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s 2010 Dow Jones & Company, All Rights Reserved. THE WALL STREET JOURNAL. Monday, March 8, 2010 R1

The journal reportEnvironment

PHOTOGRAPHS BY GENESIS PHOTOS

One thing is certainin the race for acleaner energy sys-tem: Nothing is go-ing to be certain

for quite a long time.In Washington last week, the

Obama administration aban-doned the long-running plan tobury nuclear waste below Ne-vada’s Yucca Mountain, anotherpotential barrier to new nuclearpower plants in the U.S. Bigquestions loom about the viabil-ity of electric cars and of futuris-tic power plants that wouldshoot their greenhouse-gas emis-sions underground instead ofskyward. And concerns about un-intended environmental conse-quences are thwarting plans forwind and solar farms from Wyo-ming to the Mojave Desert.

Don’t expect clarity from thegovernment, the financial worldor even the scientific lab, saidthe chief executives and entre-preneurs who gathered last weekat ECO:nomics, The Wall StreetJournal’s third annual conferenceon the business of the environ-ment. But, they advised eachother, don’t dally in trying todominate the new energy mar-

ket, because the spoils will go tothose who exploit the uncer-tainty the best.

When the Journal held thefirst ECO:nomics conference, inMarch 2008, things seemedclearer. Oil prices were high, in-vestors were showering moneyon renewable-energy developers,and federal lawmakers werepushing to limit emissions ofcarbon dioxide and other green-house gases. The Intergovern-mental Panel on Climate Changerecently had won the NobelPeace Prize for a report conclud-ing that global warming was “un-equivocal” and was “very likely”caused by human activity, so thedebate over climate science ap-peared largely done.

All that has changed. Oilprices, though rising again, arejust above half their mid-2008highs. Tough economic times arepinching clean-energy invest-ment and prompting new opposi-tion to a mandatory carbon cap.And the IPCC has said it will ap-point an independent committeeto investigate questions raisedrecently about its widelywatched climate-science reports

“It’s frustrating, but scientists

are human beings,” Energy Sec-retary Steven Chu said at theconference. Society has produced“a greenhouse-gas layer that isabsolutely, positively due to hu-mans,” he said, but the preciseimpacts remain unclear. “The un-certainties are quite large.”

The uncertainties about whattechnologies might slash green-house-gas emissions remain justas big.

Consider just the race for analternative to the petroleum-powered car. Peter Voser, CEO ofRoyal Dutch Shell, predicted thatby 2050 electric cars might ac-count for 40% of autos world-wide. T. Boone Pickens, oilman-turned-energy reformer, said thegovernment should subsidize bigtrucks that burn natural gas. AndCraig Venter, a self-described“life designer,” is trying to makefuel from newly created organ-isms that consume CO2.

Each of these options couldbecome a disruptive technol-ogy—something that really rocksthe world. It will take years toknow. The action playing outamid this uncertainty is today’sreal energy shift.

—Jeffrey Ball

Robert Iger of Walt Disney on the challenges andopportunities of dealing with a green generation

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Energy Secretary Steven Chu on theObama administration’s game plan

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Royal Dutch Shell’s Peter Voser talks aboutthe energy bill he would like to see

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J. Craig Venter explains how biology canhelp solve our energy problems

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Venture capitalistsJohn Doerr, Vinod Khoslaand Paul Holland revealwhat they’re betting on

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Bloom Energy’s KR Sridharexplains all the fuss about

his fuel-cell productR8

T. Boone Pickens onwhy he keeps on trucking

for natural gas astransportation fuel

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PLUSBest Practices

What works—and whatdoesn’t work—when it

comes to the intersectionof business and the

environmentR2

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R2 Monday, March 8, 2010 THE WALL STREET JOURNAL.

Best PracticesWhat works—and what doesn’t work—when it comes to business and the environment

P articipants at The Wall Street Journal’s ECO:nomics conferencespent Friday morning in private sessions, sharing best practices insix key areas at the intersection of the environment and business.

Many of the participants expressed the view that although government ef-forts to address climate change have faltered, there is still much business cando. There was also strong agreement that a business’s environmental effortsshouldn’t be treated as a separate activity, but need to be central to the com-pany’s operations and mission. And there was a near universal feeling thatbusinesses can do much to improve energy efficiency and reduce carbon emis-sions while at the same time helping, not hurting, their bottom line financialperformance.

Following the discussions, each group reported back to the full confer-ence on their conclusions. The following is a summary of their reports:

Business Efforts toAddress Climate Change

DISCUSSION LEADERSTEVE FLUDDER, Vice President,Ecoimagination, General Electric Co.

WHAT WORKS

1 Continue to focus on improvingyour company’s own energy effi-

ciency.

2 Talk about all the benefits to so-ciety, including jobs, and not justbenefits to the environment.

3 Emphasize local benefits that aretangible for those communities.

4 Give your customers reasons tochange their behavior in ways that

are environmentally responsible.

WHAT DOESN’T WORK

1 Don’t ask the government to pickwinners and losers. Government

should focus on technology-neutralstandards.

2 Don’t let the current uncertaintyover government action become

an excuse to stop innovating.

Green MarketingDISCUSSION LEADER

RICHARD EDELMAN, President and CEO,Edelman

WHAT WORKS

1 Provide information about theenvironmental benefits of your

products as close to the point of pur-chase as you can.

2 Tie purchases directly to envi-ronmental results. Make it per-

sonal.

3 Provide information to all inter-ested stakeholders. Don’t give a

hard sell on environmental benefits;engage in a conversation.

WHAT DOESN’T WORK

1 Don’t just market the benefits tothe environment; those benefits

should be part of a bigger valueproposition.

2 Don’t just talk about beinggreen; make it part of your com-

pany’s DNA.

3 Don’t make it about politics;make it about the economics

and the experience.

Reducing CarbonFootprints

DISCUSSION LEADERTRUMAN SEMANS, Principal, GreenOrder

WHAT WORKS

1 Don’t shoot from the hip. Planyour efforts carefully.

2 Look for low-hanging fruit; focusfirst on simple efficiency.

3 Rethink all your assumptions.Look at waste as an opportunity.

4 Look for things you can do thatwill have multiple benefits—that

will, for instance, boost your produc-tivity at the same time they cut car-bon emissions.

WHAT DOESN’T WORK

1 Don’t underestimate the culturalobstacles to change.

2 You want to be innovative, butdon’t be impractical.

Working WithNongovernmentalOrganizations

DISCUSSION LEADER

GWEN RUTA, Vice President, CorporatePartnerships, Environmental DefenseFund

WHAT WORKS

1 Business and NGO partners musthave a shared understanding of

the goals and constraints of theirpartnership.

2 Both sides must understand therules of engagement. There has

to be mutual respect, and no sur-prises.

3 Both sides must be willing totake some risks and to lead.

WHAT DOESN’T WORK

1 Avoid deals that have no sub-stance.

2 Don’t underestimate the peopleand resource needs of these part-

nerships.

3 Beware of separate agendas onone side or the other.

Financing Green ProjectsDISCUSSION LEADER

RICHARD COHEN, Managing Director,Environmental Strategic InvestmentsGroup, Bank of America

WHAT WORKS

1 Focus on getting a price for car-bon emissions to stimulate more

market demand.

2 The market needs more cer-tainty in government policy to

free up investing for green projects.

3 Look into new forms of financ-ing, both public and private.

4 Create new training and educa-tion programs to train the en-

ergy work force.

WHAT DOESN’T WORK

1 Government and regulatory rulesin the U.S. at both the local and

national level are Byzantine and bu-reaucratic, and that discourages fi-nancing.

Doing Green BusinessIn China and India

DISCUSSION LEADER

J. ERIK FYRWALD, Chairman, Presidentand CEO, Nalco

WHAT DOES WORK

1 Blow up your assumptions. Con-sider the possibility that China,

in particular, could become your newcore market.

2 Understand that a global com-pany can win in China if it ex-

ploits both its global and its localstrengths.

3 Bring your best technology, buttailor a local strategy that will

protect your intellectual property.

WHAT DOESN’T WORK

1 Don’t underestimate how fastgovernment policies can change,

particularly in China.

