It wasn’t so much the predictions as the discussion that was most interesting at last night’s annual predictions dinner, organized by the Washington Technology Industry Association. Will Twitter be acquired in 2010, and why? Who will have the dominant cloud computing platform in the next couple of years? What kind of startup are you looking to build or finance, and which areas are you staying away from?

A panel of Seattle-area tech entrepreneurs and investors gamely took the bait and had some lively exchanges over the course of an hour. OK, these guys all know each other, and we’ll take what they say with a grain of salt since it’s a public forum—but here were some of the most interesting points they made. (You can read more comprehensive recaps of the panel on Brier Dudley’s blog at the Seattle Times, and soon on TechFlash by moderator John Cook.)

The panel was split 3 to 2, with the narrow majority guessing Twitter will get bought next year. Andy Sack of seed-stage fund Founder’s Co-op predicted Twitter will make more money than Facebook in 2010 (surprising, given the current disparity in the other direction). Glenn Kelman, the CEO of Redfin, an online real estate firm, said Twitter should charge for search (as it has begun to do in partnerships with Google and Bing). Kelly Smith from Curious Office and the startup Pressplane argued that Twitter could be “absorbed by a big company,” but “it’s going to go nowhere.” By the end of the evening, Sack was predicting that Microsoft would buy Twitter next year.

There was a consensus that 2010 could be a big year for acquisitions. Bill Bryant of Draper Fisher Jurvetson boldly predicted that Amazon will buy Netflix, Blockbuster, and Hulu, while opening brick and mortar “Amazon media stores.” Greg Gottesman from Madrona Venture Group said Cisco might buy EMC (for VMware) and Seattle-based F5 Networks, while Microsoft might buy Research In Motion, the maker of the BlackBerry smartphone. Sack predicted Adobe would pick up Seattle photo-editing startup Picnik. Rupert Murdoch (News Corp.) would buy Seattle’s Cheezburger Network, and someone would buy Redfin.

Looking back on 2009 for a minute, the big deals that were questioned by the panel included Adobe’s acquisition of Omniture (Gottesman said it just didn’t make sense strategically) and …Next Page »

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[This post also appears on OVP's blog---Eds.] The University of Washington’s Computer Science and Engineering (CSE) department’s Affiliates day is one of the most fun and rewarding days of the year for me as venture investor and geek. It involves a showcase of projects and research areas by professors and students and is a festival of creativity, new ideas, and engaged smart people. It is a day my colleagues and I look forward to every year.

Last Thursday’s meeting ended with a panel on “The Changing Face of Venture Capital” moderated by UW’s Ed Lazowska, who prompted us with a series of provocative questions. On the panel with me were Greg Gottesman of Madrona Venture Group, Ron Howell of WRF Capital, Bill McAleer of Voyager Capital, and Cam Myhrvold of Ignition Partners.

One of the first topics was the impact of the recession on startups and venture capital. Most VCs expressed the opinion that money was harder to find but that if you could get funded, it was a great time to start a company because skilled people were available, cloud computing providers such as Amazon have made it possible to do with less capital, and there were fewer competitors being funded. There was recognition that it has to be done with less, given the exit markets. But if anything, Greg Gottesman said Madrona is sticking to its model and not changing given a one-year blip.

Cam Myhrvold made the point that there were a lot of entrepreneurs using Amazon Web Services and open source to quickly bootstrap companies with much less capital than prior years. My comment was that if you play at the application layer using open source and AWS, you better think hard about marketing and customer knowledge since there are few technical barriers to entry.

One topic that was raised was why should entrepreneurs go for VCs over angels, money aside. I disagreed that money could be ignored and said that the quality of money was critical in these times. The recession has meant that almost all companies have needed more cash and, given that outside funding is tough, insiders had to step up. Many investors have not stepped up, which has made all VCs more conscious of the quality of their co-investors.

Ed asked what areas were particularly attractive for Seattle, and we got a consistent set of answers. Digital media, gaming, software, and the emerging areas of IT applied to green tech and IT applied to biology are core areas of interest. Each firm had its own areas of interest—for instance, Bill McAleer liked mobile apps and the application of social networks to the enterprise as one of his areas. Bill related a story from a recent trip to NYC where the cab driver was touting his favorite iPhone app—a map of all the public bathrooms. When asked about really innovative new ideas, Greg Gottesman mentioned 3-D printers and how his son was willing to empty his bank account to get one.

At OVP, we like the investment thesis that green tech and biology are becoming more compute-intensive, and that companies that can bring a view of IT applied to these areas are particularly attractive.

My conclusion from the evening is that Seattle is a great place for innovation and has a set of dedicated VCs who want to see a vibrant, risk-taking community. Each firm had its own areas of focus, some overlapping, but all were focused on creating great companies and skilled entrepreneurs here in Seattle. I left feeling that we were lucky to have UW CSE, a great research department generating innovative ideas, and a VC community very committed to fostering growth.

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On Tuesday, we reported that Pivotal Investments has led a $2 million financing round for Tuusso Energy, a solar power developer based in Seattle. Tuusso is an intriguing startup focused on developing and operating solar plants to supply renewable energy to utility companies; its first plant is slated to be built in the California desert by 2011. But the deal is worth a closer look through the lens of what Pivotal is doing.

