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Green is Dead? | June 2011

Green is Dead! Are “they� right?

THE INTERVIEWS

Panasonic | Becoming the Green Electronic Leader. Jones Lang LaSalle | Building an energy efficient corporate future. Markit | Evolving Carbon Markets. Duke Energy | Still Bullish. Mohr Davidow Ventures | Investing Now


Letter from the Publisher



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n a time of hard economic choices, many are saying that “Green is Dead”. Their concerns are founded on range of issues from the reality that consumers are looking harder at the price than ever before, and political and technological uncertainty leave business unsure where to turn. In this issue, Maryruth Priebe interviewed corporate heads from around the country, and found some interesting results. Panasonic is betting on a green future: that is a future where homeowners and businesses take more control of energy costs, looking at generating as well as storage and efficiency. Jones Lang LaSalle is finding new intiatives that help businesses look to their energy future, and Mohr Davidow is finding investments in companies with a future vision. While many consider carbon markets to be a dead issues, Markit, a company that has created new markets in many products, sees an expansion in the type of products that are being commoditized. Finally, Duke Energy is bullish, continuing to invest and expand their mix of renewables along with traditional energy sources.

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or these companies, green isn’t a fad. It is a way of doing business that keeps them moving into the future, prepared for changes that believe aren’t likely— but already happening. We’re excited by their opinions, and look forward to hearing yours. Sincerely,

A. Tana Kantor


THIS ISSUE

is green dead? 04. Panasonic | Becoming the Green Electronic Leader. 08. Jones Lang LaSalle | Building an energy efficient corporate future.

14. Markit | Evolving Carbon Markets. 16. Duke Energy | Still Bullish. 20. Mohr Davidow Ventures | Investment Overview: Time Is On Our Side

 THE GREEN ECONOMY Green | 2011


“Panasonic has launched a longterm agenda to become the number one green business in the electronics industry by 2018, our company’s 100th anniversary.”



Peter M. Fannon Vice President, Corporate & Government Affairs, Panasonic Corporation of North America

And we’re doing that by three steps: 1) constantly improving the energy and eco-efficiency systems in our products, 2) growing our existing energy businesses, 3) and expanding into new energy businesses. So through those three actions, we believe our company is well positioned to provide products and support for an ever-greener economy around the world. We are bullish on the growth of alternative energy, new energy management systems, and all of the pieces that will make and environmentally sensitive economy work well at an improved lifestyle for people around the world.


What components have to fall into place for the green economy to become business-as-usual? Smart Grid

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think forward movement on the smart grid on a global basis gives us all a great reason for real optimism on advancing energy and eco improvements in the energy field. Many of the pieces to make that happen are already available. In the US, Europe, many parts of Asia—certainly Japan and China— governments are actively participating with industry to set the standards necessary to make smart grid inter-operability work seamlessly and efficiently. This means that a number of technologies won’t interfere with each other, but relate to and help manage energy in the home, office, school and government. Even utilities— those providing energy—will be ultimately able to produce in the most efficient ways, with the most carbon-neutral or no-carbon emissions. In terms of managing energy, Panasonic is already a well-established player in Japan, and we’re working with a number of partners to develop energy management systems in other parts of the world for home and small office use.

Energy Storage

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e also make products which create, store, save, and mange energy. In Japan, we launched a fuel cell co-generation product for the home – a 1 kW generator that uses city gas—essentially methane—along with air from the environment. So for a typical Japanese house, with four people, it can provide hot water and heating (air heating and floor heating) to support the family. But we also make storage batteries for use in the home and in office environments, and those will be just coming into the market this year and next. So those are several ways we crate and store energy.

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e have an established business in electric vehicle batteries. Panasonic has been the supplier for the Toyota Prius from the beginning

and now supplies Tesla in the US, and Ford (originally through Sanyo, but now through combined Panasonic). Our global company supplies EV (Electronic Vehicle) batteries and related systems to many European auto makers as well. There will be more announcements coming in the next 6 months.

Consumer Products

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oday, a TV uses around 1/3 of the power of the old cathode ray tube sets. It’s funny, because a lot of people don’t believe these numbers, but they are true. The largest version of the tube television set was 36”. The most popular one in the US was made by RCA and consumed 310 Watts—and all it did was show you a very nice standard definition picture with some color with some stereo sound. Today’s 50” plasma TV, more than twice the screen size, uses less than 100 watts. All of these changes over the last five years have been made by us and by our counterparts and competitors without any prodding—but as part of a voluntary effort to improve the energy efficiency of all the devices that we use in the home. We’re making great strides in energy efficiency in day to day products. For example, a set top box for cable, satellite, PVR, DVD, or BlueRay player – all of these things typically use 1 watt or less in standby and typically 10-20 watts in maximum use for features that do many, many things differently than any television device could do just barely 10 years ago.

