In the absence of official targets on costs, energy storage companies would have to compete “at a unit below” the price of natural gas, currently trading at around $2.50MMBtu said Hanns Anders, an associate in the energy technology practice at Claremont Creek Ventures.

“When I talk about costs coming down, it needs to come down in order of magnitude difference,” he said. “If it’s an order of magnitude, it’s probably not worth looking at because it really needs to be compelling from an investors’ standpoint.

“The reason VCs have been attracted to storage historically is that this is a massive market. If you get a hit, chances are it will be a home run, but getting a hit is going to be hard.”

Despite the high capital costs and the long-term horizons to exits, a diverse range of energy storage companies had raised $630.5 million in the past 12 months, according to the Cleantech Group‘s i3 figures, which segments the market into consumer-scale electronics and electric vehicles and utility-scale storage and power management systems.

Draper Fisher Jurvetson, Kleiner Perkins Caufield & Byersand the US Department of Energy were the leaders in terms of deals, while European energy technology companies such as BASF in Germany, Schneider Electric in France and ABB in Switzerland have so far led on acquisitions.

Claremont Creek’s cleantech investment portfolio focuses on the intersection of energy and software technology, said Anders. But it had also joined Bill Gates with an investment in Energy Cache‘s “gravel ski lift” storage system.

Anders, who recently joined Claremont Creek after managing battery storage projects at Pacific Gas & Electric, said that investors were taking flight to less risky off-the-shelf technologies. Energy Cache did not suffer the same permitting and siting problems as pumped hydro or compressed air, he said.

“It’s like a ski lift with rocks – when energy is cheap and readily available you’re pumping rocks uphill and bringing them downhill when power is expensive.

“Batteries are taking 5 to 10 years to come out of the lab to commercialisation – that’s about the timeframe where you need a return. If you’re just getting to the market at that point, then you’re going to have some problems. Your investors are looking for a return in a reasonable time frame.”

In 2009 natural gas prices were twice today’s prices after a year of double-digit trading in 2008. Costs for renewable energy projects were benchmarked against gas-fired electricity, portfolio standards were mandated in many states based on high natural gas prices and energy storage was seen as a “gamechanger” in managing the intermittency of wind and solar. Natural gas prices have since dropped to a level that has undercut competition from energy storage.

Lee Burrows, a partner at VantagePoint Capital, said that exits from energy storage startups required more patience than VCs had previously been used to.

“We look at a lot of energy storage,” he said. “We always try to have the companies map out
the levelised cost of energy versus gas peaker, versus demand response, versus energy efficiency, etc. At the end of the day, that’s what you’re competing against. You’ve also got to scale solutions to manufacturing. No utility is interested in one, two or ten of these things.”

The San Francisco Bay Area has around 30 energy storage startups alone; many of them struggling to scale and looking to strategic partnerships with large energy technology companies such as Siemens, GE and ABB. CalCEF, the influential fund of funds, has been in discussions with Lawrence Berkeley National Laboratory that would lead to a consortium aimed at leveraging finance and expertise.

Many companies now are calling for a market price signal similar to that used in Renewable Portfolio Standards or the US Department of Energy’s Sunshot initiative which aimed to reduce the cost of solar to $1/watt.

Burrows said that despite headwinds from record-low natural gas prices, energy storage companies in the US had great market potential in Asia and Europe.

“The US utility industry is a great market and there is a lot of potential,” he said. “But the US energy storage market will be slower to mature and evolve. There are real markets now elsewhere in the world that are much more motivated to integrate these solutions and will be great potential markets for US companies.

Daidipya Patwa, from the renewable integration unit at PG&E, said that California’s largest public utility would soon announce a location for its new compressed air energy storage (CAES) project to add to its 1.2 GW Helm’s pumped hydro plant.

PG&E would also finally flick the switch on a delayed NGK battery storage project in June, he added, while startup A123was working with Southern California Edison on a lithium ion battery storage 8 MW pilot for a wind project in Tehachapi.

“The big hurdle now is to get some highly publicised and successful pilot out into the field,” said Lee Burrows. “We’ve had some highly publicised failures in multiple technologies and that’s not good for anyone.

“The industry looks at energy storage outside of pumped hydro as a risky endeavor. If you want to make the deployment and financing easier you’ve got to have some good examples of deployments.

“This is a great time to be in the industry. Pilots will crack things open and help utilities write their business case for wider deployment.”

