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rnational cyber-terrorism isn’t easy, but it’s a mission on which we can all agree, right? Not so fast.

Russia has been pushing a proposal in The United Nations agency for information technology, which describes the greatest cyber-threat not as hacking or stealing but as using the Internet to spread ideas that might undermine a country. Russia wants any such use of the Internet classified as “aggression,” and hence illegal under the UN Charter.

Sounds like China right? Yes, but check out this awfully teal map of countries that agree. It seems that a lot of the world seems more aligned with the Chinese view of controlling any information that may be considered subversive than they’re aligned with the high-minded Western ideals of freedom of speech and access to information. Most notably they include the other BRICs: India, Brazil and Russia. In fact, it’s Brazil that has asked Google to remove more content from the Web than any other nation this year. Brazil made more than double the requests of the next closest country, Libya.

NPR covered the story this morning, but it’s not a new shift in thinking. Russia has actually tried to introduce this information-arms-control-like agreement every year since 1998. So why do we only jump up and down about China? Presumably, under Russia’s proposition, Iran could hold Twitter accountable for giving people the ability to change their avatars to green or any Middle Eastern country could hold Facebook accountable for providing a platform by which people de-radicalize potential suicide bombers.

It’s a delicate issue for the US diplomatically and inside the US– way bigger than “Googlegate” because, well, I refer you again to the map. The issue doesn’t seem to be about different political systems, but rather different levels of stabilization in more chaotic emerging markets. Near-unfettered Internet freedoms aren’t always as high a priority in these countries, not because they’re evil, but because there are more pressing problems of gun violence, terrorism, or a paucity of food, water, jobs and basic infrastructure.

I usually try not to get into a lather about protecting Internet freedoms in other countries, because I don’t think it’s the job of private sector tech companies who are supposed to be international to act as tools to enforce Western-style democracy. Freedom and democracy are two different things. Some “democratic” countries I’ve reported in are more repressive in day-to-day life than other authoritarian countries. In addition, I believe that Google would have done more good by staying in China and working within the system than pulling out with a pouty “We don’t like their laws” as Eric Schmidt said on the Colbert Report this week. (To which Colbert astutely asked how long did it took for Google to start disliking China’s laws.)

But this is something different. It’s not about whether other countries should be allowed to control what happens within their borders and whether US companies simply chose to do business there or not, based on local laws. At stake are new rules that would bring international United Nations justification to draw sovereign boundaries around many different Internets. At stake is making it OK to build powerful new Web 2.0 technologies like Facebook and Twitter at the borders of the Western world– not with an easy-to-circumvent Great Firewall but with internationally-accepted rules against freedom of information and expression. Talk about unintended consequences in a debate we thought was about identity theft and hacking.

On a more crass, business note, this could have a chilling impact on US Internet companies expansion into lucrative emerging markets. So far China is the only country that’s developed larger audiences for its own homegrown Internet companies than US versions in almost every category. That makes not only political sense but business sense because China is so culturally and linguistically different and the market is so much more advanced in terms of entrepreneurship, venture capital and the wild-west IPO markets of Shanghai, Hong Kong and the new Startup Board in Shenzhen.

But so far, US companies do better in many categories in India and Indonesia– because the Internet has grown slower giving less opportunity for locals to build big companies and more challenges with monetization. When the percentage of the population online is this small, frequently the people online are city-dwelling, affluent multinational employees or office workers who also speak English, making the need for, say, a local-grown Hindi Facebook a lot less immediate. And on a platform like Twitter, there are even fewer cultural and language restrictions because the site is so simple, how people use it localizes it.

But comparatively isolationist countries like Russia and Brazil could easily fork off with a more local versions of sites dominating as their markets grow. It’s not hard to see how local, business pressures could drive this diplomacy around blocking ideas on Western sites– they way some people allege it already has in China. And–on a more banal level than the future of freedom in the world–that would be disastrous for older Web companies in the US counting on emerging markets to grow.

This problem is not going to go away– and not just because Russia appears to introduce it every year. By 2050, the US will be the only G7 nation that is still one of the largest nations in the world. Its testament to the sheer size and resilience of the “world’s only Superpower” that we’ll still be no. 2. At least we’ll still have a strong say in the way the world runs. But sharing power with modern, emerging markets that have had a totally different history and experience with the 20th century will likely take the bulk of the 21st century to figure out– especially when it comes to border-less technology issues like the environment and the Internet.

I criticized Groupon last week for running too fast with its international strategy before it had stabilized its lock on the US market. But the flipside of that argument is that at least Groupon executives are getting a better picture of what the Internet will look like in this new world.
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Sept. 24 (Bloomberg) -- Japan’s economy may be hurt by its political dispute with China, Economy Minister Banri Kaieda said today, signaling widening concern at the consequences of tensions with the nation’s biggest trading partner.