2 Don’t assume your China strat-egy will save your company.

3 Don’t presume to Americanizethe Chinese market; understand

that what you learn in China canchange how you do business in theU.S. and around the world.

The Journal Report welcomes your comments—by mail, fax or email. Letters should be addressed toLawrence Rout, The Wall Street Journal, 4300 Route 1 North,South Brunswick, N.J. 08852. The fax number is 609-520-7767, and the email address is [email protected].

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WSJ.comONLINE TODAY: See videos from the ECO:nomics conference, including conversations with CEOs on thefuture of electric cars, renewable energy and clean-tech energies, plus hear Wall Street Journal reporterJeffrey Ball discuss highlights from the conference, at WSJ.com/Reports.

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W hat clean technology is due for a big break-through—and what has been a dud so far?

To find out, The Wall Street Journal’s AlanMurray talked with three men who work closely withgreen-technology companies: venture capitalists JohnDoerr, a partner at Kleiner Perkins Caufield & Byers; Vi-nod Khosla, founder and managing partner of KhoslaVentures; and Paul Holland, general partner of Founda-tion Capital.

The three gave their thoughtson the bets in this area, why thecollapse of the Copenhagen talkswasn’t a disaster for their port-folios—and what clean techneeds to make the big time.

What follows are edited ex-cerpts of the discussion.

What’s Hot?ALAN MURRAY: All three of youwere here a year ago. What in-vestment opportunities have youseen out there in the past yearthat really get you excited?PAUL HOLLAND: It’s been 50years since the last big upgradeof the utility infrastructure. Andso we think it’s a good place tobe. It’s the combination of theopen Internet and this upgradein infrastructure around thesmart grid. This notion of an en-ergy Web.

We think we’re beginning tosee the pieces of the platformcome together. What we think isgoing to happen is there’s goingto be hundreds and then thou-sands of applications that willthen come from that.VINOD KHOSLA: I think energystorage is evolving extremelyrapidly with all sorts of newtechnologies. I actually think so-lar and wind are not that viablewithout those technologies. Ithink the area of internal-com-bustion engines has been largelyunexplored and offers huge op-portunities. In new areas, I’vegotten pretty intrigued with bio-plastics, biomaterials, andthere’s some interesting optionsfor technology in agriculture.

MR. MURRAY: Let’s take the flipside of the question: some typeof technology you thought waspotentially promising in thisarea that has disappointed you.JOHN DOERR: There are notwhole fields that have disap-

pointed us, but we will backsome highly technically riskyprojects. And whenever one ofthose fails, it’s something of adisappointment. We were in-vested in a technology that wethought would raise the effec-tiveness of air conditioning [by acertain amount]. And it didn’tget there.MR. HOLLAND: We’ve focused ourefforts around the demand side,around energy efficiency, smartgrid, smart materials and soforth. And as a consequence, I’mdisappointed in, but I’m not sur-prised by, some of the thingsthat we’ve seen—you know,technology’s trying to drive tosort of a lower cost per watt.

That’s just a very, very diffi-cult place to play. You’re makinga bet that your set of scientistsis going to beat the other 500sets of scientists that are work-ing on that one particular piece.And then how long is that com-petitive advantage going to last?

So we’ve seen a number ofprojects flow through that havebeen looking for a follow-onfunding there, and I think, gen-erally we’ve seen them dry up,appropriately.

The Carbon QuestionMR. MURRAY: One of the very sig-nificant changes about today’senvironment is that the certaintythat we were going to get to aprice on carbon seems to haveevaporated. Copenhagen didn’tproduce much, Washingtondoesn’t seem to be getting any-where. What percentage of theinvestments in your portfolioneed, to some significant degree,a price on carbon in order to beeconomic?MR. KHOSLA: My answer is zero.Clearly, their deployment wouldbe accelerated if there was aprice on carbon. But do I believe

companies in our portfolio canreach unsubsidized market com-petitiveness without a price oncarbon? At least 100% of themare targeted to achieve that ob-jective and in five to seven yearsof getting in the market.MR. DOERR: None of the invest-ments that we make to earn anoutstanding rate of return de-pend on putting a price on car-bon. Except in the followingway: All the investments thatwe’ve made are capital-con-strained for their growth. Weplowed right into the greatestrecession of my lifetime. Andwhen that happened, all theproject finance disappeared.

If a price had been put on car-bon, when a price is put on car-bon, it’s going to be the consis-tent price signal that investorsare waiting for and need toknow. So that will free up invest-ment decisions that have beenwaiting.

The only way we’re going toaccomplish what we want to ac-complish, in the form of new en-ergy and clean energy, is relying

on private capital markets. So aprice on carbon would be one oftwo Netscape moments. Theother Netscape moment wouldbe to have a blockbuster publicoffering for a company that per-meates the American public,their consciousness, in the sameway that the Netscape public of-fering did.

I remember, I was in a super-market on the day that Netscapewent public. Some store clerkwas bragging to the one on theother register, saying, “And I gotNetscape at that price.” It firedthe imaginations of entrepre-neurs and investors, and terri-fied people in old industries. Ithink we will have a clean-en-ergy Netscape moment.

MR. MURRAY: How soon mightthat be?MR. KHOSLA: It’s hard to predictthe markets. But likely, it’s thisyear. My concern is that toomany companies [will be the op-posite]. Under the green banner,you go public, set up a set of ex-pectations, miss them.

D.C. Steps InMR. MURRAY: John, you said thatthe government has become yourmost important co-investor. Howdoes that affect what you do?MR. DOERR: I think the importantpoint about all this is the leader-ship of America has come to theconclusion that the Chinese gov-ernment has come to. And thatis that getting hold of our en-ergy future is a really importantthing to do—for the strength ofour economy, for energy secu-rity, just for being sure that wehave access to the fuels that weneed to grow. So in both of therecovery programs that were inplace, there was substantialfunding devoted to home-grown,home-developed, new energysources. And that’s a good thing.

MR. MURRAY: How does it affectyour portfolio picks?MR. HOLLAND: Like many of thethings we talked about, it’s toounpredictable to make an invest-ment decision. The investmenthas to stand on its own.

MR. KHOSLA: I’m like Paul. Younever use that in the decision.And frankly, the last thing youwant is somebody sitting in [theDepartment of Energy] to be de-ciding what’s a good investmentor not.

MR. MURRAY: John, you referredto what’s happening in China.Obviously, there’s very seriouscompetition to develop new tech-nologies. Who’s winning thecompetition for clean tech?MR. DOERR: Today, China’s carsare more than one-third morefuel-efficient than ours. China isinvesting 10 times as much asthe United States on new cleanenergy, as a percent of their GDP.China’s growth in renewables is,for me, astounding.

Now I believe, as a red-blooded American capitalist, wejust can’t sit back and let thenext great global industry not bedeveloped.

My conclusion is China iswinning. My conclusion is we’rebarely in the race today and we’dbetter double-down on this. y

Where the Smart Money IsVenture capitalists John Doerr, Vinod Khosla and Paul Holland on what they’re betting on—and why

I f any company seems well-positioned to both influence and profit from a genera-tion of environmentally aware youth, it’s Walt Disney Co. And Robert Iger, presi-dent and chief executive of Disney, insists the company is doing just that.

Mr. Iger sat down with The Wall Street Journal’s Alan Murray to talk about the newgreen strategies the company applies to everything from its theme parks to its moviestudios, as well as changes Disney has seen in consumer attitudes. They began the con-versation by talking about the company’s conservation campaign—Friends forChange—which so far has reached more than a million children, he says.

What follows are edited excerpts of their discussion.

ALAN MURRAY: I’ve got two teen-age daughters, so I get it.They’re putty in your hands.Anything Hannah Montana orthe Jonas Brothers tells them todo, they’ll do it.ROBERT IGER: God bless you.

MR. MURRAY: But we’re talkingabout serious economic issueshere, environmental issues. Whatcan 14-year-old girls really do tohelp? I mean, what’s the point?MR. IGER: When you have theunique opportunity that ourcompany has [to reach millionsof children], and you can teachthem the importance of behav-ing in a more responsible wayfrom an environmental perspec-tive—it adds up.