Pivotal Investments is a venture capital firm that started investing in cleantech and sustainability companies out of its first fund in January. The firm, based in Portland, OR, is led by managing directors Gregg Semler, Brad Zenger, and John Miner. (Semler and Zenger previously were co-founders, along with Reference Capital, of the Sustainability Investment Fund 2007, which backed Northwest firms EnerG2, SeQuential Biofuels, Plas2Fuel, and RNA Networks.) Pivotal’s investment focus is primarily early-stage startups in the Pacific Northwest, often with first-time entrepreneurs. The firm’s areas of expertise include clean energy, water, air, green materials, and sustainable agriculture.

Semler confirmed via e-mail that Tuusso Energy is the first investment from Pivotal’s new fund. He says his team is excited about the solar company because of its strong team; it’s in a big market; it is capital efficient; it provides strategic insight into multiple facets of the renewable energy market; and it represents a “strong opportunity for investor returns with or without an IPO or acquisition.”

The Pivotal team says it has evaluated more than 250 companies since January. “This deal flow in quantity, breadth, and quality is a proof point that the Northwest is a great place for investing in sustainability,” Semler says. “It also validates the premise behind Pivotal Investments as the only venture fund in the Northwest completely dedicated to these opportunities.”

Earlier this summer, Semler and Zenger told me a little more about their investment themes. And what they said rings true with Tuusso Energy. “We get excited about investments that have systemic disruption in large markets that can be proven in the Northwest, and then scale to other markets like California and Asia,” said Semler, a cleantech entrepreneur himself who has led firms such as ClearEdge Power and PolyFuel over his career as an executive.

Yet if you ask Seattle entrepreneurs and investors alike, they’ll say alternative energy and sustainability are not in most local venture capitalists’ comfort zone. “We talked to most of the VCs in Portland and Seattle, and this is a new space for them—new markets, new technologies, and many times new teams,” Semler said. (A notable exception would be Rick LeFaivre of Kirkland, WA-based OVP Venture Partners, who notes that cleantech VCs should invest in the sweet spot between mom-and-pop companies and $100-million-upfront deals, like wind farms, that call for private equity or other means.)

Which is also why cleantech and sustainability can be such an attractive field—for the right firm. “This is bigger than the original Industrial Revolution,” said Zenger, a co-founder of Portland-based Pixelworks (NASDAQ: PXLW) and an expert in global technology markets. “The scale of these opportunities is just huge.”

Huge investments, however, are not what the Pivotal VCs have in mind. Their typical deal structure will be to contribute around $3 million, investing over multiple rounds—often with other investors—to ensure the company has the resources it needs to achieve its plan. I wondered how much you can really do with $3 million in a capital-intensive space like energy. Quite a bit, they said. “Entrepreneurs need to be creative and find ways to use less capital to make the same progress,” Semler explained, “especially in the current market environment.”

“While we’re a little concerned about the amount of capital pouring into the cleantech sector, we believe it’s a great time to be a cleantech investor in the Northwest,” Semler said. “Valuations are low, innovation is high. If you’re willing to do early-stage work, there is a great opportunity for reward.”

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One of MIT’s leading business professors, Richard Locke, came to Seattle yesterday to talk about the “S” word. Yes, we’ve been hearing a lot about sustainability lately, in the context of technology and business. Big companies like Microsoft, Amazon, and Boeing are talking seriously about the issue. Smaller Seattle-area companies like Verdiem, Powerit Solutions, and R.W. Beck have been making progress in important areas like energy efficiency and water management. To Locke, and many others, sustainability is much more than a corporate buzzword.

Locke is deputy dean of the MIT Sloan School of Management, and a professor of entrepreneurship and political science at MIT, based in Cambridge, MA. His research specialties include labor standards and practices, global entrepreneurship, and sustainable businesses. I sat down with him at the Westin Hotel downtown to get his perspective on Northwest companies’ green initiatives, and their possible partnerships with MIT. Locke was coming from meetings with Intel in the Portland area the previous day (the Santa Clara, CA-based chipmaker has manufacturing and development facilities in Hillsboro, OR). His other meetings in Seattle included a stop at Amazon to speak to Sloan School alums about the changing face of MBA education, and about sustainability in the corporate realm.

Locke defines sustainability broadly as “using resources today in a way that permits future generations to use them as well.” By this he means not just natural resources—energy, materials, water—but also social resources like people, jobs, and standards. “Let’s redefine sustainability in such a way that we can show the opportunities available, not just the constraints,” he says. “Once you broaden the definition, you expand the scope for individuals and organizations to try to do something about it.” (As I understand it, this definition of sustainability could include managing employees so they don’t burn out, creating jobs that last, and establishing fair labor standards that endure.)