“Given that our growth strategy has been to incorporate Asian demand into our own demand, the current rare-earth, rare-metal problem that has been reported in the press is becoming a very big obstacle,” Kaieda told reporters in Tokyo today. “I hope for the earliest possible resolution to this problem.”

Kaieda spoke after a spat erupted this month over Japan’s detention of a fishing-boat captain. The Chinese sailor was detained after his vessel collided with two Japanese Coast Guard vessels.

Chief Cabinet Secretary Yoshito Sengoku said separately that there’s no confirmation of a Chinese embargo on so- called rare-earth elements. The New York Times reported yesterday that it put an embargo on exports of the products, which are used in items including cars and weapons, to Japan. Chinese Ministry of Commerce spokesman Chen Rongkai said yesterday that “China does not have a trade embargo on rare earth exports to Japan.”

A deterioration in the relationship between China and Japan would be negative for the global economy as a whole, Japan’s finance minister, Yos

How come my husband gets to let himself go?
His weight goes up and down. He can't stick to a diet or fitness plan. Am I the only one who has to stay in shape?
BY HYLA SABESIN

iStockphoto
"I need you!" my husband yells from the hotel bedroom.

I fly out of the bathroom to find him face down on the floor.

"What happened?" I ask, attempting to remain calm but already annoyed that he appears to have injured himself, yet again, in the midst of an all-too-rare vacation.

"Back spasm," he groans, his cheek pressed against highly suspect hotel carpeting.

"I guess we're not going to the gym," I accidentally say out loud.

"Too bad. I was really on a roll," he says, referring to yesterday's workout -- his first in a year and the promised kickoff to a much-procrastinated lose-25-pounds-eat-right exercise initiative.

"Yeah, you were," I say, my voice drifting off along with my perennial dream of jogging on the beach, hiking or treadmilling in tandem with a fit, healthy husband.

A work crisis. A restless night's sleep. An aching pinkie. When it comes to exercise excuses, my husband is unrivaled. Leave it to him to sabotage his comeback with an over-zealous, injury-inevitable performance in the gym yesterday.

"Give me a hand," he says. "We need to find a doctor."

A hand? How about a kick in the derriere?

"I love working out," he said when we first met. He was a buff, 21-year-old first-year law student. I was a naive, 17-year-old college freshman. I assumed he'd have those rock-solid abs forever. Forever lasted one semester. By the second, trips to the gym ceased and sweats replaced his size 32 jeans. Struggling to shed my own freshman 19 and too infatuated with him to really care, I assumed his condition, like mine, was temporary.

It was. If by temporary you mean the two years that passed before he rediscovered his passion for fitness. Seemingly overnight, hours on the couch became hours at the gym. His cheekbones returned. His six-pack reappeared. His pants zipped. He became sanctimonious -- chomping raw vegetables at the movies while eyeing my popcorn disdainfully. ("Do you have any idea what's in that?") Smug. ("Can you believe the way people let themselves go?") Superior. ("It's not like working out regularly is that hard.") So what? The abs were back.

And then, without warning, they vanished -- along with gym visits, broccoli florets and the self-righteous attitude. How, I wondered, could he throw away all that hard work? Was it my fault? Had I not sufficiently praised his determination? His well-defined pecs? His stir-fry? Crushed as I was, I didn't panic. I'd seen tangible proof that transformation was possible. He'd done it once. He'd do it again.

I was still repeating that mantra two years later on our honeymoon. Distressed by the love handles (in retrospect so relatively small and insignificant) spilling over the top of his bathing suit, I sent subliminal "get thee to the gym" signals to him as he circled the breakfast buffet loading his plate with eggs, waffles and pastries. Petty? Yes. Superficial? Absolutely. Justified? Definitely. Was I the only one who had to stay in shape?

"Let's join a gym," he said when we returned home. My messages miraculously received, I immediately signed us up at a nearby health club. He went religiously, returning home each evening exuberantly pontificating on proper push-up technique, the distinction between fast and slow twitch muscles and the delicate balance between carbs and protein. Life was good. New marriage. New apartment. New gym-going husband. Until, one day, he left his workout bag at home. And again the next day. And the next.

"Who has time?" he said, overwhelmed by the reality of a get-there-early-leave-late career. "Exercising at home is more efficient." Skeptical that the short stroll to and from the gym was a major time-sucker, I feigned enthusiasm as free weights overwhelmed our living room and an Arnold Schwarzenegger bodybuilding bible monopolized his attention.

"Squat deeper," he called from the couch, where he'd taken up residence once the thrill of the home gym wore thin -- leaving me and my guilt-ridden conscience (I felt compelled to use not only the gym membership but the new equipment) to bear the burden of the barbell.

"An exercise bike would be good cardio," he said a few months later. "Weights alone aren't going to cut it." Not when you don't use them.

