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Carbon capture and sequestration is the only way to make coal-fired power environmentally responsible, and yet we’re so far from getting there. Last week’s decision by utility AEP to cancel its plans to continue with the country’s first commercial-scale project to capture carbon from a working coal power plant gives an indication of just how little economic pressure exists on the utility industry to change its ways. AEP tells the world that without federal carbon legislation, it just can’t justify the project’s investment. Given how challenging it is just to capture coal smokestack carbon and pump it underground, perhaps there’s little surprise that actually doing something useful with captured carbon will be even further down the road. So says a report out from the UK-based Center for Low Carbon Futures, which finds that feeding captured carbon to algae or other plants for conversion into biofuel, or pumping it into alternative systems for manufacturing cement, plastics or other materials, will require many years of testing and refinement to reach commercial viability. Will the world’s carbon emitters and their regulators be willing to spend the time and money to make these lines of business worthwhile to investors?

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This morning brings lots of energy news from Japan, a country on the forefront of the energy challenges facing the world at large. Japan’s Fukushima nuclear reactor complex disaster has forced the island nation to confront its energy future in ways that are shaking the country. Prime Minister Naoto Kan, facing withering criticism of his government’s handling of the disaster, has agreed to step down — but not before he oversees passage of an energy law that would set lucrative rates for renewable energy to boost clean power development. This proposal is facing criticism from the nuclear power-friendly opposition party, however, which says it could boost power bills sky-high — a similar concern facing utilities in the U.S. and Europe. Japanese clean energy has its champions, including billionaire Masayoshi Son, Japan’s richest man, who has proposed building massive solar projects — but the sketchy proposal would require him to gain access the country’s transmission system in ways that could shake up the country’s centralized utility system. In the meantime, pressing short-term power problems remain. Tuesday saw Japan planning to restart the first nuclear reactor of all those closed after the March earthquake and tsunami. While the country is stricken with nuclear fears, it also faces critical power shortages this summer unless it ramps up its shuttered nuclear power capacity.

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California’s carbon cap-and-trade program has been put on hold — not by wealthy polluters or right-wing ideologues, but by a judge upholding a lawsuit saying the law doesn’t go far enough. In a decision well-forecast by a March ruling, San Francisco Superior Court Judge Ernest Goldsmith on Friday enjoined the California Air Resources Board from moving forward with its carbon cap-and-trade system set to start in January 2012. Created by AB32, the law that seeks to return the state to its 1990 greenhouse gas emission levels by 2020, the cap-and-trade program would have been a landmark for the U.S. in setting terms and prices for carbon trading. But in holding up a lawsuit from environmental and advocacy groups, Goldsmith found the state hadn’t looked at all available alternatives, such as carbon taxes or outright bans on emissions, that could work better to reduce greenhouse gas emissions. Of course, those alternatives are politically unfeasible, making it unclear just how the plaintiffs in the case expect their argument to lead to a better outcome for the people they represent in low-income areas disproportionately affected by local sources of pollution. The state has said it will appeal the ruling, which doesn’t effect other aspects of AB32, such as the state’s renewable portfolio standard calling for one-third renewable energy by 2020, or its low-carbon fuel standard for in-state vehicles.

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California’s new greenhouse gas reduction law is rolling toward implementation, and that means big emitters — like utility Pacific Gas & Electric — have to start planning for it. Earlier this week, PG&E picked Carlsbad., Calif.-based Enviance to help it meet its needs under California’s AB 32 Mandatory Reporting Regulation, meant to establish both reporting systems and technology platforms for big emitters to participate in carbon markets, cap-and-trade mechanisms and the like. There are a lot of carbon accounting startups out there — Hara just landed $25 million, and SAP and CA are among the big enterprise software vendors tackling the market. But most of them rely on data from other sources, and rarely go out to oil and gas wells, refineries, industrial boilers and other such real-world emitters to collect data. That’s what Enviance does — founded in 1999, it has a customer list that includes CH2MHill, Chevron, Georgia Power, Southern Co., AEP, DuPont and Valero. Most companies aren’t going to want to spend so much money on real-world sensors and data collection. But for those that do, getting this deep-dive view will be critical — and there’s little doubt their data will be making its way up the corporate chain of command, so to speak, to end up in disclosure statements with the SEC or voluntary carbon reporting groups like the Carbon Disclosure Project.

