Are these the faces of the next EV influencers? The group certainly has some heavyweights, with a combined market cap of more than $100 billion, but hardly represents the entirety of the energy, utility, auto or energy storage industries — or even just the EV sector. But most of the 13 have bet big on the nascent electric vehicle market. With the stated mission to “promote government action to facilitate deployment of electric vehicles on a mass scale,” the Electrification Coalition has released a 91-page policy paper this morning, advocating government action to boost the industry.

The Electrification Coalition calls for some policies that may be familiar to EV advocates — for example, revising building codes to require wiring for 220-volt charge points in newly constructed homes, and providing government loan guarantees for retooling auto assembly lines.

But the group also digs deeper into the EV ecosystem, arguing that in order to support a rapid scale-up in production of advanced batteries, the feds should provide tax credits for installation of automotive-grade batteries in stationary applications. To help convince consumers that plug-in vehicles will perform as well or better, at lower cost, than conventional vehicles, the coalition urges regulators to review vehicle warranties and establish a minimum residual value for large-format automotive batteries (potentially smoothing the way for battery leasing and recycling).

When it comes to charging infrastructure, the group isn’t sold on the idea that private companies should install public charging infrastructure “wherever consumers may need it.” The reasoning behind the stance? A “profitable business model for public charging infrastructure has not been reliably demonstrated,” writes the group, which counts among its ranks Coulomb Technologies — a charge point maker with its eye on revenue from residential, workplace and retail installations.

Alternative business models for charging infrastructure might work, however, according to the coalition. Better Place’s network operator model, in which the startup “presumably could operate profitably while deploying infrastructure,” represents one option. But as we’ve noted before, while Better Place has packed its project pipeline at a brisk pace, each charging network requires a massive amount of financing.

The Electrification Coalition anticipates a new, government-supported model to emerge similar to the arrangement with cable TV providers — with the government awarding “monopoly rights in specific territories” and entities “obligated to install a complete infrastructure to earn that right.” (See our GigaOM Pro article on “What Electric Car Charging Can Learn From the Broadband Buildout.”)

The Electrification Coalition will be kicking off its policy persuasion effort this morning in a press event with Federal Energy Regulatory Commission (FERC) Chairman Jon Wellinghoff and other political bigwigs in Washington, D.C. You can watch the full webcast starting at 10 a.m. (EST) over at the group’s web site.

Gevo: The Englewood, Colo.-based startup will receive up to $1.7 million to develop a yeast fermentation organism that can cost-effectively convert cellulosic-derived sugars into isobutanol. This liquid could then be used as a biofuel or as a chemical precursor for certain “high-value” products like PET plastic. Despite the economic downturn, Gevo hasn’t had much trouble raising funding. The startup got a $40 million investment led by French oil company Total SA in April after raising $17 million from Khosla Ventures Virgin Green Fund and others the year before.

GE Global Research: The research arm of tech-behemoth General Electric will get up to $1.5 million to develop detailed and simplified “kinetic models” of biomass gasification, a process that converts biomass into a gas mixture called synthesis gas, or syngas. A better modeling capability could lead to the widespread design of feedstock-flexible biomass gasifiers that are cost-effective and scaled to match the regional availability of biomass feedstocks, according to the release. GE Global Research has been working with the U.S. Department of Defense’s Advanced Research Projects Agency since late 2007 to integrate gasification and hydroprocessing, which coverts syngas into a liquid fuel, according to this report. The $3 million effort is meant to help develop bio-based jet fuel.

Exelus: The Livingston, N.J.-based company will receive up to $1.2 million to develop a biomass-to-gasoline technology. Exelus uses engineered catalysts — or solid, benign chemical substances — that could replace conventional high-temperature processes like gasification with a series of mild, low-temperature reactions. Exelus launched in 2000 with funding from the Department of Energy and the National Science Foundation to work on technology for converting liquid petroleum gas into gasoline. Exelus President Mitrajit Muckherjee tells us that this is the company’s first foray into the biofuel industry. Exelus, which is profitable, hasn’t received any venture funding.

Velocys: The Plain City, Ohio.-based company, part of the UK’s Oxford Catalysts Group, will receive up to $2.6 million to improve biorefinery economics through microchannel hydroprocessing. The company’s chemical processors decrease the transfer resistance between process fluids and channel walls and thereby increase throughput and reduce the required size of processing equipment. The project will explore the ability of Velocys’ technology to speed up chemical processes, which could result in more efficient conversion of cellulosic residues to liquid fuels.

