EVs) a “zero-billion-dollar market”—meaning sales are essentially nothing right now, but as prices come down and competitors like the planned Chevy Volt and other mass market vehicles hit the road, the market will be huge. And, the company figures, since all EVs will have to charge up in some manner, there should also be a big opportunity awaiting WiTricity’s elegant, easy-to-use solution.

Some quick background here. WiTricity is the fruit of a discovery a few years back by MIT assistant professor of physics Marin Soljačić, who, after being awakened by a cell phone beeping in the night because no one had charged it, realized he might avoid that problem forever if he could find a way to tap wirelessly into the wired electric power already flowing throughout his house and have it charge the cell phone for him.

His answer depends on what’s called highly resonant magnetic coupling. Basically, a specially designed coil (WiTricity’s transmission unit) is connected to a small electronics module that converts the normal 60-cycle alternating current that you’d find in your home or office to a higher frequency and voltage—inducing an oscillating magnetic field around the coil. If a different coil designed to resonate to the same frequency is near enough to the source, power is transferred between the two coils (think opera singer shattering a glass). There’s a lot more to it, of course, which you can read all about here. Soljačić won a MacArthur genius award for the invention last fall.

Chances are you have already heard of this story, as Soljačić and WiTricity have been written up from the New York Times to Scientific American to Sueddeutsche Zeitung. Giler says the technology works from distances of a few centimeters to a few meters and at power levels from a few milliwatts to several kilowatts—and that it is completely safe for people and animals, producing magnetic fields under the limits set by the FCC and in other guidelines. “Safe, efficient power transmission over distance,” is a company mantra.

But let’s steer the conversation away from basic physics back to the electric car, which is the really new thing for WiTricity—and which Giler says hasn’t been publicized before. He revealed …Next Page »

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The coming generation of electric and hybrid gas-electric vehicles will need safer, longer-lasting, faster-charging batteries. Boston-Power—the Westborough, MA-based known up to now mainly for its “green” lithium-ion laptop batteries—wants to supply them, and it’s pursuing federal stimulus money to fuel its bid.

At a planned media event today featuring Massachusetts Governor Deval Patrick, the company will introduce a new “green” lithium-ion battery for electric and hybrid cars called Swing. To build the new product, the company is unveiling plans for a 455,000-square-foot manufacturing facility to be located in Auburn, MA, a Worcester suburb about an hour’s drive from Boston.

Boston-Power says the proposed facility could create 600 new jobs, and both the company and state officials are describing it as a major step toward making Massachusetts into a vehicle battery mecca. “This is the state of innovation,” says Christina Lampe-Onnerud, Boston-Power’s founder and CEO. “It’s a state that is committed to clean technology and has been for a long time. We put Boston-Power’s headquarters here for the same reason. We believe manufacturing should be close to the innovation.” (Below is a complete interview with Lampe-Onnerud, who will also be a featured speaker at the June 24 Xconomy Summit on Innovation, Technology, and Entrepreneurship.)

Indeed, Boston-Power’s project, along with similar efforts at Watertown, MA-based A123Systems, could give the state a key foothold in the reborn auto industry if, as expected, federal bailout conditions force American automakers to retool for a new generation of greener vehicles. A123 landed a deal in April to supply Chrysler with lithium-ion batteries based on its MIT-bred nanophosphate technology. (Those batteries, however, will be built in Michigan rather than Massachusetts, thanks to a $100 million tax-credit lure extended by the Michigan Economic Development Corporation.)

Boston-Power’s plan to build in Massachusetts hinges on its ability to lasso a big chunk of federal stimulus cash. The American Recovery and Reinvestment Act of 2009, known colloquially as the stimulus bill, provides $2 billion for “facility funding awards” for “manufacturers of advanced battery systems and vehicle batteries that are produced in the United States, including advanced lithium ion batteries.” Boston-Power is applying for $100 million of that money. It also plans to hit up the Department of Defense for funds designated in the proposed 2010 federal budget for the construction of manufacturing facilities that contribute to national security.