If you had to choose, what has been the most disappointing aspect of the green economy? The most encouraging? Measurement

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he biggest enemy to forward progress is confusion, which often comes from failure to recognize the end to end impact of fundamental change. It’s not surprising because we are changing long-standing practices of energy generation and distribution, which impacts home operation and business attitudes, which are driven by costs. But energy has to




 “The biggest enemy to forward progress is confusion, which often comes from failure to recognize the end to end impact of fundamental change.”

sustain performance over the long term, so it’s not surprising that confusion can come. What is important is there be a common baseline for measuring improvements and what changes are needed and how they might be accomplished. Everyone interested in the green economy and energy efficiency in particular have different views in how to calculate where efficiency should be measured. I think it’s very gratifying that public awareness is so high about the importance of environmental action by individuals in their own homes. So inside the consumer electronics industry we’re working to create—along with our retail partners in the consumer electronics manufacturing, selling, and recycling chain– ways in which standardized information can be provided so that it is easy to make comparisons in the shop or think about an action you’re ready to take. Thirty years ago, it may be that government alone could take the steps in these areas, but today, we have a sophisticated public. Not just here, but around the world, people are very tuned in with multiple sources of information and guidance. So they are capable of making good sound decisions, typically for economic or product performance reasons. So industry is trying to develop common standards that will make it easier to compare product to product, service to service.

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ne good example, I think, of something that federal government has done, is the Federal Trade Commission. At the urging of the

Consumer Electronics Association, and all of us who are members, the FTC initiated a very fast rule-making process to mandate television labels for energy efficiency. They picked a very easy to understand, very common-sense approach that is similar to what people already use on things such as refrigerators. While the two pies are completely different in what they do for the home, the common element is an easy way to understand day-to-day and annual consumption. It’s a really smart move. And they made sure to work with industry to make it happen in a way that guarantees information that’s easy to identify and easy to obtain – in the store, online, and in the packaging. Together, I think industry and government can make some smart moves and we hope to go on contributing at Panasonic to those kinds of moves.

Eco House

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e actually demonstrate, in the Eco House at the Panasonic Center on the edge of Tokyo, essentially a zero CO2 emissions lifestyle with no loss of the devices, services and comfort that a family in a developed economy expects. A CO2 zero emissions design is based on improving the energy efficiency of the devices in the home, which make up approximately 30%, and the rest is made up by generating your own power, storing it, and using it over time in your own home with a combination of fuel cell and photovoltaic designs. This is a two story house with all the most modern appliances and equipment, and either a hybrid or an electric car in the garage. Plus, there are those electric bicycles which really help at the end of the day when you’re heading up the hill home!


What holds the greatest potential for a turnaround? Operations

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or almost 15 years now, Panasonic has annually recorded—in great detail—how we acquire materials, as well as manufacture, ship and recycle our products. Our reports literally deal with everything from changing valves and metering in factories. We look at the design and exterior tightness to ensure that our factories reflect sunlight and minimize the demand on air conditioning, while designing products for ease of de-manufacturing and recycling. We clean the rain water that collects on our giant facilities, and then reuse almost all of the water that’s consumed in the manufacturing process. We take every step possible to the minimize packaging, as well as the distances in shipping and re-shipping associated with finished products. By engaging with our supply chain, we seek to ensure ontime delivery which minimizes handling, using trucking and logistics that are energy efficient and meet international and local standards.

Management

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ur management are judged in their annual reviews on their environmental performance in their respective departments— everything from day to day operations, to the way in which products and business are carried out. We try to make it part of our routine, because we believe that if everything achieves constant improvement over time, that will make things much better much faster than simply focusing on the utilities or transportation alone.

PETER M. FANNON Vice President, Corporate & Government Affairs, Panasonic Corporation of North America Mr. Fannon manages Panasonic’s Corporate Communications, Brand Marketing, Environmental, Government & Public Affairs, Product Safety & Regulatory Compliance, and Shows & Exhibits groups. He participates in technology evaluation and development activities for new products and services, and represents Panasonic in industry, trade, and advisory organizations.

Do you think dubious green marketing has tarnished the glimmer of green? It’s impossible for every individual to make every calculus in his or her own mind about each product, so if we can come up with sensible guidelines that meet the test of outside scrutiny, including from government, then together industry and government will have gone a long way to helping citizens act and be responsible knowing that the information they are providing is truly valuable and has worth and is not superficial and is not simply dealing with one end of a problem. As long as our actions are transparent and people have a chance to comment, critique, advise, or even salute us for what we do, then we’ll feel good about continuing next steps and making even more improvements. It is thrilling to see the excitement and energy going into electric and hybrid vehicle development, and the numbers of models and choices often at very reasonable prices. And it’s also fascinating to see the smart grid revolution moving to common standards and easy to use, established interfaces, that is the way in which devices in the grid connect and communicate with each other. Those two steps alone – improvements on transportation power and energy management in buildings and houses – will go a very long way to reducing CO2 emissions, which is one of the key goals everyone has for ensuring a responsible and livable future.

“Those two steps alone – improvements on transportation power and energy management in buildings and houses – will go a very long way to reducing CO2 emissions, which is one of the key goals everyone has for ensuring a responsible and livable future.”

Mr. Fannon was interviewed by Maryruth Belsey Priebe in December, 2010. Editing by Maryruth Belsey Priebe and A. Tana Kantor. Images left to right: US and Australian TV labels Eco House Home co-generation system





“On the investor side, there’s a lot of pressure to make real estate portfolios perform financially, so there’s not a lot of money for programs that don’t produce a direct return on investment. If they have cash, they’re hoarding it right now. And corporate owneroccupiers are holding on to their cash as well.” Peter Belisle, President of Energy and Sustainability Services, Jones Lang LaSalle

Rendering by Rogers Marvel Architects, PLLC Ferry Gateway to Governors Island by Rogers Marvel Architects, Jones Lang LaSalle Hotels and Market Ventures Inc.

