I am reading Mark Stevenson’s book, An Optimist’s Tour of the Future.  He quotes Ray Kurzweil, “Our intuition is linear and I believe it’s hardwired into our brains.”  This linear bias bangs hard against the “Law of Accelerating Returns”.  Technological innovation feeds upon itself.  Innovative growth is not 1+1+1+1, but rather 1+2+4+8.  Although the ubiquitous iPhone is a reminder of the how explosive innovation can be, we look to the future dreading that positive change will be too little, too late.  Our linear bias leads to judgments influenced by static inputs rather than future values which will be determined by innovation replicating exponentially.  The commercialization of algae biofuels is an important example.

The algae business is basically farming.  The output of the algae agricultural system will be used to produce “drop-in” biofuels as well as animal feed and a myriad of other products.  If all technological innovation were frozen at this moment, the algae biofuel business would most likely not be commercially viable.  However, just like corn and pigs, improvements are being made over time. 

In my lifetime the yield per acre of corn has tripled due to improved genetics and production technology.  What took years and decades to happen with grains and livestock is happening over weeks and months with algae.  The algae industry is not only benefiting from the explosive technological innovation of the past decade, but also from the huge universe of algae being screened to identify commercially viable strains.

There are over 800 breeds of cattle.  The gestation period for cattle is about the same as humans.  Heifers can be bred at about 12 to 14 months.  Now imagine a breeding program with cattle drawn from over 5,000,000 different species which can produce a new generation every 30 days.  With existing technology, genome engineering and capital, the accelerating refinement of super strains is rapidly advancing the algae industry.  The algae of the very near future will be as dramatically improved as the pig of 2011 compared to his scrawny ancestor of the 1950s. 

La Jolla is at the center of the global algae Petri dish.  Greg Mitchell, director of the Photobiology Group at the Scripps Institution of Oceanography, has a global reputation as an algae pioneer.  The San Diego Union Tribune wrote about his exciting life, “Algae visionary imagines a future that’s green — literally”.   Click here to read.

The two largest equity fundings for algae biofuel development were done in the La Jolla zip code (Synthetic Genomics and Sapphire Energy).  On Wednesday I attended a press conference for California Assemblyman Nathan Fletcher who was named chair of a new committee that will focus on creating a climate for jobs.  Sapphire Energy was selected as the site for the event to showcase the importance of innovation for job creation.  After the remarks we toured Sapphire’s labs.  Their time line is clearly stated.  “We expect to be at demonstration scale in three years and at commercial scale by 2018.”  Sapphire Energy has received $54.5 million in loan guarantees from the USDA Biorefinery Assistance Program to build a plant to turn algal oil into jet fuel.

The challenge for most disruptive technologies is finding a deep-pockets customer that is sufficiently convinced to make a meaningful buying commitment.  The algae biofuels business has that in the U.S. military.  The military’s motivation is both financial and strategic.  They know that their greatest vulnerability is dependence on imported oil.  Their bill for fuel and electricity last year was $20 billion. The prospect of growing fuel in Hawaii and Southern California versus shipping oil half way around the world has a strong appeal.  Of greatest importance to the algae biofuel industry is a military making their decisions based on future economic and strategic plans unimpeded by the wrong-headed influence of politicians. 

The military’s impact on accelerating the growth of the algae biofuels industry will be enhanced if legislation is passed allowing the Pentagon to sign long-term contracts for up to fifteen years as opposed to the current five-year limit.  A long-term commitment from a highly-rated buyer makes deal financing substantially more doable.  Members of the aviation industry testified at a Senate Aviation operations, safety and security subcommittee hearing requesting legislation enabling the Defense Department to enter into long-term contracts for fuels.

To learn more about the local burgeoning biofuels cluster go to the San Diego Center for Algae Biotechnology (SD-CAB).  Greg Mitchell was one of the founders.  SD-CAB along with UCSD, SDSU, CleanTECH San Diego, and BioCOM collaborated to launch Educating and Developing Workers for the Green Economy (EDGE) focused on educating a next-generation workforce in green technology.