Friends for Change has at-tracted over 1.5 million mem-

bers. The impact is enormous.It’s 200,000 tons of savings froma waste perspective a month. It’shuge savings in water usage,huge savings in emissions, hugesavings in power usage. Takeshorter showers. Turn off thelights in your room, and so onand so on. And it’s not just do-mestic. It’s global.

MR. MURRAY: You can make 14-year-old girls take shorter show-ers?MR. IGER: A 14-minute instead ofa 15-minute, but yes. But everyminute counts.

Corporate CitizenMR. MURRAY: What’s the busi-ness proposition here? Do you dothis because you think it’s the

right thing to do? Do you do itbecause it helps you win over allthose 14-year-old girls?MR. IGER: Disney’s had a legacyfor decades of being environ-mentally conscious and responsi-ble. When I got this job almostfive years ago, it was clear to methat our reputation was a busi-ness driver.

We were seeing growth andinterest in corporate social re-sponsibility from three constitu-encies: Customers were startingto be more aware of the qualityof the product, not just what itwas made of but how it wasmade; we were hearing it fromshareholders; and we were hear-ing it from employees and po-tential employees.

So I created messagingaround it, which is basically, wewant to be the most admiredcompany in the world, admiredfor the quality of our product,the integrity of our people, andthe way in which we behave ascitizens of the world. When youthink about morality, it’s theright thing to do. But it’s alsothe right thing to do from ashareholder-value perspective.

Specific PracticesMR. MURRAY: What about yourpractices?MR. IGER: We created an environ-mental council made up of rep-resentatives from all of our busi-nesses and charged them withthe task of doing two things:lessening the impact of the com-pany on the world, and creatingprojects that teach and inspire.

We did a baseline inventoryof our environmental impact

over the 2006 to 2009 pe-riod—how much waste we werecreating. We then created veryspecific targets, that are publiclyreported at this point, on reduc-tion, primarily. And we then cre-ated a way that we would moni-tor this.

Right now, we’re delivering toeach of our business units aquarterly report on what theirimpact on the environment is. Soif you’re running a movie studio,starting in 2010, every quarteryou get a report on how muchwaste you’re creating, energyyou’re using, water you’re using,etc. That’s a big step.

Every capital request now hasbasically an environmental-im-pact component. You want tobuild a building, a theme-parkattraction, you want to buy anew fleet of buses or cars, thereis, in that capital request, a pagethat forces you to detail or beaware of the impact on the en-vironment that project is goingto have.

We created a tax where webasically projected over the nextfive years what each business’simpact would be, and we’recharging them money for thatimpact. We use that money tocreate a fund that’s largely going

to conservation projects, mostlyforestry around the world. So wewere actually buying our carbonoffsets through that. But thebusiness units are incentivizedto reduce. And I think that’spretty unique.

MR. MURRAY: Is it possible forbusiness leaders to make thingshappen that need to happen?MR. IGER: Businesses can make adifference. We’ve got thousandsof vehicles at our theme parksaround the world. A hundredmillion visitors on an annual ba-sis. What they consume, how wetransport them, how cool the airconditioning is in their hotelroom when their lights getturned off—there’s a lot you cando. And we’re finding more andmore that our guests want toknow about these things.

We used to be relatively tight-lipped about our practices. Peo-ple just weren’t interested. Theywanted to come and have fun.Now they’re actually interestedin how they’re having fun. Theyget on one of our classic steamtrains that Walt put in Disney-land in the ’50s, and we tellthem that the trains now run onvegetable oil, and they love tohear that. By the way, the trains

smell like french fries. That’skind of cool.

Will They Pay?MR. MURRAY: They feel goodabout it. But are they willing topay more for products, experi-ences they view as environmen-tally friendly?MR. IGER: That’s still an openquestion. But we’re finding waysthat we can reduce the cost ofbeing more environmentallyfriendly.

MR. MURRAY: The year 2009 wasa tough one for you, like it wasfor a lot of people. Does that af-fect the way you deal with anyof these issues? Does it affect theway consumers view any ofthese issues?MR. IGER: It may have affectedthe way consumers were willingto pay more. It didn’t affect usone bit. We created this environ-mental council and the stepsthat I described were put inplace in 2007.

Then, 2009 was a watershedyear. It was the first year wewent public with the detailsabout all of this. And to myknowledge, we haven’t sloweddown one bit. y

Tapping Into a New GenerationRobert Iger of Disney talks about how environmentally aware consumers offer plenty of challenges—and opportunities

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Voices From the Conference“We threw away a lot of

biblical tenets of Westernwater. We threw away ourpriority water rights, re-placed it with a sharedshortage arrangement. Nowall of a sudden conservationcould be a reality. We saidwe would have similar pric-ing structures, which meantwe went from a flat rate toa tiered rate structure. Noone is different. Whetheryou are a commercial useror a residential user, youwill pay the same depend-ing on the volume of waterthat you use. Our largestresidential customer is the

Sultan of Brunei. He uses 17million gallons a year.”

—Patricia Mulroy,General Manager, Southern

Nevada Water Authority

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John Doerr, Paul Holland and Vinod Khosla

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I t’s fair to say these have been some frustratingmonths for Steven Chu, secretary of the U.S. Depart-ment of Energy. Among other things: The global cli-

mate summit in Copenhagen failed to produce much of anagreement. The prospects of passing a comprehensive en-ergy bill are murkier than ever. There have been a stringof revelations about questionable practices and outrightmistakes by scientists who contributed to a big 2007 U.N.climate-science report. And the Obama administrationhas been criticized for the way it has doled out economic-stimulus funds.

Mr. Chu talked with RobertThomson, managing editor ofThe Wall Street Journal. Whatfollows are edited excerpts ofthat conversation.

ROBERT THOMSON: You’re in thenews today in part because ofthe administration’s announce-ment that it would drop plansfor a federal nuclear-waste vaultbeneath Yucca Mountain in Ne-vada. As someone who has beenan advocate, and many wouldsay a brave advocate, of the ad-vancement of nuclear power, isit a little frustrating for you thatthis decision was clearly mademore for political than scientificreasons?STEVEN CHU: Well, it’s fair to saythat the whole history of YuccaMountain was more politicalthan scientific. But also verytruthfully I can say that givenwhat we know today, the reposi-tory looks less and less good. Sonow we’re in a situation where itcan’t go forward.

When Yucca Mountain wasbeing established in the early’80s, the idea then was the nu-clear industry was going to tailoff. Now, because of climatechange, we do want to restartthe nuclear industry. Because ofthat, the statutory limit of YuccaMountain would have been usedup in the next couple of decades.So we need to take a fresh lookat everything.

The Nuclear EquationMR. THOMSON: If you are a util-ity that had invested in theYucca development on the un-derstanding that it was going tobe a government priority, how

can you reassure them that nu-clear itself will be somethingworth investing in, because it isa very expensive proposition?DR. CHU: It’s expensive, but itcould still be a very good invest-ment. [In the 1980s, before nu-clear construction came to astop], it took longer and longerto build the plants. The timefrom your application to thetime you actually turned theswitch on was in excess of 15years. If the nuclear industry isgoing to be viable you just can’tdo that. At the beginning, it wastaking six years, seven years tobuild a plant. So we want to getback to this time scale.

The Nuclear Regulatory Com-mission is changing. They willtry to generically approve a re-actor like the AP1000 fromWestinghouse, and say, OK, allAP1000s are now approved. Ifyou start approving a few ge-neric reactors and then make avery short approval period forreviewing the specific site modi-fications, that’s a very, very dif-ferent process.

In addition, the reactorsthemselves are designed withless elaborate, more passivelysafe mechanisms, so the designsare becoming more economical.

We think with these new de-signs plus the faster process forgetting them approved, investingin the industry can be back ontrack.

MR. THOMSON: Is it right to havea comprehensive energy billwhen what’s needed in the shortand long term is a price on car-bon?DR. CHU: I think the price on car-bon is the most important part

of any comprehensive energybill. But it’s not only the pricebecause to be realistic, the priceto build a new coal plant withcarbon capture and sequestra-tion is actually quite high.