Looks like ten political sideshows on Solyndra weren’t enough.

If tomorrow morning’s hearing were being used as a chance to objectively assess where the industry stands, that would be one thing. But the title of the meeting gives away the real political intent: “The Obama Administration’s Green Energy Gamble: What Have All The Taxpayer Subsidies Achieved?

Actually, those green energy investments have yielded substantial returns. And before the political grandstanding begins in the House of Representatives tomorrow, here are five important things you should know about how promotion of clean energy has supported American businesses and consumers:

1. The 1603 grant program supported up to 75,000 jobs and 23,000 renewable energy projects during the height of the recession. When the recession hit, it was very difficult for project developers to find banks that were willing to utilize tax credits. So a cash grant program was created to give companies an easier way to finance projects. While it’s very difficult to know the exact influence of the grant on each project, the program played a major role in maintaining momentum — helping support $25 billion in gross economic activity, according to the National Renewable Energy Laboratory.

2. The production tax credit helps leverage up to $20 billion in private investment annually. With this key tax credit in place, the wind industry has dropped costs by 90% over the last few decades. It’s helped states like Iowa reach 20% wind penetration — bringing that state over 215 businesses that support 5,000 workers. Across the rest of the U.S., the entire industry supports 75,000 jobs, with 30,000 in manufacturing. However, up to 37,000 of those jobscould be at risk due Congressional lawmakers’ inability to extend the tax credit.

3. The loan guarantee program is expected to cost $2 billion less than budgeted. This program has gotten a black eye due to the bankruptcies of a few companies — most famously Solyndra — that received guarantees. But according to John McCain’s National Finance Chairman, Herb Allison, the cost to taxpayers will likely be far less than initially thought. In fact, over the last 20 years of experience, the U.S. government has shown a knack for managing risk — with loans and loan guarantee programs only costing tax payers 94 cents for every $100 dollars invested.

4. Home weatherization grew 1000% from April to June of 2011, creating 14,800 jobs. After a slow ramp-up, efficiency programs supported by the stimulus package have helped weatherize hundreds of thousands of homes. In addition to supporting the retrofits of individual homes, the Obama administration has supported the Better Buildings Initiative, a program that hasleveraged billions of private dollars to upgrade more than 4 billion square feet of public and private buildings in the next two years. That’s enough demand to support over 100,000 jobs.

5. ARPA-E has supported dozens of potentially groundbreaking technologies in advanced materials, renewable fuels, electricity generation, waste heat, and battery storage. Helping enhance America’s lead in technological innovation, the Advanced Research Research Projects Agency for Energy — initially funded through the stimulus package — has helped inventors, companies, and university labs boost their work. This program has immense bi-partisan support for promoting the “innovative research that makes America great and has fueled our economic growth for generations.”

Despite these successes, Republicans continue milking the Solyndra bankruptcy for an election-year story that doesn’t hold up — dragging the rest of the clean energy industry into the mud.

The sector has gone through some high-profile shake-ups and bankruptcies, so it’s the duty of lawmakers to understand how tax payer dollars are being deployed. That’s a supportable endeavor. But holding yet another hearing to lambast the President for a so-called “gamble” in clean energy isn’t productive for anyone.

The company blog outlines how it would work:

we have created an accountability model which will make every Microsoft business unit responsible for the carbon they generate – creating incentives for greater efficiency, increased purchases of renewable energy, better data collection and reporting, and an overall reduction of our environmental impact. To put this into action, we’re creating a new, internal carbon fee within Microsoft, which will place a price on carbon. The price will be based on market pricing for renewable energy and carbon offsets, and will be applied to our operations in over 100 countries. The goal is to make our business divisions responsible for the cost of offsetting their own carbon emissions.

The fee applies to data centers, office buildings, etc—each arm of the many-tentacled business. Emissions will be tracked using an extensive software system designed by CarbonSystems, according to Greenbiz. The software will tally how much carbon each operation, or “business unit” is emitting, and how much it will therefore be docked. That group will then have to pony up the fee, which goes into a company-wide investment fund that will be used to purchase renewable energy, and, yes, offsets.

The business groups can opt to invest in energy efficiency or local renewable power—which will likely be cheaper than coughing up the fees. Microsoft will, essentially, be running its own mini-version of a cap and trade. The whole data-driven approach is very Gates-ian indeed, and is certainly interesting enough (and comes at a rather opportune moment—right when Apple is making headlines for its heavy carbon footprint).