Take Intel, for instance. Locke says the company is pursuing a series of initiatives to reduce its carbon footprint, improve its supply chain efficiency, and reshape the way it uses energy, water, and people. “Are there ways they can make, for example, new chips that might require less energy? They’re having a very interesting internal discussion about chip speed versus energy consumption. I find it fascinating that a large company in an extremely competitive sector, that still does manufacturing in …Next Page »

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When we last checked in with Verdiem back in June, the Seattle energy-IT firm was reporting encouraging results from its product trials in Seattle, Chicago, and Honolulu. Today, Verdiem is announcing that its personal computer power-management software has reached a new milestone, having been installed on more than one million desktops. What’s more, the company says its business customer base has doubled in the past 12 months.

Verdiem’s software helps big companies and organizations control and manage energy usage by PCs on their network. The product includes simple features like automatically turning off computers when they’re not in use, and turning them back on when they need to install software updates, as well as dashboards for managing energy use. The company says more than 300 corporations, government agencies, and universities have deployed the software, and have typically reduced their PC energy costs by 30 to 60 percent. The latest announced customer is Atlanta, GA-based Cox Communications, which has outfitted 15,000 of its networked PCs with Verdiem’s energy-saving software.

“Business and IT leaders are searching for solutions to tangibly reduce costs and protect the environment,” said Brett Goodwin, Verdiem’s vice president of marketing, in a statement. Companies see PC power management as “low hanging fruit” in the growing effort to make everyday computing greener, he said.

Verdiem was founded in 2001 and is backed by Kleiner Perkins Caufield & Byers and NCD Investors, among others. Since December, the company has been led by chief executive Jeremy Jaech, the co-founder of Aldus, Visio, and Trumba.

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Xconomy has learned that MicroGreen Polymers, an Arlington, WA-based developer of technology to recycle plastics into cheaper, environmentally friendly coffee cups among other things, has raised $1.6 million for expansion from WRF Capital and local angel investors (Northwest Energy Angels, Alliance of Angels, and Atlas Accelerator), out of an ongoing round the company expects will net $3 to $4 million later this month.

The money will be used to build up MicroGreen’s commercial manufacturing capacity, and boost its payroll from 9 people to as many as 30 over the next year, says CEO Tom Malone. The company is also scouting new locations, likely to be in Everett, WA, he says.

MicroGreen got started in 2002, when it spun out of the University of Washington. The basic idea from founders Greg Branch and Krishna Nadella, a pair of graduate students, was to see if they could develop a technique to squeeze high-pressure liquid carbon dioxide into plastics, to heat them up and expand them while in a solid state. This process creates billions of tiny microbubbles that allow manufacturers to maintain most of the properties of regular plastic, while using a lot less of the regular plastic that is made from oil. The MicroGreen technique also creates a handy insulating layer of air inside the plastic, which can protect your hand from getting burned while holding that hot morning coffee. But plastics are everywhere in the modern world, and MicroGreen Polymers sees plenty of opportunities to stick its recycled product into markets that are worth billions.

“We can use less plastic to do the same work,” Malone says. “It’s a less-is-more story.”

The technology, which MicroGreen calls “Ad-air” does just that—it adds air bubbles into recycled PET plastics (like the stuff from water and soda bottles), which makes the subsequent product lighter, uses less material, and makes it cheaper, Malone says. It retains many, but not all of the same properties as the original plastic, so it can’t be used for everything, he says.

The initial applications of the MicroGreen technology have been for a reflector plate that a Japanese manufacturer used to make liquid crystal display TVs appear brighter, and for a contract with Northrup Grumman to help make some electronics equipment lighter, Malone says. These aren’t huge clients, generating revenue of about $1 million last year, and almost $2 million this year, Malone says.

Bigger opportunities lie ahead in disposable coffee cups, food packaging such as …Next Page »

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Cisco Systems announced today the release of software developed in partnership with Seattle-based Verdiem to automatically save energy in idling computers, phones, networked devices, and eventually, whole buildings. The first version of the product will be available in February as a free upgrade to Cisco’s network switch, to manage energy usage of IP devices. Next summer, Cisco will release a version based on Verdiem’s software to save PC energy, and in 2010 a version will be released that monitors whole-building energy, including lighting and heating. Customers can adjust settings to have computers or other appliances automatically shut off overnight, for example.

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This morning, I had a good chat with Seattle entrepreneur and investor Martin Tobias, in advance of tomorrow’s holiday open house at his new startup, Kashless. Known to get around on his Segway, Tobias said he trudged down the hill on foot today to his new office, which is in Lower Queen Anne. All of his meetings were canceled because of the snowstorm, he says.

Tobias is the former CEO of Imperium Renewables, the troubled Seattle biodiesel refiner, and a venture capitalist with Bellevue, WA-based Ignition Partners. I wanted to hear more about Kashless, whose green-tech software has been in private alpha trials since Tobias raised $5 million from RRE Ventures in October. (Tobias is an investor in two RRE funds, so in part, he funded himself.) “Stuart Ellman [RRE's co-founder and managing partner] has taken a pretty thoughtful look at how a tech fund can play in the green space. He’s focused on doing software deals that relate to green,” Tobias says. He adds that other tech investors have tried to get into cleantech in areas that don’t relate to software—like solar and biofuels—and they got burned.