What we are doing here in theDepartment of Energy is a veryactive research program to dem-onstrate much more cost-effec-tive technologies to bring thatcost down. You also have to givetime for certain regions of thecountry that have been used toinexpensive energy to make ad-justments. You have to give thema little stimulus to make them goin that direction, we have to dothe research and development tohelp those industries. It’s notjust, give them the price signaland then they will make that ad-justment. That would be a littlebit too painful.

The Allure of CarrotsMR. THOMSON: Is it possible tostrip out a carbon bit so thatyou at least have a paradigmwithin which companies can be-gin to plan and leave the verycomplicated political stuff untillater?DR. CHU: Well, it turns out in

Washington it’s easier to get allthose carrots, to get funds forresearch in carbon capture andsequestration, funds to help peo-ple make the transition to morefuel-efficient homes and facto-ries. It’s much harder to get auniverse-wide cap on carbonthat ratchets down.

MR. THOMSON: When would youforecast that bill will be passed?DR. CHU: I’m really optimistic. Iwant it to pass this year.Whether it will be over the en-tire energy usage or whether itwill be divvied up into sectors Idon’t know. China is moving.They’re diversifying their supply.They want to be a leader in thisnew technology. They think it’sgoing to be good for exports. Soit’s ours to lose, but we couldblow it.

MR. THOMSON: You mentionedthe bumps and warts. That littlebit of sloppiness at the IPCC [theUnited Nations’ Intergovernmen-tal Panel on Climate Change],was that frustrating because itdid turn the debate a little bit?DR. CHU: Well, it’s frustrating,but scientists are human beings,and it doesn’t negate the huge

amount of data that was goingon, and over a two- to three-de-cade period where it’s very, veryvisible and it gets scrutinizedup, down, sideways.

The wonderful thing aboutscience is scientists themselveslove to scrutinize each other, be-cause the scientist who actuallyfigures out that the mainstreamis wrong becomes incredibly fa-mous. That’s how scienceprogresses.

Stimulus SnagsMR. THOMSON: You mentionedthe stimulus funds. There aretwo complaints. One is that thereis just way too much bureau-cracy in the approval process.And secondly, that there’s been alack of ambition in investing orsupporting next-generation re-search.DR. CHU: First, there is alwaysgovernment bureaucracy. We aretrying our best to cut that downto the bone, but there are stat-utes. For example, the loans.Why does it take so long to get aloan out? Well, we are requiredby statute to do certain things.We have to protect the taxpayerinterests. We have to make sure

when we give a loan that there’sa reasonable probability of get-ting it back. And then there’s, ef-fectively, the credit subsidy loaninsurance, and then how youscore the loan insurance. So wehave to do due diligence, andthen we have to go and convincethe [Office of Management andBudget] that our analysis is cor-rect, and then they have to buyonto it. So that takes a while.

Now, because of those con-straints on our loans, we can’tmake a lot of loans we’d like tomake of more daring stuff. Be-cause in the more daring tech-nologies the probability of fail-ure is higher. So what we arguedin the next budget is, increasethe credit subsidy for renew-ables and efficiency and forother more daring things thatmay or may not work.

In an ideal world when thecapital markets are there, you’dlike the commercial people totake this over. But right now,capital is very tight. Look howlong it took to make the transi-tion from wood to coal, coal tooil and gas: 50-60 years. We can-not make this transition in an-other 50 or 60 years. It will betoo late for the climate. y

Politics and PolicyEnergy Secretary Steven Chu on the administration’s game plan

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The Wall Street JournalThe Wall Street JournalThe Wall Street JournalThe Wall Street Journal would like to thank the companieswould like to thank the companieswould like to thank the companieswould like to thank the companiesand organizations that supported ECO:nomics 2010.and organizations that supported ECO:nomics 2010.and organizations that supported ECO:nomics 2010.and organizations that supported ECO:nomics 2010.

To learn more about ECO:nomics, please visitTo learn more about ECO:nomics, please visitTo learn more about ECO:nomics, please visitTo learn more about ECO:nomics, please visit ECOnomics.wsj.com.ECOnomics.wsj.com.ECOnomics.wsj.com.ECOnomics.wsj.com.

To inquire about sponsorships for ECO:nomics 2011, please contactTo inquire about sponsorships for ECO:nomics 2011, please contactTo inquire about sponsorships for ECO:nomics 2011, please contactTo inquire about sponsorships for ECO:nomics 2011, please contactMark Pope at 212.597.5868 or [email protected] Pope at 212.597.5868 or [email protected] Pope at 212.597.5868 or [email protected] Pope at 212.597.5868 or [email protected].

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YELLOW


T hese days, giant oil companies find themselvestrying to balance two big pressures on their busi-ness. Governments are trying to slash carbon

emissions—but the world’s thirst for oil is growing byleaps and bounds. Peter Voser, chief executive officer ofRoyal Dutch Shell PLC, is navigating the situation byjoining a business-backed effort to push for global-warm-ing laws, and making sure Shell has a strong exposure tonatural gas and alternative fuels.

Mr. Voser sat down with TheWall Street Journal’s Alan Mur-ray and Kimberley Strassel totalk about the future of climate-change legislation, the com-pany’s push beyond oil, the pros-pects for electric vehicles andmore.

Here are edited excerpts oftheir discussion.

Change From WithinALAN MURRAY: I’d like to start byasking you about U.S. CAP [theU.S. Climate Action Partnership],the business effort to push forglobal-warming legislation. Youare the last oil company there.Many of the other majors neverjoined to begin with. BP joinedand then pulled out because itdidn’t like the direction that itwas going in. Why is Shell aloneamong the oil companies in con-tinuing to push for this?PETER VOSER: We have a beliefthat we need a market-based en-ergy legislation in this country.And by the way, in all the othercountries as well. We feel thatwe can do more by being insideU.S. CAP together with the otherstakeholders represented therein order to actually achieve theright outcome.

KIMBERLEY STRASSEL: What kindof bill could you want or expectthat would actually be good foryour industry?MR. VOSER: What we want is en-ergy legislation that drives sup-ply security in this country,which drives the country tolower fuel emissions, which gen-erates new jobs but also pre-serves old jobs.

To then go further down, weare a keen proponent of market-based energy legislation. We willquite clearly look out for natu-ral-gas developments, which wesee as a long-term source of en-ergy that has a lot of positives.

And in general, I think our in-dustry is facing an interestingchallenge that the demand in theworld will double, but we haveto provide that energy at a muchlower cost to the environment.This will drive technology devel-opments, innovation develop-ments, etc., and that’s normallywhere our industry has alwaysbeen in a leading position. Andthat’s what we want to see inthe legislation so that we havecertainty on the carbon price,certainty on, let’s say, legislationthat will stay for a while so thatwe can operate.

MS. STRASSEL: What odds do yougive passage of a cap-and-tradebill this year?MR. VOSER: I’m still hopeful thatwe get something passed. I knowthe timing will be longer thanwhat we expected maybe 12months ago, but we will do ourpart in order to make sure thatwe get something that the indus-try and the country can take for-ward. But I think we are in for alonger period before we getsomething.

New in the PipelineMR. MURRAY: We talk about Shellas an oil company, but you’revery close to becoming a pre-dominantly natural-gas com-pany, aren’t you?MR. VOSER: That’s absolutely

correct. Shell started quite awhile back, actually, to put a lotof emphasis on gas. And by2012, we will have more gas pro-duction world-wide than wehave oil.

So this has been a journey of20, 30 years that we have usedour technology and innovation inorder to drive the gas develop-ment on a world-wide basis be-cause, let’s face it, it has 50%,70% less CO2 than coal, for ex-ample, and that’s exactly wherewe see the long-term benefit.

MR. MURRAY: And in your view,is that the big answer to our en-vironmental problems for thenext 50-plus years?MR. VOSER: I don’t think there isone answer.

On a global perspective, theenergy demand will double—thisis pretty much proved now—by2050. So we will need most ofthe energy forms that we knowtoday.

MR. MURRAY: What percentage ofyour capital spending goes to re-newable energy sources,roughly?MR. VOSER: It is not the capitalintensity that drives renewableenergies and alternative ener-gies. It’s what you spend in tech-nologies and in innovation.Roughly 25% of our budget atthis stage goes into what we callalternative energies from anR&D point of view.