But whether or not it actually works will depend entirely on how serious the company is about enforcing the system, how stringently it does so, and the price it actually ends up setting on carbon emissions. If properly calibrated, it should prove a worthy experiment in reducing CO2 with innovative corporate governance.

Asif A. Ali / flickrMontreal at sunset: Quebec’s economy is about one-sixth that of California.

Quebec has emerged as California’s first full-blown partner in the carbon trading program that ramps up later this year. That means that, pending final approval next month, when the two governments issue their first round of greenhouse gas pollution permits in November, industrial buyers will be able to use them both interchangeably.

Mary Nichols, who chairs the California Air Resources Board and heads implementation of the program, says the move, “provides more options to California businesses and lays the groundwork for other partners to join with us.”

Most other potential partners maintain only a paper presence in the so-called Western Climate Initiative, a regional carbon trading pact that was designed to create a regional carbon market. Nichols, who’s on record saying that California would not “go it alone” in cap-and-trade, can breathe a small sigh of relief today. But Quebec is a relatively tiny partner, with economy one-sixth the size of California’s.

“It’s a demonstration that you can work out all the technical details and difficulties of linking two very different economies with each other, and create a tradeable instrument,” Nichols told me by phone today,  “It’s an ambitious attempt,” she conceded, but “an important step toward a global solution.”

Nichols declined to predict what U.S. state might be the first to join hers aboard the carbon-trading bandwagon–or when, but she predicted there might be some movement after November’s presidential election, and pointed to progress in three other Canadian provinces and recent legislation in Mexico, which she thinks sets the stage for a “vibrant potential North American market.” She says she’s optimistic that Ontario and British Columbia might join within a year or so.

Cap & trade remains a controversial policy, under which businesses pay fees to exceed their allotted carbon emissions, and can buy and sell credits among themselves, so long as total emissions don’t exceed a state-imposed “cap.” The concept has been opposed by both heavy industry and some environmentalists.

Québec’s minister for Sustainable Development, Environment and Parks, Pierre Arcand, said in a prepared statement that, “Climate change is a global issue that must be addressed by all levels of government.” Arcand added that he’s, “optimistic” that his province’s link with California “will be followed by many other partners.”

Today’s announcement triggers a 45-day public comment period in California, after which the Air Board is expected to formally adopt the linkage in June.The first linked auction between California and Quebec is scheduled for November, with a dry run in August.

A large ethanol producer and subsidiary of Koch Industries, Flint Hills Resources Renewables, also joined EdeniQ’s round as a new investor. Comerica and ATEL Ventures provided the debt. Flint is interested in EdeniQ because the startup has technology that can help a corn ethanol producer transition to cellulosic biofuels, which are made from energy crops or waste and are widely considered the future of biofuels.

EdeniQ originally raised $30 million when it launched back in 2008, and later raised $12.4 million, so the company’s total investment is close to $75 million. AltraBiofuels was also backed by substantial money — some hundreds of millions of dollars.

Cellulosic ethanol is facing a really tough road in the U.S. Amyris, which was one of the leaders a few short years ago after it went public, has hit a wall and recently reorganized its management team. MIT Tech Review reported that Amyris was very far away from being able to produce biodiesel profitably, leading to the company getting out of the biofuel business for the time being. Amyris’ stock is trading at $1.96 per share, far below its $16 per share price debut.

Another charticle from the MIT Tech Review this week shows just how far away the U.S. is from meeting its (ridiculous) renewable fuel mandates, particularly because very little cellulosic ethanol is being produced. Biofuel exec, and blogger, Robert Rapier tweeted to me that he predicts that the actual amount of cellulosic ethanol production in 2012 will be less than 5 million gallons (and probably less than 2 million gallons). The EPA is predicting the industry will make 10 million gallons 2012, down from the amazingly-off prediction goal that the industry would make 500 million gallons of cellulosic ethanol in 2012.

The energy credits are among a wider jobs “to do” list — which even comes with its own logo — that Obama will call on Congress to act upon at an appearance in upstate New York later Tuesday.

“Congress needs to help put America in control of its energy future by passing legislation that will extend the Production Tax Credit to support American jobs and manufacturing alongside an expansion of the 30 percent tax credit to investments in clean energy manufacturing (48C Advanced Energy Manufacturing Tax Credit),” the White House said.