The concept of Kashless, as I understand it, is to provide an online service whereby people can efficiently acquire and give away stuff for free—equipment, furniture, whiteboards, and the like. It’s a combination of social network, community message board, and Web service, all with a green environmental theme. Kashless calls it “recommerce.”

Kashless currently has five employees and is looking to hire four more senior software engineers, Tobias says. They have moved into a 1,200-square-foot office, which will be on display tomorrow evening. (Tobias says he expects around 100 guests, so it might get crowded.) Not surprisingly, Tobias used Kashless to furnish the new office. “Every piece of furniture was free,” he says, from tables and chairs to whiteboards, and even some computer monitors. “Kashless could be an interesting tool for startups to reduce their expenses.”

Tobias says he even got some of the beer for the holiday party for free. He was looking for a beer fridge, and instead found several people trying to give away unopened cans and bottles. “We’ve been amazed what you can find for free in the community,” he says.

As for his product, Tobias says there are now 13,000 items in the Kashless system. The software searches community sites like Craigslist and Freecycle.org for all free stuff, and posts it. So far, Kashless users can’t post their own items yet, but that will come in January. Tobias says the service will move into beta trials in March or April—when the site will be “feature-complete but you’re working on scalability and usability” for a large number of users.

“Our idea here is to get more of this stuff actually moving around the community,” Tobias says. The longer you can use something, the better.” Recycling is great in principle, he says, but e-waste recyclers are not always reputable. “We prefer to extend the lifespan of an item as an alternative.”

So what will Kashless provide that isn’t already covered by community e-mail lists and websites? “We’re trying to hook into lots of different marketplaces and lots of different lists, to get the largest potential distribution for free stuff,” Tobias says. “You can see stuff from all over region. We certainly want to partner with STS [the Seattle Tech Startups list] and the whole startup community…We want to make it extremely valuable for people in Seattle first, before we pour gas on the fire.” But the eventual plan is to go national, and then global.

Tobias points to some expansion lessons from Craigslist, including the site’s ease of use, simplicity, and being lightweight. The key is to build a high-traffic website without a big staff, he says. “A lot of startups make the mistake of hiring a lot of people. I’ve done that myself…We’re focusing right now on building a valuable service. We’ll figure out how to make money later.”

In the meantime, he says, “We’re funded, we’re expanding, and we’re hiring.”

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Sapphire Energy has not provided many details about its technology since CEO Jason Pyle stepped into the limelight six months ago to announce the San Diego startup has developed a revolutionary process for turning pond scum into high-octane gasoline.

“I have no intention of being secretive,” Pyle told me at the inaugural networking meeting of the newly formed San Diego Biotechnology Network, or SDBN. But after seeing the effects of the boom-and-bust cycle in two recent tech bubbles, Pyle says, “My goal is to maintain a serious and thoughtful approach in a frothy market. I don’t want Sapphire to get caught up in that hype.”

Keeping the media from hyperventilating, however, could be a tall order for a company developing technology with the potential to help the United States break its dependence on imported crude oil. And who can blame us?

At a time when U.S. gasoline prices were arcing beyond $4 a gallon nationwide, Sapphire said it had proven the feasibility of using algae to make “green crude” that can serve as an identical substitute for crude oil. Sapphire said its product, unlike other biofuels, could enter the pipeline at any petroleum refinery for processing into gasoline and other fuels.

The company calls it “the world’s first renewable gasoline.”

Sapphire’s process has been used successfully to make the three most important fuels, gasoline, diesel, and jet fuel, Pyle says, and all three products have been independently certified to meet fuel standards set by the American Society for Testing and Materials.

The prospects are electrifying, and interest in Sapphire has been extraordinarily high. Sapphire only added fuel to the fire, so to speak, when the company said in September it had raised $100 million in a second venture round from Bill Gates, Arch Venture Partners and others.

Aside from Sapphire’s corporate pedigree and the revolutionary potential of its technology, the company says its green crude is environmentally appealing because it will have no effect on global climate change. Sapphire says it’s technology is “carbon neutral” because its algae absorbs as much carbon dioxide as a car releases when its fueled by renewable gasoline.

In San Diego, Sapphire has been recruiting heavily for chemical engineers, lipids chemists, senior algal production scientists and other skilled workers at its headquarters on Torrey Pines Mesa. The startup currently has about 80 employees, Pyle said.

Sapphire’s CEO remained vague, though, about details of the company’s technology.

“We use genetic engineering, directed evolution, synthetic biology and (agricultural) breeding,” Pyle told me. But Sapphire’s approach specifically does not include fermentation, a technique adopted by some biofuels startups.

“All of our systems are photosynthetic,” Pyle says about a process in which algae “directly converts sunlight and carbon dioxide into hydrocarbon products.”

Sapphire already has demonstrated that its technology is feasible, and is now working to show it also can work on an industrial scale, Pyle says.

“We’ve proven this from sunlight-to-gasoline, from soup-to-nuts, so we don’t have any questions about whether the technology works. The only question is about the cost of production.”

He adds that Sapphire’s near-term goals “are to test our existing organisms and to grow those organisms in pilot plants into green crude on a scale larger than we have here in San Diego.”