That said, the energy conservation side of the equation is going really strong. Now, it’s all about looking at return on investment for a particular initiative. Our corporate and investor clients are implementing energysaving programs that will result in a very clear-cut return on investment, in terms of the number of years of energy savings it will take to pay for the program.


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e see what’s happening on both sides of real estate ownership—those who lease buildings as an investment and companies that lease space and own property as occupiers. On both sides, with the economic collapse over the past couple of years, there has been a decrease in the amount of discretionary spend for softer, more programmatic types of sustainability strategies­—things like recycling and programs to get employees and tenants more involved.

Corporate owners have an appetite for programs that have a payback period of three years or less. [Investors] are looking at paybacks of 18 months...

Corporate owners have an appetite for programs that have a payback period of three years or less. So for instance, if replacing a chiller plant to reduce air-conditioning costs will pay for itself in seven or eight years, that’s too long in the red before the investment starts to pay off—there’s not an appetite for that. But if updating lighting or thermostats will pay for itself in two years or less, that’s a good ROI that will cause a company to move forward with those projects. We’re seeing the same sensitivity on investor side. But because their horizon and ownership of these assets is uncertain—or certain but short—they’re looking at paybacks of 18 months or less. You have to look at low- or nocost initiatives in order for it to move ahead. Sometimes they’re tied to rebates, but they’re things that allow quick wins or quick successes in the energy conservation or energy reduction space.

These opportunities do exist: when we take over management of a property, we can usually lower energy costs by 5 to 15 percent over a few years without capital spending.

There’s not the free flow of capital that you would expect to see in a normal real estate economy. So people that have money are hoarding it, and people that need to borrow are having a hard time finding financing programs that will allow them to do these projects.

What components have to fall into place for the green economy to become business-as-usual? Efficiencies in Technology

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lot of the alternative technologies— particularly solar but also geothermal, fuel cells and wind—will continue to become less and less expensive to implement. In the U.S., solar power is 40% less expensive to generate onsite than it was three years ago, not including incentives that are often available. Material costs are dropping 10% to 30% a year, labor costs related to this work are falling because installation is getting simpler and more people know how to do it. As these technologies become more costeffective and as capital becomes more easily available, you’re going to start to see more


These opportunities do exist: when we take over management of a property, we can usually lower energy costs by 5 to 15 percent over a few years without capital spending.

of these clean technologies installed at buildings. W e ’ r e anticipating that some alternative technologies that might have a payback period of 7-10 years now will see a payback of 3-5 years within the next five years.

There will be continue to be a lot more financial rigor around the results than just hand-waving, saying “Hey, wouldn’t this be a great thing to do?”

If you had to choose, what has been the most disappointing aspect of the green economy? The most encouraging?

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hat you’re hearing as disappointment are some of the same drivers that we’re seeing in the rest of the real estate sector.

Engagement

A lot of these programs require the ability for a prospective client to finance these types of energy retrofits, to finance these solar installations. The financing industry around this is still very tight. Underwriting is still very difficult. There’s not the free flow of capital that you would expect to see in a normal real estate economy.

s we start to free up capital and see the economy right itself, corporations will start getting back into programs that are really about engaging customers and their employee base in sustainable activities. You’re going to see that come back in as well.

So people that have money are hoarding it, and people that need to borrow are having a hard time finding financing programs that will allow them to do these projects. Those are two really big drivers that are throwing a wet blanket on the green building movement.

Employee

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Financial rigor

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his shift that we’ve seen over the last 2 years to a much more dollars-and-cents focus around sustainability. We needed a dose of pragmatism for how the space is viewed. I think initially it came out of the gate as, “Hey, It’s the right thing to do from the socially conscious perspective, we want to reduce greenhouse gases, we want to save a lot of our natural resources.” And that’s good, but what better way to lead with these results than to lead with initiatives that make business sense?

Do you think dubious green marketing has tarnished the glimmer of green?

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e’ve seen a lot of greenwashing and a lot of negative connotations—more on the consumer product side than the real estate side. I do think people are a bit over stimulated— they feel that it is difficult as a buyer of real estate products or services to discern who is doing something impactful and who is not.

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Image from greenbuildingpress.co.uk

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I think that will change over time, as we find more transparent ways of judging the efficiency or effectiveness of products and activities.

Certification So right now, LEED (Leadership in Energy and Environmental Design) certification is one of the few ways the public can tell objectively that a building has achieved a sustainable performance above its competitors. But you’re not going to see every building get LEED certified, due to the expense and other factors. The nice thing about ENERGY STAR is that it’s very economical to participate. This is the same EPA program that rates appliances and computers, and they have a great system for benchmarking energy performance of buildings. A building in the top quartile can get an ENERGY STAR label, and prospective tenants can identify the building as efficient in that area. We are seeing more governments requiring participation in ENERGY STAR and disclosure of

the scores to prospective tenants and investors. Washington, D.C. is the first U.S. city to require this, but more are following suit. This will create transparency in the real estate market that will help tenants and investors do a better job of comparing Building A to Building B. And then greenwashing will just fall by the wayside because the score is what it is.