A disturbing pattern was emerging. While I got cranky if I missed a day of exercise, he enjoyed extended periods of slackerdom until inspiration struck -- perhaps initiated by a favorite shirt that wouldn't button, a "you ate that entire veal parmigiana?" remark from me or, more likely, a riveting late-night "fit in 30 days" infomercial. An academic pursuit (research gyms, evaluate fitness equipment, compare and contrast diets) would commence. Next up, the never-small financial investment. ("You can't skimp on equipment. It has to last.") Finally, the physical endeavor would ensue. Duration? Predictably unpredictable.

My husband, as I eventually acknowledged, was an all or nothing man. I was his reluctant accomplice. Although I longed for a "normal" husband who kept his weight in check, satisfied his sweet tooth with a small daily serving of frozen yogurt and maintained a non-anxiety-provoking cholesterol level, I was intoxicated by his bursts of arm-flailing enthusiasm -- whether for a rice cooker, heart-rate monitor or Bosu ball -- and ever-hopeful that eventually his "all" would stick.

I charted our life together not by new cities, jobs or homes but by the fitness bandwagons he embraced. There was a rowing machine (remember those?). A recumbent bike. A treadmill. Another set of free weights (the first donated to movers who hardly needed them) and a bench press. A second gym membership (close to work). A third gym membership (close to home). An ab roller (an infomercial must-have). A city bike. A mountain bike. A personal trainer. Spinning. Yoga. Martial arts. A bright red punching bag hanging from the basement ceiling that bopped me on the head each time I did laundry as if trying to knock some sense into me.

In between the gym memberships and equipment purchases, there were carb-loading, gluten-free, juicing and high-protein diets. There were mesmerizing monologues on the power of exercise and holier-than-thou rants about the less holier-than-thou. There were "I don't eat bread" pronouncements to bread-basket-waving waiters. There were pants size downgrades. And upgrades. Declarations of determination. Final Sunday pizza dinners. Countless Monday fresh starts. Refrigerator purges. Trips to produce stores. Fish markets. Vitamin shops. Twenty pounds lost. Twenty-five gained. The ecstasy of the endorphin high. The agony of starting from scratch. Again. And again.

There was frustration. As my husband's nothing periods expanded, so did his waist size. Lusting over six-packs had morphed into obsessing about his health. And my sanity. Five, 10, 15 years into our marriage, I still couldn't crack his code. He couldn't be charmed, cajoled or shamed into dieting or gym-going. Where was his sense of panic, guilt, vanity? My mind raced. Didn't he love me enough to take care of himself? Didn't he want to be around for our daughters? Why was he the one who got to let himself go?

"I'm hungry all the time," whined Mark, the brawny, 6-foot tall boyfriend of my über-fit friend Courteney, during my first visit to their apartment. "Courteney won't let me eat," he said, when I noted their sleek but barren refrigerator. Nearly drooling, Mark pointed out the window to the new hamburger place on the corner and sadly said, "I'm not allowed to go."

"For you," Courteney said, handing him a sample-size sliver of pear topped with a speck of cheese. Watching him savor it with the intensity of someone unsure of his next meal, I felt sorry for him but in awe of Courteney's power.

Clearly, I was no Courteney. I could no more carry on a conversation while stair-climbing than convince my man to trade a muffin for a hundred-calorie snack bag. But each time I was ready to accept my impotence and embrace a fuller-figured husband, he'd suddenly shift into "all" mode. Despite myself, I'd get caught up in the excitement. We were a low-fat-cooking, complaining-about-aching-muscles team. This time it would last. I could already picture us as one of those obnoxiously fit, clean-eating, dessert-declining couples. Then, a bad night's sleep, an elbow injury or a too-tempting takeout menu would send him down the slippery slope. Protein powder was chucked. Vegetable juice soured. Lettuce wilted. I was left holding the bag, the weights, the yoga blocks.

Often, I blamed myself. Although I kept a steady exercise routine -- interrupted only by the sporadic supplementation of his equipment castoffs -- I wasn't perfect. An offhand, "How 'bout pizza?" from him, and I'd cave. Why, I'd silently scream as I clutched my bloated post-pizza belly, wasn't I stronger? By indulging my weakness, I'd opened the door to his next downward spiral.

During a prolonged "nothing" spell, a friend encouraged my husband to run a marathon. Uncharacteristically, he followed the slow and steady training protocol. Characteristically, he bought "the best" running shoes, a moisture-wicking wardrobe and countless packs of Gu, an aptly named "energy gel." Raving relentlessly about the race, he was happier than I'd ever seen him. Then, two months before the marathon, he became debilitated by pain and learned that running had destroyed a hip. The marathon was history. Malaise usurped exuberance. Months after a hip-replacement operation and subsequent rehabilitation, he remained disheartened. Dropping even the breeziest of "thinking of exercising" hints seemed cruel.