The company has established a test facility in Las Cruces, N.M., and has been drawing on the scientific resources of New Mexico State University to help develop its fuels.

In an interesting twist, Pyle says the origins of Sapphire began two years ago as …Next Page »

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At SmartGridNews.com, we expect the Obama Administration to announce two things that will converge to give this already growing sector an additional boost. The first is a Clean Energy program to stimulate five million new jobs. The second is a “New Deal” stimulus package based on rejuvenating essential infrastructure.

In both case, the Smart Grid will be a centerpiece. We cannot achieve clean energy without a Smart Grid to transport it where needed. And we are increasingly reliant on the electric power system as the critical infrastructure that makes our way of life—and our global competitiveness—possible.

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Burnaby, BC-based NxtGen Emission Controls announced today it has closed a $15.4 million Series B round, led by Denver, CO-based Altira Group. Other investors included Itochu, an undisclosed Japanese auto maker, and return investors Yaletown Venture Partners, GrowthWorks Capital, BC Advantage Funds, and Polygon Financial Investments. NxtGen Emission specializes in “syngas” technology for reducing emissions and optimizing combustion of diesel, biodiesel, natural gas, and gasoline.

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Algae-based biofuels are the topic du jour. And why not—the prospect of using pond scum to power 21st-century transportation and replace crude oil is pretty appealing. So one of the highlights from the Algae Biomass Summit in Seattle yesterday, besides the keynote by venture capitalist Vinod Khosla, was a panel of prominent VCs discussing the ins and outs of the fledgling biofuels business. Bob Nelsen, a co-founder and managing director at Seattle-based Arch Venture Partners, was joined by Jim Long, a venture partner at Redwood Shores, CA-based Gabriel Venture Partners, and moderator Josh Green, a general partner at Mohr Davidow Ventures in Menlo Park, CA.

Nelsen and Long plugged their portfolio companies in the algae space, of course, but they also engaged Green in a fascinating conversation about biofuels strategy and challenges. Green himself has no investments in algal fuels, but he’s open to the idea— “I’m agnostic, not an atheist,” he said. “But it’s late to get into algal fuels. The bar for differentiation has been raised, so you have to have something special.”

Nelsen (who’s an Xconomist) certainly thinks he has something special. He serves as a director of Sapphire Energy, a San Diego-based algae biofuel startup that has more than $100 million in the bank, and “anticipates commitments for future funds that are quite large,” Nelsen says. In addition to Arch Ventures, Sapphire is backed by Bill Gates, Venrock, and Wellcome Trust. “We want to create the market leader based on a real technological advantage,” says Nelsen. “We’re going to replace oil. It’s a grand goal.”

Meanwhile, Long is chairman of the board of Aurora Biofuels, an Alameda, CA-based startup out of UC Berkeley that uses genetically modified algae to create biodiesel. In addition to Gabriel Venture Partners, it is backed by Noventi and Oak Investment Partners.

So, apart from their respective bets, how do they think algae biofuel companies should differentiate themselves from the competition? Nelsen provided some high-level context. “You will see a couple high-profile [startups] from people who didn’t get into the initial party. We’re excited because we’ll be ahead. There will be many winners in this space.” He pointed out several ways for companies to …Next Page »

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Seattle-based Earth Class Mail, which digitizes paper mail and delivers it via the Internet, has announced it has raised $5.1 million in angel investment led by Keiretsu Forum. Earth Class Mail also said it has increased staffing by 35 percent in the past two quarters to keep up with demand from corporate and government customers.

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Today marks the opening of what will be North America’s largest solar-cell manufacturing plant. And it’s right here in the Northwest. SolarWorld, based in Bonn, Germany, is launching a new solar facility in Hillsboro, OR. On the docket this morning is a ribbon-cutting ceremony and a tour of the sprawling, 480,000 square-foot facility. Expected to be in attendance are some prominent Oregon officials, including Governor Ted Kulongoski, Congressman David Wu, and Senator Ron Wyden.

It’s a big deal for the local economy, and for solar energy. By 2011, SolarWorld’s Hillsboro plant is expected to employ 1,000 people and produce enough solar-cell material to generate 500 Megawatts of electricity per year—enough to power roughly 80,000 U.S. homes, in theory. SolarWorld acquired the Hillsboro facility from Japan’s Komatsu Group in March 2007 for $40 million. Komatsu had planned to use the site to manufacture silicon wafers, but it didn’t pan out, because of weak demand for chips. Now SolarWorld, which was founded in 1977 and had its IPO in Germany in 1999, says it is investing more than $400 million in the Oregon facility.

Solar power is a big piece of the renewable energy and cleantech puzzle. Annual revenues in the solar industry are predicted to triple in the next three years, from $13 billion to $40 billion, according to the investment banking firm Piper Jaffray. Yet the problem has always been that solar cells are very expensive to produce. If they have large enough scale and efficiency, manufacturing facilities like SolarWorld’s could play an important role in making solar energy more mainstream. “SolarWorld…is helping to bring real alternatives to market through a strategy focused on high-volume manufacturing. The new Hillsboro facility is our most shining example of this strategy in practice,” said SolarWorld CEO Frank Asbeck in a statement.

