Through Edison’s agreement with Imperial Valley Biopower, LLC, Edison will receive deliveries of 140 GWh per year from the new 20-megawatt (MW) biomass facility.

The CPUC’s Renewables Portfolio Standard (RPS) program, one of the most ambitious renewable energy standards in the country, requires Investor Owned Utilities, Energy Service Providers, and Community Choice Aggregators operating in California to obtain 20 percent of their retail sales from renewable energy sources by 2010. On November 17, 2008, Governor Schwarzenegger signed an Executive Order (S-14-08) that established a 33 percent by 2020 RPS goal.

For more information on the CPUC, please visit www.cpuc.ca.gov

Under Edison’s proposed 20-year contract with Imperial Valley Biopower, (a unit of privately held San Diego, Calif.-based Energy Integration Group), the utility would take all the output from a 20-megawatt biomass facility near the town of El Centro in California’s Imperial Valley.

The $51 million plant has been financed and would convert cow manure from local feedlots into steam energy, to produce about 140 gigawatt-hours a year. Woodchips and other organic materials could be used as backup fuels for the plant, which is expandable to up to 40 MW.

The facility is expected to be online early in 2010 and will generate enough electricity to power over 20,000 homes. It will also provide for a long-term solution for an environmentally responsible disposal for cattle manure in Imperial Valley. The project is expected to create 50 full-time jobs and it will bolster industrial activity in the recently created Enterprise Zone.

Southern California Edison would count the power from the biomass plant toward its obligations, under California’s Renewable Portfolio Standards, which requires power providers to use renewables for 20% of their retail power by 2010.

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Imperial Valley Biopower is a wholly owned subsidiary of Energy Integration Group (EIG); a leading Renewable Energy Developer in San Diego. EIG is an environmentally friendly, wholesale power generating company, committed to building a more sustainable future in energy by providing solutions to meet the global demand for alternative energy. Additional information about the Imperial Valley Biopower project and EIG is available at: http://www.energyintegrationgroup.com

An Edison International (NYSE:EIX) company, (Southern California Edison), is one of the nation’s largest electric utilities, serving a population of more than 13 million via 4.6 million customer accounts in a 50,000-square-mile service area within central, coastal and Southern California.

It’s clean, green and holds the seeds to better efficiency in the ways businesses utilize energy. Clean-technology — the methods of producing environmentally friendly and economically feasible sources of power — has driven the rapid growth of an entire industry focused on the abundance of potential energy sources that have yet to be tapped. Companies developing everything from biofuels to solar cells to windpower solutions have comprised a market that brought in $55 billion in 2006, according to a recent report released by the clean-technology research firm CleanEdge. With greater numbers of venture capital firms funding startups in upcoming years, that number could rise to $226 billion by 2016. Despite its fledglingstatus as an industry, the consensus among local investors, executives and officials is that the industry’s growth to date is only the tip of the iceberg.

“With geopolitical factors and the growth of the global economy, fuels have become increasingly expensive,” said Michael Kagnoff, Clean-tech Steering Committee Chair for Heller Ehrman, the law firm and lead sponsor for San Diego’s upcoming Clean-technology Venture Roundtable hosted by CONNECT. The volatility of oil prices, he reasoned, has enabled once-wary investors to “cross the threshold” of developing a solution to our dependence on foreign oil. Higher prices have thus emphasized the need to develop the alternatives that clean-technology offers.

Furthermore, widespread concern over global warming has created a social consciousness that has been the impetus for the industry’s progress. Jerry Foster, co-founder of Biorenewable Projects, a San Diegobased company that has developed renewable projects to harness energy from materials ranging from cow manure to wood, said: “There will be more demand and more desire on the part of people, as they begin to take global warming very seriously.”

Citing a renewed sense of popular environmental responsibility that has come from greater education, Foster said consumers’ lifestyle changes will be the new industry’s foundation. “People will start becoming more conscious of industry uses and the vehicles they purchase,” he said. “You’re going to see a lot of changes in people’s behavior as it relates to energy.”

Yet despite these factors pushing clean-technology forward, obstacles remain. The relatively recent emergence of the industry has meant that it has no “tried and true” path to success. Kagnoff said that it lacks an established economic infrastructure within cities, a set of experienced executives or a large set of financiers — all factors that suggest risk. The issue of future regulation poses another large question mark, as well as the question of how much the government will subsidize research when competition increases. While these challenges linger, venture-capital firms have seen in startup clean-tech companies more promise than doubt: From 2005 to 2006, venture-capital investments in clean energy tripled to $2.4 billion, according to the CleanEdge analysis.

“We are in the very early stages of what should be a large industry going forward,” said Carl Eibl, managing director for Enterprise Partners, a venture capital firm in San Diego. Enterprise Partners, which specializes in investment in the life sciences industry, exhibited its confidence in clean technology when it recently invested in Relion, a Washington-based company that has developed a fuel-cell driven backup power source for telecommunications towers. The new energy source will serve as an alternative to the relatively inefficient batteries now used to provide only two to six hours of power for towers in emergency situations. Greater investment in clean technology is forthcoming, as Kagnoff described venture capital’s interest in clean-tech as “dramatic.” He predicted the amount of investment by venture capital firms would increase “four or fivefold” in the next several years.