The Commonwealth of Massachusetts has pledged up to $9 million for the Auburn facility—but that money is in the form of matching financing, meaning Boston-Power will have to secure the federal money first. The company says it’s “working closely” with state officials, including Governor Patrick, energy and environmental affairs secretary Ian Bowles, and Representative Jim McGovern (a Democrat who district includes Auburn), to pursue federal and state incentives.

Lampe-Onnerud says building the Auburn facility will cost far more than the $100 million the company is seeking from the U.S. government, but that “it’s enough to get private investors to believe that you can do battery manufacturing in the United States.” Without some pump-priming in the form of federal stimulus spending, she says, the financial markets might not back risky technologies in areas like energy and clean technology. “What I think the Obama Administration has realized, to its credit, is that if we want to be a player, the government has to help,” Lampe-Onnerud says. “It will not happen on its own.”

Boston-Power isn’t saying much yet about the Swing product itself, except that it will set new standards in the vehicle battery business for safety, lifetime, weight, cost, environmental sustainability, and energy density. (Lithium-ion batteries have a higher energy density, or energy output per weight, than most other battery technologies, and both A123 and Boston-Power have come up with engineering tricks that make it even higher.) But Lampe-Onnerud says the Swing builds on the same basic technology platform as the Sonata, which is marketed by Hewlett-Packard under the Enviro brand name. She adds that the manufacturing blueprints and procedures the company has already developed for its Sonata factories in Asia can be adapted relatively easily to make larger-format batteries for cars here in the United States.

And using an existing building—a warehouse off I-90 once used by the rapidly downsizing Filene’s Basement bargain clothing chain—will hasten the project, Lampe-Onnerud says. “This factory will be up and running full speed within three years, which is very fast in the battery industry,” she says. “We have experience with this type of manufacturing in Asia, so I think it’s a low-risk investment for the government.”

Boston-Power and other applicants for the battery-manufacturing grants have already submitted proposals to the government, and the Department of Energy plans to announce a list of grant recipients as early as July. Governor Patrick, Secretary Bowles, Rep. McGovern, Lampe-Onnerud, and other officials plan to promote the Boston-Power proposal at a noon ceremony today at the Auburn site.

Xconomy spoke with Lampe-Onnerud about the project Friday evening; a transcript follows.

Xconomy: How much of the actual cost of the proposed Auburn plant would be covered by the $100 million stimulus grant you’re seeking?

Christina Lampe-Onnerud: It’s not the whole amount, by far, but it’s enough to get private investors to believe that you can do battery manufacturing in the United States. For a company like ours, cash flow is everything. I believe that Boston-Power, 10 years out, will be a smashing success. But it’s tough in the early years because you’re growing the company at the same time you’re growing the top line. Revenue needs to grow and you need to establish market share at the same time as you’re innovating. This will allow us to …Next Page »

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If struggling automaker Chrysler survives its current financial crisis, it will likely come out the other end with a different owner (the Obama Administration wants it to link up with Italy’s Fiat) and a different lineup of vehicles. In fact, it’s already working on a line of electric-only automobiles, including five Dodge, Jeep, and Chrysler models displayed at the 2009 North American International Auto Show in Detroit in January. And today the Auburn Hills, MI-based carmaker announced that A123Systems of Watertown, MA, will supply advanced lithium ion batteries for the vehicles, the first of which is expected to hit the market next year.

Under the agreement announced today, A123 will build a plant in Michigan to manufacture its nanophosphate lithium ion battery cells, which can be combined into battery packs large or small enough to suit the size of each vehicle. Using the same battery cells in all of its upcoming electric-drive vehicles, Chrysler says, will reduce development time and system costs and help increase production volumes. The cells will end up inside the company’s so-called “ENVI” line, which includes the Dodge Circuit EV, the Jeep Wrangler EV, the Jeep Patriot EV, the Chrysler Town & Country EV, and the Chrysler 200C EV concept car (see photo; click for a larger version).

