Emerging Markets Plugging In To Mother Earth

Imagine you are living far, far off the grid, in an emerging market rural outpost, say 100 miles Northwest of Moroto, Uganda near......well, you are pretty sure there's an outside world. You'd like a radio, maybe even a cellphone. You'd like to see at night without lighting candles and filling your home, and your baby's lungs, with soot and other dangerous combustion reaction products. If only you had an extension cord 100 miles long or better yet, if only you could just plug in to the dirt floor of your own home.

Soon you will be doing exactly that. Lebone Solutions, a team of six MIT students, has developed a battery powered by microbes living in dirt which can operate for months, charging LED lights, radios and cell phones. The device costs less than $20. It harnesses the energy from metabolic reactions of soil dwelling bacteria, an energy source that has been recognized for years but not utilized in a practical way. Lebone Solutions member Presser Aiden predicts 1,000 households will be using one by this summer. Although the dirt battery will be welcome in many emerging market areas, it was designed with sub-Saharan Africa in mind a region where some of the Lebone Solution members (along with 500 million other people) have lived without power.

The dirt battery was hailed by Popular Mechanics as one of the ten most brilliant innovations of 2009 and named one of the winners in this year's MIT IDEAS competition. It's also featured in a cover story on public service at MIT in this month's Spectrum (an MIT newsletter). The Spectrum story made me feel much better about many years of contributions - contributions to a wealthy institution that didn't always seem like it should be high on the list of neediest candidates for my limited funds.

The Spectrum public service story also reminds me of two trends I've been noticing lately. The first is a greater emphasis on relatively low tech solutions to problems like malaria, rural power or clean water. Solutions that combine solid engineering and cultural analysis without spending a fortune on new frontiers of basic science or expensive equipment that many emerging market populations can't afford. The second trend is the rapid advance of microfinance, with organizations like Kiva leading the way and tools like securitization steering microfinance in the direction of a socially beneficial investment that can compete with other interest bearing options. These trends are a powerful combination that might lead to a real take-off for impoverished rural areas a lot faster than expected.

Photo Credit: AnnaleeBlysse

ARPA-E: VC, Angel Investor or All of the Above?

ARPA – E, that's Advanced Research Projects Agency for Energy. It's like DARPA, but instead of creating the Internet, it fosters transformative energy technologies. It's like a VC or an angel investor, but with a half-open DOE checkbook instead of private capital. It's even a little like the old depression era CCC, spending government reconstruction money on projects that employ people, but in this case they employ a few scientists who will lead us, eventually, to a greener future filled with high tech jobs, secure energy sources and stabilized greenhouse gas levels. ARPA-E is prepared to get involved with transformative energy technology anywhere from the laboratory stage to the difficult juncture between development and early commercial application.

Enough with the alphabet soup. What's new with ARPA-E, how much funding does it have and how is it being spent? On March 2, 2010 ARPA-E announced its third funding opportunity, with $100 Million available to focus on grid-scale energy storage, electrical power technology, and building energy efficiency. This came relatively hard on the heels of ARPA-E's December 2009 news releases establishing a fellows program and announcing a second funding opportunity, also with $100 million available, to focus on electrofuels, carbon capture, and batteries for electrical energy storage in transportation. 37 projects have been selected for funding (at cost to ARPA-E varying from $500,000 to $10 Million each) as the result of the initial funding opportunity, a relatively open ended call for transformative energy related proposals. The selected projects are too diverse to summarize. The winners include a mix of universities and private companies, small and large.

Is ARPA-E an angel investor or a venture capitalist? Of course, it's the government and it's not investing for a financial return. The cost of funded projects is shared with the project proponents, and the percent ARPA-E contributes varies depending on several factors, particularly on the technology's stage of development. The closer the technology is to the basic research stage, the higher the percentage of the tab ARPA-E will pay. DOE does get some rights in intellectual property developed with its funds, although the ARPA-E structure allows the bulk of the IP value to remain with the project proponents. The low end of that $5000,000 to $10 Million per project does not sound like much, but remember, ARPA-E isn't covering the whole cost, and in some cases projects might be able to attract private capital well before the technology is commercialized. So, the angel or VC answer, is, (as always), all of the above, depending on the project.

ARPA-E is more than a source of capital. ARPA-E Director Arun Majumdar writes, “We are determined to attract the best and brightest minds to solving the energy problem”. Top engineers and scientists are serving as reviewers for project selection, but now ARPA-E is seeking program directors, to guide funded projects and identify new areas for breakthroughs. So ARPA-E, like a successful angel or VC, is providing guidance and connections, but the focus remains technical. ARPA-E's funding is a drop in the bucket compared to what other nations, particularly China, are spending on energy research, but innovation isn't all about money. With the right choices on projects and people, ARPA-E can be the catalyst for the next........you fill in the blank, think energy Internet.

Photo Credit: C-Ali

China’s Second Wind: Asian Superpower Embraces Alternative Energy

China is no longer just a manufacturer of low cost widgets and knock-off designer bags. The Asian superpower has propelled itself into the clean energy market with a fervor, and is now the leading manufacturer of wind turbines, solar panels. China is poised and ready to expand into the construction of other energy infrastructure such as nuclear reactors and state of the art coal power plants. Chinese manufacturers benefit from three big advantages. The first is cheap labor. The second is a booming domestic market. Third, the Chinese government has made energy infrastructure its top priority (not be confused with making climate change a priority).

Just how cheap is Chinese labor? Reliable statistics on Chinese workers are hard to come by, making it difficult to analyze China’s competitive strength. The U.S. Bureau of Labor Statistics estimates that Chinese factory labor costs just 64 cents an hour (workers in the city make about $1.06 per hour while suburban and rural manufacturing workers earn roughly $.45 an hour). This includes wages, employer contributions for benefits and social insurance. Although wages have risen sharply over the past five years, they are nothing when compared with the average compensation of U.S. manufacturing workers at $21.11 per hour. Renewable energy industries in China are creating over 100,000 jobs per year, which need skilled and unskilled labor to keep its massive domestic economy chugging along at a smooth 8% growth rate.

China’s demand for electricity is rising 15% per year, and unlike more developed countries, China does not have excessive legacy infrastructure complicating its investment decisions. According to the International Energy Agency, China will need to add nearly nine times as much electricity generation capacity as the U.S., resulting in huge economies of scale and efficiencies from large production. U.S. companies often need to decide between buying renewable energy equipment or continuing to operate fossil-fuel power plants that have already been built and paid for. In China, power companies are buying new equipment anyways. Thus, alternative energy is particularly attractive and increasingly price competitive.

The Chinese government has put policies in place to steer loans toward renewable energy. Bank loans are available at interest rates as low as two percent, made financially feasible by China’s 40% savings rate and bolstered by further government incentives and taxes. All electricity users are charged a renewable energy fee. The fee increases residential electric bills by .25 to .4 percent and to .8 percent for industrial users. The fee revenue is transferred to companies that operate the electricity grid to pay the cost differential between renewable energy and coal-fired power.

China’s wind and solar industries are clearly making moves, but still need to grow structurally to create a cost-effective and sustainable energy system that will support its vast energy needs. Grid operators are not reimbursed for the cost of building power lines to wind turbines and other renewable energy producers, many of them in remote areas. Transmission losses are high for sending power over long distances to cities, and over 30% of China’s turbines are not yet connected to the national grid. Many of these wind turbines were built in the last year and construction has not caught up.