Oklahoma State University: The Stillwater, Okla.-based university will receive up to $4.2 million to develop best practices and technologies related to sustainable and profitable production of cellulosic ethanol feedstocks. The project will look at the economic and environmental sustainability of switchgrass, mixed-species perennial grasses and annual biomass cropping systems and research the synergy between bioenergy and livestock production.

But a closer read of the report reveals its basic premise shouldn’t actually be that controversial. Electric cars have a role to play in reducing greenhouse gas emissions from transportation, the group argues. But the electricity supply will have to be cleaned up by adding renewables (like solar and wind) to the power grid (with a push from government), and the cars “must be more energy-efficient than state-of-the-art conventional vehicles on a ‘tank to wheel’ basis” (which they already are) in order to realize significant environmental benefits.

“Without a doubt,” the group writes, “electric and plug-in hybrid cars can help reduce CO2 emissions and oil consumption.” But surprise!: Electric vehicles won’t solve climate change. The cars don’t produce tailpipe emissions (thus, the common shorthand of “zero emission vehicle”), but they are only as clean as their electricity supply. “Electric cars powered by wind or solar energy are obviously superior,” in terms of well-to-wheel environmental impacts, Transport & Environment finds. “But if the electricity comes from coal, hybrids perform better.”

Cleantech venture capitalist Vinod Khosla raised a related point earlier this year in a talk at the AlwaysOn Summit. For years to come, he said, electric vehicles in the U.S., China and India will be “plugging into a lump of coal.“

That said, some studies have found that even when plugging into a “dirty grid,” electric cars can result in fewer overall emissions than their gasoline-fueled counterparts because power plants burn coal more efficiently than cars burn gas, and can potentially be controlled more effectively.

The impact of electric vehicles on energy imports and emissions will vary by country. But for the U.S., the Pacific Northwest National Lab has found that switching about three-quarters of the national light-vehicle fleet to plug-in vehicles that charge at night, oil consumption could be slashed by 6.2 million barrels per day — eliminating more than half of imports, according to the Wall Street Journal.

In analysis released last year, McKinsey & Company estimates that swapping out a gasoline-powered car in China, with its notoriously coal-fired grid, for a similar-sized electric model would reduce greenhouse gas emissions by 19 percent per car (see chart at left). That’s not enough, but it’s a start.

An important next step, the report’s authors argue, must be taken by government. They recommend three legislative actions: Long-term CO2 standards should be tightened for vehicles (new emission standards for vehicles in the U.S. are slated to be phased in with 2012 models); “strong post-2020 targets for renewable energy” should be set; and the “quantity and quality of electricity” should be measured with on-board metering.

Silver’s appointment to the role of executive director of the loan programs comes as part of an effort, the DOE says, to “strengthen and streamline” the agency’s operations. Having left the Washington, D.C.-based firm Core Capital Partners (where he was the managing general partner) last year, Silver will now oversee the application process, analysis and negotiation for loans and guarantees under the two programs, as well as staffing. According to a release from the DOE, he will also manage “the full range of the Department’s alternative energy investments.”

This week’s announcement comes two years after then-Senator Obama’s energy plan called for the government to invest in green technologies in a similar way to venture capital firms, by pooling a venture fund and doling out funding tranches (an idea criticized by New Energy Finance as showing a “certain naivete“). It also comes less than a year after New York Times columnist Thomas Friedman gave voice to the notion that the feds should provide capital to VCs themselves (a scheme soundly rejected by Benchmark Capital partner Bill Gurley).

Silver’s appointment, however, is hardly a case of D.C. turning to Silicon Valley for guidance. Silver is very much a man of the beltway. In addition to working in private investment (you can read more about his background here), he served as an adviser to the Secretaries of Commerce, Interior and Treasury during the Clinton administration, and as Forbes noted in a 2006 profile, Core Capital “counts its Washington expertise as a defining specialty,” although it doesn’t explicitly seek to invest in companies selling to the federal government. (The firm focuses on Series A and B rounds for alternative energy, advanced manufacturing, telecommunications and software companies.)

Silver told Forbes that Core would typically select as few as 8-10 investments from up to 4,000 pitches each year. For the popular and competitive programs he’s now overseeing, that experience searching for gems should come in handy.

Now California Insurance Commissioner Steven Poizner has given the green light for regulations permitting and authorizing insurance companies to verify mileage, the Sacramanto Bee reports. These final regulations, originally proposed last year, open the door for insurers to consider pay-by-the-mile plans in the state who previously rejected the option because they didn’t have the authority to double check drivers’ mileage estimates.

But at the same time, the news also marks the launch of a new balancing act in the age of digital privacy issues, with insurers and consumers having to weigh security concerns, access to vehicle tracking data against potential savings.