“We’re very proud to have been selected to supply advanced battery systems for Chrysler’s family of ENVI electric-drive vehicles,” David Vieau, A123’s president and CEO, said in a statement issued by Chrysler. “This bold move by Chrysler changes the game and greatly improves our country’s ability to modernize our transportation fleet. We’re confident that our collaboration with Chrysler will serve as proof that American innovation is alive and well and ready to lead the new global market for fuel-efficient electric vehicles.”

Chrysler says the deal with A123 will help it respond to calls from government and the public for a new generation of cars that create fewer greenhouse gas emissions and that reduce the nation’s dependence on petroleum. Michigan Governor Jennifer Granholm welcomed the news, saying the Chrysler-A123 alliance “will create new jobs in the state, deliver benefits to consumers and contribute significantly to bringing more environmentally friendly vehicles to market.”

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New ideas for alternative energy and cleantech were in the air on Tuesday at the University of Washington, which hosted a regional meeting of the National Academy of Engineering and a public symposium on energy topics. We’ve taken a keen interest in this subject lately at Xconomy as we prepare for our own Northwest cleantech event next week, and wanted to hear from a couple of our very own Xconomists—Ed Lazowska of UW computer science and engineering (who co-organized the meeting), and Charles M. Vest, president of the National Academy of Engineering and the former president of MIT.

In his opening remarks, Vest noted that the National Academy of Engineering will soon release a report called “America’s Energy Future.” “We hope it will become a bible for policymakers to understand what the technological and economic facts are about most of the major technologies that may play a role in the next 10 to 20 years in the distribution, generation, and transportation of electrical energy,” Vest said. “It will not be a policy document, but it will be a basis of facts which we hope those in Congress and the administration will utilize.”

Here are a few highlights from three of the ensuing energy talks:

—Rob Pratt, a staff scientist and program manager at the Pacific Northwest National Laboratory, spoke about “smart grid” technologies and how minute-by-minute communications and monitoring of energy use could lead to huge overall savings in cost and carbon emissions.

In California, for example, an estimated 1 percent decrease in electricity demand would lead to a 10 percent decrease in energy bills, because electricity generation is most expensive during times of peak demand (e.g., hot summer days). That could translate into some $50 billion in savings for the U.S., if people had enough information about power usage to adjust their consumption levels.

Pratt presented the results of a trial of 112 homes on the Olympic Peninsula, in which letting customers explicitly control their energy usage and savings (and guaranteeing they would not pay more than normal) led to a 15 percent decrease in peak load demand over the course of a year. “You need a simple, intuitive interface,” Pratt said. “Do you need standards for [smart grid] communication? Ours were simple—you need to understand cost, quantity, and time.”

As for his outlook, Pratt said, “I predict this country will embark on an energy efficiency program that will make anything else we’ve done look like child’s play.” He noted that the cleanest power plants are the ones that produce energy for intermediate demand levels—not the peak, not the lowest. And he sees a big opportunity in electric vehicles, provided people manage the timing of charging them up. Giving consumers and utilities minute-by-minute data to track usage levels will be crucial. “The smart grid can help sort this out,” he said. “If we buy the smart grid, this is free. This is like software.”

—Tim Rahmes, biofuels program manager at Boeing (he’s based in Everett, WA), spoke about his team’s recent efforts to test biofuels for aviation. Boeing’s customers in the airline and defense industries are concerned with carbon emissions, fuel availability, and fuel costs, he said. The most important thing about Boeing’s biofuel effort is that it must be sustainable, and not compete with …Next Page »

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One of the distinguished panelists for our upcoming Xconomy Forum on March 26 (The Rise of Cleantech in the Northwest) is Mark Aggar, director of environmental technology strategy for Microsoft. Aggar has been at his current post for just about a year, having come over from the Windows Server product planning group to be part of the sustainability team run by chief environmental strategist Rob Bernard.

I spoke with Aggar yesterday to get his thoughts on Microsoft’s role in advancing energy efficiency and sustainable technologies. A native of England, Aggar has been in the IT industry for 20 years, having cut his teeth on network software at Portland, OR-based NCD before joining Microsoft in 1999. Aggar and the sustainability team work on ways to reduce the environmental footprint of IT, as well as how IT can help the environment. All told, they work closely with about 100 other people from different divisions within Microsoft such as Windows Server, Data Center Services, and Dynamics (a business management tool).

