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Introduction
The 'greening' and 'cleaning' of America will not come without unsettling at least a few well-established brands for a young upstart or two that ends up tipping some flat-footed giant on its head. Power dynamics are once again shifting. Buyer and supplier relationships are evolving, and a lot of people are interested in changing things to the color of green and the tune of 'clean'. If it's not organic they don't want to buy it, and if it's not green and clean, they don't want it. However, not until the bottom line starts looking better by going 'clean' or 'green', will we see increased and widespread adoption of new technologies and services - but we do seem to be getting closer to the tipping point.
I just read that Starwood Hotels recently signed a Master Energy Services Agreement with Fuelcell Energy, Inc. and Alliance Power. If that doesn't drive the broader hotel industry into scurrying around to get 'cleaner' faster, I don't know what will. And as one banker in Europe was recently quoted as saying (pardon the paraphrase) on www.planetark.com - basically that it was time the proponents of green put aside the morality/environmentalist play and instead got down to number crunching and making sure the numbers do the motivating rather than 'hype', because the hype won't get people to change, but real change to balance sheets will. As a friend just today said to me - which I heartily agree with - it's not going to be called 'organic' architecture at some point, or 'sustainable business' - it'll just be the way things are done. Our water filtration systems, heating systems, and plumbing systems will have some sort of 'eco' tag attached to them, denoting them a member of the big green family, but my baby niece will grow up never knowing, unless someone tells her, that once upon a time her washer and dryer DIDN'T have a 'green' sticker on them denoting their environmental awareness as machines.
It's actually a very interesting time to watch the lifecycle of technologies - from birth in the 'lab' to development as brands, there are all kinds of interesting companies out there…www.nanosolar.com, to www.steelcase.com, to name just a couple. The interesting questions are a) what technologies will consumers grab onto, and b) what will be the 'new' brands that consumers will grab onto/which old ones will they remain attached to and why? c) How much will consumers absorb the idea of 'green', and how much will it be enforced? And at what point will the pendulum swing a bit in the opposite direction again? There's enough momentum today, with one environmental crisis after the other cited, raising alarm bells that we have to take care of Mother Earth, for the greening of America to finally have come of age. Even investors are interested. I don't find this surprising, given that in the post-'90's boom and bust that occurred, everyone sort of wanted to wash themselves of the grime from the boom of the '90's and the lack of conscientiousness of that period of time, too.
Companies I talked with this month included Riverworks, Krystal-Planet, Terrapass, Gulftex, and Interra Project and RAN (Rainforest Action Network). Actually, I just received my decals in the mail from Terrapass. Great idea - kind of like getting everyone to wear the yellow "Live Strong' bracelet that Lance Armstrong and his foundation have made so memorable and coveted. That's part of what's interesting, too. It's become VERY cool to be clean and green.
So, to get down to business, my reason for writing this monthly note (or report, if you want to call it that) is simple: though I realize that 'clean' (or 'green', whichever moniker you prefer) really wasn't anything new per se, I have my own questions, as a consumer, and as a former technology analyst for a well known analyst firm, as to what 'clean' technology is all about, and who's in the game, and what 'clean' really means, anyway. I wonder things like, is the production process also considered environmentally sustainable if I buy from this eco-friendly technology company? Is the packaging and the packaging process the same? And what are these firms' motivations? Is it strictly financial, trying to get into new markets? How many companies are having to sit down and go through all their 'old' technologies to see what salvageable to make it into the 'clean' cut, vs. that which they will have to bail on? Sustainability reporting has become hip, and it makes me wonder how Kentucky Fried Chicken might stand up in terms of their use of 'clean' tech relative to other old service companies out there and the technologies they're using, and who's determining that? How do you determine the greenness of a river restoration project gone bad, when you have to call in a company to restore the damage done by the previous 'restoration project'?