Progressive Insurance already offers a program in Oregon called MyRate, which provides a discount of up to 25 percent for “low-mileage drivers who install a palm-sized tracker in their cars,” the Oregonian notes. The discount is based on factors including miles traveled, time of day, braking and acceleration — a lot more detailed information than you typically give to a car insurer.

In California, the Insurance Commission’s new regulations say insurance companies can verify odometer miles using a technological device installed on a policyholder’s vehicle, or low-tech methods such as smog stations, repair shops or their own vendors and agents. But the regulations explicitly prohibit insurers from “using a technological device to gather vehicle location data for rating purposes.”

Carmen Balber of the nonprofit policy group Consumer Watchdog tells the Bee that this doesn’t close the book on privacy concerns with verification systems for by-the-mile insurance plans, but will rather give insurers a “foot in the door” to press for data collection methods like Progressive has in Oregon.

In the era of grid-connected cars, smart appliances and open energy information (as Katie has written), and now even attempts at greener car insurance plans, issues of privacy and security will be front and center, as they are in the Internet world.

According to the DOE’s announcement this morning, the $5.5 million for the X Prize Foundation comes from the agency’s pot of stimulus funds, and will help expand education and outreach efforts for the competition nationwide. The DOE also plans to provide technical expertise “to ensure that each of the competition designs is reviewed correctly and consistently.”

This isn’t the first time Washington has gotten giddy over the green car contest, which requires teams to submit a viable business plan for building 10,000 cars. The Senate passed a resolution last year praising the foundation for helping “break the addiction of the United States to oil and stem the effects of climate change.”

The DOE also awarded a nearly $3.5 million grant last year to help with the education and outreach component. At the time, then-Assistant Secretary Andy Karsner called it “one important way the Bush administration is leveraging private sector expertise to educate and engage the public about utilizing clean, cutting-edge technologies to transform our transportation sector.”

The Obama administration’s DOE can use similar language with a bit more cred, having finally doled out funding under a long-delayed green car manufacturing loan program, raised the bar on fuel efficiency for cars, and just handed out some $33 million for cutting-edge green vehicle tech development, among other things. Announcing today’s award, Secretary of Energy Steven Chu said, “This funding will support cutting-edge, American innovation that can help us fundamentally transform personal transportation and address the global climate crisis.”

Prior to this decision, handed down on Tuesday, the SEC allowed companies to reject the growing number of shareholder requests for disclosure of financial risks related to environmental and social issues (including climate change) as “no-action requests.” The org reasoned that such risks were part of ordinary business operations, and therefore not open to a shareholder vote, according to a legal bulletin from the SEC.

Now the SEC says it will consider these requests on a case-by-case basis. Mindy Lubber, president and director of Ceres, a group of environmental and advocacy groups, as well as institutional investors, cheered the decision as striking “the right balance of ensuring that resolutions about critical matters reach company shareowners, without opening the floodgates to proposals of more questionable significance.”

The move marks a significant shift for the SEC, which in the bulletin, wrote: “[T]he evaluation of risk should not be viewed as an end in itself, but rather, as a means to an end.”

Some companies are already making strides toward transparency, and some investors have successfully pushed firms to develop climate strategies or set greenhouse gas reduction goals. Last month, Apple, which has recently undertaken a major effort to green its image on its own terms (rather than at the hands of Greenpeace or competitors), divulged its carbon footprint (10.2 million tons of carbon emissions annually) for the first time, taking into account the greenhouse gas emissions associated with manufacturing as well as consumer use.

But according to a pair of reports released earlier this year from Ceres, the Environmental Defense Fund and the Center for Energy and Environmental Security, despite movement in this direction, climate-related disclosure “continues to be weak or altogether nonexistent in SEC filings of global companies with the most at stake in preparing for a low-carbon global economy.”

Graphics courtesy of Flickr and Ceres

He underlined the power of the coal and oil lobbies in Washington and urged solar and other renewable-energy advocates to start showing their strength on Capitol Hill. The most important thing people can do is get involved in the government, he said. “It’s much more important to change your politician than it is to change your lightbulb,” he said to laughter from the audience. “We need to show our muscle and get tough, aggressive people on Capitol Hill, flying around in solar-power Lear jets or whatever it is. We need to be demanding, ‘Hey, we are patriotic, we are saving this country…and we need to fight these enemies.’ If a foreign enemy poisoned 600,000 children every year, we’d consider that an act of war. We shouldn’t put up with this, and we can’t put up with this.”