What holds the greatest potential for a turnaround? Economic Recovery I think the economy is going to have to kick back into gear. It will affect the private sector as well as the public sector. We need the markets in the real estate sector to be able to free up capital in the form of financing for these projects— and corporations to initiate capital program projects with some of the cash they’ve been holding onto. Both of those things will change in the next two or three years. Everyone has a different view of when we are in full recovery.


Generation of power close to the users of power is more efficient, and can be a visible reminder that the company or the building is environmentally conscious. I tend to think that probably we’re looking at something around 2013-2014. The other thing that is going to drive more green projects is the incentives that are driven at a federal, state, or municipal level. I don’t think those incentives are going to come back in force until our government is in better financial shape than it is in today. It is very difficult to see these programs put into place or renewed when they’re having a hard time meeting their budgets.

Micro-Generation

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ne of the things that we think will have some real promise is the ability for micro-generation. When you hear about wind or solar power today, most of it is done at remote locations where there is a lot of land to work with, and some of the efficiency is lost in transmitting the power to where it’s needed. Micro-generation involves renewable energy systems that can be cost-effective on a small scale, so it can be implemented at urban and suburban properties that don’t have a big footprint. Higher efficiency technologies allow owners to generate a meaningful amount of power, which may be for consumption at the site or in some cases sold to local utilities. We’re starting to pilot some micro-generation projects with corporate clients who want to make a strong sustainability statement, but even with incentives the technologies are not quite cost-effective to meet the return on investment criteria I talked about earlier. As technologies become more and more refined, there will be more power generation at buildings in dense urban or suburban areas. Generation of power close to the users of power is more efficient, and can be a visible reminder that the company or the building is environmentally conscious. I think that combination of factors will drive many installations over time in the commercial space.

Mr. Belisle was interviewed by Maryruth Belsey Priebe in December, 2010. Editing by Maryruth Belsey Priebe and A. Tana Kantor.

Peter Belisle Peter Belisle, President of Energy and Sustainability Services (ESS) at Jones Lang LaSalle, oversees more than 70 professionals across disciplines such as project management, energy management, solar power solutions, corporate consulting and facility management. Integrated with more than 12,000 Jones Lang LaSalle commercial real estate professionals throughout the U.S., Mr. Belisle’s team in 2009 documented $100 million in energy savings on behalf of corporate and investor real estate clients. The energy savings translated to 465,000 tons of reduced greenhouse gas emissions annually. The team also has been instrumental in the LEED certification of more than 100 new and existing properties and commercial interior spaces, and has earned top industry honors such as the U.S. Green building Council’s Leadership Award in 2009; Urban Land Institute’s Sustainable Cities Award in 2008; and the ENERGY STAR Partner of the Year award in 2007 and 2010. Prior to taking the reins at ESS, Mr. Belisle oversaw more than 1,500 project managers across the country with responsibility for delivering assignments totaling $5 billion in annual construction value. Under his leadership, Project and Development Services led a company-wide drive to hire and train more than 550 LEED Accredited Professionals and some of the country’s first professionals accredited Green Globes . He continues to oversee project management of several specialized product types and integrates with the larger group on projects such as the Empire State Building energy retrofit. Prior to joining Jones Lang LaSalle, Mr. Belisle served as Director of Development and Program Management for The Walt Disney Company, where he successfully completed over $230 million of development internationally. He received an M.B.A. in real estate and finance from The Anderson School at the University of California, Los Angeles (UCLA), as well as a bachelor of science degree in Civil Engineering from UCLA. Mr. Belisle is registered as an Engineer in Training (E.I.T.), is a Council Member of the Urban Land Institute (ULI), and a member of the American Society of Healthcare Engineers (ASHE) and CoreNet Global.

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“A number of years ago carbon credit trading seemed to be the focus. Now a number of initiatives have grown out of the concept of carbon into a more complete picture of the environment, including biodiversity, water, and energy efficiency credits.” In your opinion, is the green economy dead?

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arkit doesn’t think so. We’ve implemented our own carbon offsetting program for the entire company. We purchased and retired carbon credits through our Environmental Registry and our partners, so we’re carbon neutral. However, it is clear that the “green economy” is evolving. From a product perspective, the Markit Environmental registry seeks to accommodate all types of environmental assets as the market continues its evolution. Markit Eco product helps corporate sustainability officers bridge the gaps between theory and practical application of their carbon management plans. There is still an enormous opportunity in this space.

If you thought that the environmental movement was going to solve global warming and add to the economic recovery you are probably disappointed. But if you see the environmental economy as being in its infancy, then you see that the changes in the world are only just beginning.

If you had to choose, what has been the most disappointing aspect of the green economy? The most encouraging?

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et’s focus on the positive side of things. After all the talk and waiting it seems as though REDD [Reducing Emissions from Deforestation and Forest Degradation] has finally gotten the support it needs – and deserves – and is beginning to be fully launched in the marketplace. In fact, Markit Environmental Registry will be the first registry to list dual-certified REDD credits and we are working closely with leading developers and their clients to facilitate the issuance of REDD credits. Brazil is a huge proponent of REDD and there are multiple initiatives that show promise – including Mata Viva and sub-national REDD registries for Brazilian states that will be accepted into the California’s cap and trade system.


Sal Naro Executive Vice President Markit

Do you think dubious green marketing has tarnished the glimmer of green?