Where, then, does San Diego fit in the picture?

Industry leaders point to San Diego’s major research universities and experience in biotechnology as qualities that would facilitate the growth of the clean-tech industry. Mike Sund, vice president of communications and investor relations for San Diego’s Maxwell Technologies, whose ultracapacitor-based energy storage solutions have improved the efficiency of electrical devices and systems by 20 percent to 30 percent, added: “San Diego’s highly educated work force and California’s leadership in initiatives to protect the environment are both pluses (for clean-tech companies operating here).”

While San Diego still needs greater venture-capital funds to compete with areas such as Silicon Valley or Boston, it has taken steps to enter into the clean-tech arena. Jim Waring, chief deputy for Land Use and Economic Development for the city of San Diego, pointed to the upcoming roundtable discussion hosted by CONNECT as a sign of the city’s progress in promoting clean technology. The forum, set for April 26, will facilitate the interaction of venture capital firms and several startup clean-tech companies looking for investors. “You have to execute on this vision by communicating that you are open for business, that you want to be receptive,” Waring said. “Historically, the city stood on the sidelines, wasn’t a member of CONNECT, didn’t participate in roundtables and didn’t have a seat in startup business presentations for venture-capital companies.” But, he added: “Now the city does. It is an exciting industry, and we want to be part of it, and we want our community to be a leader in it.”

Highlighting the ingredients for any industry’s success — intellectual capital, innovative culture and access to leadership — Waring made the point that San Diego is, at the very least, on its way toward having a greater stake in the clean-technology industry. “We’re behind a number of cities, but not materially,” he said. “It’s like being behind during the first half-mile of a marathon. This is a long race, and a race that has just begun.”

BioRenewable founder Jerome Foster and CFO Peter Jackson build clean power plants, based on the natural resources of a client’s geographic region.

What they do: Create renewable energy technology for electricity, using natural resources of the client’s geographic location. These resources include solar, wind and cow dung. “We’re not technology-driven,” said Foster. “We’re open to doing technology, based on the resources of the area we are going into.”

In Imperial Valley, 400,000 heads of cattle create an abundant supply of dung. This causes environmental issues because of the methane gas released. But BioRenewable is building a facility that harnesses this natural resource, turning the methane into electricity.

The facility, the largest of its kind in the nation, will use cow poop and old frying oil to create methane, which drives the turbine to produce electricity. While other facilities also use cow dung, Foster said that BioRenewable is able to generate four times more energy, by including oil collected from fast food joints and restaurants. “We’re adding a higher energy content by adding fat and grease,” said Foster. “There’s a magic to how you put it together and the amounts and the temperature.”

Current Project: The $36 million methane facility in Imperial Valley will generate 14 megawatts of electricity – enough to power 98,000 homes. The electricity will be sold to Imperial Irrigation District starting in 2008.

Other Projects: BioRenewable is bidding to supply solar electricity to a Southern California utility company, transmitting from Imperial Valley to San Diego in 2008. BioRenewable also has projects elsewhere in Southern California that harness the area’s abundant supply of sun and wind. In Florida, where wood waste is prevalent, the company is working on a wood waste facility to generate electricity. The company is also exploring projects in Arizona and Nevada that will use solar energy.

How He Got Started: “I used to laugh at people who did renewable energy projects, because it wasn’t a big part of the energy industry,” said Foster, who started working in
traditional energy companies in the 1980s.

“In 2002, I began to see the world

differently, in terms of the environment, the cost of foreign oil, and our usage of energy as Americans. For most people, as long as they can turn on their lights, and they can start their cars and get to work and back, they’re not that concerned with energy uses. We as Americans take it for granted that it’s always going to be there,” said Foster. “The reality is the world does not have the resources to supply all the cars.”

Philosophy: “You reach a stage in life where maybe the best way to move forward is to walk the walk yourself and make a difference,” said Foster, “and at the same time you
have to eat. You begin to say, ‘I can’t change the world, but I can change how I do things.’”

Vision: “I would like to see us become the first major renewable energy company that’s not technology driven, but resource driven and market driven,” said Foster.

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Company Name: BioRenewable Energy Projects, LLC (A Wholly owned subsidy of Energy Integration Group)
Founder and managing member: Jerome Foster
Based: San Diego
Year Founded: 2003
Number of Employees: 6
Funding: Private investors
Revenue 2006: None
Revenue 2008: $15 million, with 20 percent to 30 percent projected growth by 2011

In four years, Pentech Energy Solutions Inc. had driven revenues from zero to $28 million. The company was selling electricity and natural gas, along with pursuing related businesses in offices from Mexico City to Washington, D.C. Pentech had 100 employees. So by some conventional measures, it was a success.