The costs of oil and coal far exceed their price, with taxpayers absorbing many of the hidden costs of these resources, he said, citing as examples the special roadways for coal trucks, as well as health costs, including mercury contamination of fish and people (including 640,000 children born each year who have been exposed to dangerous levels of mercury) and asthma attacks that cost 1 million workdays per year. Kennedy called upon the government to reduce the “tsunami” of subsidies going to these sources and to force oil and coal companies to pay the true costs of bringing their products to the market. “You show me a polluter, I’ll show you a subsidy,” he said. “I’ll show you a fat cat that is using the free market to escape the costs [and to get the public to pay them].”

Once a coal plant is built, the costs are just beginning, but with a solar plant, once it’s built, the electricity is free, he said. He compared the current stimulus plan with former President Franklin Delano Roosevelt’s New Deal, saying that instead of seeing stranded assets — planes, tanks and bombs for the war — we’re building things today that will ensure prosperity for generations. “When we get done, we build a system that gives us free energy forever,” he said. “Just think what that does. In a few years, companies can come and access the biggest [permanent] tax break in the world.”

Protecting the environment is not about just protecting the fish and the birds, but about preserving important assets for future generations and about choosing long-term wealth over “a few years of instantaneous prosperity,” he said. “We’re going to democratize the energy system in this country and take it away from the incumbents over the next 10 years,” he said, calling it a choice between cheap fuel from hell and wholesome fuel from heaven. “There is a bright future ahead, and it comes from the sun.”

That said, the industry faces big challenges to shift public policy, improve transmission — and access to transmission — and figure out what public land can be appropriately used for large centralized solar projects, he said. Concentrating solar-thermal projects have very specific needs, and only a few pieces of land are suitable, but these projects are key for solar to gain a more significant piece of the U.S. energy portfolio. Rooftop PV can’t do it alone, he said. “We need a real analysis of the land to figure out which land should be preserved, because it is critical for wildlife, and what land should be used for solar thermal, and those places should be…put aside right now.”

Kennedy also urged the renewable-energy industry to make natural gas companies their friends. While many natural-gas companies still see themselves as more aligned with oil and coal than with renewables, some — such as Chesapeake Energy and T. Boone Pickens’ company, Mesa Power — have begun to realize they are environmentalists, Kennedy said.

He acknowledged the environmental impacts of fracking natural-gas wells, but called natural gas a “natural ally” for renewable energy because it’s the cleanest of the fossil fuels and it’s needed to balance out variable sources of power, such as solar and wind, until a better storage solution is developed. According to Kennedy, overturning “insane” rules in all 50 states that require utilities to dispatch coal plants before natural gas plants — which now cause gas-fired power plants to sit idle 62 percent of the time while coal plants are working 99 percent of the time — would reduce national carbon emissions by 25 percent without having to build a single new plant.

Photo courtesy of Solar Power International

According to Lux Research analyst Jacob Grose, who headed up the firm’s recent report on electric vehicle adoption, this first round of funding (there’s nearly $250 million left in the pot for later rounds) offers support for a strong balance of innovations. “Overall, I think the ARPA-E guys hit all the key areas for vehicle technologies,” by investing in the motors, batteries and electronics for today’s electric vehicles, as well as “some future technologies which are higher risk but may play a role in novel vehicles down the road,” and others that could help boost the MPGs of cars with the ol’ internal combustion engine.

J.D. Power and Associates analyst Michael Omotoso agreed, noting that ARPA-E fits into a larger portfolio of federal programs supporting advanced vehicle and battery manufacturing, “so most of the bases have been covered.” But at the individual project level, not every award is a clear home run for ARPA-E’s mission “to develop nimble, creative and inventive approaches to transform the global energy landscape while advancing America’s technology leadership.” And of course, not every tech with potential to aid that transformation made it into this first round.

While universities, smaller businesses and startups account for the bulk of awards related to vehicle technology, two legacy players in the auto industry — General Motors and Delphi Automotive Systems — are taking home a total of more than $9.4 million for projects that, according to Grose, are both “a bit strange.” Delphi’s project (awarded $6.7 million) involves gallium nitride electronics, which Grose said are more efficient than the silicon-based devices currently available, but don’t perform at as high a level as a third technology (silicon carbide) that other companies are working on. So considering the goals of ARPA-E, it’s “a bit of a conservative choice, technology-wise,” he said.

GM’s project, which involves memory-shape alloy technology for capturing waste heat from car engines, by contrast, struck Grose as “very speculative, especially when compared to thermoelectric solutions that companies like Amerigon are working on.”

GM won a smaller grant than Delphi — just $2.7 million. But Grose questioned the wisdom of the awards for the two projects. He said, “I think most of the other investments are more on target from a risk/benefit point of view.”