The wind industy is lobbying heavily for renewal of the Production Tax Credit, which is vital to helping finance new power projects. New wind installations have dropped off significantly when the credit has been allowed to lapse, which last occurred in 2004.

The American Wind Energy Association, a trade group, warned in April that with the expiration looming, “the supply chain is feeling the uncertainty, and layoffs have now begun.”

While wind power has bipartisan support — Midwest and Great Plains Republicans are particular fans — extension of the credit this year is uncertain amid election-season political battles over green energy and other factors.

Separately, the 2009 stimulus provided $2.3 billion worth of credits for manufacturing equipment such as solar panel components, “smart” electric meters, fuel cell components and wind turbines.

Applications for the 30 percent credit far outstripped the $2.3 billion cap, but several congressional efforts to add billions of dollars to the cap have sputtered.

Adler described a “Green Bank” for California, a funding model for clean energy initiatives that would return the benefits to Californians. He said, “There is a way that we can collectively participate in the economic development that this environmental policy will yield.”

In its sixth year, the Green California Summit and Exposition spanned two days and included educational programs, vendor exhibits, green technology demonstrations and an awards presentation. This year’s summit theme was, “Building a Green Future for the Golden State.”

The second keynote presentation was given by Jared Blumenfeld, the EPA Regional Administrator for the Pacific Southwest. Blumenfeld began by reading the American Lung Association’s list of the 10 Most Polluted Cities in the Nation, defined by ozone pollution. Nine of those ten cities on the list are in California. (Sacramento is #6.) Blumenfeld attributed the high pollution levels to goods movement – the in-state transportation of mechandise by trucks, trains and ships. About goods movement, he said, “They’re put on trucks, they’re put on trains, the ocean going vessels themselves are a very large source of pollution. They go through our lowest income communities. Those impacts are being suffered by communities that live along roadways.”

Blumenfeld also spoke about the economic benefits realized by companies that undertake environmental initiatives. As an example, when Walmart reduced their packaging by 5%, they saved $3.4 billion and took 200,000 trucks off the road.

Over 100 exhibitors displayed alternative fuel vehicles, LED lighting products, recycled building materials, solar power systems, water conservation products and energy-efficient appliances.

Climate change is often considered to be a controversial issue, even in environmentalist circles. This controversy has spawn political, economic, and scientific debates that call into question the validity of the issue. While many are divided on the topic of climate change, the insurance industry is approaching the matter concerned only about the risks the phenomena presents and not about arguments regarding fact and fiction. The industry has a long history of taking risks very seriously and going to great lengths to examine and prepare for their impacts. This tenacity and caution is becoming more apparent in California.

CalCEF highlights lack of insurance as detractor for alternative energy projects

The California Clean Energy Foundation (CalCEF), a non-profit organization working to promotealternative energy, has spent years struggling to attract investors to alternative energy projects in the state. The organization has experienced varying degrees of success, but has noticed that alternative energy investment is stymied by fear of risk. Many alternative energy technologies are new or untested, presenting a significant risk for investors because of the potential failure of these systems. CalCEF believes that these risks are stopping a large amount of investments from coming to the alternative energy industry. The organization believes that the answer may lie in insurance.

Green insurance could make energy projects more attractive to investors

CalCEF suggests that insurance coverage could help attract investors to alternative energy projects. These investments could help drop the costs of these projects by an average of 20%, enough to expedite the development and construction of new energy systems throughout the country. The insurance industryhas already shown a great deal of interest in providing coverage that is associated with alternative energy and environmentalism in general. This coverage is typically referred to as “green insurance.”

Chubb and other insurers offer green insurance, showing acknowledgment of changing environment

The Chubb Corporation, one of the country’s largest insurance companies, has begun providing employers with new insurance products that are designed to encourage employees to be more environmentally friendly. These policies are part of the company’s auto insurance products and provide coverage for those that carpool. Other insurance companies have begun offering policies that offer protection against storms, floods and droughts that occur in parts of the country where such phenomena are not common. Many of these policies are still new, but show that the insurance industry, as a whole, is beginning to take the issue of climate change more seriously.

Boulder Ionics Corporation today announced the completion of a $4.3 million Series A financing. The over-subscribed financing round was led by Pangaea Ventures, and joined by new investors 9th Street Investments, CalCEF Clean Energy Angel Fund, and JSR Corporation as well as existing investors including Protonic Capital. The investor funds complement the company’s grant awards totaling almost $1 M from the National Science Foundation (NSF), U.S. Air Force (USAF) and U.S. Navy (USN). Boulder Ionics has developed a novel, high-throughput, low-cost synthesis platform for producing ionic liquid electrolytes for use in advanced energy storage devices.