MR. MURRAY: And of the 25% ofyour R&D budget that you spendon renewables, what in thatportfolio do you personally thinkis the most promising?MR. VOSER: We are focusing a loton biofuels at this stage. We justannounced a few weeks ago abig joint venture in Brazil wherewe are bringing our first- andsecond-generation biofuels tech-nologies together with Cosan, asugar ethanol producer there, inorder to speed up the second-

generation capabilities becausewe need to speed up that pro-cess. So biofuels is one.

We are in wind. We have goneout of solar. We tried both sili-con and thin-film solar, but wecan’t see that as being some-thing that we can scale up glo-bally and get the economies ofscale. So we leave that. It’s atechnology that will be devel-oped, no doubt, but we leavethat to a smaller, medium-sizedplayers.

Driving AheadMR. MURRAY: For your oil busi-ness, transportation is obviouslya key to the future. How long doyou think it will take for electriccars to become a significant partof the vehicle fleet?MR. VOSER: We think betweennow and 2050 we will go fromone billion cars to two billioncars world-wide. So it’s quite agrowth there. We think by 2050

that roughly 40% of those twobillion cars will be electric cars.

But there is a but to this.Which means in the meantimewe will need all [types of envi-ronmentally friendly cars]. Sowe will need low-carbon-fuelscars, more-efficient engines. Wewill need the hybrids. There willbe more electrical cars comingin. There will be fuel cells, therewill be hydrogen. So I thinkthere will be room and space todevelop all of them.

Looking to the MarketMS. STRASSEL: You talked abouthow you wanted legislation herein the U.S. to help with the cer-tainty. But as a global companyyou already operate in regionsthat do have climate restrictions.How has that affected your busi-ness?MR. VOSER: I would like to havea market-based system that ac-tually works on the global envi-ronment. Because the world, thetrade flow today, is a globaltrade flow, so you cannot cut be-tween frontiers, boundaries,countries, etc.

So while I think it is OK tostart country or regionally, weneed governments working to-gether, and that’s where I thinkCopenhagen would have been agood way to achieve a globalagreement. We didn’t get it. I’mnot too disappointed because Ithink this is a journey. We willneed more time.

The politicians or the govern-ments also have to learn to bringsome reality into the discussionfrom time to time. So we getbiofuels legislation, for example,and two years later they changebecause they realize technicallyit’s not possible. I think that’swhere governments, companies,NGOs can work together to setthe right frames.

MS. STRASSEL: Some people sayinstead of all the negotiationsand the offsets and the carbontrading, just put a carbon tax, inparticular a gas tax, and seewhere that goes.MR. VOSER: I would say you needa market-based system whereyou can actually give the rightincentives for those industriesthat are affected to make surethat they can lower the CO2 overtime and they can lower thecosts to achieve that over time.You need an incentive there, andI just struggle to see that a tax isan incentive. y

The View From Big OilPeter Voser of Royal Dutch Shell talks about the kind of energy legislation he’d like to see

S ince mapping the human genome 10 years ago, J. Craig Venter has found plentyof work. The biologist now is burrowing into DNA in as many forms as he candiscover, in organisms from the sea and deep underground. His goal: to use the

building blocks found in naturally occurring DNA to make synthetic cells. He and hispartners at Exxon Mobil Corp. and BP PLC believe genetically engineered life formshold great promise for energy and other industries.

The Wall Street Journal’s Alan Murray interviewed Dr. Venter about his work. Whatfollows are edited excerpts of their conversation.

ALAN MURRAY: You’re one of themost intriguing characters of ourgeneration. You cracked the codeon the human genome, and formost people that would be suffi-cient for a life’s work. But you’renow trying to find the biologicalreplacements for everythingwe’ve been talking about thismorning: oil, gas, coal. Howclose are you to the answer?J. CRAIG VENTER: It’s not totallyclear yet. We’re at the earlystages of seeing what biologycan do in ways that peoplehadn’t imagined. I think biologyhas the chance to be the truedefinition of a destructive tech-nology. Because of the exponen-tial growth of biological systems,producing huge amounts of sub-stances from them is theoreti-cally very possible.

The program we have withExxon Mobil, to try and go from

carbon dioxide and sunlight tohydrocarbons that could go rightinto the refineries, we’re at arelatively early stage. My teamat Synthetic Genomics had amajor breakthrough in changingthe genetic code of some algae,because algae was viewed as afarming problem for people. Yougrow algae, you harvest it, youextract the hydrocarbons. Weengineered the algae so theywould just continuously pumpout the hydrocarbons into themedia in a pure form.

So theoretically that makes itreally nice. You just continuallyharvest this. The question isscale. That’s the real bugaboohere for everybody.

MR. MURRAY: You’re looking at awhole portfolio of biologicalprojects. What are the mostpromising?

DR. VENTER: The most promisingis the fundamental technologywe’ve been developing at theVenter Institute with fundingfrom Synthetic Genomics. Andwe’re very close to the first cellpowered by a completely syn-thetic DNA genome. We’re writ-ing new software so we can de-sign in the computer cells to dowhat we want them to do. Theareas we’re applying these in,Exxon with CO2 to a biocrude…

MR. MURRAY: You create a bugwhose feedstock, its food, is ac-tually CO2. So it consumes CO2,helps the environment in thatway, and then creates fuel.DR. VENTER: That’s right. We’reusing natural organisms andmodifying them right now. Butexactly what you said—the car-bon that ends up in the carbon-based fuels, that carbon came

from CO2. So these organismsuse sunlight. They fix the CO2into these hydrocarbon mole-cules that, the goal with thisprogram is, go right into theExxon refineries and create gas-oline, diesel, that’s indistinguish-able from what we use today.

Delivery DateMR. MURRAY: When do they ex-pect you to actually be able todeliver fuel?DR. VENTER: Scalability is thebiggest issue. There’s over 200algae companies, I think, in theU.S. alone. If we can’t generatebillions of gallons of fuel peryear per facility, it’s not going towork. But I think with the Exxonengineering team and theirmoney, we have a chance toscale it up. Our optimistic viewis on the order of a decade be-fore you would have gasoline inyour tank made from CO2.

MR. MURRAY: If you look 20years, 30 years down the road,how much of our fuel could comefrom this sort of algae?DR. VENTER: Theoretically, alltransportation fuels. There’s noshortage of areas with lots ofsunlight and seawater. It is goingto get down to the cost equation.And it’s too early to know.

MR. MURRAY: The other thing youdo is sail around the world inyour sailboat and look for genesthat have already been createdin biodiverse places around theworld. That’s a pretty good gig.DR. VENTER: It’s why I have a lotof fun with my job. The ideastarted after we finished the hu-man genome in 2000, looking atwhat we could apply these toolsto. And we knew virtually noth-ing about the environment. Wediscovered in just a barrel ofseawater 40,000 new speciesand one million new genes. Wepublished over 20 million genesto date. We’re about to doublethat number again.

The importance of this is,when you’re writing the geneticcode out of the computer, I viewthese genes as our raw materi-als. We have all of these designcomponents we’re discovering inorganisms around the planet.

Probably the first stages of an

Exxon or other facilities will beeither naturally occurring organ-isms or ones that have had sim-ple modifications. But imagine ifwe can design a new algae fromscratch that has two or threetimes the efficiency of anythingthat occurs naturally. That willbe a game-changer overnight,doubling or tripling the capacityof any facility.

MR. MURRAY: So out on yourboat, you’re looking for the ge-netic information that you canuse in your synthetic biologyproducts.DR. VENTER: We’re capturing allof the DNA that we find in theocean. We decode it, build upthese huge computer databases,so that when we want genes thatdo different things, we just pullthese out of the computer. DNAis, in fact, the software of life.

MR. MURRAY: How confident areyou that you can use syntheticbiology to create bugs that basi-cally can consume CO2 and pro-duce energy for the world?DR. VENTER: The biggest carbonsink on the planet is these or-ganisms in the ocean that arecapturing back CO2. The biologyis known. It’s a question of im-proving the efficiency for workin a production facility.

How Expensive?MR. MURRAY: Any questionsabout the costs of these pro-cesses?DR. VENTER: We’re trying withExxon to create a new biocrudeout of carbon dioxide that would

go right into the refineries. Sothe cost of these facilities, thecost of the biocrude, has to beon the order of what we wouldget from oil. Imagine if we andothers are really successful atthis—this becomes an alterna-tive for oil that could actuallylower the price of oil.