As long as the pendulum swings in the direction of more conscientious consumer, the hype only goes so far, and as usual, generally serves the market's constituents well, but without further analysis, and an even-handed review at that, the hype doesn't mean much to enough people unless they are somehow personally affected by a service or technology enough to become a evangelist of that product. More to the point, many smaller 'clean' or 'green' businesses don't have the marketing budgets to expound upon the virtues of their businesses to would-be purchasers of their products. I'm just one person, really interested in learning more about some of these companies out there…and interesting in educating myself and others. Take my input for what you will. I hope it provides some interesting insight for you that you can in turn use in your own lives and occupations.
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On Trends
As www.globalcitizencenter.org pointed out recently, (though I've paraphrased a few and added also some of my own ideas to this list of trends they published):
- Expect 'old' technology houses to start reviewing their technology arsenals to determine what needs to go, what can be adapted, and what will continue to bring customers through the door.
- Green building is spreading widely in the construction industry and its price competitiveness is improving.
- Social venturing is shifting monies from traditional equity and debt instruments to real estate and green building investments.
- The nonprofit business development community is gaining in savvy, acceptance and increasingly sophisticated.
- Hype is finally being replaced with positive examples of alternative system structures and models.
- There is a growing movement focusing on building the local, green economy (BALLE, Inst. for Local Self Reliance, Local Exchange, Buy Local Month, sprawl-busters.com, etc.), in sharp contrast to the transnational corporation.
- Environmental 'emergencies' are helping to create urgency around the transition to conservation economics.
- Portable power should be a substantial market opportunity - whether spawned by work in the photovoltaics field, in fuel cells, or whatever.
- Green economy sectors (solar, wind, organic, recycled) are increasingly price competitive and popular. These sectors are well organized on a sectoral basis (solar energy associations, Hemp Industries Assoc., wind energy associations). Wind-hosting is gaining in popularity in certain communities around the country. Eco-hosting companies and eco-energy companies are popping up everywhere. If you want to offset your 'dirty' electricity bill with 'clean' electricity, put a chunk of change every month toward renewable energy projects in your area. That's what companies like www.krystal-energy.com are offering, and www.pristine-power.com.
- City governments are realizing that downtown infill development, especially along mass transit corridors, makes more economic and social sense than continuing the sprawl that characterized the past half century, and they are passing measures designed to foster that kind of redevelopment (S.F. Mid-Market Redevelopment Zone).
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Gulftex
The Pulverizing Air Dryer
www.gulftex.net
GulfTex, says John Teague, has a major breakthrough in industrial processing. Their technology, the Pulverizing Air Dryer (PAD) eliminates 80 % and more of energy consumption in many basic industries while producing a product with 50 to 80% higher value.
How They're Doing It
GulfTex is placing emphasis on leveraging regional JV partners more for marketing than they are for financial purposes. The structure of the JV is such that regional joint venture partners are required to fund the initial plant going into that region - which earns them the PAD exclusivity in that region.
Industries they're targeting: the paper mill industry; municipal sludge and fermentation ethanol production.
Examples of how their PAD works:
Re. Fermentation Ethanol Production: the PAD dries the wet solids using less than 8% of the natural gas that a thermal dryer consumes while producing a dried product with 30 to 50% higher protein. A 40 million gallon per year ethanol mill can save $2 million / year using this method, says Teague. In addition, such a mill produces over 5,000 tons per year of VOC's without the PAD and under 45 tons / year with the PAD.
Paper Mills: Paper mills produce 400 to 1,500 tons / day of sludge with 60% and higher moisture content. Before the PAD came along, their only options have been to landfill or to burn this wet material at a huge net loss of Btu's. With the PAD, this sludge is dried at 40% under their present disposal costs, plus produces a product that sells at $50.00/dry ton. A typical mill swings from a loss of $3,200 to $ 30,000/day to a net profit of $ 450.00/day. In addition, the emissions produced from burning 250 to 900 tons/day of water in the sludge is removed.
