Clean-tech pacesetters for a low-carbon California

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Times staff writer Edward Silver looks at some of the private companies that could become big players in the search for energy solutions -- and eventually make their way to the public market:

Drill, drill, drill? In California, the slogan is: Conserve, conserve, conserve.

The price of a barrel of oil bullies our state as badly as any other -- or worse. But rather than burrow deeper into the grip of fossil fuels, officials in Sacramento have stepped up a plan to wriggle out.

In late June, the California Air Resources Board roughed out a road map for moving toward the goal, defined by AB 32, of reducing carbon emissions to 1990 levels by 2020. As the right to emit wanes, a marketplace for trading those rights becomes a key feature of the plan. And there are no short cuts -- read: clean but dicey nuclear energy -– on this road map.

There’s a vision here: The state’s zeal to spearhead the global climate battle melds with entrepreneurial energies to build a green industrial mecca. In the hoped-for scenario, the resources devoted pay off in triplicate: beating back the warming threat, flouting merciless energy costs and launching a new cycle of economic growth.

The will clearly is there, but the way is filled with obstacles. Investments in sustainability, and penalties for waste and pollution, could raise costs that trickle down to -- or jolt -- consumers. On the level of everyday life, habits are hard to change.

And two other issues are easily overlooked. California already is a conservation-minded place, burning less air-fouling coal than many other states. So gains will be harder to come by. And gasoline -- our state chugged 15.7 billion gallons last year, according to the Board of Equalization -- could get dirtier across the country, with more of it coming from carbon-heavy, ‘unconventional’ sources such as the Alberta tar sands.

That raises the bar for the ingenuity we’ll need to get us to the promised land. California is populated, however, with problem-solvers and technical wizards, many of whom see sustainability as both an emergency and an opportunity. It’s almost as if we are constructing a clean-tech Silicon Valley without a geographic center.

Likewise, the aims of these pacesetters are dispersed. R&D shops are humming across the board in clean tech. Green building materials help, but we also need smart indoor energy controls. Cheaper, lighter windmill parts would be a boon, along with next-generation means to store and convey the power they generate. To trade carbon rights, we’ll need software to manage heaps of new kinds of data. To cut car exhaust, we’ll have to accelerate public transit.

Hordes of entrepreneurs already have taken up these challenges. Many companies that are well-placed to advance the state’s long-term goals, and prosper in the bargain, are based in California. Eventually, it’s safe to say, some will go public. Some will flourish and grow; others are bound to become casualties of the competitive battles ahead.

For investors, now is the time to think about opportunities that may present themselves later. A small sampling follows.

Sustainability starts with renewable energy, and sunny California has a wealth of solar specialists to complement its climate. This spring, BrightSource Energy and Pacific Gas & Electric signed a multiyear deal that’s believed to be the biggest ever -- potentially 900 megawatts.

The pact could be worth as much as $3 billion to Oakland-based BrightSource. Everyone seems to want a piece of this company. Among its many backers are the nonprofit California Clean Energy Fund (CalCEF), Google.org, VantagePoint Ventures and BP.

BrightSource uses mirrors to whip up steam to drive turbines to produce power, a method known as solar thermal. Nanosolar, another innovator, focuses on ‘thin film’ rooftop products, a less costly solution than conventional silicon solar cells. It lays claim to building the world’s largest solar plant in San Jose, its home base, financed by a coterie that includes Google founders Larry Page and Sergey Brin, the U.S. Army and Benchmark Capital.

The state also offers inviting terrain for geothermal producers, who tap the heat below the Earth’s surface. One advantage: With most of the action underground, the not-in-my-backyard crowd is kept at bay. CalCEF President Dan Adler sees growth in store for Oregon’s Vulcan Power, which has long-term geothermal supply contracts with both PG&E and Southern California Edison. Merrill Lynch owns a stake in the firm.

While utilities modernize their mix of sources, we’ll continue to get much of our electric power from coal. L.A.’s Department of Water and Power is especially reliant on the dirtiest fossil fuel. Bottling up coal’s carbon emissions is one of clean tech’s grand challenges -- though perhaps not as daunting as what to do with them afterward (but that’s another post).

Powerspan Corp. has a technique for stripping sulfur and other pollutants out of coal combustion and is working with utilities in Texas and North Dakota to trap carbon. Though it may turn out to be little more than a pipe dream, true clean coal would not only change the world, it would take some of the guilt out of turning on the AC in the summertime. RockPort Capital and engineering giant Fluor Corp. own stakes in the New Hampshire company.

Silver Spring Networks has been likened to a Cisco Systems for the utility business. Driven by software smarts, the Redwood City, Calif., firm offers an Internet-based platform to equip the electric grid for its upcoming tasks.

In the future, more energy sources will need management and some of that power will be produced by customers themselves, who send their surplus back into the pool. Usage plans are being tailored to shift demand away from peak times. Eventually, the grid may be used to charge up armadas of plug-in vehicles.

Silver Spring aims to help power companies bring order to all this complexity while managing supply and demand with minimal waste. It shows that like data networks, the web that allocates energy is getting more capable, flexible and efficient. Silver Spring’s marquee client, Florida Power & Light, plans a wide rollout of its technology next year. Foundation Capital is an investor.

Vehicles are California’s No. 1 source of carbon ooze and a tough nut to crack. With gas prices what they are, it’s painful to put the key in the ignition, but the slight downshift in driving has hardly solved the problem. CARB’s goals require more fundamental change.

ISE Corp. has a role in both switching fuels and changing habits. It designs alternative drivetrains, mostly gasoline-electric hybrids, for municipal buses, greening a sector whose growth is itself part of the solution. Long Beach Transit is ISE’s biggest customer, but L.A. County’s MTA will take delivery of six hybrids within weeks. Sanitation trucks are the next target market.

‘Transit agencies are looking into electric vehicle technology and want to do the right thing if it pencils out economically,’ said RockPort partner Hap Ellis, an ISE investor. These days, ends are meeting much better. The Poway, Calif., firm expects sales this year to triple the take in 2006.

Put simply, gases form the barricade that traps heat and warms the world. SpectraSensorsInc., a spin-off from Jet Propulsion Laboratory in Pasadena, is a premier analyzer of gases. The firm has the kind of know-how that may be enlisted when the state gets serious about measuring CO2 and setting up an emissions exchange.

Chief Executive George Balogh foresees a role in tallying carbon credits and debts. ‘With cap and trade, you need accurate data,’ he said. ‘We plan to be there when the commercial market starts trading.’

Spectra has a large presence in Rancho Cucamonga but is headquartered in Houston, near its oil and natural gas clients. It also monitors the skies for the National Weather Service. Among its backers: Chevron Technology Ventures, giant Japanese bank Nomura and CalCEF.

When they consider committing money to an idea, venture investors typically gauge the size of the market a start-up can hope to address. With California committing its vast economy to a low-carbon future, the markets these companies play in can only get bigger.

Top photo: A rendering of BrightSource’s solar-thermal system. Bottom photo: A New Flyer bus that uses the ISE Corp. gasoline-hybrid drive system.