Old habits, unlike hips, die hard. Poof! My husband woke one day ready to roll. Before I could protest, a giant elliptical trainer arrived -- eclipsing the Zen-like atmosphere of our bedroom. Each night he set the alarm for an early morning workout.

Each morning, when the alarm went off, I mumbled, "Time to use the machine."

"Not happening," he replied before dozing back off. Rolling away from him in anger, my gaze fell on that monstrous machine and my blood boiled. Twelve monthly interest-free payments later, he had used the elliptical three times. Had the "all" morphed into almost nothing?

My patience depleted, I did what any loving, caring and exhausted wife would do: I recruited my young twin daughters into the battle. With little prompting, they pleaded with their father to exercise, gave him the nickname "Fluffy" and suggested he stop eating "Fluff size" portions. When they encouraged him (far from thin but hardly contestant caliber) to join the cast of "The Biggest Loser," it was obvious the students had surpassed their master. "When we're on vacation, I'll start over," he said, finally succumbing to pressure from his progeny. That familiar flutter of hope returned.

-------

"Are you going to help me up or what?" he says from the floor of the hotel room, shaking me out of my walk-down-fitness-lane reverie.

Still tempted to kick some sense into him, I refrain. Instead, I grab my camera and shoot a picture -- "My husband, prone on vacation" -- for posterity. Then, I lie down next to him. Staring at dust balls and UCO (unidentified carpet objects), we laugh hysterically about being floor- not beach-bound, about his endless string of unsolved "injuries" and his museum-worthy collection of exercise paraphernalia. What's the alternative? Give up? Throw in the gym towel? Impossible. My husband might not be the biggest loser, but he's the loser I love. Besides, the 90-day extreme fitness DVD workout he ordered should be waiting for us when we get home. I've got a good feeling about it.




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eories. If the New York Times' ace China correspondent Keith Bradsher is to be believed, China has has halted exports of rare earth elements to Japan, in protest of its neighbor's detention of a Chinese fishing boat captain.

A spokesman for China's Ministry of Foreign Trade and Economics is denying that any such trade embargo exists, but Bradsher's article makes a convincing case that some kind of message has come down from on high to restrict the flow of minerals. Regular readers of HTWW will understand the significance of the move. Rare earth elements play an extraordinarily important role in the high tech, clean energy economy -- as well as advanced military technology such as missile guidance systems.

The Prius, for example, depends heavily on the rare earth elements neodymium and lanthanum. Last year Reuters reported that each Prius motor "requires 1 kilogram (2.2 lb) of neodymium, and each battery uses 10 to 15 kg (22-33 lb) of lanthanum." China controls 90 percent of the production and processing of neodymium.

Japan, Bradsher writes, is sensitive to blockades of key industrial resources, harking back to the U.S. oil embargo that played such a critical role in Japan's decision to attack Pearl Harbor. But the U.S. is also bound to pay close attention. At a time when the U.S. government is stepping up criticism of China for artificially depressing the value of the yuan, and concern about how the country may be flouting international trade rules to grab market share for its solar panel and windmill industries is growing, the indication that China is prepared to use its rare earth dominance as a diplomatic club is alarming. The panda is throwing its weight around.
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How G.M. helped China to world magnet domination
To get a piece of the Chinese market, the automaker sacrificed important technology and American jobs
BY ANDREW LEONARD

Steven Milne / CC BY 3.0
Can't get enough of those rare earth elements! David Cay Johnston, former New York Times reporter and ace exposer of tax law shenanigans, writes in to remind HTWW that chapter four of his book, "Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You With The Bill)," includes the interesting, if disturbing, story about how China ended up with a monopoly on the neodymium-boron magnet industry.

(Readers will recall that neodymium is one of the rare earth elements that the United States no longer has the capacity to process. Neodymium magnets are used in computer hard drives, smart bombs, wind turbines, and hybrid car engines.)

Once upon a time, the U.S. did make neodymium magnets. A subsidiary of General Motors called Magnequench pumped them out, and employed 260 people to do so.

Then in 1995 the automaker decided to sell the division. Because the deal was for only $70 million it attracted little attention. The buyer was a consortium of three firms led by the Sextant Group, an investment company whose principal was Archibald Cox Jr., the son of the Watergate special prosecutor whom President Richard M. Nixon famously fired.

In the few press reports Sextant got most of the notice, but the real parties behind the purchase were a pair of Chinese companies -- San Huan New Material High-Tech Inc. and China National Nonferrous Metals. Both firms were partly owned by the Chinese government. The heads of these two Chinese companies are the husbands of the first and second daughters of Deng Xiaoping, then the paramount leader of China.