Municipal Sludge: Due to liability and market conditions for compost, many municipalities are looking at other options for their sludge disposal. Compost in particular has become a glutted market in many regions. Cities pay $20.00 to $60.00/wet ton for sludge disposal of 200 to as high as 2,500 wet tons/day. The PAD, in combination with an off the shelf gas-to-liquid technology can take this municipal sludge and make fuel ethanol on a gasification/gas-to-liquid at a total cost of under $ 0.40/gallon, making us competitive against fossil fuel with no subsidies or tax breaks needed. Two 500 gallon/day pilot plants will be installed in the Midwest later this year.
Pilot Projects and Customers
GulfTex is about to do a full scale plant at the Appleton Paper Mill in Ohio for Waste Alternatives, with the next step being a pilot plant there for gasification to produce fuel ethanol. Other projects will happen later this year in Pennsylvania and Kansas
Pricing
$6.50-$7.50/wet ton, depending on volume, and $12/wet ton on received sludge. Initial cost of each project: Initial cost - 1.5-1.7 million per project. This yields an annual EBIT to the JV of 60 to 80 % of the capital cost of the PAD.
Funding
Self and venture capital. Most governmental agencies and venture capital sources, according to Teague, have shown little to no interest in funding the company, indicating the company is too far along in its growth path to take in government or incubator level sponsored funding. However, the company has recently raised $ 9.7 million in project financing and has raised about $ 5.6 million in equity to date.
Average Deal Size Targeted
GulfTex is targeting $ 1.7- $ 3.5 million deals - the equivalent of handling 120-250 tons of sludge a day. "We're looking at those companies that have the right size facility for the volume of sludge we target, Teague noted. "Our ideal targets are those companies handling up to 250 tons of sludge per day."
The straight drying market, Teague says, would be a 400-600 million dollar market/year in the U.S., not including the aftermarket.
Advisory
Having followed this company for a little over a year now, Teague and his team are on the right track. They have hit on a sore spot and should be able to capitalize – and clean up – on business, as a result.
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Terrapass
Will It Become A Tax That Gets Levied On Everyone?
www.terrapass.com
What was started as a class project in problem systems analysis and design for 41 students at Wharton has turned into an idea to retail carbon credits, says CEO Tom Arnold. "Clean up after your car" is the idea behind Terrapass that Arnold and his team hope will resonate with a growing group of consumers. The class sold its first Terrapass on November 23rd. Class only started October 12th. In 8-9 weeks, the class project grew from a concept to revenue and profits, now boasting about 300 Terrapass decal-carrying members.
TerraPass is a product of Benven LLC - a company owned and operated by students at The Wharton School of the University of Pennsylvania. Benven's mission is to develop and market economically viable products that combat global warming by mitigating human-made environmental emissions.
TerraPass was initially created as a project for the course Problem Solving, Design, and System Improvement (OPIM651) taught by Professor Karl Ulrich, with teaching assistant Karan Girotra, and with entrepreneur George Favaloro. The students are all MBA candidates at the Wharton School of Business, with diverse backgrounds in operations management, finance, technology and entrepreneurship.
Products
Using TerraPass, Arnold says consumers can take responsibility for their environmental impact by funding clean energy projects that directly offset the carbon emissions from your car. Let's say that your car puts out 6 tons of CO2 per year. When you buy a TerraPass, you eliminate 6 tons of CO2 from the atmosphere by funding reductions in carbon output elsewhere. In this way, you directly counterbalance the impact of your driving, without making any changes to your car. The company offers four products, all ranging in the $30-80 dollar range. Their best-selling products so far? Efficient and standard. Why? Terrapass' CEO reasons that people who've already purchased smaller cars probably feel they've already made a decision to be environmentally friendly. So they aren't the 'target' per se. With the Efficient product, consumers' cars average 29-40 mpg, and the product term offered is 1 yr/12,000 miles, providing 8,000 lbs CO2 of offset. That's $39.95 inc. tax + shipping. The company's Standard product is offered for cars averaging 19-28 mpg, same terms, but providing 12,000 lbs CO2 offset. The cost of that product? $49.95 inc. tax + shipping
Buying most of their volume on the CCX exchange (www.chicagoclimatex.com), the first multi-national and multi-sector market for reducing and trading greenhouse gas emissions, Terrapass is one of the many companies (www.chicagoclimatex.com/about/members.html) committed to emissions reductions and offset projects around the country.