Aggar’s concerns range from making PCs, processors, and data centers more energy-efficient, to making car-pool transportation easier to arrange, to using sensors and intelligent monitoring software “to identify where big-value opportunities are,” he says. That means thinking about how everything from office buildings to large corporate campuses to the national electricity grid operate, and how to improve them using IT.

Here are a few of Aggar’s personal areas of interest (it’s not yet clear to me how much, if anything, Microsoft is doing in each of these areas—we’ll have to grill him on March 26):

—Building management. “We see a lot of potential in dramatically driving up the efficiency of office buildings,” he says. That includes using “smart systems” to continuously evaluate a building’s energy usage and other factors.

—Smart grids. “With new renewables coming onto the grid, you really have to be more integrated with the actual consumers of the energy,” says Aggar. Installing sensors and communications technology (plus software to coordinate it all) and being able to respond to energy demands in real-time is crucial to improving efficiency.

—Water management. “This may not be such a big deal in the Northwest right now, but it will be in 20 to 30 years’ time,” he says. “You could dramatically change the amount of water with more intelligent use, like not having sprinklers running when it’s raining.” Aggar points out that agriculture uses 70 percent of the world’s freshwater resources, and a lot of that gets wasted. Smarter monitoring systems could help.

—Electric vehicles. “Electric cars are an environmental paradox,” he says. “If you’re not careful, you’ll create more CO2, and have to build more roads,” because it might increase the number of drivers out there. Getting people to share vehicles instead is a huge opportunity, he says. Social software, combined with location and scheduling technologies, could help people carpool.

So how might Microsoft help with all of this? “We have a strong role to play in ensuring our products are both energy efficient and have minimal impact on the environment,” Aggar says. “We have very broad reach into all elements of people’s lives—homes, businesses. We have the platforms and the technologies to help accelerate systems to help us live a more sustainable life. Plus it’s the right thing to do. And there are a lot of people at Microsoft who feel that way.”

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The Automotive X Prize in Los Angeles announced today it has chosen its first 22 teams to compete for $10 million in prizes that will be awarded for developing super fuel-efficient vehicles (100 miles per gallon or equivalent is the nominal goal). Among this first wave of contenders are three Northwest teams: Bellingham, WA-based Avion; Kinetic Vehicles, based in Cave Junction, OR; and the Vehicle Research Institute at Western Washington University in Bellingham.

—Avion has built an aerodynamic, diesel-powered, ultra fuel-efficient sports car. The company is led by Craig Henderson.

—Kinetic Vehicles has developed MAX, a turbocharged diesel-powered roadster. Its fuel comes from petroleum, biomass, or straight vegetable oil. Jack McCornack leads the operation.

—Western Washington University’s Vehicle Research Institute (VRI) has developed a series of cars called Viking, which run on gasoline, electricity, or biomethane and compressed natural gas. The VRI was founded by Michael Seal in the 1970s and is now headed by Eric Leonhardt.

The Automotive X Prize, which is sponsored by Progressive Insurance, will kick off its competition next year, holding stage races in several cities. More than 100 additional teams have signed letters of intent to compete so far, according to the X Prize website. The winners are expected to be announced in 2010. “The technologies reflected in this first wave of Registered Teams are as diverse as the teams themselves, and we look forward to hearing more about their individual ideas in advance of the 2009-2010 stage race competition,” said Julie Zona, director of team development and relations for the Automotive X Prize, in a statement.

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I pinged energy expert Jesse Berst, the managing director of Redmond, WA-based GlobalSmartEnergy, to get his take on EnerG2, the venture-backed energy-storage startup we profiled earlier today. EnerG2 has developed a nanotech approach to building better batteries and “ultracapacitors” for storing electricity. Berst, an Xconomist, replied with some insights into the startup’s prospects for becoming a major player in the electricity economy (you can read more about this here and here), and the main challenge it faces.

