Weekly Insider (Dean Kamen, Water Invitation & A123 Battery IPO)

Here’s three things for your Labor Day weekend.

First, join me and Dean Kamen at the NanoBusiness Conference next week in Chicago at www.nanobusiness.org

Second is a private invitation to listen to a Lux Research webinar: “Lux Research Water State of the Market: Global Energy -- Unshackling Carbon from Water” on Tuesday, September 15, 2009 11:00 AM - 12:00 PM EDT Register here: https://www2.gotomeeting.com/register/269154627

The huge water footprint associated with energy production plays second fiddle to worries about carbon dioxide output in the popular imagination, but it is a vitally important consideration in our increasingly parched world. New energy technologies – from advanced methods of extracting fossil fuels to low-carbon renewable energy – may look appealing, but they exacerbate water worries, creating ugly trade-offs between carbon and water. As water stresses, multiply energy technologies’ water intensity will often play as great a role as their carbon footprint in determining the future makeup of the global energy mix.

In this webinar, Lux Research will examine conventional and alternative fuels and electricity generation and investigate the myriad of technologies – including water reuse and recycling, increases in energy production efficiency, and large-scale distribution – and answer the following questions: How much water is used today to produce electricity and fuels through conventional means? What is the relationship between water intensity, carbon intensity, costs and reliability for alternate energy sources? How does the water relationship affect the viability of biofuels and alternative methods of extractive fossil fuel? What technologies and approaches are available to reduce energy related water intensity while allowing for a reduced carbon footprint? What are the implications of water intensity on the future roll-out of energy technologies? Which companies stand to win or lose and how will this affect investors?

Third, here’s fellow Forbes columnist Mark Mills citing Lux Research’s battery team in his newest piece: “Battery IPO Could Recharge New Issue Market”

“Confidence, the Rorschach of economic indicators, is a weird thing. Easier to recognize than define or measure. We may soon learn something about confidence in our economic future via the market's reaction to the forthcoming IPO of A123, a Boston-based energy green-tech company just over half a dozen years old with cool new MIT-derived battery technology.

The Conference Board's Consumer Confidence Index (CCI), benchmarked as 100 in 1985, dropped to 65 in 2008 and plummeted to 25 earlier this year, even lower than post 9/11. We're a long way from the heady days of confidence exhibited during tech mania when the CCI approached 200, but the index has been tracking up recently, hitting 47 in July and 54 by late August.

For calibration; the index was 100 in 1985, the year Nintendo came out; one year earlier Apple had launched the Mac at a time when only 40,000 people in America used cell phones.

Confidence both reflects and creates the economic future we want more than any single characteristic of the human enterprise. Of course confidence is what drives people to create new companies, and jobs, to compete with big established guys, and, apropos of emerging from our Great Recession, let us not forget that small businesses with one to 499 employees account for nearly two-thirds of job creation..."

The full article can be found on Forbes.com, to be linked to the article click here.

Weekly Insider (Clever China Commodity Charge)

Everyone looks to explain things away. China buying commodities? It must be growth, they say. Maybe decoupling is real. I say not. Yesterday's NY Times headline, "China Fills its Pantry With Global Commodities". Commentators cheered on China's consumption. If this is the consensus view, it’s likely to be wrong. This isn't consumption. It's investment. It's diversification. Away from the US Dollar.

We have a debt overh ang. The options are simple: pay your debt or don't. You can pay it in cash or kind. Pay it in cash, you're clear. Pay it in kind (collateral—whether a house or a stock), you may be 'cleared out'. Since most debtors can't pay, lenders must either take debtor's stuff by seizing and selling their collateral or take their stuff by converting their debt to equity. Rule of law and bankruptcy allows for orderly procedure of this last option, unless the rule of law is suspended by government to prevent riots and revolutions from the working class that elected the government. The US government isn't really willing to let the prices of stuff (collateral) fall. So the other option is to let the value of the stuff that the stuff is valued in (ie. dollars), fall. We devalue our houses or we devalue our dollars. We do the dollar-devaluing thing by printing more of them. Many, many, more of them. More supply, less value. This is inflation. When there is a lot of money going around, it will eventually find itself into the prices of some other stuff. This way, the pain gets spread to those holding lots of dollars—like say China.