Strategy
Direct mail, email marketing, event marketing. Targeting NGO's and not-for-profits first, which should add credibility to the brand. Partnerships with dealers.
Market Message
Terrapass' CEO has one message to deliver to consumers: consumers can now take responsibility for their greenhouse gas emissions and offset efficiency - and they get to feel good about doing it, too. If their fast progress is any indication of the market opportunity for this small company, expect to see them making some real impact in the coming months.
Market Impact
From a case study point of view, Terrapass has certainly proven that there's definite interest from consumers in making a contribution to decreasing environmental pollution. Terrapass has already demonstrated their appeal to a broad political spectrum in its short life. What they're finding with this class 'case study' is that some carbon reduction mechanisms definitely resonate with a broader public - and some don't. Much like the idea of wearing a yellow "Live Strong" wrist band, as promoted by Lance Armstrong's foundation - a concept which very quickly became popular with the popularity of the man behind the bike, Terrapass is aiming to make a statement and change the way people view driving their cars. And, with any additional products coming down the pike, who knows…perhaps changing the way people view driving their motorcycles, and other vehicles, too.
Competitors:
Future Forests
Native Energy "the best, and well run", according to Arnold
EDA Environmental
www.Carbonfund.org
Advisory:
They'll be on the lookout for funding. CEO seems to understand his market quite well. Great promotional concept, the decals look great, and are very nicely done (just got mine), and it leaves one with the expectation that with such a simple idea, Terrapass is onto something. They're certainly in a good position to help push 'branding' and 'promotion' of the idea behind Terrapass further into consumers' consciences.
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Krystal-Planet
The Freedom Plan (Get Consumers to Pay For Clean Energy, Happily)
www.Krystal-Planet.com
“Wind energy is very predictable…we can predict 24 hours in advance, and even potentially up to 20 years in advance [how much we’re going to be able to produce].”
- Troy Helming, CEO, www.Krystal-Planet.com
Channel Strategy
The Freedom Plan. A $2 trillion dollar plan to convert the American population to 100% clean power in 10 years without government subsidies or legislation. Company founded to capitalize on the grass roots demand for wind power and reduce dependence on foreign oil. Going to market with a three-pronged approach: a business-to-consumer play (Krystal Planet), a business-to-business play, (Pristine Power) and a not-for-profit play. (Renewable Energy Investment Trust and Save the Planet USA).
Through Pristine Power, to sell to corporations, getting businesses to use wind power, and serving as channels of influence. The company has also established a renewable energy investment trust so that institutional or private investors who want to invest in wind projects around the country may do so.
Team
15 full-time employees
3500 independent ECos (market consultants)
Financials
KP has raised almost 1.5 million to date. “We hope to go public…wind energy is the fastest growing sector, and there’s more equity investment out there than projects currently," says Helming.
Audited currently by Grant Thornton, which also certifies all green tags sold.
Objective
A business-to-consumer play, Krystal-Planet's objective is to get 1 million customers on clean power. This would virtually guarantee, says Helming, the success of the Freedom Plan. "2% market penetration is really where we need to be to get to the momentum stage. America already has 1 million people paying a little extra to buy green tags - in Europe, there are approximately 35 million people already doing this."
To create 10,000 financially independent families. “We’re the first company to enter the green field using viral marketing." It's kind of like Amway's model, but turned on its head to drive development of renewable energy projects around the country instead.