Berst first emphasized the importance of EnerG2’s core market. “Energy storage is the choke point of the electricity economy,” he writes. “Whether you want electric vehicles, a smarter, more reliable grid, or simply a laptop that lasts all day on a single charge, it is the lack of cost-efficient storage that stands in your way.”

He then gave a bit of context to the problem EnerG2 is solving. “Although we’re making progress, it is largely incremental—squeezing out more efficiency from approaches that have been known for decades. If EnerG2 has found a new way to store energy, and a way that can achieve industrial scale, the world will beat a path to its door.”

“That said, it should be prepared for skepticism,” Berst writes. “Every few years a new startup appears claiming radical improvements in storage. So far none of them have been able to move to real-world applications in quantity.”

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GE announced today it invested an additional $30 million in A123Systems, the Watertown, MA-based battery maker. That brings GE’s total investment in A123 to $55 million, or a 9 percent ownership stake. According to the announcement, the $30 million was part of a $102 million Series E round raised by A123 in May, but the particulars of the financing had not been confirmed by A123.

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The idea of electric vehicles is in the crisp Northwest air these days—and the vehicles are on the road. Earlier this week, we reported that Seattle-based V2Green, which makes software to manage the charging of plug-in electric vehicles, was acquired by Virginia-based GridPoint. V2Green is part of a pilot study being run by Seattle City Light to measure the behaviors of plug-in hybrid drivers, and help utility companies plan for the emergence of electric vehicles, as described by Alan Boyle at MSNBC. And with this week’s news that electric sportscar maker Tesla Motors, based in Silicon Valley, was bringing its prototype up to Seattle for a demonstration (as reported by Brier Dudley of the Seattle Times), well, I had to get in on the action.

So this morning I beat the rush hour over the I-90 bridge to Bellevue, WA, to an empty parking lot that used to serve a Kmart. There, I met Rachel Konrad and Zak Edson from Tesla, who set up a carefully controlled test drive for several journalists, including me and my “photographer” David Caffey, Xconomy’s VP and managing director of business development. (All photos courtesy of David.)

A “thunder gray” Tesla Roadster sat on the pavement waiting for us. It’s 100 percent electric, weighs 2700 pounds (900 of that is the battery), burns no oil, and is supposed to go from 0 to 60 mph in 3.9 seconds and go 244 miles per full charge. Its top speed is 125 mph. Konrad, Tesla’s senior communications manager, said it’s the first “highway-capable,” purely electric vehicle in production. The car is already on order for a bunch of celebrities, including Paul Allen, the Google guys (who bought three), Arnold Schwarzenegger, Matt Damon, George Clooney, and Leonardo DiCaprio. So I’m in pretty good driving company. Besides, who can resist saving the environment for only $109,000?

I got behind the wheel of the engineering prototype. Just one gear, no stick shift. Driving around the parking lot, the steering felt pretty good and tight to me (”Watch the bump,” said Edson). On the straightaway, I floored it and got up to 50 mph quickly before hitting the anti-lock brakes. The pickup was impressive. Not quite “back to the future” (88 mph), but enough to knock off my trusty New England Patriots cap.

Now, my driving experience is limited mostly to Saturns, Hondas, and the occasional Audi, so for more of a performance comparison, I had to defer to the expert. David, whose tastes run more towards Benzes, Porsches, and Ferraris, took a spin and noted a few things (if we must be critical): the handling actually felt a bit loose to him, the stability somewhat limited by the car’s tire width or light weight, and it was eerily quiet during acceleration—no satisfying roar of an internal combustion engine.

For Tesla, that’s the whole point, of course—to own the eco-friendly, electric-sportscar niche. The prototype is “pretty close to the finished product,” which will be available to local owners in June, said Konrad. “We’ve been doing a lot of intensive high-mileage validation…to see what happens when you drive for a long time…and when does the battery power start eroding.”

Tesla is privately financed and is currently in the middle of a Series E funding round, says Konrad. (Its investors include Elon Musk, VantagePoint Venture Partners, Draper Fisher Jurvetson, Jeff Skoll, Nick Pritzker, and the Google guys.) It is looking to open a showroom and service facility in the Seattle area by June. Meanwhile, the Tesla team is doing private demonstrations at Microsoft today, where there have been many early orders. Interestingly, it sounds like Bill Gates isn’t one of them. His recent backing of San Diego-based Sapphire Energy would suggest he’s betting on biofuels rather than electric vehicles.