How much of a difference can a grant of a few million dollars really make for companies of this size? According to Grose, while the awards for GM and Delphi “will not at all move the needle for these companies, they will certainly allow these longer-term research projects to continue at a faster pace than they otherwise would, since cash-strapped companies rarely have the resources to invest in more speculative R&D.”

For a smaller, venture-backed company like Envia Systems — which raised $3.2 million in Series A financing last year — the ARPA-E funds can help build out a new business. Envia co-founder and director Michael Sinkula told me in an interview Tuesday that the 2-year-old company’s $4 million award will help it “pursue technology that we were not really focused on.” So far, Envia has dedicated its resources to developing cathode materials, but with the ARPA-E grant it will venture into anode technology.

ARPA-E has also reached into fuel cells. The University of California at Riverside won funding for work on alkaline polymer electrolyte fuel cell membranes, which the ARPA-E announcement says has the “potential to drastically reduce fuel cell costs and enable their widespread application in building and automotive applications.” It’s the smallest grant of yesterday’s bunch, at $760,705, and the only vehicle-related project clocking in at less than $2 million. Good thing, suggested Ron Gremban, technical lead for the nonprofit California Cars Initiative (CalCars.org), since it’s only “one of the seven or nine simultaneous breakthroughs necessary to make hydrogen vehicles practical and effective.”

As for the remaining millions, for future ARPA-E rounds, Omotoso sees plenty of areas of green car innovation that could use some more research and funding, notably: electrical grid optimization, electric motor technology, light-weight materials for vehicles and components, and finding “the best type of electric motor for an EV or a PHEV.” Gremban, meanwhile, said he would like to see “funds go to small, innovative projects” for plug-in conversion startups. Andy Frank, a staunch advocate of plug-in hybrid vehicles and an engineering professor at the University of California, Davis, echoed that point. “I think the DOE has missed the boat in this round,” he said, by failing to support lower-hanging fruit, such as conversions of conventional vehicles to plug-in hybrid or all-electric, that could accelerate “the transition from oil to electricity.”

For some of this tech, maybe the private sector will beat Uncle Sam to the punch. ARPA-E, after all, is “explicitly for long-term home runs,” rather than near-term solutions, as CalCars.org founder Felix Kramer put it. But starting now, there’s a new investor in town with high risk tolerance. If this week’s awards send one message to the venture capital community, said Grose, it’s this: “ARPA-E knows what they are doing, and will be akin to a well-run government VC fund.”

The winners in this first round include General Motors ($2.7 million), battery materials startup Envia Systems ($4 million), ultracapacitor developer FastCAP Systems ($5.3 million), auto supplier Delphi Automotive Systems ($6.7 million), solar tech developer 1366 Technologies ($4 million), efficient designers PAX Streamline ($3 million), and several universities (for a complete list see here). In all, the funding will cover work across the spectrum of green technologies, including building efficiency, carbon capture, energy storage, fuel-efficient vehicle technologies, renewable energy, waste heat capture and water desalination.

Created in 2007, but left unfunded until passage of this year’s stimulus package, ARPA-E has $400 million to award over the next two years. The projects announced today represent just about 1 percent of the original pool of applicants. A team of 500 scientists from U.S. universities considered 3,600 preliminary proposals, and invited 300 of those teams to submit complete proposals this summer.

The DOE explained earlier this year an ideal ARPA-E applicant would have a “multi-disciplinary” technical idea that could reduce dependency on oil imports, improve energy efficiency across all sectors of the economy, reduce greenhouse gas emissions and/or give the U.S. an edge in deployment of energy technologies.

The grants are meant to support ideas and technologies in these areas that are facing the “valley of death” — the place where many capital-intensive cleantech startups go to die because they can’t find financing for a critical phase of development or commercialization.

“It’s not supposed to be things that are 90 percent worked out, but more what-if kinds of things,” biochemistry professor Lawrence Wackett, who’s working on an ARPA-E project at the University of Minnesota, told the New York Times.

Many of the projects funded under this first round — particularly the university projects — are at an earlier stage than when venture capitalists step in with big investments. Stealthy startup Envia Systems raised $3.2 million in Series A funding for its work on “a new class of cathode materials” in October 2008, but that would hardly be enough to finance the company’s development, commercialization and plans for high-volume production in late 2010 or early 2011.

Getting in on the ARPA-E program gives startups like Envia Systems access to more than government funds. The DOE has said it will work with teams to develop intellectual property strategy and technical data strategies, as well as a procurement or financial assistance instrument to help manage risk once government funding for a project runs out.

According to the Times, which interviewed Secretary Chu on Friday, “Some of the ideas may be supported until they are picked up by venture capitalists or major companies.” All is not lost for the 99 percent of proposals that did not receive funding in this first round: The DOE may host a “fair” to let venture capitalists sniff them out for investment.