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Let us mourn the shelving of a national climate change strategy this morning. Word from Washington D.C. is that Carol Browner, President Barack Obama’s handpicked coordinator of energy and climate policy, will be stepping down from her post as soon as an “orderly transition” can be arranged for whoever takes over. As Grist magazine rightly points out, there’s not much Browner’s replacement will be able to do except suffer the slings and arrows of a concerted Republican and conservative attack on the Obama Administration’s entire energy and environmental platform. What share of the blame lies at Browner’s feet is hard to say — as the New Yorker’s Ryan Lizza reported in November, the administration’s climate change strategy failed to line up the needed support with its Congressional allies. Now, the Republican takeover of the House has doomed carbon or climate legislation for the next two years, and the EPA’s bid to regulate carbon emissions as a pollutant is facing opposition from the state of Texas and a host of business and industry groups. Perhaps individual states (like California) will take up the slack on policies to combat climate change? In an interesting side note, Reuters reports another nation where the provinces are pushing the central government to move faster on creating markets to combat climate change — China.

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Happy New Year, everyone — welcome to a new year of efforts to obstruct policy progress on the greentech front. The state of Texas has kicked off 2011 with a fresh set of court actions seeking to prevent the Environmental Protection Agency from enforcing its rules regulating carbon dioxide emissions as a pollutant under the Clean Air Act in the state. Reuters reports that the state is seeking to be exempted from a host of rules for permitting large-scale emitters such as power plants, refineries and factories that went into effect as of Sunday, Jan. 2 (PDF). Texas’ petition is part of Gov. Rick Perry’s long-running battle against federal environmental enforcement in the state, but it could also be seen as an opening salvo against EPA’s greenhouse gas regulations, which are being opposed by a host of industry groups. Given the new Republican majority in the House of Representatives, the greentech industry can likely expect to see similar battles against federal tax incentives for renewable energy projects, as a recent Wall Street Journal article inveighing against “green pork” indicates.

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Contour Energy Systems — the Caltech battery spinout formerly known as CFX Battery — has launched an opportunistic attack on a niche consumer market right in time for Christmas. The Azusa, Calif.-based company has  a line of disposable coin cell batteries specifically engineered for 3D TV glasses, and promises they’ll last about 60 percent longer than competitors batteries. It’s an opportunistic move because it lies outside Contour’s specialized carbon and fluorine-based chemistry — the 3D glasses batteries are lithium-based — and because they’re not being made at Contour’s own factory, but by an unnamed Chinese manufacturer. Still, it may represent the kind of niche application targeting that battery startups may have to tackle to differentiate themselves from the Energizers and Duracells of the world.

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How deep can corporate carbon accounting software dive into a corporation’s individual data centers? San Francisco-based startup Sentilla and enterprise software giant SAP intend to find out. The two announced Monday that they’ve tested out an integration of their software — Sentilla’s Energy Manager, which measures and manages server utilization and energy data, and SAP’s Carbon Impact software for calculating and accounting for a corporation’s carbon footprint — in SAP’s Co-Innovation Laboratory in Palo Alto, Calif.. The two haven’t made an official go-to-market announcement yet, but will be presenting together at SAP shows in Berlin and Las Vegas this month. SAP rival CA has similar roots in data center efficiency management, and has tied that into its ecoSoftware carbon and sustainability product, by the way.

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There’s some bad news out this Monday for the fledgling Regional Greenhouse Gas Initiative (RGGI) carbon market — as well as companies hoping to see regional CO2 markets jumpstart corporate investment in carbon management. According to Bloomberg New Energy Finance, trading in RGGI “ground to a halt” in the third quarter of this year, as surpluses in carbon credits and lack of progress on a national carbon cap-and-trade program drove trading volume down 90 percent compared to the same quarter last year. That helped drive down global carbon trading down 9 percent in dollar terms for the third quarter, from $31 billion last year to $28 billion this year, despite an 8 percent uptick in volume in Europe.