Johnson portrays the deal as a quid pro quo. General Motors wanted access to the domestic Chinese auto market, while China wanted to get its hands on militarily significant technology. The new owners were originally required to keep magnet production and technology in the United States for five years after the deal closed, but shortly after the term expired, the U.S. facilities were closed. Now China has an effective monopoly on the production of the raw ore from which neodymium is derived, the processing technologies that produce neodymium, and the manufacturing of neodymium magnets.

Johnston uses this tale as a launching point for how U.S. tax law encourages American corporations to offshore jobs and manufacturing production. HTWW supports vigorous international trade, but Johnston's reporting on how U.S. companies have manipulated tax laws to increase their own profits at the expense of American workers and the U.S. manufacturing base is appalling. And while the nepotistic corruption hinted at by the presence of Deng Xiaoping's family in an immensely important strategic sector of the Chinese economy definitely should give pause to anyone who thinks economic growth in China will lead to more openness, its hard to avoid the conclusion that the Chinese are playing the game of capitalism a lot more adroitly than the U.S.


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THURSDAY, SEP 23, 2010 18:33 ET
Meg Whitman sees the writing on the Proposition 23 wall
The candidate says she won't vote for the attempt to suspend California's global warming law. But there's a catch
BY ANDREW LEONARD

AP
California Republican gubernatorial candidate Meg Whitman
The No on Proposition 23 campaign is trumpeting the news that Meg Whitman, the Republican candidate for governor of California, has announced that she will not endorse the out-of-state oil-company-funded ballot initiative aimed at suspending AB 32, California's Global Warming Solutions Act.

However, Whitman is still calling for a one-year "moratorium" on the implementation of AB 32, which she remains determined to keep calling a "job killer."

"While Proposition 23 does address the job killing aspects of AB 32, it does not offer a sensible balance between our vital need for good jobs and the desire of all Californians to protect our precious environment. It is too simple of a solution for a complex problem. I believe that my plan to fix AB 32 strikes the right balance for California. I will vote "no" on Proposition 23."

Talk about trying to have it both ways! Whitman's campaign has obviously concluded that Proposition 23 is a loser. Ever since she won the Republican primary she's been steering toward the center, and in a tight election in a state where voters take environmental issues seriously, you just don't want to be seen on the same side as out-of-state petrochemical companies.

At the same time, a majority of California Republicans support overturning AB 32. So she's aiming for the best of both worlds -- rejecting Prop. 23, and avoiding getting caught in the crossfire of the millions of dollars that the No on 23 campaign is marshaling for an advertising blitz, but at the same time pledging to protect the state from a "job-killing" law while unemployment hovers at 12.4 percent.

We'll find out whether California voters will buy that classic demonstration of political flimflam in a couple of months. But in the meantime, it seems safe to say that Prop. 23's chances of passing just took a big hit.
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SL, Now Offering Speeds of 700 Mbps
BY STACEY HIGGINBOTHAM
Huawei, the telecom gear maker, today said it has achieved speeds of 700 Mbps over DSL using a prototype shown in Hong Kong: the fastest DSL we’ve seen. Earlier this year, Alcatel-Lucent showed off 300 Mbps over DSL that could travel for 400 meters one kilometer, because with copper, it’s not just speed, but how far an ISP could deliver those speeds. Huawei has managed its top speed for 400 meters as well.

The race for faster copper may fly in the face of my own personal desire for a fiber-to-the-home connection, but is necessary because of both the prevalence of existing copper networks around the world and the cost of upgrading all of those networks to fiber. Verizon has spent up to $19 billion transitioning to fiber-to-the-home, but it too has halted further expansion to wait for customer demand to keep up. Contrast that with AT&T strategy of upgrading its copper networks with fiber-to-the node, (where it brings fiber to the equipment in the neighborhood, then uses the existing copper to connect to the home.) I’ve called it the slow road to fast broadband, but it’s certainly less risky and much, much cheaper.

Given that many ISPs are content to use their copper until customers are ready to rip it out of the ground and dig their own fiber trenches, Huawei’s advances are a boon to it and to the end consumer who may well be using DSL for the next several decades at this rate. To reach the 700 Mbps speeds, Huawei is relying on what it calls SuperMIMO (multiple-input multiple-output) technology that uses four twisted pairs to achieve its downstream speeds. This technology addresses crosstalk among multiple twisted pairs and increases DSL bandwidth by 75 percent, from an average of 100 Mbps per twisted pair to approximately 175 Mbps.
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Adds total value of offering in first paragraph.)

Sept. 23 (Bloomberg) -- Petroleo Brasileiro SA, the state- controlled oil company, raised 120.4 billion reais ($70 billion) from the Brazilian government and other investors in the world’s largest share sale.