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August 8, 2008. The Olympics Games begins in Beijing. A123 Systems, the Watertown, MA-based advanced battery maker with big operations in China, files for an IPO.

Coincidence? Maybe not. The number 8 is considered lucky in China because it is similar to the Mandarin word for “wealth.” That’s why the opening cermony for the Olympics began at 8/8/08 at 8 pm in Beijing. Just a guess, but perhaps the folks at A123 are also banking on lucky number 8.

In any case, in a filing today with the SEC, the seven-year-old maker of high-power lithium-ion batteries for applications like GM’s planned Volt electric vehicles and Black & Decker cordless power tools, revealed its plans to sell up to $175 million worth of stock in an initial public offering. The company plans to trade on the NASDAQ Global Market under the symbol “AONE.”

It’s a long-anticipated filing for A123, which has taken in some $132 million in venture funding from the likes of General Electric, MIT, North Bridge Venture Partners, Procter and Gamble, Motorola, Qualcomm, and Sequoia Capital, among others. I profiled the saga of A123, how it was formed around one idea that didn’t really pan out but switched gears to become one of the world’s leaders in advanced lithium ion batteries, back in January. At my last count, the company had six manufacturing plants in China, 1,100 employees, and the largest lithium-ion R&D team in North America.

According to today’s filing, the company has seen sales grow from $34.3 million in 2006 to $41.3 million last year—and it reports $10.3 million in revenue for the first quarter of 2008, up from $8.1 million a year earlier. A123 had a net loss of $30.2 million last year, according to its prospectus.

The filing paints a vivid picture of the potential for A123’s business going forward. Among the statistics it cites:

—The market for advanced batteries for electric vehicles, hybrid electric vehicles and plug-in hybrids is currently $700 million, on its way to some $5 billion by 2012.

—The market for batteries and other energy storage technologies for electric grid services, another A123 focus, was $2.4 billion in 2007 and is expected to surpass $3 billion by 2015.

—The market for lithium ion batteries for portable power tools (A123 makes such batteries for Black & Decker’s DeWalt line) was $411 million in 2007 and is expected to grow to $1.1 billion by 2012.

The company says in its filing that it intends to use the net proceeds from its IPO “for capital expenditures, working capital and other general corporate purposes, including the expansion of manufacturing facilities, repayment of approximately $2.5 million in debt, research and development and sales and marketing expansion.” It might also use some of the funds for acquisitions and other means of growing its business, according to the filing.

A123’s top shareholders include:

North Bridge Venture Partners — 7.8 million shares (13.6 percent)

Gururaj “Desh” Deshpande — 7.3 million shares (12.7 percent)

General Electric — 6.0 million shares (10.4 percent)

Qualcomm — 5.0 million shares (8.8 percent)

Motorola — 4.8 million shares (8.5 percent)

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Intel’s Andy Grove is a Silicon Valley legend, Time’s Man of the Year (1997), and the subject of a magisterial biography by Harvard Business School historian Richard Tedlow. He’s also one of the world’s toughest-minded thinkers about competition and innovation, the kind of boss who writes books with titles like Only the Paranoid Survive.

Which is why it’s so surprising that Grove’s recent essay in Portfolio magazine (the slick new business monthly from Condé Nast) is so thoroughly unpersuasive. In the article, titled, “Think Disruptive,” he urges the CEOs of two of America’s biggest corporate juggernauts to take on two of the country’s biggest challenges. He thinks Jeff Immelt, CEO of General Electric, should be “building an electric car and taking on the energy industry.” And he wants Lee Scott, CEO of Wal-Mart, to use his company’s market clout and more than 4,000 stores to deliver medical services and transform the health-care industry. (Wal-Mart has begun experimenting with in-store clinics for services such as vaccinations and cholesterol screening.)