In 1996, however, Pentech had a problem: Its profits were shrinking. Even worse, when then-chief executive officer Jerome Foster looked at the company’s future, he saw no way to reverse the trend.

So Foster and a few others at the company did something they don’t teach at entrepreneurial seminars: He disassembled the company and terminated employees. He pared Pentech down to
a staff of four — then jolted the company back into start-up mode.

It was a process Foster describes as among the most painful of his life. Yet, three years after tearing down the old, the new Pentech believes it is poised for growth as a supplier of high technology controllers for heating and cooling systems.

The company’s wireless control systems can diagnose problems without the need for going rooftop to physically inspect heating, ventilating and air conditioning (HVAC) units. The company’s PERC Communicator also monitors system efficiency and alerts personnel of problems.

Pentech took a big step forward late last year when the Applebee’s restaurant chain put the controllers to work on 21 restaurants in the Midwest. Ray Bond, director of facilities management for Applebee’s, says the chain expects to quickly recoup its investment in PERC monitors. “We expect a 14- to 16-month payback on the equipment,” said Bond. The savings will come from the added efficiency the monitors are expected to wring from HVAC systems, along with providing more customer comfort, said Bond.

“Energy usage is becoming more of an issue . . . Even if energy is reasonably priced today, there is money to be saved.” Ultimately, Pentech says its systems could allow a manager like Bond to remotely monitor HVAC usage, at locations across the country, from a personal computer screen in his office.

To hear Foster tell it, the difficulty of building Pentech’s new business pales in comparison with the pain of tearing down the old. He had been to the homes of employees he ultimately fired, and he took personal pride in having built a company that provided so many jobs.

“It was great to tell people you had all this revenue, but we didn’t have profits,” said Foster, so the layoffs were inevitable. “It was a devastating period for the company and the people. And it was very humbling for me as an individual.”

Perhaps it was more difficult for the employees. One former worker said the company’s problems became apparent before the layoffs — “I saw it coming” — and that no severance package was provided. Pentech had been created in 1990 when five former Caterpillar Capital Company executives won financing from the big company for a start-up that would market natural gas to utilities.

Restarting the company in 1997 with a small team, Pentech had first to develop a new raison
d’etre. For Foster — who had spent much of his early career in marketing roles for General Mills and Polaroid — it was important that the new company be more than a middleman or a reseller. And Foster — who is an African American — rejected positioning the company as a minority subcontractor.

“You could not build a company of any significance (going that route),” Foster said. “I concluded that you’re not really a company unless you have a product.”
So the founders went searching for a product idea.

A software program to coordinate hazardous waste cleanups was rejected because of concerns that dealing with government regulators might create long sales cycles. Foster recalled hearing customers complain about the hassle of dealing with rooftop HVAC units. Pentech’s engineers also knew the big units tend to operate inefficiently, cycling on for longer than needed and wasting power in the process.

Somehow, the small team was unintimidated by tackling development of an entirely new product. “The attitude was, `We’ll figure out a way to get it done,’ ” said Foster.
But now he concedes that product development was challenging — and winning credibility from potential customers was even more challenging.

The four founders first self-financed their venture. Foster, who went two years without salary, also made the rounds of venture capitalists to raise more funds. Describing his efforts as blissfully ignorant — “I never attended a workshop on raising money” — Pentech landed $3 million from Enterprise Partners, a San Diego-based venture-capital firm.

Later, the company received $1 million more from Enterprise and $2 million from a Bay Area venture firm. Financial backers agreed with Pentech’s founders that the company was unlikely to face immediate competition from a larger rival.

“The attitude of big companies (in this market) is now, `We can’t afford to invent it here,’ ” said John Friderichs, director of customer and technical services for Pentech — ” `but we have the money to buy it.’ ” On the other hand, Pentech’s founders believe they have two years to develop significant market share and make themselves an attractive acquisition target. Foster, in fact, has relinquished the duties of chief executive officer — he retains the titles of president and chairman — to sharpen his focus on marketing.

He hopes to reach a strategic marketing agreement with a large corporate partner, some time during the first quarter of 2000, to rapidly expand Pentech’s customer base. For Foster, meanwhile, the rebuilding of Pentech is providing a new lesson in business. He had already been schooled in hard knocks, growing up Florida during legal segregation and overcoming a stuttering problem.

So, in Pentech’s first incarnation, Foster said, “I was into monument building. My dream was to have someone walk into the office in 100 years and see my picture on the wall.” That led to an excessive emphasis on boosting revenues rather than profits, said Foster. Now he says: “I’m on the path of building wealth.”

QUICK AUDIT
Company: Pentech Energy Solutions Inc.
Business: Energy efficiency products and services for heating and cooling systems
Founders: Jerome Foster, Sharon Covert, Dale Gauthier, John Mellor
Headquarters: San Diego
Employees: 38
Revenues: $3.8 million in 1999; projected $12 million in 2000
Credit: STAFF WRITER