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ome of the marketing hype in the environmental space hasn’t been helpful. Muted but positive attention and marketing seems to be most successful. For instance, if you compare this year’s COP16 in Cancun to COP15, you’ll see what I mean. So much was expected from Copenhagen and when it didn’t materialize as desired, everyone cried failure. Whereas for Cancun I think expectations were much more reasonable and some significant advances were made, in particular for establishing funding that will impact the area of REDD.

There’s been so much talk of green jobs, stimulus funds, etc - what aspect, in your opinion, might have started turning people off?

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Sal Naro heads Markit’s valuation and analytics services, which includes the environmental businesses. Prior to joining Markit, Sal was Co-Founder and Managing Partner of Sailfish Capital Partners, a multi-billion dollar fixed income hedge fund that wound itself down successfully before the 2008 credit crisis. Previously, Sal worked at UBS for seven years - most recently as Managing Director and Global Co-Head of Fixed Income - a role that encompassed trading, syndication and research for all credit markets. He was also a member of the UBS Investment Bank Board of Directors. Prior to UBS, Sal was a Senior Managing Director and Global Head of Credit Trading at Bear Stearns where he worked for close to a decade. He holds a B.S. in Business Administration from Long Island University, and is a member of the university’s Board of Trustees.

f you thought that the environmental movement was going to solve global warming and add to the economic recovery you are probably disappointed. But if you see the environmental economy as being in its infancy, then you see that the changes in the world are only just beginning. Technology is improving and costs will come down. We may not see this impact in the short term but most definitely in the medium to longer term. Market driven mechanisms will make this happen, not government imposed taxes or subsidies. The arenas for technology and markets to add value to the environmental movement will be numerous.

What does the future hold for the green economy?

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he easiest way for me to answer this is to talk in terms of Markit. We think the future of environmentally driven economy is strong. First, we continue to invest in our two core environmental products. With the Environmental Registry are making sure we can accommodate the growth in asset types and markets that require the need for connectivity to transaction marketplaces and other service providers. We are also exploring services that meet the specific needs of different entities from multi-regional to local initiatives looking to harness the infrastructure of a registry to help with their environmental goals. With Markit Eco we continue to expand our offering and find partners who can provide the information and services that sustainability officers need to help manage, implement and benchmark their carbon reduction and energy management efforts.

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“I think it’s important to look at all of these initiatives as a portfolio. There will be points in time when certain aspects slow down or don’t go as fast as people would like. But I think in total, from a longterm perspective, we’ve got to acknowledge that there have been a number of successes, both in the industry and in Duke Energy. And so we are in the position where we can continue to manage that work as a portfolio and accelerate growth.” Gregory C. Wolf President, Duke Energy Commercial Renewables

The green economy is a broad basket of products and initiatives in the US and the global economy. We’re still bullish on the long-term opportunities here and so we’re still actively investing in the market.

What does the future hold for the green economy?

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f you step back, from a broader Duke Energy point of view, we’ve got a ton of initiatives going on that support our broader goal of producing affordable, reliable and clean energy for our customers. That ranges from significant investments in smart grid to preparing for the potential widespread adoption of plugin electric vehicles. Our regulated business is investing in solar, and in our business on the nonregulated side we’re investing in utility-scale wind, solar and we’ve got a biomass venture as well. We’ve had growth in the commercial renewables business year after year since we launched it in 2007.

If you had to choose, what has been the most disappointing aspect of the green economy? The most encouraging? Regarding wind, there have been some people who view that market as going through a real slow-down. We acknowledge that there has been increased competitiveness there. However, we’re committed to our goal of adding roughly 250 megawatts of new capacity per year. We exceeded that goal both in 2009 and 2010. So I think we still feel good about our ability to maintain that growth rate.

Are you able to comment on what percentage renewables are of Duke Energy’s portfolio?

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he Environmental Footprint section of our most recent annual Duke Energy Sustainability Report—which is available online at sustainabilityreport.duke-energy.com—states that in 2009, the most recent year for which we


have complete numbers, wind was 2.1% of our generation capacity in the U.S., hydroelectric was 3.3%. We were just bringing solar projects online in 2009, so that figure was negligible. If you take into account our Latin American power-generating assets, which are predominantly hydroelectric, then nearly 40 percent of the electricity Duke Energy produced in 2009 was from carbon-free sources. This includes nuclear, hydro and wind. We’re now the third-largest producer of carbon-free electricity in the Americas among U.S.-based investorowned utilities.

Where do you see growth in the future? There are plenty of investment opportunities, so for us it’s a matter of finding the right projects that have quality characteristics consistent with our strategy. We seek longterm customer power purchase agreements with quality customers and build projects with proven technology. Therefore, we end up with a portfolio of projects with predictable revenue and low risk profile. Fortunately, we’re seeing

plenty of those opportunities emerge as we move into 2011.

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olar: In our commercial solar business, we’ve had some real successes in Texas. We announced in November the completion of our Blue Wing Solar Project in San Antonio, which is the largest the largest photovoltaic solar project in Texas. We’re happy to have CPS Energy as our customer. We’ve commercialized three other projects in the US, for a total of four. We have several others that are in advanced development. We definitely see solar as having another big year in 2011 for Duke Energy Commercial Renewables.