MR. MURRAY: You have a projectwith BP as well?DR. VENTER: The BP programwas to look for new biology deepin the Earth, to take coal as thestarting material, metabolize thecoal into methane in the Earthand just isolate the natural gas.When we started, we had noidea the extent of biology a miledeep in the Earth. It was stun-ning. We found the same densityof organisms that we find in theocean, all new types of organ-isms. We have hundreds of themthat eat coal and coal substratesto produce different molecules.So we’ve been characterizingthis biology now to see howscalable it would be to justchange some of this biology andget a lot more natural gas out.

MR. MURRAY: Are there other in-dustries that ought to be part-nering with you? Utilities? Carcompanies?DR. VENTER: We are having dis-cussions. Being able to write thegenetic code is something wethink will have implications toevery human endeavor. So we’relooking at far-ranging thingsfrom whole new ways to makevaccines, new ways to makepharmaceuticals. We can createwhole new foods. y

It Came From the SeaJ. Craig Venter on the search for biological energy replacements

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“The real challenge is:How do you make low-car-bon energy really cheap—ascheap as coal is? I think thereality is that we are not go-ing to get beyond a fossil-fuel economy, and I don’tthink we are going to imposebig costs on the fossil-fueleconomy either in the U.S.or in foreign developingcountries like China, untilthe alternatives become a lotcheaper. I think while it isconceivable to have a carbontax in the U.S., it will neverbe high enough to make fos-sil fuels as expensive asclean energy technologiesare today.”

—Michael Shellenberger,President, Breakthrough

Institute

Voices From the Conference

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F or start-ups that har-ness the energy ofthe sun, 2010 looks tobe a promising year.

In The Wall StreetJournal’s first survey of ven-ture-backed clean-technologycompanies, three solar-powerfirms came out on top: Solyn-dra Inc. of Fremont, Calif.;Suniva Inc. of Norcross, Ga.;and eSolar Inc. of Pasadena, Ca-lif. The rankings, announced atthe Journal’s ECO:nomics con-ference, seek to identify thosegreen companies that have thecapital, executive experienceand investor know-how to suc-ceed in an increasingly crowdedfield.

Other notables on the Top 10clean-tech list include two eco-friendly car makers—Fisker Au-tomotive Inc. of Irvine, Calif.,and Tesla Motors Inc. of SanCarlos, Calif.—and New York’sRecycleBank LLC, which pro-vides rewards programs to mo-tivate people to recycle.

Several companies on the listhave benefited from the De-partment of Energy’s largesse.Last year, No. 1 Solyndra se-cured a $535 million govern-ment loan on top of $286 mil-lion it raised in venturefinancing. The company alsosaw its revenue jump to $58.8million for the first ninemonths of 2009 from $6 millionfor all of 2008. Solyndra filedin late December for a publicoffering and declined to com-ment for this article, citing aquiet period.

A team from research firmVentureSource (owned byNewsCorp., which also ownsDow Jones & Co., publisher ofthe Journal) calculated the

rankings, applying a set of fi-nancial criteria to some 350U.S.-based venture-backed busi-nesses in clean technology.

Companies that make every-thing from fuel-cell technolo-gies to carbon-managementsoftware were analyzed accord-ing to four financial criteria:the track records of success forboth a company’s founders andmanagement, and for the inves-tors on its board; the amount ofcapital raised in the past threeyears; and the percentagechange in a company’s valua-tion in the 12 months endedNov. 30. Dow Jones reportersand editors who cover the ven-ture-capital industry also pro-vided their perspective and ex-pertise beyond the numbers.

—Teri Evans, RivaRichmond and Scott Austin

contributed to this article.

The Top 10 Companies

1 Solyndra Inc.Headquarters: Fremont,

Calif.Description: Provider of aphotovoltaic system featur-ing proprietary cylindricalmodules.Founder: Christian GronetInvestors: Argonaut PrivateEquity, Artis Capital Man-agement, CMEA Ventures,GKFF Investment Co. LLC,Kohlberg Kravis Roberts &Co., Madrone Capital Part-ners, Masdar Clean TechFund, Redpoint Ventures,RockPort Capital Partners,U.S. Venture Partners, U.S.Department of Energy, Vir-gin Green Fund

2 Suniva Inc.Headquarters: Norcross,

Ga.Description: Provider of solarcells and modules.Founder: Ajeet RohatgiInvestors: Advanced Equities,Apex Venture Partners, Co-gentrix Energy, GoldmanSachs Group, H.I.G. Capital,New Enterprise Associates,Quercus Investments, Triple-Point Capital, Velocity Com-mercial Capital, WarburgPincus

3 eSolar Inc.Headquarters: Pasadena,

Calif.Description: Developer ofmodular solar power plants.Founder: Bill GrossInvestors: ACME Group,Google, Idealab, NRG Energy,Oak Investment Partners,Quercus Trust

4 RecycleBank LLCHeadquarters: New York

Description: Provider of in-centive-based recycling ser-vices to communities.Founder: Ron GonenInvestors: Coca-Cola BottlingGroup, Generation Invest-ment Management, KleinerPerkins Caufield & Byers,RRE Ventures, Sigma Part-ners, Westly Group

5 Boston-Power Inc.Headquarters: Westbor-

ough, Mass.Description: Provider of aportable lithium-ion batterytechnology platform.

Founder: Christina Lampe-OnnerudInvestors: Foundation AssetManagement, Gabriel Ven-ture Partners, GGV Capital,Oak Investment Partners,Venrock Associates

6 Fisker Automotive Inc.Headquarters: Irvine,

Calif.Description: Developer of envi-ronmentally friendly cars.Founder: Henrik FiskerInvestors: Eco-Drive CapitalPartners, Kleiner PerkinsCaufield & Byers, Palo AltoInvestors, Qatar InvestmentAuthority, Quantum FuelSystems Technologies, U.S.Department of Energy

7 eMeter Inc.Headquarters: San Mateo,

Calif.Description: Provider of en-ergy information manage-ment solutions for utilitymass-market and commer-cial and industrial deploy-ment.Founders: Cree Edwards andLarsh JohnsonInvestors: DBL Investors,Foundation Capital, SequoiaCapital, Siemens AG

8 Serious Materials Inc.Headquarters: Sunnyvale,

Calif.Description: Provides energy-efficient building materials.Founder: Kevin SuraceInvestors: Cheyenne Partners,EnerTech Capital, Founda-

tion Capital, Mesirow Finan-cial, Navitas Capital, NewEnterprise Associates, RusticCanyon Partners, Saints Cap-ital, Staenberg VentureFunds, VantagePoint VenturePartners

9 Silver Spring NetworksInc.

Headquarters: Redwood City,Calif.Description: Provider of net-working infrastructure andservices for the smart grid.Founder: Scott LangInvestors: Beaver Creek Fund,Edison Electric Institute,Foundation Capital, GoogleVentures, JVB Properties,Kleiner Perkins Caufield &Byers, Northgate CapitalGroup, Seneca Capital Man-agement

10 Tesla Motors Inc.Headquarters: San

Carlos, Calif.Description: Provider of ener-gy-efficient electric sportscars.Founders: Martin Eberhard,Elon Musk, JB Straubel,Marc Tarpenning, Ian WrightInvestors: Aabar Investments,Capricorn Management,Compass Technology Group,Daimler AG, DBL Investors,Draper Fisher Jurvetson,Fjord Capital Partners, J.P.Morgan Chase, Tao Group,Technology Partners, U.S.Department of Energy, ValorEquity Partners, Vantage-Point Venture Partners,Westly Group

Clean-Tech Companies:Ranking the Top Venture-Backed Firms

BY COLLEEN DEBAISE

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E ven in the volatile world of energy markets, T. Boone Pickens has a reputationfor being unpredictable. The longtime oilman became an advocate of alternativeenergy in recent years, with plans for a huge wind farm in the Texas panhan-

dle—plans he’s been forced to rethink some.More recently, he has funded a national media campaign to reduce U.S. dependence

on foreign oil, and has sponsored legislation in Congress to subsidize trucks that runon natural gas—a less expensive and cleaner fuel than oil, and one that is present inthe U.S. in plentiful supply.