Petrobras, based in Rio de Janeiro, priced its Brazilian common shares at 29.65 reais each, according to a regulatory filing from the company today. The company’s preferred shares are being priced at 26.30 reais each.

The company is selling stock to fund development of offshore oil fields such as Tupi, the largest discovery in the Americas in three decades, and to preserve its investment grade credit rating. As part of the share sale, Petrobras issued about $42.5 billion of stock to Brazil’s government in exchange for the rights to develop 5 billion barrels of oil reserves.

The company sold 1.87 billion preferred shares and 2.4 billion common stock in the offering today. Including supplementary and additional over-allotments, Petrobras had said it would sell as many as 1.98 billion preferred shares and 2.72 billion common shares.

Before the offering, Brazil’s government owned a 32 percent stake in Petrobras and controlled the company through 55.6 percent of voting shares. The sale will probably lead to an increase in the government’s stake, the company said in a Sept. 3 prospectu
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olar Power: Brighter Long-Term Investment Outlook
Energy standards requiring U.S. utilities to use solar power could drive growth for companies ranging from inverter makers to installation financiers

By David Bogoslaw

With utilities adopting standards to increase the amount of solar-generated electricity in coming years, the U.S. could bolster its presence in the global solar-power market. The quickening growth pace could present attractive opportunities for investors, according to some professionals.

At the end of 2009, the U.S. ranked fourth in total solar capacity, with 2.09 gigawatts installed, behind Germany with 9.79Gw, Spain with 4.01Gw, and Japan with 2.68Gw, according to Bloomberg New Energy Finance. With U.S. installed capacity growing at a faster pace than that of the international market, the country may be on track to become a more dominant market by 2014, according to Larry Sherwood, an analyst at the Interstate Renewable Energy Council (IREC).

Some 23Gw of solar capacity are under development in the U.S., enough to provide electricity for 4.4 million households, according to the Solar Energy Industries Assn. (SEIA). Solar demand in the U.S. is expected to grow 75 percent in 2011, compared with 2010. About 1.5Gw to 2.0Gw of capacity—1.36Gw in California alone—is scheduled to be installed next year.

One factor could snarl that time line: the expiration of federal incentives, specifically the Treasury Dept.'s cash grant program, which currently covers 30 percent of a project's costs, as long as construction has begun by the end of 2010. SEIA and other groups are pushing to have the qualifying construction start date extended by two years, to the end of 2012. Members of the U.S. Senate Finance Committee didn't return calls asking when they would vote on extending the program. Kaufman Brothers said in an Aug. 17 research note that the firm didn't expect a major decision on solar incentives until after the fall U.S. elections.

U.S. FOCUS ON UTILITY-SCALE SOLAR
The diversion of $3.5 billion from the Energy Dept.'s Loan Guarantee Program to other stimulus projects—and uncertainty as to whether any of the money will be restored—is also delaying some projects. Indeed, the main reason the U.S. solar market lags Europe's is that the federal government has consistently failed to commit to a long-term policy offering financial incentives to power providers, without which solar can't yet compete with such cheaper sources of electric generation as coal and natural gas.

While Europe is moving toward smaller rooftop installation, utility-scale projects are fast becoming the focus in the U.S. and are the most likely way for the U.S. to catch up with the leading solar markets. Photovoltaic panel makers FirstSolar (FSLR) and SunPower (SPWRA) have large pipelines of utility-scale projects and will be dominant players in the U.S., starting in 2011, says Matthew Page, one of the managers of the Guinness Atkinson Alternative Energy Fund (GAAEX).

With so much uncertainty surrounding incentives at home and overseas, the fact that more countries are adopting renewable energy standards and planning to build solar plants has analysts and some fund managers feeling more confident about the industry. "I'm bullish on solar because the market is no longer dominated by two or three countries," says Jeff Osborne, an analyst who covers clean energy stocks at Stifel Nicolaus (SF). "Morocco said in 2009 that it wanted to build 2Gw of solar." Utilities in Eastern Europe, he adds, are eager to diversify their energy sources to reduce their exposure to periodic supply disruptions from Russia's Gazprom (OGZPY:US), which provides roughly 25 percent of Europe's natural gas needs.

Solar's brighter future has some investment pros seeking opportunities beyond manufacturers of photovoltaic solar panels. Page at Guinness Atkinson recommends investing in stocks likely to benefit, no matter where solar demand is strongest. Page likes SMA Solar (S92:GR), a German producer of inverters, which convert the direct current produced by solar and wind into alternating current that can be used on the grid.

SATCON'S UTILITY-SCALE INVERTERS
The bigger the installation, the more important the inverter that enables a connection to the grid, says Osborne at Stifel Nicolaus.