China officials have already jawboned the US publicly about maintaining a strong dollar, about finding alternative stores of currency reserves. And THAT dear reader is my opinion of what China is doing. They are doing what Dave Swensen did when he arrived at Yale as a 31-year-old. He looked at Yale's holdings, saw 50% of their equities in US Stocks and the rest in US bonds and thought that no matter how diversified Yale was within those two asset classes, having a total of 90% in US marketable securities was definitely NOT diversified. He embarked on, and others later emulated, the now famous endowment model—diversifying into commodities, real estate, private equity and active managers—that has outperformed and compounded Yale's endowment to be the envy of institutional money managers.

China may be diversifying its reserves into hard assets. If inflation comes, the value of those assets, especially in dollars will rise. If hyperinflation comes, the value, especially in dollars will skyrocket.

Clever. And what you might expect from the academic pedigree that comprises their government officials. In the US ours are mostly lawyers and career politicians. In China, theirs are mostly engineers, geologists and mineralogists. Who's got the edge?

Click Here, To get access to the newly launched Forbes/Wolfe Emerging Tech Repcort (covering nanotech, cleantech, and all physical science breakthroughs)

Weekly Insider (A sit-down with Obama's new Secretary of Energy)

Obama's High-Tech Energy Pick

By Josh Wolfe

Below is an interview after sitting down with Nobel laureate Steven Chu to talk the future of energy and investing. President-elect Obama just nominated him as Secretary of Energy. Here’s his background

Dr. Steven Chu is the director of the Lawrence Berkeley National Laboratory. Additionally, he serves as a professor of physics and professor of molecular and cellular biology at the University of California, Berkeley. Previously, he was at Stanford and Bell Laboratories, where his research included tests of fundamental physics, polymer physics, single molecule biology and the development of methods to trap and cool atoms with laser light. He has become active in the energy space and is co-chairing an InterAcademy Council study, "Transitioning to Sustainable Energy." Chu has received numerous awards, most notably the 1997 Nobel Prize in physics. He received A.B. and B.S. degrees in mathematics and physics from the University of Rochester, a Ph.D. in physics from UC Berkeley and 10 honorary degrees.

Forbes/Wolfe: Energy and environmental issues are the rage, fueled either by rhetoric and emotion or reason and empiricism. How do you see the debates shaping up?

Chu: There's three key things. First, there is an energy dependency issue reshaping worldwide politics. The U.S., for example, spent $250 billion importing fossil fuels in 2005--a significant fraction of the wealth we have in the U.S. While we buy from Canada, others buy from Venezuela, and others from Iraq--it's a commodity. So our foreign policy is highly directed in trying to get guaranteed access to oil.

The other component has to do with security. Zurich, for example, is extremely vulnerable to the gas supplies in Russia. And we in the U.S. are no longer a net exporter of natural gas. So there is sort of an economic competitiveness. As you spend more money on this stuff, everybody wants to keep the cost of energy, electricity and gasoline down. But those costs are low relative to virtually all other countries.

Another component is that those companies that took this issue head-on realized that they could actually become more economically competitive. Wal-Mart decided to spend less on energy and go greener, which will make it more economically competitive. Dow Chemical decreased its energy costs of producing its carbon components that it buys in the forms of natural gas and oil. And it decreased its energy input for producing certain types of plastic by more than 25%. This can save the company hundreds of millions of dollars.

Wolfe: What about the financial players?

Progressive investment houses like Goldman Sachs are beginning to see that the more energy efficient you are, the more competitive you will be. The long-term view is that energy is just going to get more expensive. So these companies are positioning themselves so they can be more competitive.

Wolfe: Even if we make a single device more efficient, the proliferation of new applications found by those devices suck up electricity such that the aggregate amount of energy we use always increases.

Chu: Fair enough. I think there are certain cases where the so called "rebound effect" you are talking about is true. The first pass of remote controls were very inefficient until we started to realize they were gobbling up tens of milliwatts, and now there are laws being passed in California because these were so called "vampire" devices which sucked lots of energy.

Refrigerators are now 4.5 times more efficient than they were in the 1970s! And even though the refrigerator itself went from an average size of 18 cubic feet to 22 cubic feet, the inflation adjustment price went down by a factor of two.

Wolfe: But what do the figures look like when you analyze the total aggregate energy used then versus now?

Chu: It depends on which state. In California, it's been flat. From 1975 to 2005, it's within 10% per person what we've been using for electricity. The rest of the United States went up by about 60%. Now that's another myth that people propagate. If you are going to become more energy efficient, you need to compare energy use to GDP, and in the years 1975 to 2005, the GDP in California went up by 90%--1.9 times higher GDP. It's because of appliance and efficiency standards that we've been able to keep our energy usage relatively flat, and considering California is on average a warmer state, that's pretty amazing.