Grove’s message: Why leave disruptive innovation to startups? Why don’t big, successful companies, with vast technological and financial resources, “shake up the status quo and reap big profits” by entering new fields—what he calls “cross-boundary disruption.”

It’s a nice idea, but it strikes me as wishful thinking at best. Why would GE, with so much opportunity in its businesses around the world, and so many headaches from Wall Street (GE shares are barely unchanged from when Immelt took over six years ago), take on a high-profile gamble such as electric cars?

Do any of us think that Wal-Mart, which has had such a tin ear for customer service (not to mention employee relations) in selling mundane products such as laundry detergent and lawn mowers, is poised to make the U.S. health-care system more patient-friendly? “Wal-Mart is in an excellent position to assume the role of the disrupter,” Grove argues. Really? Speaking for myself, the only thing less attractive than a visit to the doctor’s office is a trip to Wal-Mart.

Grove’s one piece of evidence for “cross-boundary disruption” is Apple’s move into digital music, with the iPod, iTunes, and other Steve Jobs innovations. To me, though, the iPod is actually a counter-argument to Grove’s core theme. Apple didn’t develop the iPod just because it sensed a big opportunity in a new field. It developed the iPod because it worried about its creeping irrelevance (bordering on insolvency) in its original field of personal computers. Apple developed the iPod because it had to, or risk going out of business altogether.

As I read Grove’s essay, I thought back to a conference I attended a few months ago featuring a session with Irving Wladawsky-Berger, the recently retired vice president of technical strategy and innovation at IBM, who has been behind so much of what’s gone right at the company over the last 10 years—its enthusiastic embrace of the Internet, open-source software, and innovation on so many fronts. (Irving, who spent 37 years with Big Blue, is now a visiting professor at MIT, among his many activities.)

What made Irving’s session so memorable was the fact that he was so candid. Yes, IBM had engaged in deep-seated transformation and far-reaching innovation, he explained. But to this day he wonders whether Big Blue would have made such big changes had the company not walked to the edge of the abyss. “Can a company reinvent itself,” this legend of corporate transformation asked, “without going through a near-death experience?”

To me, the obvious answer is no. How many examples of truly deep-seated transformation can you cite that did not involve what Wladawsky-Berger calls a near-death experience? These days, there’s Procter & Gamble under A.G. Lafley, who may be the most underappreciated big-company CEO on the planet. Then there’s. . . There’s . . .In the immortal words of the high-school economics teacher in Ferris Bueller’s Day Off, “Anyone? Anyone?”

I understand where Andy Grove is coming from. He looks out at the American landscape and sees huge problems that demand breakthrough innovations if they are to be solved. He looks at his fellow titans of industry and sees leaders with infinitely deep pockets and world-class labs. And he asks the obvious question: Why can’t the latter be deployed to address the former?

The answer is, well, because that’s just not the way innovation in established companies works. They have a hard enough time fixing themselves, let alone fixing society—especially when what ails society is not remotely core to their existing businesses.

Indeed, that’s why we have Silicon Valley, Kendall Square, and other hotbeds of grassroots innovation. Not because big companies can’t do what startups do, but because they won’t do what startups do. Andy Grove, better than anyone, should understand that.

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If there’s one Boston-area energy company atop everybody’s list to become the next great New England success story, it’s got to be A123 Systems. The six-year-old Watertown, MA, maker of high-power lithium-ion batteries for applications like GM’s planned Volt electric vehicles and Black & Decker power tools has quickly established itself as a real powerhouse. After accumulating some $132 million in venture funding, it now counts six manufacturing plants in China, 852 employees (at last tally), 120 patents and filing, and the largest lithium-ion R&D team in North America. More to the point, everybody representative of the company whom I’ve met, from the chairman—legendary New England entrepreneur Desh Deshpande—to investors and key execs repeats a mantra you don’t hear all too often in these days of entrepreneurial early exits: “We’re in it for the long haul, and we’re out to change the world.”