For those not familiar with the Yes Men, here’s another clip of them posing as a Dow Chemical exec and pretending to take responsibility for an environmental disaster caused by Dow (and of course they have a movie in the works).

That’s a massive task, particularly during a time of flux for how we generate, manage and consume energy, and according to Jeff Byron, the presiding member of the committee that put together the Draft Integrated Energy Policy Report (IEPR) released this week, a few factors made the challenge even greater: the state financial crisis, staff furloughs and the stimulus package, which created new funds and programs for the commission to manage.

Speaking today at the final public hearing for the IEPR this morning, Byron said, “It’s not quite the IEPR I envisioned when I took on the assignment a couple years ago.” The committee hasn’t been able to address all of the issues it wanted to, said Byron, and it’s looking for more feedback on three issues in particular before it settles on recommendations: how to meet the state’s target for utilities to get 33 percent of their energy from renewable sources by 2020, how to “procure” electricity from renewables and conventional sources, and as the CEC’s Suzanne Korosec put it, “how to make hybrid market work a little more effectively.”

The 247-page document presented at today’s hearing touches on hot-button issues including the state’s low-carbon fuel standard, renewable portfolio standard and the lack of emissions credits available for power plants in the southern part of the state, and the smart grid buildout.

Of course, the challenges for building a cleaner, smarter power grid are many. Just integrating variable sources of energy (such as fickle wind and solar) into the power supply and building the transmission lines to support it requires years worth of deal making, financing, bureaucratic processing and government approvals.

But according to comments submitted to the commission by utility Southern California Edison ahead of today’s hearing, another important piece of infrastructure is being overlooked as regulators develop policies for the smart grid buildout: the distribution system, which encompasses the network of power lines, substations, transformers and meters that connects the end user (your household, for example) to the transmission system.

“[M]ost of the smart grid technology discussion is confined to transmission issues and integration of renewable generation,” SCE writes. While the utility agrees these areas are “critical,” it points out that “the state’s energy policy goals will have significant impacts on the distribution system as well.”

It’s a critical piece of the grid upgrade, and not just in California. According to the final 2007 IEPR (which as SCE points out, dedicated a full chapter to assessing the impact of policy recommendations on the distribution system — it’s grouped in with transmission in today’s draft), 90 percent of all customer outages within California and throughout the U.S. were related to problems with distribution, and the system accounts for a larger share of energy losses (read: inefficiency) than transmission.

Addressing distribution is part of the hefty to-do list the IEPR has created. Today’s draft report recommends that the Energy Commission as well as the California Public Utilities Commission open a joint proceeding to analyze just how important distribution system upgrades will be for ensuring grid reliability and bringing distributed energy onto the grid at large scale. More research is needed, Byron’s team concluded, on how energy policies will affect the distribution grid:

For example, distribution lines may need to be reinforced with technology that can meet demand when on-site distributed renewable energy is not generating electricity. At the same time, upgrades, storage, or other resources may be needed to accommodate two-way flows from intermittent renewable power that is not dispatchable and is placed where it is convenient to the customer, but not to the grid.

In other words, as California races to reach its emission reduction and clean energy goals, and to upgrade its grid, a lot of unanswered questions remain. Regulators have limited resources and a running clock to answer them.

In Schwarzenegger’s view, those limits made the proposed laws overly “protectionist” and lacking in pragmatism, since development of renewable energy projects and transmission infrastructure within California has been relatively slow going. The governor’s veto last night, and the controversy over his executive order last month to have the California Air Resources Board (rather than the legislature) determine how utilities can meet the renewable portfolio standard, highlight a major choke point in the effort to clean up the national power supply: the approval process for transmission lines.

Policymakers, utilities and renewable energy developers at this point largely agree that the U.S., with its aging transmission infrastructure, is overdue for a grid upgrade. As we noted in a recent GigaOM Pro article (our subscription-only research service), to accommodate new renewable energy projects coming online the U.S. needs many more transmission lines, and California’s utilities commission estimates that no fewer than seven new transmission lines are needed to reach the 33 percent by 2020 goal.

Yet despite this support for investment in transmission, power lines are in many cases being built at a slower pace than renewable energy generation projects are being developed. Getting financing and a green light from government authorities to build a solar plant in the desert is one thing — winning approval for the entire length of a transmission line, which often runs through multiple cities, counties and states, including areas near people’s homes and businesses, is another animal entirely.