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e’re doing really compelling work on electric vehicle infrastructure planning. A lot will depend on how our regulated utility invests in that infrastructure and how EVs will interface with our distribution network. Together with auto manufacturers and our partner utilities, we’re making significant progress on creating a very positive experience for the EV driver. Vehicles like the Chevy Volt

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As some of the uniqueness and novelty of ‘green’ wears off and enough time passes, these decisions will just become part of what we do in America. We’ll just naturally lose the ‘green’ label.

are finally starting to hit the market and that can only help.

We do have a small investment that we’ve made in an area that I have responsibility for. Our investment group has an interest in a plug-in hybrid vehicle company, Bright Automotive, which is focused on commercial fleets. That continues to move forward. Bright has some potential government DOE funding for new technology advancement and we’re hopeful that it will deliver vehicles that Duke will use in our fleet operations.

Do you have goals for the growth of renewables?

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enewable energy growth on the regulated side of Duke Energy will continue to be

Bright Automotive: http://www.brightautomotive.com/

shaped by state-level renewable standards that are established in our five retail states. In our commercial, non-regulated renewables business, we’re focused on quality earnings growth and quality investments. We think there are plenty of opportunities for us to invest which would be material growth in a still-fairly-young business and allow us to achieve enough scale to benefit from operating efficiencies. We want to be one of the top players in the utility-scale photovoltaic solar sector.

Do you have a sense as to when we might achieve grid parity with some of renewable technologies?

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hat’s clearly the major question. Everyone have opined on that—our CEO included.

Some organizations associated with traditional generation technologies aren’t that optimistic. But those of us who work on the renewable side see some of the real cost productivity occurring year-over-year on wind turbines, wind turbine operations, and installations costs, as well as solar panels and some of the balance system costs, which are just as important to achieving cost productivity. I’m pretty comfortable that within 5 years, in states that have higher-cost electricity, grid parity can be achieved. But in states that have traditionally lower average electricity prices, it might be a little bit longer. Nevertheless, grid parity could be achievable within 10 years on a national basis and in some of those higher-cost areas, even sooner.

Do you think greenwashing has tarnished the reputation of the green economy?

I

think discussing the “green” aspect of a product or service definitely has become ubiquitous, no doubt about it. Virtually every company, in some way, has considered how they can pitch themselves as green. If they are making a meaningful investments and


they can back up their claims with meaningful performance, then I don’t see a major issue. Buy I don’t see a high correlation between so-called “green fatigue”—where people are tired of seeing companies brag about being green when some of the initiatives cited are not real—and any real or perceived slow-down in segments of the true green market, like smart grid or renewable energy deployment. Any slow-down has been driven by market forces that are really twofold: First, from a federal level, we’ve got to acknowledge that we have shortterm incentives and we don’t have a comprehensive energy strategy in our country. That is certainly providing a ceiling to the growth opportunities associated with the green movement.  Second, the economy itself—including diminished state and federal tax revenues—dampened some initiatives because there’s less money to help pay for them. Some of these investments have near-term cost requirements, even though over time they will pay for themselves. Therefore, whether it be consumers, companies, or governments, I think it’s obvious in today’s economy that those investments have to be more guarded then when the economy was doing much better. The economy has had a far greater impact on these initiatives than socalled green fatigue. 

What pieces will have to fall into place before the green economy becomes just the economy?

I

f a company can get a reasonable payback on an investment, then it ought to pursue it. In reality, so many initiatives are being tagged as ‘green,’ when they’re really just smart investments.

As some of the uniqueness and novelty of ‘green’ wears off and enough time passes, these decisions just become part of what we do in America. We’ll just naturally lose the ‘green’ label. At Duke Energy, we feel good about the renewable power projects that we’re building all over the country. They’re green, but they make excellent business sense. Customers who buy electricity from our commercial renewable power projects under 20 or 25-year agreements are not doing so because it’s a big green splash, but because they’re looking at these investments to supplement their long-term power portfolio needs. The fact that these electricity prices will be fixed or have already established escalators help our customers balance other parts of their power generation mix where there’s perhaps greater uncertainty. This uncertainty can stem from volatile fuel costs or future environmental compliance requirements. Buying electricity from a Duke Energy wind or solar farm helps customers lockin clean energy for years to come. It’s green, but just as importantly, it’s a prudent business move.

Greg Wolf is President of Duke Energy’s Commercial Renewables business unit. In this role, he leads the company’s non-regulated renewable energy growth, including Duke Energy’s wind generation, solar generation, and ADAGE, Duke Energy’s biomass joint venture with AREVA. He was named to his current position in December, 2010. Most recently, Greg was Senior Vice PresidentDevelopment for Duke Energy’s solar and biomass businesses. He also has managed Duke Energy’s investment portfolio focused on energy technologies and infrastructure services and served Duke Energy as the vice president of Communications Infrastructure, where he had responsibility for Duke Energy’s commercial telecommunications businesses. He earned undergraduate degrees in industrial management and finance from the University of Cincinnati, and a master of business administration degree from the Harvard Business School. He represents the company with board observation role with General Compression Corporation. He is active in the community, serving as Chair of the Cincinnati Children’s Museum Advisory Board, a Trustee on the Cincinnati Museum Center Board, a cabinet member for the 2007 United Way campaign, and on the Board of UCATS at the University of Cincinnati.

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Mohr Davidow:

Time is on Our Side

!