Why Oregon? SolarWorld is certainly not alone in setting up manufacturing facilities there. Companies like SpectraWatt (spun out of Intel), Solaicx, Peak Sun Silicon, XSunX, PVPowered, Mr. Sun Solar Enterprises, and Wacker, to name just a few, have all set up solar-cell factories in Oregon. The main reasons are probably the state’s business energy tax credit, and its large talent pool of tech workers, especially in the semiconductor industry. Also, there is plenty of cheap hydropower, and being close to California, the nation’s largest solar market, can’t hurt either.

“The Pacific Northwest possesses a hotbed of talent in both silicon manufacturing and clean-technologies. Oregon is the obvious choice for where to undertake this new level of solar cell manufacturing, said Boris Klebensberger, SolarWorld’s chief operating officer, in a statement. Klebensberger is coming off a panel appearance (entitled “The great crystalline silicon debate”) earlier this week at the Solar Power International conference in San Diego, CA.

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The Pacific Northwest could potentially be the first region in the United States to achieve 75 percent of its electricity supply from carbon-free sources like hydropower and renewables. But that will require a dedicated new effort in cleantech policy and investment which, if successful, could create 41,000 to 63,000 new jobs in Washington and Oregon across five energy sectors by 2025.

That’s according to a study released today by Clean Edge, a cleantech research and publishing firm based in Portland, OR, and Climate Solutions, a Seattle-based non-profit organization focused on global warming. The report, entitled “Carbon-Free Prosperity 2025: How the Northwest Can Create Green Jobs, Deliver Energy Security, and Thrive in the Global Clean-Tech Marketplace,” makes the case (both economically and environmentally) for a serious cleantech push in Washington and Oregon. It points to five main technology areas in which the Northwest has a competitive advantage:

—Solar photovoltaics manufacturing. For instance, SolarWorld’s plant in Hillsboro, OR, will be the largest crystalline silicon solar-cell manufacturing facility in the U.S. by 2011.

—Green building design services. Seattle and Portland consistently rank in the top three U.S. cities with the largest number of certified green buildings.

—Wind power development. The Shepherd’s Flat Wind Farm, slated for operation in 2012 in north-central Oregon, would be the largest wind farm in the U.S., and one of the largest in the world.

—Sustainable bioenergy. Pacific Ethanol in Boardman, OR, SeQuential Biofuels in Portland, and Seattle-based Imperium Renewables are part of an emerging group of companies in biofuels in the Northwest.

—Smart-grid technologies: Liberty Lake, WA-based Itron is the top global manufacturer of advanced meter readers. Ron Pernick, managing director of Clean Edge, calls these kinds of smart sensors and communication technologies “the linchpin” of the entire cleantech effort.

However, the Northwest also faces some significant barriers in cleantech, the report says. First, there has been less venture capital activity in cleantech in Oregon and Washington (they received about $65 million and $47 million in clean-energy investment in 2007), as compared with California and Massachusetts ($1.4 billion and $378 million, respectively). Second, the report cites the lack of a 21st-century electric grid, and the “lack of a coordinated regional strategy.” That fits with what energy expert Jesse Berst of GlobalSmartEnergy (an Xconomist) told me over the summer: that other parts of the U.S., like New Mexico and Hawaii, are “more progressive and aggressive about energy.”

To overcome these barriers, the study recommends a 10-point plan to get cleantech on track in the Northwest:

—Put a price on carbon
—Increase Washington’s renewable portfolio standards (required percentage of electricity from renewables) to 25 percent by 2025
—Implement low-carbon fuel standards
—Pass aggressive green building codes
—Foster regional cooperation
—Ensure public funding for cleantech via public employees retirement system investments and through targeted cleantech funds
—Implement effective tax credits for renewables development
—Deploy cleantech workforce development programs
—Establish government purchasing policies for cleantech products and services
—Build regional smart grids and a 21st-century transmission backbone

If these steps are taken by regional government and industry, the independent study says, then Washington and Oregon could lead the U.S. in clean-energy deployments. “The cleantech industry is really taking root in the Northwest,” says Rhys Roth, co-founder of Climate Solutions. “The opportunity is real, but we have to act now, with urgency.”

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I first heard of a Seattle startup called Voltan Biofuel two months ago, when I talked to Jim Roberts, head of business development at UW Tech Transfer’s LaunchPad, a program to promote university spinoffs. Voltan was a LaunchPad company that won $5,000 for “best cleantech idea” in UW’s 2008 CIE Business Plan competition. Yesterday the company announced its official launch under a new name, AXI, with seed funding from Allied Minds, an investment firm based in Quincy, MA.

The terms of the deal were not disclosed, but Allied Minds typically invests a few hundred thousand dollars in each of its companies. As we’ve written about previously, Allied’s strategy is to fund very early-stage technology startups fresh out of academic labs—which VCs often avoid because such ventures are unproven. “What ends at the university is still too early for most investors,” says Roberts. “[Allied] fills a void there for us.”