Building out new transmission lines requires coordination of multiple authorities, as Bob Anderson, managing director of the Western Grid Group, told us recently: “Landmass agencies, environmental regulators, energy regulators -– it’s just kind of a brawl.” And it touches the nerves of eminent domain and NIMBY-ism: Transmission lines may offer benefits to the country as a whole, but for the municipalities and landowners that have power lines running through them (without necessarily delivering energy along the way), they’re not too appealing.

These hurdles will continue to arise for the electricity that California utilities will continue to bring in from out of state (since they’ll inherently deal with interstate transmission lines). Now that Schwarzenegger has left the door wide open for energy imports, utilities can continue to purchase power from whoever makes it available at the most competitive rates. That’s the plan, at least, until Schwarzenegger leaves office at the end of next year — critics have said his executive order may not hold after that.

Photo credit NREL

I agree that what Green and Coleman call a dirty secret is a problem. For example, updating the power grid with information technology (creating the smart grid) is basically about getting utilities up to speed with modern digital technologies, which should have happened years ago. There’s no revolution there, it just makes sense for utilities’ businesses, for consumers’ needs, and for fighting climate change. Smart grid technologies will create a lot of revenues for the existing players, including large IT companies like Cisco and IBM, and some newer firms like eMeter and Silver Spring Networks. But the VCs are right — this isn’t a sector that the U.S. can use as a way to revitalize the American economy and maintain our lead in the global economy.

Green and Coleman want cleantech to follow the path of the computing boom, where the U.S. led (and still leads), and where venture capitalists in Silicon Valley have the cat bird seat to choose from entrepreneurs that have come from all over the world to the Valley to create innovations. The two say that if the U.S. government spent more on fundamental cleantech research and investments in early stage cleantech startups, it would help solve the problem. They point out that only one of the companies awarded funds in the first round of the advanced battery grant program was an innovative startup (both A123Systems and EnerG2 got funding).

That might be true, but the advanced battery grants came out of the stimulus package, which is emphasizing jobs and stimulating the economy in a recession. There would be unbelievable political backlash if the stimulus funds were invested in a bunch of high-risk, early stage Valley startups. I also don’t think the policy-makers handing out the grants are in a very good position to evaluate the merits of early stage startups that aren’t producing revenues or even products in some cases.

But I do agree with the partners that there needs to be more emphasis on Washington supporting more early stage cleantech startups and fundamental research. Whether that means creation of a “green bank,” more emphasis on the new ARPA-E programs, as they suggest, or even just vastly more funds for universities with strong cleantech programs and government labs with solid tech transfer programs.

At the end of the day the analogy between computing and cleantech is the problem. I doubt that transformational change driven by cleantech will look like the one that was created by computing and information technology, or even that the U.S. and Silicon Valley will dominate it. It will be vastly more global, with China likely taking a strong position in certain sectors. But more importantly cleantech is fundamentally about making existing systems and products cleaner, specifically electricity and transportation. The fact that a cleantech boom won’t likely follow the path of a computing boom is the real dirty secret for VCs. If cleantech venture capitalists are set on waiting for a recreation of the computing boom, they’re going to be waiting for a very long time.

Spain is often held up as the role model for renewable energy development. The Spanish government has been generous with subsidies for clean power in the form of grants and direct low-interest loans — $1.6 billion for the solar industry alone in 2008. The result has been that it’s basically subsidized companies’ losses and the true costs of renewable energy development has not been passed on to the consumer. Now the Spanish government is warning that its clean power policies could result in significant end user cost increases for electricity — for many years to come.

Spain’s Clean Power Folly

Gabriel Calzada, a Spanish economist and critic of the government’s approach to the solar market, notes that for each job his country’s alternative energy sector has created the cost to the Spanish government was $855,000. While hundreds of jobs were created during the construction phase of these alternative energy projects, few of them were permanent. Even more discouraging, according to Calzada, for every “green job” created in Spain, 2.2 jobs in other sectors were lost.

Spain’s subsidies and low-interest loans, which climbed to $1.6 billion in 2008 from $321 million in 2007, resulted in an explosion in solar panel manufacturing. But as the global recession hit and solar purchases took a dive, the Spanish government sought to reel in overcapacity and the market collapsed, resulting in thousands of job losses (and an unemployment rate of as high 18 percent) as the government –- and taxpayers -– no longer footed the bill.

Spain’s approach to renewable energy development was fundamentally flawed. And California, if it’s not careful, could find itself repeating Spain’s mistakes.

California Following in Spain’s Footsteps?