While SMA Solar dominates the inverter market, Satcon Technology (SATC) is the largest manufacturer of utility-scale inverters, whose importance is sure to grow as the U.S. market moves toward utility-scale systems. While Satcon continues to report net losses, its revenue tripled from a year earlier, to $27.6 million in the second quarter. Some 45 percent of that volume derived from Europe, vs. nearly all its demand coming from North America a year earlier. The company's "geographic diversification is also reflected in its record backlog of $111 million," 20 percent of which comes from Europe, with another 33 percent coming from Asia, according to an Aug. 6 research note by Raymond James & Co. (RJF). The total backlog has grown 35 percent since June 30. Satcon has announced plans to build annual production capacity from 1Gw now, to 1.25Gw by the end of 2010, and to 1.75Gw in 2011.

Much of Satcon's revenue growth and gross margin expansion, bolstered by a recent shift to lower-cost manufacturing in China, is being offset by higher fixed costs necessitated by international expansion and a bigger workforce, said Raymond James, which still expects the company to post net losses through 2011. The red ink didn't stop Osborne at Stifel from upgrading the stock on July 27 to buy, from hold, citing improving margins and prospects for market share expansion.

The transformation of the U.S. market from rooftop to utility-scale systems is also expected to benefit Power-One (PWER) and Advanced Energy Industries (AEIS), which also make inverters. Dougherty & Co. estimated in a July 30 research note that Power-One's total renewable energy backlog increased by more than $500 million, compared with the first quarter, and is now over $900 million, the equivalent of 3.2Gw to 3.5Gw in shipments. The fast-growing inverter business introduces "a compelling growth aspect to an otherwise cyclical semiconductor capital equipment stock," giving the company more potential than other semiconductor makers to branch into adjacent segments such as solar over the long term, Pacific Crest Securities said in an Aug. 12 note.

KEY ROLE FOR CAPITAL EQUIPMENT MAKERS
Another company that is expected to do well regardless of where demand is strongest is STR Holdings (STRI), which makes adhesive encapsulants, the ethylene vinyl acetate sheets used to weatherproof solar panels and prevent yellowing. Demand for STR's products is strong, with half the world's solar panel makers signed up to use them, says Page at Guinness Atkinson. The company's net sales for the second quarter rose 126 percent from a year earlier, to $67 million, and were up more than 22 percent from the first quarter.

Capital equipment makers are also a fairly safe bet, with attractive returns on invested capital, says Osborne. Applied Materials (AMAT) and GT Solar (SOLR) both make the semiconductor equipment that deposits chemicals on large polysilicon cell surfaces. Applied Materials also makes equipment that cuts silicon wafers, while GT Solar makes polysilicon and wafers. Osborne sees them as "the arms merchants to the sector," which is attracting new customers in such countries as Korea and India.

If utility-scale installations grow as analysts expect, photovoltaic technologies will in time be outshone by concentrated solar thermal power, or CSP, which uses rotating mirrors to reflect the sun toward parabolic troughs carrying a liquid heat conductor or to so-called "power towers" with hot water boilers on top. The concentrated sunlight superheats the liquid heat conductor or the water, producing steam that drives turbines and generates electricity.

The companies that make materials for solar thermal installations such as mirrors and receiver tubes are now privately held. Turbines are made by public companies, however, and Siemens (SI) is one manufacturer whose turbine orders may increase as solar thermal power gets commercialized. BrightSource Energy, the privately held developer of Ivanpah, a 392-megawatt complex consisting of three CSP plants in California, is using Siemens turbines; the first of those plants is scheduled to begin operation in 2012.

BY 2020, 6GW OF SOLAR CAPACITY
Still, photovoltaic systems are the backbone of the U.S. market, now and for the foreseeable future. In the U.S., 29 states and Washington now have mandatory Renewable Portfolio Standards, while a further six states have set voluntary goals. Most of the solar development is occurring in the 16 states that have "carve-outs," which establish a minimum percentage of electricity that retailers must provide from solar or distributed generation by a certain date, says Justin Barnes, a policy analyst for the Database of State Incentives for Renewables & Efficiency (DSIRE).

Total capacity for grid-connected PV installations was 1.26Gw at the end of 2009. Total solar capacity must reach 6Gw by 2020, and 9.5Gw by 2025, in order for the 16 states with solar carve-outs to meet their targets, according to projections by the Lawrence Berkeley National Laboratory, which is part of the U.S. Energy Dept. That's expected to be a key driver of revenue growth for manufacturers of PV panels and related materials.

Apart from companies that serve the PV panel market, there isn't yet much of a solar industry for retail investors to buy into. That will change in the next couple of years, says Nancy Pfund, a managing partner at DBL Investors, a San Francisco venture capital firm that was spun out of a JPMorgan equity fund in 2008 and which has invested in the Ivanpah complex. "There's going to be a lot more choice very soon," she says, citing the coming of gigawatt-sized solar projects by 2016.