I caught up with Roberts to hear more about the deal. More than a year ago, Roberts says, he first visited the lab of UW biology professor Rose Ann Cattolico. She was experimenting with new strains of algae that can produce large amounts of oil for biofuels. Not by genetic modification, but rather by using natural evolutionary processes that could potentially be scaled up to large operations. Given the skyrocketing interest in alternative fuels, Roberts immediately grasped the opportunity. “As soon as I saw it, I knew,” he says.

Through LaunchPad, Cattolico partnered with two UW M.B.A.s, Eric Gertsman and Carrie Stearns, and together they entered the business-plan competition. Although they didn’t win the grand prize, they placed well and learned a lot. Having filed a patent for the technology and formed the team, both through the university, the next step was to get an investor interested.

It turns out Allied Minds has a vice president based in Seattle. Erick Rabins has been involved with the local innovation community for years as an entrepreneur and now an investor. Roberts knew him, so he introduced Rabins to Cattolico. It proved a good fit. With Roberts negotiating the terms of the technology license and other parts of the agreement, the deal was done quickly. It’s the first between UW and Allied Minds, but probably not the last. “We hope to do business with them again,” says Roberts.

Roberts says AXI will be based in Washington and will grow oil-producing algae, though its exact business model is still to be determined. “Once we do the deal, we step out of the way,” he says. “But we’ll keep in touch, we’re very interested in how it’s doing… We’re very, very confident. The technology is very, very promising.”

Still, AXI will have plenty of competition in the algae-biofuel space, what with the likes of South San Francisco-based Solazyme, Cambridge, MA-based Greenfuel Technologies, and Naples, FL-based Algenol Biofuels, to name a few. But to Roberts, this is a good thing, as well as a challenge. “There’s real demand and real need,” he says. “The market is definitely there.”

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I’ll admit it. The planet would be better off if you stopped reading this and shut down your computer. That’s because your desktop or laptop PC wastes roughly half the energy it consumes and puts out 1,000 pounds of carbon dioxide per year. Multiply that by something like a billion PCs worldwide, and you get the idea.

Enter Seattle-based Verdiem, a maker of energy-management software for businesses, founded in 2001. Today the company announced its release of an energy-monitoring tool for consumers, called Edison. You can download it for free, and it helps you keep track of your computer’s energy usage and optimize it based on your work schedule, power and standby settings, and so forth. The user interface shows you in real-time how much you’re saving in energy costs and carbon dioxide emissions. (So maybe you can feel a little less guilty for reading us now.)

A lot of companies and organizations, including Google and the Environmental Protection Agency, are getting into the green-computing trend. Round Rock, TX-based Dell has just declared that its computer-making operations have become carbon neutral, ahead of schedule. And as for today’s consumer software release, Verdiem is partnering with Microsoft—Edison runs only on Windows-based operating systems—and the Climate Savers Computing Initiative.

If 1 percent of all PCs used Edison, said Verdiem CEO Kevin Klustner in a statement, it could potentially reduce carbon dioxide emissions by 7 billion pounds, which is equivalent to taking more than half a million cars off the road. CNET has a nice piece today about taking Verdiem’s new tool for a spin. The writer tried it for four hours and reports that she would be on track to save $30.85 on her power bill and 472.52 pounds of carbon dioxide per year. Modest savings, to be sure, but every little bit helps.

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In terms of eco-friendliness, the Pacific Northwest and New England—Xconomy’s two homes—are both sitting pretty. In terms of education, however, one of them is not.

That’s according to the 2008 Business Facilities rankings report, released this week. The annual survey, which compares different business environments around the country, ranks cities and states based on everything from air pollution and renewable energy incentives to K-12 spending and graduation rates. The report covers a wide range of topics, but I want to highlight two lists that caught my eye.

First, the good news. Washington, Oregon, and five New England states made the list of top 20 greenest states, with Oregon and Massachusetts leading the way:

1. Oregon
2. Massachusetts
3. Colorado
4. Washington
5. California
6. Connecticut
7. Minnesota
8. Arizona
9. Vermont
10. New York
11. Maryland
12. Hawaii
13. New Mexico
14. Rhode Island
15. Wisconsin
16. New Hampshire
17. Texas
18. Iowa
19. New Jersey
20. Florida

That’s based on pollution levels, financial incentives and policies for energy efficiency and renewable energy, number of hazardous waste sites, percentage of people who use public transit, and a couple of other metrics.

The “greenest” rankings by city are a little less meaningful, as they are based solely on data from the U.S. Green Building Council—basically a measure of the number of “green” buildings in town. Nevertheless, Seattle tied for first place with Chicago. Portland, OR, was next, and Boston and Cambridge, MA, placed 7th and 9th, respectively.

Now for the bad (or at least mixed) news. Although Seattle and Portland ranked #1 and #4 in …Next Page »

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Within five minutes of sitting down to lunch, Jesse Berst has burst my bubble. “I’m not sanguine about Seattle as a big leader in the area,” he says. “I don’t know if we’ll have a cluster here.”

He’s talking about smart energy and cleantech, and he knows a thing or two about the space. As managing director of Redmond-based GlobalSmartEnergy, Berst provides strategic consulting on energy technologies (and market opportunities) to corporations, investors, and government agencies. He is also the executive director of energy and environment prizes for the X PRIZE Foundation, based in Santa Monica, CA (more on that shortly).