Here in California, according to the 2006 law AB32, investor-owned utilities are required to deliver 20 percent of their electricity from renewable sources by 2010. That’s a target the utilities will certainly miss because only 13 percent of the power delivered today is considered renewable, according to figures made public by the California Public Utilities Commission (CPUC). Even that agency is saying it will likely be 2014 before the 20 percent target is met. AB32 also created the regulatory framework by which the California Air Resources Board (CARB) could mandate that 33 percent of that power has to come from renewable sources by 2020, a mandate which Governor Schwarzenegger authorized by executive order last month.

Meanwhile, over in the Assembly, state senator Joe Simitian came out with a bill titled SB 14, which would require investor-owned utilities in California to not only deliver 33 percent of their power from renewable sources by 2020 but also require them to produce it in California. This would pose a real problem, however, as California doesn’t actually produce much power, but rather pipes it in from other western states and the Canadian province of British Columbia.

While the governor has announced that he plans to veto SB 14, the details of its proposal are worth noting. It attempts to force utilities to abandon existing sources of clean energy (California uses a lot of hydroelectric power) and replace it with new clean power generation that would have to be built within the state. According to utilities, the cost for complying with SB 14 on top of existing state mandates would exceed $115 billion by 2020.

To put that in perspective, PG&E, SDG&E, and Southern California Edison combined sell about $25 billion in energy (gas and electric) each year. In other words, Californians would see a sobering increase to their utility bills.

Don’t Go There

This micromanagement of the electricity marketplace is in essence an attempt at centralized economic planning, and would have dire consequences for the state. Simitian’s approach would foist significant costs on the consumer in the name of job creation.

But when power gets expensive, industries leave. It’s no secret that Google and Microsoft have been building out their massive data centers not in California but in the Northwest, where power is cheap. Over 25 percent of California’s manufacturing jobs — 35 percent of all high-tech manufacturing jobs — have left the state since 2000, according to a report prepared by the Milken Institute, to the benefit of neighboring states Arizona, Nevada and Texas.

The future of California is inextricably linked to Californians having jobs, but if the Legislature gets its way every job created in alternative energy will be accompanied by an exodus of jobs in other industries. While Spain’s policies have caught the attention of the world’s clean power industries and make for exciting reading material, California would be very unwise to follow that country’s lead.

Jeff Nolan is a former enterprise software venture capitalist and media/advertising executive who blogs at Jeffnolan.com.

Apple’s departure makes is just the latest company trying to distance itself from chamber’s stance on climate policy — several utilities including California’s PG&E have said they will let their membership lapse at the end of this year and Nike has stepped down from the chamber’s board. But in a move that shows the high stakes of the climate policy debate for corporations, Apple has taken a bolder step and made its resignation from the chamber “effective immediately.”

Apple’s statement today is notable not only because it marks a clean break from the business group, but also because of the motivation behind it. Energy companies and utilities that have made big investments in cleaner energy and energy efficiency, could see direct benefits from a cap and trade system that makes carbon-intensive electricity from coal more expensive. But Apple, while it could arguably benefit from regulatory certainty, also wants to win good will among green-minded consumers and regain tight control over its image when it comes to environmental impact.

Apple’s decision to leave the chamber comes on the heels of its very interesting (and public) move recently to become more transparent in its carbon accounting process (following persistent criticism from Greenpeace and other environmental groups). For the first time last month Apple unveiled its carbon footprint, taking into account emissions associated with consumers’ use of its products, as well as manufacturing. By contrast, Apple competitors such as Dell and Hewlett-Packard often don’t factor all of these emissions into carbon footprint disclosures.

Leaving the Chamber of Commerce at this point represents a more proactive move for Apple — the computer industry has been moving gradually toward more disclosure in recent years, but Apple is the first company in its sector to sever ties with the  lobbying group. Apple’s President of Worldwide Government Affairs, Catherine Novelli, wrote in a letter to Chamber of Commerce President and CEO Thomas Donohue on Monday:

Apple supports regulating greenhouse gas emissions, and it is frustrating to find the Chamber at odds with us in this effort. We would prefer the Chamber take a more progressive stance on this critical issue and play a constructive role in addressing the climate crisis. However, because the Chamber’s position differs so sharply with Apple’s, we have decided to resign our membership effective immediately.

Last week Donohue issued a statement on the chamber’s position on climate change, emphasizing support for “strong federal legislation and a binding international agreement to reduce carbon emissions and address climate change,” while opposing the Waxman-Markey climate bill and emission regulation by the EPA. Responding to the WSJ’s Environmental Capital this afternoon, the chamber reiterated its position that “climate change must be addressed.”

In other statements, however, the group has used less diplomatic language. As the Los Angeles Times notes today, “The Chamber claims that limits on greenhouse gas emissions by Congress or the Environmental Protection Agency would be ‘a job killer’ that would ‘completely shut the country down’ and ‘virtually destroy the United States.’”