How They’re Doing It
“We sell the power into the grid on the electricity spot market. We make our money on our $30 Green Tag – there’s a small margin there. And on products. And largely on the $20 per month paid by those using our Global Business Center, because there’s not much overhead for us there," says Troy. The bottom line is we’re doing this to build more wind turbines, and this is the fastest and most efficient way to do it.
International customers can pay via a virtual money card which allows people who can’t get a U.S. credit card to participate. This card can be used at any ATM anywhere in the world. To date, the company has customers in 17 countries around the world.
Their Backend
“We originally bought software from Multisoft in Florida, and now, with 3 full-time programmers, we have developed the software such that it allows any of our ECo’s (consultants) to see customers in real-time. It operates on both Windows and Mac, and is completely web-based,” says Helming.
Where They’re Getting Their Turbines
“GE – who manufactures in Tahachapee, CA – they’re number 2 in the world, having bought the business from Enron, with 60% market share, and Vestas, as our second choice, in Denmark – as the world’s largest wind turbine manufacturers. Both offer long-term warranties, certified to last 30-50 years. They have proven equipment, and are very sophisticated. GE recently completely sold out of wind turbines.”
Average size of wind farm: 100 megawatt. Cost – $100 million dollars ("Whereas a coal plant will cost 2 billion at delivery,” Helming noted in our conversation.)
On Wind Software Models
“One of the best companies is Global Energy Concepts out of Portland, Oregon. And Gharrad Hassan out of San Diego.”
Products
FutureWindSM – Getting customers to pay for future wind projects. “It’s a futures type of Green Tag”- you buy a Green Tag on a wind turbine that has not yet been built.
How does a consumer get started with Krystal Energy? “Sign up for 30 bucks to offset all the pollution for your whole house."
Competitors
Helming cites Green Mountain Power out of Austin, Texas as their largest competitor, but they include natural gas in their green tags, which he does not feel is green.
Advisory
Watch for this company to become even more successful than it already is, and likely to take in venture capital funding as well. If Pristine Power and the Trust takes off, which it should, Helming and his team will do a great amount of good. I also noted to Troy that he had to be careful with his ECos in their marketing of wind power, as being 100% wind-powered is not the same as saying "I'm paying x dollars per month to fund renewable energy projects around the country." Contributing to creating financial independence for families and individuals who want to make a difference, Krystal Planet has already made a significant contribution by promoting the development of wind power. Look for Helming's book, "The Clean Power Revolution" for more. Helming is very knowledgeable on the industry, and also on the opportunity.
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Links
www.organicarchitect.com
www.sustainablebusiness.net
www.ecomoto.com
Now if only someone would do this business on a MASS scale…Businesses owner, John Schlee, committed Eco Moto to the e2 business program. The Eco Moto inventory includes: electric scooters, fuel-efficient gas power scooters and electric bicycles. Besides selling energy efficient transportation, Eco Moto adheres to the e2 businesses environmentally sustainable practices and has implemented the following procedures in their everyday business dealings.
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Next Month
Sensicore, Nanosolar and Intematix, Elfon, Steelcase, Rainforest Action Network, and Photovoltaics - Check out www.photovoltaic-conference.com. Also: we’ll review Rastra, Nowhouse.org, and R-Control and SmartWrap.
My interests (so if you think there's a company I should talk to, to learn more about, please send me an email or give me a call to let me know.) In terms of an editorial calendar…well, I have an idea to start one, but for now, I'm not publishing one. Ideas, thoughts, suggestions, criticisms welcome. E-mail: lara@laraabrams.com. Thanks for reading.
Green building and industrial goods
Renewable Energy
Resource-efficient products
Alternative transportation
Clean production and packaging technologies
Ecological home and office products
Organic/recycled fiber products
Environmentally friendly appliances
Eco-tourism and travel
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