Author: Russell Gold

We heard a lot last year about how improving energy efficiency was cheap, low-hanging fruit and how it was the best way to curb greenhouse-gas emissions. Break out your caulk guns!

Frankly, it all sounded a little too good to be true. Without any big sacrifice or a change in lifestyle, less energy would be needed. Just keep your tires properly inflated. Oh yeah, targeting energy efficiency would create jobs also. A double shot in the arm for the ole economy!

Is there really that much waste? Consider the lesson of Morgan Stanley’s trading floors. At its global headquarters in Times Square, Morgan Stanley kept its trading floors at a nice temperature 24 hours a day, five days a week. Even at 3 a.m. Why push so much heat in during the winter – or cool air in the summer – in the middle of the night?

That was one of the questions posed by EnerNOC Inc., a Boston-based darling of the energy efficiency industry, after it began monitoring the 42-story building. Another finding: Morgan Stanley, which owns the building and occupies somewhat more than half of it, was keeping the elevator machinery rooms and other mechanical spaces as cool as the corporate suite. And the bathroom fans were running 24/7.

In all, EnerNOC said it found about $100,000 in savings for Morgan Stanley last year. (The Wall Street firm posted a $729 million profit in the first three quarters of 2009, so the energy savings are not a make or break figure.)

Morgan Stanley has “definitely recouped all of their investment,” says Tim Healy, EnerNOC’s chief executive. “They were ahead of the game within months.” Since he’s selling monitoring – not expensive new lighting or higher-efficiency furnaces – it was a relatively low upfront cost. (Morgan Stanley confirmed EnerNOC’s account of EnerNOC’s work and the savings uncovered.)

EnerNOC’s business is all about using information technology to monitor buildings and ferret out inefficiencies. Mr. Healy calls is data-driven energy efficiency.

“Let’s put a super computer inside that building that processes all the ways energy is being used, the way air is being used, the way lights are being turned on or off and try to optimize that,” he says. (No people wandering around the building with notepads are needed. The company can monitor carbon monoxide levels to figure out how many people are working in a certain space.)

He figures active monitoring of buildings to save energy will be a $30 billion to $40 billion market in the U.S. in a few years. That seems pretty bullish, but there are a lot of people who see a big potential in efficiency right now. In 2009, energy efficiency got $1.6 billion in venture capital and private equity investments, according to New Energy Finance, not far behind leading sectors wind ($1.75 billion) and solar ($1.74 billion.)

A boom in Chinese wind investments helped Asia top the Americas in clean energy spending last year, but Europe-Africa-Middle East remained the top region, according to data out this morning from consultant New Energy Finance.

Totalling up spending by venture capitalists, governments, asset financiers and so forth, the green eye shades at NEF found $37.3 billion invested in Asia-Oceania, versus $32 billion for the Americas. Europe plus got $42.2 billion.

Overall, considering that 2009 was the depth of the Great Recession and credit markets were chilly, clean energy investments continued to do well. Total new investments were $145 billion, down only 6.5% from all-time high of $155 billion in 2008. Increases in government spending and small-scale (think rooftop solar) projects rose, while spending by venture capitalist and private equity firms plunged.

Most of the money that NEF tracked went to asset financing — building wind farms, solar arrays and what not. And as you drill down into the data, things get interesting. We totalled up data from all four quarters and found that the European Union led the pack with $33.6 billion in asset investments, China came in next with $13.6 billion, followed by South America ($11.3 billion) and then North America ($7.9 billion.) Globally, most money went to the most mature renewable energy — wind — then solar and biomass in a distant second and third.

The one place where North America is clearly tops: it was far and away the top region for venture capital and private equity investments in small companies trying out new ideas.

Just to keep things in perspective, Exxon Mobil and Shell spent about $55 billion and change on new oil and natural gas projects last year.

Environmental Capital expects to restart in 2010 next week.

As Mark Twain said when a reporter asked him how he should reply to reports that the author had died: “Just say the report of my death has been grossly exaggerated.”

A happy, healthy and prosperous new year from Enviromental Capital.

Thanks for joining us for the wild, bumpy ride through 2009.

See you in 2010.

In the meantime, a French court struck down a new tax on carbon emissions set to go into effect on Jan. 1, but Economy Minister Christine Lagarde promised to salvage the tax and close certain loopholes.

Meanwhile, an Environmental Capital favorite — natural gas producer and cheerleader Chesapeake Energy — has won a dubious award. The worst financial footnote of the year.

Photo credit.