Berst, who’s also an Xconomist, made his name in the 1980s and 90s as a technology analyst, and co-founded three successful high-tech publishing companies. Around six years ago, he decided to work full-time on energy and the environment—something closer to his heart. “I got bored with [information technology], plus it was so obvious that energy was going to be the next big industry,” he says.

Most recently, he’s been focused on the “smart grid.” This is an envisioned upgrade to the existing electricity network, and it involves the use of various technologies—smart monitors and sensors, communications, and advanced software and hardware to control the network, which in the United States is run from 130-odd control centers around the country. The goal is to more efficiently and reliably regulate power usage, and Berst says the smart-energy industry is following roughly the same evolution as telecommunications. Now, because of the growing amount of data to be managed, corporations like Microsoft and Oracle have entered the arena. And the main hurdles to adoption are bureaucratic, not technical.

“Most of our projects are in places like Hawaii and New Mexico, places that are more progressive and aggressive about energy,” Berst says. (This was surprising—I had thought the Northwest was pretty progressive in terms of energy.) In his research consultancy duties, Berst says the key question is, where is the money in cleantech? Corporations, banks, and agencies want to know, should we get into the sector? He is currently advising several startup companies, still in stealth mode; the most recent (”today was our first day,” he says) is looking into building smart-energy infrastructure at the community level, in places like resorts.

The other big thing I wanted to talk with Berst about was the X Prizes. Starting last fall, he began consulting for the X PRIZE Foundation, which sets up ambitious innovation awards to advance the state of the art in space, genomics, transportation, and other fields. Recently, Berst’s team submitted recommendations for energy prizes; the areas being investigated include alternative energy generation, efficiency, storage, sustainable housing, and carbon sequestration. The X PRIZE board is reviewing them, but it may be a while before we can tell you any more (watch this space). Berst did say that any eventual prize(s) should be worth more than $10 million, and should “stretch people farther than a venture-based company would.”

A few more take-aways from our discussion:

—Don’t forget the role of mid-size companies in energy and cleantech. We often look at startups and big players, but Berst points out that “real, permanent job growth comes from small-to-mid-size companies that grow up.” Case in point: Areva T&D, a French smart-grid company that has operations in the Northwest and is looking to hire for its global R&D center. (Its parent company Areva has roughly 150,000 employees worldwide, but the point is to follow the Arevas-in-the-making.)

—Large organizations like Boeing and Pacific Northwest National Laboratory (PNNL) have some hidden gems of energy-related projects, but they often struggle with commercializing such technologies. Nevertheless, says Berst, “they’re a warehouse of breakthrough concepts.” (Berst serves on the advisory council of PNNL.)

—In smart energy, there is a manpower shortage in the Northwest. “We have to import power engineers,” says Berst, because of a dearth of engineering training programs, which were phased out over the past few decades.

My bottom line? Anyone in the area with a serious interest in energy and cleantech can look to Berst’s group as a tremendous resource in their back yard. If they take advantage, perhaps they can help make Seattle a more energy-progressive place.

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Not in my back yard. Just kidding, always wanted to say that. This morning I stopped by the media launch of Seattle-based Propel’s new biodiesel station on the corner of Westlake Avenue and Valley Street, which becomes Broad Street—just blocks from my home in South Lake Union. (In fact, I can see the green canopy from my living room.) The station is Propel’s sixth biodiesel fueling facility in Washington, but it’s the largest, and the first one dedicated to only biodiesel—no regular diesel. It officially opens for business tomorrow.

Biodiesel is derived from crops such as soybeans and canola, as well as recycled cooking oil. It is touted as being much better for the environment than petroleum-based diesel and gas, but it’s not without controversy—such as the issue of whether it contributes to rising food prices. This morning, Propel founder and CEO Rob Elam deflected the criticism, sticking to the theme that relying on petroleum is the real problem.

Elam pointed out that petroleum is up to $142 a barrel today, an all-time high. Meanwhile, the two 5,000-gallon biofuel tanks behind him spoke to the benefits of biodiesel, with the following stats printed on them: 1,126,000 pounds of carbon dioxide saved in total, 1,496 barrels of oil displaced, and the carbon equivalent of 87,647 mature trees saved annually. Regular cars won’t run on the bio stuff, but any diesel vehicle will.

Propel seems to have picked this location carefully—a very busy intersection in what Elam calls the “most sustainable neighborhood” in Seattle. Like a lot of residents, I don’t own a car here and I don’t plan on buying one anytime soon—not even a fancy diesel car that can run on biofuel (the Jetta model in the photo above will be available in August). But with all the construction and development going on in the neighborhood, it’s a good bet the station will get its share of business, as long as biofuel prices stay competitive with regular diesel. “This is an industrial area, and we want to fuel those trucks,” said Elam.

I couldn’t help but notice that this sustainable neighborhood with the “greenest” drivers also has a drive-through espresso store, right across the street from the Propel station (see right—photos courtesy of Mara E. Vatz). Let’s keep our priorities straight…

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