It’s funny, because you can imagine a lot of incumbents waving their hands and saying, “These ideas are just about improving efficiency; we’ve been doing that for 50 years!” And in many ways, that will mean that we’ve won! That will mean that the green economy has been adopted into the industrial technology One of the stream and it’s just things that considered part of was under business as usual. appreciated by those people who were hyping the green economy is that a lot of these technologies are industrial technologies.

To scale them and deploy them means that you’re deploying them across hundreds of millions if not billions of dollars of assets, and deploying those types of assets takes capital and it takes time.

At this time, the cost leaders are taking as much margin as possible and the markets still support pricing. But the fact that on a c comparative with natural gas an amazing. It means we’re really a solar deployment.


But if you look globally, there’s a huge appetite for dealing with the problem of carbon. We’re getting surpassed by an enormous number of countries.

higher cost basis they are nd still on a declining curve is really at a tipping point when it comes to

The good newsbad news is that I would have expected there to be more innovation, but that means there is more to do, and that means more opportunity. We’re over the peak of hype and we’re entering the valley of disillusionment.

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clock: http://www.1worldglobes.com/1WorldGlobes/w1868-vintage-map-wall-clock.htm


“There are huge industries which are still ripe for disruption or transformation that really haven’t adopted new technologies in a long, long time.”

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Will Coleman, Partner Mohr Davidow Ventures

The green economy is about applying many of the new tools and approaches that have been used in other sectors to some of the more industrial value chains in the American economy. It is partly about incremental change across massive value chains and partly about disrupting those value chains entirely with new approaches.

What does the future hold for the green economy?

O

f course there has been a lot of hype. Much of it was driven by politics and the political desire to have an answer to an ailing economy. The problem is that politics are impatient and there was very little patience for taking the time to let the investment take hold and let companies develop and meet their milestones.

One of the things that was under appreciated by those people who were hyping the green economy is that a lot of these technologies are industrial technologies. To scale them and deploy them means that you’re deploying them across hundreds of millions if not billions of dollars of assets, and deploying those types of assets takes capital and it takes time. Many of these technologies are just beginning to emerge from the start-up stage. There are also a lot of sectors that have just begun to innovate. You look around at some of these sectors and a huge number of very smart people are pouring in looking for solutions. It’s really amazing. In that sense it really does feel like just the beginning. On the other hand, we’ve seen a bit of a capital pull-back in the last 6-12 months and a large part of that—this isn’t new—is just the classic Gartner hype cycle. We’re over the peak of hype and we’re entering the valley of disillusionment. People are beginning to realize that this is hard and that it takes time. And so I think that is what is leading to that sense of ennui that some people are sensing.


I do think that there is going to be a whole lot of extremely competitive technologies that are created in the next 12 to 36 months that are tremendously transformative to the economy. The other thing is that the green economy will become less of a stand-alone idea and more of a just a piece of the entire industrial economy. I think people are realizing that the green economy really means better, faster, cheaper, and that’s not a green thing, that’s an economic thing. In some cases, the green attributes are what’s driving adoption or driving politics, but I think a lot of people realize that you have to get cost competitive and that’s increasingly the point we’re at for a lot of these technologies.

If you had to choose, what has been the most disappointing aspect of the green economy? The most encouraging?

C

arbon. I think that the solutions to the carbon challenge have not caught up yet. There haven’t been tremendous innovations in terms of carbon conversion into new products or carbon capture and sequestration. It’s been surprisingly slow. I think part of that results from questions around the politics of carbon and whether or not there’s an appetite for dealing with the carbon issue and the climate issue here in the US in the near term. But if you look globally, there’s a huge appetite for dealing with the problem of carbon. We’re getting surpassed by an enormous number of countries. Not just Europe, but China is doing far more than we are on a lot of these fronts. You would think there would be more coming out of industry and research labs than there has been. The good news-bad news is that I would have expected there to be more innovation, but that means there is more to do, and that probably means more opportunity.

T

he other disappointing area is in capital formation.

The downstream capital players have really been hurt by the economic recession and I think that they’ve been slower to come back in and deploy into large infrastructure and renewables projects, projects that look a more like annuities than you would have expected. These are pretty solid investments, a lot of them are very known technologies, they’re proven, and they’re extremely cost-effective in their structures. I think people have had concerns about the macroeconomic conditions and inflation, and people have been pretty tepid about pouring capital into them. But you would have thought it would come back quicker. We’re seeing signs of it coming back now, but it’s taking more time than expected.

S

olar has been somewhat amazing. When we first started investing in solar technologies, we were taking what we thought was an extremely unique point of view, which was investing only in those technologies that had a road map to being competitive with grid power. That was our requirement. We found a company called Nanosolar that we felt had the promise to do just that. It was far out there but it was one of the only approaches that had the promise. And in the interim, we’ve seen an amazing amount of cost reduction coming from China and companies like First Solar. If you look at where First Solar is today, they’re talking about roughly $0.80 a watt with another buck, buck-fifty in system costs. That puts you at roughly $2.30 a watt all-in. That’s about $0.07 or $0.08 per kWh—unsubsidized—which means you’re competitive with natural gas at $3.50. The fact that solar has gotten to the point that it’s competitive with natural gas—unsubsidized—is mind-boggling. At this time, the cost leaders are taking as much margin as possible and the markets still support higher pricing. But the fact that on a cost basis they are comparative with natural gas

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Will Coleman, Partner Mohr Davidow Ventures Will Coleman is a partner at Mohr Davidow Ventures, focusing on energy and cleantech investing. Prior to MDV, Will worked in Washington, DC as a legislative director for a renewables coalition building state and federal level coalitions to support renewable energy legislation, and as a consultant to private equity and project finance clients focusing on the energy sector. Will has also worked for GE Wind in the commercial operations group, Xseed Capital, and Academic Partners.