Virginia Gov.-elect Bob McDonnell isn’t waiting to get the keys to the mansion to keep up his push to bring offshore drilling to the commonwealth. It would bring sorely needed jobs and tax revenue, he says.

But it turns out his oil-drilling-brings-economic-development argument rests on some threadbare data.

First, a recap: The Virginia gubernatorial election turned in large part on a major difference in the candidate’s energy platforms. GOP candidate Mr. McDonnell was a drill, baby, driller, while the sitting Democratic Gov. Timothy Kaine wanted to proceed with caution.

Earlier this week, Mr. McDonnell kept up his call for the federal government to clear the way for drilling off the Virginia coast in a letter to Interior Sec. Salazar.

“Virginia stands ready to help address America’s energy needs while creating badly needed good-paying jobs for our citizens,” he wrote, asking the federal government “move forward” with a lease sale for offshore oil and gas exploration. (The oil industry applauded the letter enthusiastically.)

But what’s the proof that offshore drilling would be an economic boom for the commonwealth? Mr. McDonnell cites the following:

A 2005 study by a former president at Old Dominion University forecast that offshore natural gas production alone off of the Atlantic coast near Virginia would, over a 10-year period, likely create at least 2,578 new jobs, induce capital investment of $7.84 billion, yield $644 million in direct and indirect payroll, and result in $271 million in state and local taxes. The study also estimated that there could be up to 500 million barrels of oil in this lease area – enough to fuel all four million cars in Virginia for more than four years.

An internet search for the study came up blank. Messages with Mr. McDonnell’s transition team seeking to see the study were unreturned. We were dumbfounded until we got an email from James V. Koch, the study’s author.

But he wrote that it wasn’t really a study, at least not in the academic sense. Mr. Koch said he was asked to do a quick look at the issue. Since “I did not have time to parse Virginia’s situation in detail, I examined the experiences of Louisiana and a Canadian province” and extrapolated. The figures “were very rough estimates” and the topic would benefit from a detailed, thorough study.

By the way, even Mr. Koch couldn’t provide us with a copy of the study. It’s not the type of thing he puts on the resume, he said. “That does not suggest the quoted study was somehow deficient, only that it was quick work. I was not painting the Sistine Chapel,” he said.

We’re still on holiday. See you soon.

Biofuels investing is not for the faint of heart.

Earlier this week, Codexis Inc. filed for a $100 million initial public offering on Nasdaq. The short press release is here and we’ve uploaded the entire 841-page file for your reading pleasure here.

Codexis, as you may recall, is a San Francisco-based company developing the microbes to chew up plants and turn them into sugars, which are then turned into ethanol and diesel. Shell owns a 20% stake in the company and is pumping about $15 million a quarter into research and development. It filed for an IPO before, but then pulled back in September 2008 citing “current public market conditions.”

That was good timing. Two weeks later, Lehman Brothers filed for bankruptcy. Within three weeks, American International Group was bailed out and Bank of America had bought Merrill Lynch.

An alternative energy, U.S.-listed IPO is something of a novelty. The last biofuels IPO was way back in December 2007, when Chinese biodiesel maker Gushan Environmental Energy Ltd. debuted. After that there have only been three IPOs – solar outfits Real Goods Solar, GT Solar and STR Holdings. (Hat tip to Dealogic for the data.) Battery maker A123 began trading a couple months ago also.

Will Codexis timing be any better this time around? There are still plenty of potholes.

The beauty of an IPO filing is that the company must file all sorts of risk factors laying out exactly what can go wrong. And in the biofuels business, that’s quite a lengthy list. Codexis (and its lawyers) cite: its sugar daddy Shell could decide it wants to stop bankrolling R&D efforts; “the development of technology for converting sugar derived from non-food renewable biomass sources into a commercially viable biofuel is still in its early stages, and we do not know whether this can be done commercially or at all”; “there are no commercial scale cellulosic biofuel production plants in operation. There can be no assurance that anyone will be able or willing to develop and operate biofuel production plants at commercial scale or that any biofuel facilities can be profitable”; new infrastructure is needed, such as rail lines; tax credits and other government subsidies could disappear; falling oil prices will pole axe revenue; fears of genetic engineering could pinch the company; and there might not be enough feedstock to turn into biofuels.

Take a deep breathe. There’s one more, although it’s really only applicable to Codexis: “Our headquarters is located in the San Francisco Bay Area near known earthquake fault zones and is vulnerable to significant damage from earthquakes.”

A swarm of locusts is not mentioned.