He and The Wall Street Journal’s Jeffrey Ball discussed such matters. Edited excerptsof their conversation follow.

JEFFREY BALL: At some point youdeparted from many of yourbrethren in the oil industry.What got you launched on thiscampaign?T. BOONE PICKENS: I kept seeingpeople that ran for president,Republican or Democrat, say,“Elect me and we’ll be energy-independent.”

I thought, really, is this goingto just happen? Or do you have aplan? And I blame you, the me-dia, that they never held thesepeople to that remark.

I struggled with it, and my

wife had to hear it and hear itand hear it. I woke her up in themiddle of the night, and I said,“Madeleine, the American peoplehave to see this, understand it.I’m going to spend some moneyto explain the story, then I’m go-ing to explain the solution.” So,I spent $62 million, and thatvery simply is the deal. Made-leine did say, “I’m sure you’regoing to be the one that’s goingto do this. But let’s go back tosleep. Do it in the morning.”

MR. BALL: It doesn’t feel like an

acute crisis to most people. Youhave loads of people followingyou on Twitter. You have lots ofpeople showing up to yourspeeches. And yet you’re bangingyour head against a wall on alot of this stuff.MR. PICKENS: No, I think I’vemade good progress. The Ameri-can people are concerned. I’vegot 1,627,000 people signed upwith me, and I do have a greatamount of following, and we’vebeen running focus groups.There’s no question that theAmerican people hate it that weimport so much of our energy.They are concerned about OPEC.I think I have created that con-cern, that we’re importing fivemillion barrels a day from theenemy. We look stupid doing it.

MR. BALL: Are they willing to paymuch more, or are they willingto change their behavior?MR. PICKENS: It’s not more ex-pensive. My plan is cheaper. Weonly have one resource in Amer-ica that will replace foreign oil,and that’s natural gas.

Start With TrucksMR. BALL: Talk about how you’duse natural gas in transporta-tion. As I understand your plan,it’s based on the notion that 18-wheelers and smaller truckswould run on natural gas. You’dhave some limited number of fu-eling stations placed strategi-cally around the country.MR. PICKENS: That’s it. The tech-nology has been there for years.

There are 12 million vehicles inthe world today on natural gas.And we are the largest in natu-ral-gas reserves in the world.Four thousand trillion cubic feetof recoverable gas. J.P. Morganput out a report the other day ofeight thousand trillion, but thatis gas in place. And I say we canget 50% of it. We have the tech-nology for that.The fuel is cheaper; it’s cleaner;it’s abundant; and it’s ours. Imean, we are going to go downin history as the dumbest crowdthat ever came along. Don’t tryto do 250 million vehicles inAmerica. Just do eight million18-wheelers.

MR. BALL: And what would bethe cost of the federal subsidiesthat you’d need—the tax breaksthat you’d need to get thosetrucks on the road?MR. PICKENS: The legislation iswritten. The subsidy is $65,000of tax credit.

MR. BALL: Per truck?MR. PICKENS: Per truck.

MR. BALL: There have been ques-tions raised about the perfora-tion of the rock to get down tothe gas, and the effect thatmight have on polluting aquifers,and the amount of water neces-sary to get at that gas. Therehave been big fights in New Yorkand Pennsylvania about this.MR. PICKENS: Show me an aqui-fer that’s been damaged. Andyou’re talking about the water:

90% of it is recovered and usedagain. Rex Tillerson, CEO ofExxon, testified before Congressa month ago. He said there havebeen over a million wells drilledin the last 50 years, and there isno evidence of any aquifer beingdamaged.

MR. BALL: You talked a lot aboutwind last time you were here.And there have been some devel-opments in that plan, right? InJanuary you said that invest-ment realities had changed. Youwere essentially backing awayfrom the plan to put all the tur-bines that you had ordered fromGE in Texas—about 650 tur-bines. So where are you going toput the turbines?MR. PICKENS: We had boughtthose turbines from GE. We ne-gotiated, it was 1,000 megawattsand we reduced it to 500 mega-watts, which is 324 turbines. Theanswer is scramble. You’ve gotto find someplace to do those. Iwas going to do it in the Texaspanhandle, and transmission gotvery, very complicated. We won’thave transmission in there until2013. But we’ll be installing tur-bines this year.

I can tell you, from Roscoe,Texas, to the Canadian border,that is the best wind area in theworld.

Price Is WrongMR. BALL: I’ve read suggestionsthat because of what’s happenedon wind, basically you have

great aspirations but you’re notfollowing through.MR. PICKENS: I’d say that I’ve gotto get a better market than Ihave now, but I think I will beback just as enthusiastic whenthat happens. You can’t reallyget started now because wind ispriced off the margin, and themargin is natural gas. So you’resitting here, gas at $4.50 andyou’ve got to have—you cansqueeze it at $6, but $7 willmake the wind work.

MR. BALL: So wind’s got a whileto go to wait out gas prices?MR. PICKENS: It does. You havesome special situations, produc-ers, where you can finance it.But what an opportunity for usAmericans to start to move overto natural gas as a transporta-tion fuel, when it’s a fraction ofwhat foreign diesel is.

MR. BALL: Just to be ineleganthere, just to raise something thata lot of people raise, does thishave anything to do with BoonePickens’s own gas holdings?MR. PICKENS: Gas holdings? Sure,I’ve got interest in gas compa-nies. What else can I say. Yeah,that’s my business. I mean, that’swhat I know. I’m a geologist, andgas and oil is it. When you said Igot out of the oil business, that’snot true. And the reason whyyou’ve got to keep me in the oilbusiness: I do not want to beidentified as a wind man or agas man. I much prefer to becalled an oilman. y

Keep on TruckingT. Boone Pickens is more convinced than ever that usingnatural gas to fuel transportation is the smart way to go

S ilicon Valley start-up Bloom Energy Corp. late lastmonth introduced a fuel-cell device called theBloom Box, which it says is capable of generating

electricity with less pollution and at a lower price, withsubsidies, than utility-supplied power in many areas.

Bloom Energy says several large companies are usingthe Bloom Box and are happy with the results so far,though skeptics note that fuel cells have been around forquite a while and so far have proved too expensive toserve as a viable alternative to grid-supplied power.

Bloom Energy Chief ExecutiveKR Sridhar sat down with TheWall Street Journal’s Alan Mur-ray to discuss the Bloom Box andwhy he believes it is a game-changer. Here are edited ex-cerpts of their discussion.

ALAN MURRAY: The ceramic tech-nology that you’re using looks toa lot of people like the kind offuel-cell technology that’s beenaround for a long time. What’sthe breakthrough?KR SRIDHAR: It’s about how youput it together. What’s thebreakthrough between an earlycar and a new car now? First, wehave the advantage of being atthe right time, at the right place.It’s the advances in material sci-ence. It’s the advances in com-puting. It’s the advances in In-ternet technology that allows usto remotely monitor and controlthe systems that are locatedanywhere—which even 15 to 20years ago you couldn’t havedone. Second, Bloom looked atthis as a big market opportunity.Energy is the ability to work. Ifyou don’t have more energy, youdon’t do more work. If you don’tdo more work, there is no eco-nomic growth. So, then we said,“You have to make it affordable.”When you start with that asyour goal, everything aboutwhat you build becomes a verydifferent mind-set.

Looking at PriceMR. MURRAY: So, let’s talk aboutaffordability, because those areoften the shoals on which manyof these promising technologiesbreak down. We’re talking abouta box, roughly the size of a park-ing space. You’re selling it for$750,000.

MR. SRIDHAR: Somewhere in thatneighborhood, yes.

MR. MURRAY: It generates 100kilowatts, so $7,000-$8,000 akilowatt. That’s a pretty highprice compared to other avail-able technologies, isn’t it?MR. SRIDHAR: That’s the wrongway to look at the whole prob-lem. As a customer, as a con-sumer, you’re buying electricity.The commodity you use is notthe box in the parking lot. Thecommodity you use is the elec-trons that you use. There is amarket price for that, and themarket price varies from four tofive cents a kilowatt-hour to 14to 15 cents a kilowatt-hour justin this country, depending onwhere you live.