Which is why I decided to stop by MIT’s Stata Center last Thursday to hear what Bart Riley, one of A123’s three founders, had to say. His talk, part of MIT Energy Futures Week, was called “A123 Systems: from nanotech to reality.” Which implies, perhaps, that things didn’t start out in reality. And, as you’ll see, that kind of turns out to be the case. Riley is a die-hard engineer, with some 40 patents to his credit. But, reining in his obvious desire to talk technical turkey, he proceeded to unfold a fascinating drama that kept the audience, roughly 60 people who filled the small Stata classroom to capacity, riveted in their chairs. His account amounted to a firsthand case study of entrepreneurship—telling how a little startup that was smart about picking employees, investors, and partners got going around one idea that didn’t really work out, and how it responded to that challenge to become a potentially industry-changing success story.

Before diving into Riley’s talk, a bit more context on A123. As we described the firm back in October, it’s “like some sort of entrepreneurial Energizer bunny: it just keeps on marching through investment rounds and deals.” At the time, the firm had just announced it had closed a new $30 million financing round. That was on the heels of a $40 million round the company closed last January—the largest New England venture deal in the first half of 2007—and brought the total raised since its 2001 inception past the $130 million mark. A123 can also point to a Who’s Who of investors that include General Electric, MIT, North Bridge Venture Partners, Procter and Gamble, Motorola, Qualcomm, and Sequoia Capital, among others.

A123 is planning to use its new funds to scale up production capacity to meet the growing demand for its products and services; a chief goal is fulfilling a big contract with General Motors, announced in August, to co-develop the battery cell for the Chevrolet Volt line of electric cars and other vehicles. The company also plans to, among other things, grow its cordless power tool battery business and rev up its aerospace ambitions.

How it intends to do all that, and its other plans for the future (Riley hinted in the Stata’s pub after his talk that another big announcement is on the way), will have to wait for another time, though. Riley’s account was about how the company got going and persevered—and he says it’s the fullest picture the company has ever revealed of those early days.

The story starts not too far from Stata, in the lab of Yet-Ming Chiang, a professor in MIT’s Department of Materials Science and Engineering. Sometime in 2000 or early 2001, Chiang (who had long been researching lithium battery materials) hit on a potentially revolutionary way to fabricate batteries. More specifically, he discovered that as a result of what are called colloidal surface forces, he could coax a mixture of cathode and anode particles to self-assemble into a battery.

“It’s a big idea,” Riley told the Stata crowd, some of whom (unlike me) probably understood what he was talking about. If it could be pulled off, he explained, the revolutionary new battery architecture would double the energy density of batteries and cut the cost of making them in half. That part, I got.

Fast-forward to the spring of 2001. Riley, who has a PhD from Cornell, was working at Danvers, MA-based American Superconductor, where he was employee No. 27. And despite not having an MIT degree (for which the audience at Stata gave him some good-natured grief), he had known Chiang for quite a while. One night, Chiang came over for one of their periodic dinners and told him about the self-organizing battery idea. The two talked about forming a company around the concept, but didn’t really know how to proceed.

Enter Ric Fulop, who drew applause when he made a guest appearance in the back of the room …Next Page »

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A123 Systems is like some sort of entrepreneurial Energizer bunny: it just keeps on marching through investment rounds and deals. In the latest news, the Watertown, MA, supplier of high-power lithium ion batteries announced today that it had received $30 million in new venture financing. The money will be used to scale up production capacity to meet growing demand for A123’s products, including fulfilling a big contract announced in August to co-develop the battery cell for General Motors’ Chevrolet Volt line of electric cars and other vehicles. The company will also grow its cordless power tool battery business, under a deal with Black & Decker.

The new funds come on top of $40 million the company raised in January; that was the biggest New England venture deal in the first half of this year. Since its 2001 founding, A123 has received more than $130 million in investment from the likes of General Electric, MIT, North Bridge Venture Partners, Procter and Gamble, Motorola, Qualcomm, Sequoia Capital, and YankeeTek, among others. A spokesman said that all of A123’s existing investors contributed to the new round, as well as two new ones: CMEA Ventures (which led the round) and Carruth Management.

The new funds should keep A123 energized for at least a little while longer.

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