Ionic liquids (room-temperature molten salts) are a relatively new class of materials that show tremendous promise for electrolytes in energy storage applications. Ionic liquids are safer and higher-performance replacements for the flammable organic solvents currently used in devices such as lithium-ion batteries. Batteries using ionic liquid electrolytes can be non-flammable, are stable at higher temperatures and can operate at higher voltages (increasing energy density and lowering cost). Although there is extensive worldwide interest in the energy storage market, commercial use has been limited due to lack of supply and high cost. Boulder Ionics will be the first U.S. manufacturer targeting production of ionic liquids in industrial volumes.

“Boulder Ionics’ novel, high-throughput production process allows us to manufacture ionic liquids at high purity and low cost, finally addressing the key bottleneck in moving these novel materials into the marketplace,” said Boulder Ionics’ CEO Dr. Jerry Martin. “With the financial backing and industry expertise of our investor base, we have the resources to increase our production capacity and advance our product development pipeline. Over the next two years, we and our partners will demonstrate ionic liquid based electrolytes in a range of devices from ultracapacitors and lithium-ion batteries to metal-air batteries.”

“Over the last decade, we have witnessed a global race to improve the performance, safety and cost of electrical energy storage,” said Andrew Haughian of Pangaea Ventures. “Looking at various technology roadmaps for the next decade, it is clear that safer, higher performance electrolyte materials will be urgently needed. The Boulder Ionics’ team has developed a breakthrough manufacturing technology and unique ionic liquids product portfolio that promises to meet the cost requirements of this market. We are excited to support the further development and realization of the huge commercial potential of these materials in the marketplace.”

Boulder Ionics will use this round of funding to further protect the company’s intellectual property, expand their team, and build a pilot production facility for electrochemical-grade ionic liquids.

For information or questions regarding Boulder Ionics’ technology, contact Dr. Jerry Martin, CEO, at 303-432-1400.

About Boulder Ionics: Boulder Ionics (http://www.boulderionics.com) is a rapidly growing energy storage materials company that produces ionic liquids and ionic liquid based electrolytes for demanding electrochemical applications. Using its proprietary high-throughput synthesis platform, Boulder Ionics is the first company to manufacture ultra-high-purity ionic liquids at prices that allow for commercial adoption. Boulder Ionics’ advanced Iolyte™ electrolytes and ionic liquids have applications in a wide range of products ranging from ultracapacitors to lithium-ion batteries and next generation metal-air batteries. The company is currently working with several strategic partners and industry leaders and expects demonstration of Iolyte electrolytes in a growing number of products by the end of 2012.

About Pangaea Ventures: Pangaea Ventures (http://www.pangaeaventures.com) invests in early stage cleantech companies with world-class advanced materials innovation. Pangaea believes that breakthroughs in advanced materials are becoming increasingly important for companies to excel in the cleantech market. Advanced materials are solving fundamental problems necessary to make products more efficient and less expensive, two of the key attributes necessary for widespread adoption of cleantech.

About JSR Corporation: JSR Corporation (http://www.jsr.co.jp) is a multinational company employing over 5000 people worldwide and a leading materials supplier in a variety of technology driven markets. JSR’s global network is headquartered in Tokyo (Japan) and has factories and offices in Europe, US, China, Taiwan, Korea and Singapore. JSR is a research-oriented organization that pursues close collaborations with leading innovators in a number of industries that are a key to the present and future welfare of human society: life-sciences, energy storage, electronic materials, display and optical materials.

About 9th Street Investments: 9th Street (http://www.9thstreetinvestments.com) is a non-traditional venture capital group born out of Coorstek, the worldwide leader in advanced ceramics based in Golden, Colorado.9th Street is primarily focused on investing in businesses in the advanced materials sector.

About CalCEF Angel Fund: The CalCEF Clean Energy Angel Fund (http://www.calcefangelfund.com) is a seed and early stage venture capital fund dedicated to clean energy. The Fund deploys deep industry networks and experience to support capital-efficient companies focusing on renewable energy, energy efficiency, energy storage, and related products and services. The Fund objective is to deliver venture capital returns to Limited Partners from investments which transform the clean energy economy.