So, for a customer, the eco-nomics is very simple. You havea box that you pay for. You’reused to understanding how toprice a capital-equipment pur-chase—it’s depreciation andwhat that does to your books.You’ve got a maintenance andoperation contract—again, noth-ing dissimilar to any big piece ofequipment that you buy. Thoseare fixed prices that the cus-tomer gets, so they can do theeconomics themselves. The sec-ond thing is what goes in. That’sthe fuel. They can buy a fuelcontract. They know for the next10 years, with certainty, whattheir price is going to be.

MR. MURRAY: Most of your boxesare operating on natural gas?MR. SRIDHAR: Either natural gasor biogas. Our customers are us-ing both, either to be lower incarbon footprint, or zero in car-bon footprint. So, they knowthat cost. On the other side is ameter that puts out electrons,

and they know that these elec-trons, if they were buying fromthe local utility, they would paythis much. They can do themath. They can do the analysis.

MR. MURRAY: So the cost is,you’re in the nine-to-10-centsrange?MR. SRIDHAR: Exactly, and youdidn’t have to take our word forit. You have the customer panelout there, and these are compa-nies that are very savvy aboutwhat they do. This is Wal-Mart.This is Coke. This is Google. Thisis eBay. They have attested thatthey have run these units forthat long, and that’s the eco-nomics for them.

MR. MURRAY: So you think theeconomics are there?MR. SRIDHAR: The economics arethere today, with a subsidy.

MR. MURRAY: The subsidy iswhat? Thirty percent?MR. SRIDHAR: Right. But we be-lieve, very strongly, that wewould not need that in a shortamount of time to [be compara-ble with grid power].

MR. MURRAY: What are the com-panies that have installed BloomBoxes finding in terms of thepredictability?MR. SRIDHAR: We have exceededevery expectation that we set forthem, in terms of what contrac-tually we obligated ourselves to.

MR. MURRAY: Was there any con-sideration on your part of hav-ing some sort of independentevaluation, so that people couldsee the results verified by an Un-derwriters Laboratories, orsomeone like that?MR. SRIDHAR: Our very first unitthat went into the field has anUnderwriters Laboratoriesstamp, so we are a UL-approveddevice. But the real evaluatorsare our customers. When youbuy a computer, or you buy aniPhone, it’s not some indepen-dent lab verifying and tellingyou it’s good. It’s the customerwho uses it.

Creating OpportunityMR. MURRAY: What’s the value ofhaving a decentralized powersource?

MR. SRIDHAR: We’ve got 2.5 bil-lion people that don’t have ac-cess to a grid, and will not haveaccess to a grid, because there isno return on investment tobringing hundreds of miles ofwire from some central powerplant for this little village in Af-rica. Their only pathway to eco-nomic opportunity is to leavethat village and go somewhereto a city. Our goal is to makesure that they use this box tofurther their economic growth,not because it’s clean, but be-cause it’s the most affordableand accessible way to get power.

MR. MURRAY: When will you startrolling out boxes to developingcountries?MR. SRIDHAR: Our hope would bethat within a decade we shouldbe able to do this.

MR. MURRAY: Just lay out for methe next couple of years. Whatdo you see as the next steps foryour technology, to prove it, andthen to begin to scale it?

MR. SRIDHAR: Our biggest oppor-tunity right now, and our biggestchallenge, both together, is weare just beginning. We haveabout 30-plus boxes in the field.That’s nothing compared to whatthe world needs and what thegoal is. So we have to execute.We have to execute to put lots ofunits with the same level of cus-tomer satisfaction, the customerexperience, as what we havedone with our early customers.We feel in two years we shouldbe at a level of robustness wherewe can say it is ready for primetime, way beyond the geogra-phies of where we are, to go tomultiple geographies and dowhat we need to do.

MR. MURRAY: What are the emis-sions ramifications?MR. SRIDHAR: The fact that youdon’t need the transmission-dis-tribution lines, the fact that youdon’t have the transmission-dis-tribution losses associated withthat, the fact that our device cancompete with a combined-cycle

gas-turbine plant, which is aboutas clean as one can get from afossil fuel, it means that net-net,we’re going to be slightly betterthan even the best power plantbecause of the lack of grid infra-structure. If you take what theworld would do in the absenceof these kinds of boxes—of coal,you’re talking about significantlybetter carbon reduction. If youuse biomass, biogas, landfill gas[in our boxes], you’re going tobe zero-carbon.

We have a longer-term plan,for which we have completelyproven the technology, whereour device is both a generatorand a storage device. I can takefuel and produce electricity. Ican take electricity and producefuel from the same box. Think ofhaving a solar panel, or a wind-mill, that when you have the ex-cess power during the day orwhen the wind blows, convertingwater to hydrogen and storing itlocally, then running that hydro-gen in reverse and being able tosupply. y

Power in a BoxBloom Energy’s KR Sridhar explains what all the fuss is about his company’s fuel-cell product

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BLACKBLACK


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Monday, March 8, 2010 THE WALL STREET JOURNAL. THE WALL STREET JOURNAL. Monday, March 8, 2010 R9

OR.

It’s just two letters, but don’t be fooled by its brevity.

OR means there’s a sacrifice around the corner.

OR means there is a choice to be made.

In the car industry, OR is the status quo.

That’s why at BMW, we believe in AND.

We believe cars can be efficient AND exhilarating.

Responsive AND responsible.

This is your permission slip to drive a performance car.

This is why The Ultimate Driving Machine® exists.

To save the road AND the landscape around it.

To save the drive AND your peace of mind.

To save the hairpins AND the air you breathe.

But above all else, to ensure that the Joy of driving lasts forever.

Joy wants a hybrid that doesn’t drive like a hybrid. Joy wants emotion

behind the wheel. It wants performance and handling while still

improving fuel efficiency. This is the all-new BMW ActiveHybrid X6.

The marriage of dynamic and hybrid. Luxury coupled with responsibility.

ActiveHybrid is an intelligent energy management system that creates

its own power, thereby reducing fuel consumption and emissions.

This is the hybrid that Joy demands, and this is how we answer to Joy.

The story of Joy continues at bmwusa.com/EfficientDynamics.

JOY IS RESPONSIVEAND RESPONSIBLE.

JOY IS THE BMW ACTIVE HYBRID.


©2010 BMW of North America, LLC. The BMW name, model names and logo are registered trademarks.European model shown.


BMWAdvanced Diesel


©2010 BMW of North America, LLC. The BMW name, model names and logo areregistered trademarks. Claim based on 335d and X5 xDrive35d each achieving thebest CARB emissions test results in more categories than the nearest competitor.

Joy will not sacrifice. It stands behind the promise to increase driving pleasure while producing

fewer emissions. A commitment supported by BMW Advanced Diesel with BluePerformance

Technology — a fuel-efficient concept that allows the six-cylinder diesel engines in the X5 xDrive35d

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one reason it’s the best-selling diesel in its class. Joy doesn’t mind being stubborn. Not when it has

a promise like this to uphold. The story of Joy continues at bmwusa.com/EfficientDynamics.

JOY IS BMW ADVANCED DIESEL.

JOY DOES NOTCOMPROMISE.


580 miles per tankUp to 36 mpg 20% less CO2 emissions

C M Y K Composite

YELLOW CYAN MAGENTA BLACK Composite

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BMW


©2010 BMW of North America, LLC. The BMW name, model names and logo are registered trademarks.Fuel Efficiency claim based on a highway mileage analysis sourced from fueleconomy.gov of five key competitors.Lower emissions based on The Environmental Defense Report titled “Automakers’ Corporate Carbon Burdens”issued August 30, 2007. Sector Leader in the Dow Jones Sustainability Index 2005, 2006, 2007, 2008. Dow Jonesis a registered trademark of Dow Jones & Company LP.

Joy has a commanding presence and a responsible conscience to match. Its longevity is focused

on efficiency, which is why BMW is the most fuel-efficient luxury fleet in America. It owes this

honor to Efficient Dynamics — our commitment to fewer emissions while enhancing the Joy of

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The story of Joy continues at bmwusa.com/EfficientDynamics.

JOY IS BMW EFFICIENT DYNAMICS.

JOY ISPOWERFULLY EFFICIENT.




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