Wolfe: OK, now let's turn to the environment.

Chu: The carbon in cleaning up the environment weighs very heavily on my mind. The earth is warming up faster than we thought, and the ice caps are melting faster than we thought. The world average for glacier melt is 1.2 meters per year, but in Greenland it's much faster. Most of the people in the world climate community think there is about a degree of warming left if we turned everything off now.

But there is a big push to keep it below two degrees. If you go higher than that, there are other tipping points, especially the release of carbon in the tundra and the things frozen in the tundra region, and that tipping point means it becomes very nonlinear and all of a sudden--boom!--there is a big hit of CO2 that is caused by the climate warming. That would mean a very high probability of all of Greenland melting. If that were to happen, Bangladesh would be gone, New Orleans gone, and probably part of Florida. This would not be good.

Wolfe: There's a myriad of solar approaches from thin-film to nanostructured. What's the key breakthrough we need?

Chu: We need a factor of two or three times better, and you'll see every box top warehouse putting it on their roofs. That kind of efficiency approaching $1/watt will make it happen. On hot summer days, you'll charge a lot for electricity, which makes sense for utility companies because everything boils down to return on money invested. If we get a factor for three to four times improvement in efficiency and cost per watt, then homes will adopt solar rapidly, as it will start paying for itself in less than 10 years.

Special Offer: Motorola has stumbled badly in recent quarters, but now the company has announced a new joint venture with Ericsson.

Wolfe: What are the odds we see a breakthrough this year or next?

Chu: Pretty low, maybe 1%. But a lot of smart people and a lot of money are going into this.

Wolfe: What about the impact of nanotech?

Chu: That's really heavy in our program, and that's because we're very good at it. You can rewrite the book of what's possible in terms of materials capturing photons and turning them into electrons and getting them into electrodes. The scale is so thin, literally 100 nanometers' worth of material. If we can make silicon a few microns thick, which is all you need because of new light-trapping techniques, the price will plunge.

So you get thin-film silicon technology or nano thin-films with spincast or wet processing techniques, and the scalability becomes very promising. Right now, it requires very high temperature, you need to refine with batch processing like baking cookies. But what you want is a continuous process. And that will drive down large-scale manufacturing costs.

Wolfe: I agree. I coined a word, "simplexity," to put manufacturing complexity into simple chemistry.

Chu: That's what we're trying to do. I recently visited Applied Materials, which started out just on integrated circuits but now makes thin-films for infrared coatings on windows. It's still very complex, with a sputtering vapor deposition process. And nearly all of our work here in photovoltaics is on new applications of nanotechnology. And as you look at emerging approaches like using biology to assemble or pattern nanostructures, because this area is moving so rapidly, the probability of having a big breakthrough is much higher than just trying to get silicon on a thin-film, because that's already been around for 60 or 70 years.

Wolfe: What is the focus of the new BP-sponsored $500 million institute?

Chu: UC Berkeley and Berkeley Labs, the idea here is that it's mostly on traditional route, grow biomass and extract energy. The important issue is, Can you develop better feedstock and avoid nitrate runoffs and water supply issues, and make the crops drought-resistant and make unproductive land be more productive and so on? The other side is, How do you take these long chains of polymer sugars and separate out the lignin from them? The lignin is actually a high-value compound, but you have to get it away from the sugars. Right now, we use hot acids, steam explosions. We want less energy intensive, and ultimately microbes that could break it down naturally.

Wolfe: What areas should we be focusing on?

Chu: Energy will become increasingly high-tech, generation and use. High-tech companies spend 10% to 15% of revenue of R&D, right? Well 10% to 15% of $2 trillion, which is what we spend on energy, is a lot of money. It's $200 billion. I'd be happy if we spent 1%, $20 billion. At $20 billion you go into nanotech solar, wind doesn't need more research; you just need mechanism for long-distance transmission lines. Capital should also be directed to power engineering, things like DC conversion and transmission technologies. There are longer-term things like fusion or nuclear fuel recycling, carbon sequestration--especially after combustion in coal plants.

Wolfe: What advice would you have for a young scientist?

Chu: Work on something you're passionate about. The likelihood of getting rich or a Nobel Prize is small. The single most important problem science and technology has to solve is this energy issue. Getting carbon-neutral energy in a cost-effective way, it's really scary.