Proposition 23, which would Suspend AB 32, the Global Warming Act of 2006, is on the November 2, 2010 ballot in California.  Assembly Bill 32 (AB 32) is known as the Global Warming Solutions Act of 2006.  The act, passed by the California State Legislature and signed by Arnold Schwarzenegger, is California’s landmark clean air legislation which requires that greenhouse gas emission levels in the state be cut to 1990 levels by 2020.  As part of this process, utilities in the state are required to obtain a third of their power from renewable sources.  If Proposition 23 is passed, AB 32 would be suspended until the state’s unemployment rate drops to 5.5% for four consecutive quarters.  To put that number in perspective, California’s unemployment rate, which currently hovers around 12%, has been at 5.5% or below for four consecutive quarters just three times since 1980.

Arguments for Prop 23

The arguments for Prop 23 are summarized here in a column quoted from the Orange County Register:

“By approving Prop. 23, voters can stall implementation of the Global Warming Solutions Act of 2006 and perhaps save more than 1 million jobs until state unemployment falls to 5.5 percent for four consecutive quarters.  Unemployment has been above 12 percent for more than a year.

We prefer permanent repeal of the 2006 law. For now, we urge at least a delay of its disastrous economic effects and infringements on private-sector freedoms.”

Arguments against Prop 23

Quoted here from The Herald (Monterey County) 

“California achieved greatness through innovation and the success of clean industries such as aerospace, high tech, film and education.  At the moment, it is poised to lead the nation again through the development of various clean-tech ventures, but that would be wiped out overnight through a ballot measure intended primarily to help the shareholders of Tesoro and Valero and Occidental Petroleum.”

My Take on Prop 23

Consider some facts on California’s clean energy sector

• The number of clean energy businesses and clean energy jobs has increased in California 45% and 36%, respectively, in the period between 1995-2008.  This rate of growth is 10 times more than the state’s average job growth rate.
• California has over 12,000 clean energy businesses and 500,000 people are employed in clean energy occupations.
• With over $9 billion in venture capital funds, California’s clean energy firms have received 60% of venture capital funds in North America

With such data, how can anyone make a plausible argument that AB 32 will lead to more job losses?   The manufacturing jobs that proponents of Prop 23 are trying to win back are gone – forever.  The globalization of commerce has made low wage countries the predominant destination for these jobs.  Simple economics dictate that these jobs will continue to go to low wage countries.  To stay ahead of the curve and grow our country’s GDP, we must continue to innovate and create products and services that can’t be won over by lower labor costs.  Research and development in the clean energy sector will contribute towards that great cause and create more jobs, not reduce them.  California is the leading state when it comes to cleantech and if Prop 23 were to pass, it would be a huge blow to the development of renewable energy and energy efficiency all across the country.  If you’re a California resident, do yourself and your neighbors a favor and vote NO on Prop 23.

Greener Dawn provides training and lead generation services to energy auditors, home performance contractors, and solar installers nationwide.  You may contact Courtland Weisleder at cweisleder@greenerdawn.com

We believe the definition of renewable biomass within the Energy Independence & Security Act of 2007 should be changed to remove the term “non-federal” from Section 201 (1) (I) (ii) and (iv).  The current definition prevents almost all federal land biomass – such as trees, wood, brush, thinnings, chips and slash – from counting toward the Renewable Fuel Standard.  Federal lands, particularly in the Western U.S., are at increased risk from wildfire because of the lack of regular thinning, the propensity to fight all fires regardless of size or risk to life and/or property and the impact of infestations such as the western pine beetle.  Changing the language to include the sustainable management of federal forest land will not only decrease the fire danger, it will enhance the overall health of the forests.  The woody biomass extracted from federal lands will also increase the volume of renewable fuels available to the country; thereby, incrementally decreasing the amount of imported foreign petroleum.

As would be expected of a 33 year veteran of the House, the Congressman is both witty and articulate. He had a chance to demonstrate his listening skills when local business leaders told him what was needed to sustain the San Diego innovation economy. Duane Roth, CEO of CONNECT, stressed the need for effective intellectual property protection with enforcement home and abroad. A senior Qualcomm executive made the case for enlightened immigration regulations. He noted that over the years Qualcomm has recruited many of the “best and brightest” only to lose them when their legal right to remain in the US expired. In each case the U.S. lost a tax payer and Qualcomm lost a skilled, experienced employee who in many cases became employed by an overseas competitor to Qualcomm.

Link to H.R. 2454:   American Clean Energy and Security Act of 2009