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Will is on the Venture Fund Advisory Board for the ASE, which operates the National Renewable Energy Laboratory, and is on the advisory committee for the California Energy Commission’s Alternative and Renewable Fuel and Vehicle Technology Program. Will also sits on the board of the Clean Economy Network, and has participated on the advisory boards of the CEC Biofuels Working Groups in 2004 and the WGA’s low carbon transportation working group in 2006. Will has a MBA and a MS in Energy & Resources from UC Berkeley, and an AB from Harvard University. While at Berkeley, Will founded the Berkeley Energy & Resources Collaborative (BERC) and the Center for Energy & Environmental Innovation (CEEI).

and still on a declining curve is really amazing. It means we’re really at a tipping point when it comes to solar deployment.

Do you think dubious green marketing has tarnished the glimmer of green?

I

don’t know if I’ve gotten a sense of people being ticked off about it, but I think there is some frustration and I think the frustration is just because people are impatient. This is not a social media application where one out of ten takes off like a rocket ship and the rest fail miserably. In green and clean technologies, we’re investing in fundamental IP and technology that takes time to develop and deploy. People expected these technologies to be completely transformative by now: to change the entire structure of the economy and provide a huge number of green jobs. But that was a false premise.

G

reen and clean technologies will be tremendously transformative, particularly over the course of the next decade or two, but the politics have to get out of the way and let it happen. If you think about what happened, private investment in the sector was steadily increasing. Then an enormous amount of hype was spawned by the stimulus package and the unprecedented number of dollars targeted to green technologies. In order to get these supports passed, the politicians basically went out there and said, “This is going to save us. This is the next big thing.”

However, only a portion of those dollars have actually hit the street. If the dollars haven’t materialized yet and if deployment reality is slower than promised, then people are going to be frustrated. Most of this is driven by politics not by people inside the green economy or inside clean technology failing to make progress.

What holds the greatest potential for a turnaround?

S

olar. Solar has hit a point of maturity, scale, and velocity that there is increasingly opportunity in and around the existing value chains. Which is very exciting.

S

mart grid. I think a lot of infrastructure has been deployed through utilities and public funding but there’s a huge amount in the smart grid which has a lot more to do with networking and traditional communications networks. These areas are beginning to take off, particularly now that the capability is unlocked at the meter level and through expanding communications networks. You’re now seeing a huge number of applications and benefits being built in on either side of the meter. Whether that’s customers being able to manage their loads, or utilities being able to manage their networks, there’s a lot that’s being done and I think that’s going to be a really interesting area over the next 5 to 10 years.

S

torage. A lot of work has been going on in energy storage domain.


In transportation we’re getting to the point of low-cost, high-density batteries that will enable an enormous number of applications in hybrids and EVs in automotive, marine, and elsewhere. On the grid side, rapidly decreasing costs enable a whole lot of different applications that can allow you to integrate renewables, firm up the grid, and increase efficiencies. Those kinds of innovations are coming along quickly and I think that’s another really interesting area.

C

arbon. We still need new innovation around capture, storage, and conversion. I think we’re going to get there because people are focusing more and more on solutions. Despite the lack of political will in Washington I think people will generate some game-changing technology innovations over the next few years.

T

he fifth area is the interface between software, hardware systems and data management. There’s a whole lot of progress being made in terms of the way we think about the interactions of these systems, as well as the data that’s being spun off of them. We have a tremendous amount of tools that we didn’t have 5 to 10 years ago. As a result, we have insights on how to optimize systems that we haven’t had before. It means the ability to be much more efficient, whether in planning, operations, supply chain management or you name it.

If you had to talk about components that would be necessary for the green economy to become business as usual, what would you say would have to happen?

P

eople need to move beyond the marketing and focus on the fundamentals.

A lot of investors are clear that they are investing in performance and cost, i.e. something that is better than the incumbent technology or

cheaper than the incumbent technology. When you’re doing that, the point isn’t that it has green attributes. The point is that it’s a better alternative. The more that these technologies move down the cost curve and the more that they are competitive in the marketplace, the more they are going to be integrated into the entire industrial economy. It’s funny, because you can imagine a lot of incumbents waving their hands and saying, “These ideas are just about improving efficiency; we’ve been doing that for 50 years!” And in many ways, that will mean that we’ve won, that will mean that it has been adopted into the industrial technology stream and it’s just considered part of business as usual. I think the clean economy, or green economy, or the clean tech industry—all those labels are convenient labels to define an area of investing and an area of opportunity. But I don’t think they’re clear definitions of anything unique when it comes to technologies or applications or approaches. It takes a little bit of patience and people are going to be tremendously successful. We’ll wake up in 20 years and see the transformation and it’s going to be like other transitions.

People would have never predicted that personal computers would have disrupted our lives the way that they have, but now it’s obvious. And I think there’s going to be a whole lot of initiatives that we can’t even think of right now that are going to be just like that. I think it’s a great time to be investing in this space.

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Green is Dead: Or is it?