Eventually, manufacturers of solar mirrors used in CSP plants will either go public or be acquired by public companies, she says. She foresees the same trajectory for makers of concentrated photovoltaics, which boost the efficiency of energy conversion from silicon on the panels by focusing on how the silicon is arranged alongside glass.

SOLAR FINANCING OPTIONS
Solar installation financing is another potentially big area for investment, Pfund believes. She sits on the board of SolarCity, the only full-service solar installation company in the U.S. In January, SolarCity signed a deal with Pacific Gas & Electric (PCG) under which the California utility will provide $60 million in tax equity financing for solar installations in U.S. homes and businesses in exchange for lease revenue from SolarCity customers, as well as federal investment tax credits and local rebates. SolarCity's financing options let homeowners and businesses switch to solar power with no up-front investment, so they can start saving on energy costs right away. The company's goal is to be a national brand and become publicly traded, although that's a few years away, says Pfund.

Banks such as Rabobank have also begun to establish tax equity funds. As solar energy becomes more prevalent, Pfund believes more utilities will be attracted to the financing model in order to avoid losing some of their biggest customers, who will move to solar because of how much power they consume.

Investors need to maintain a lengthy time horizon in betting on the growth of the solar industry, says Mark Burger, a principal at Kestrel Development, a consulting firm for renewable energy policy, markets, and technologies.

Solar is "the new 30-year Treasury bond," Burger says. "It's a nice, conservative investment. And you'll get a better return than owning a Treasury bond."
--
O GUIDE TO TECHNOLOGY July 6, 2010, 11:56PM EST
Apple's iPad Wins Corporate Converts at Wells Fargo, SAP
The tablet computer, designed for video and book-reading, is making inroads at companies as varied as SAP and Mercedes-Benz

By Rachael King

Wells Fargo (WFC) spent two years studying the iPhone before letting bankers use the device at work. Apple's (AAPL) iPad, released in April, took just weeks to get cleared.

This time around, safeguards against security breaches are stronger from the start, according to Megan Minich, a senior vice-president at the San Francisco-based bank. Her colleagues used two of the first shipment of 15 iPads to demonstrate financial products at an investor conference in May. More are on the way, Minich says. "We've got a bunch ordered that we can't get yet," she says in an interview.

Apple, known for courting consumers with sleek designs and easy-to-use software, is making inroads with corporations that say the iPad can make workers more productive without putting sensitive customer information at risk. SAP (SAP), Tellabs (TLAB), and Daimler's (DAI:GR) Mercedes-Benz are using the tablet-style computer for tasks as varied as accessing work e-mail, approving shipping orders, and calling up on-the-spot auto-finance options.

Apple Chief Executive Officer Steve Jobs announced the iPad in January, touting its ability to deliver games, video, music, Web access, and digital versions of books and magazines. Yet companies say it's widely applicable at work, too. "This iPad thing has taken the world by storm," says Ted Schadler, vice-president and principal analyst at Forrester Research (FORR) and author of Empowered, which explores how employees use new technologies. "It came in as a consumer product and very quickly the people who actually bought them were businesspeople."

BUSINESS "EXPERIMENTATION"
Last month, Apple said it sold 3 million iPads within 80 days of its release. The company may sell 9.7 million iPads in 2010, says Shaw Wu, an analyst at Kaufman Brothers in San Francisco. More than half—52 percent—of 770 smartphone users surveyed by Zogby International said they would most likely use a tablet device like the iPad to do work. The study, commissioned by Sybase (SY), was released Mar. 23. "A lot of businesses right now are in experimentation with these devices," says Dan Shey, practice director for enterprise at ABI Research, which is based in Oyster Bay, N.Y.

Many companies may keep their distance from tablet-style computers, which boast smaller screens and won't let businesspeople switch back and forth between tasks as quickly as bigger machines. Apple rivals including Hewlett-Packard (HPQ) and Cisco Systems (CSCO) are getting into tablets, too—so the iPad maker's lead may narrow.

For now, workplace adoption of the iPad stands to benefit Apple while undermining rival makers of computers that run Microsoft's (MSFT) Windows operating system. Many companies initially chafed at letting employees use iPhones for business amid concerns that it may not keep corporate data secure. That resistance ebbed after Apple in 2008 released a version of iPhone software with beefed-up security and better support for corporate e-mail. Similarly, a growing number of companies have begun letting employees use Apple's Macintosh computers in addition to, or in place of, Windows-based PCs. Apple spokesman Simon Pope declined to comment, referring instead to remarks by Jobs, who said on May 31 that "customers around the world are experiencing the magic of iPad."

With their smaller screens, inability to multitask, and lack of keyboards, tablets may not soon replace bigger computers for many work-related tasks. The iPad's display, for example, is 9.7 inches (25 centimeters). By 2015, less than one-fourth of personal computers sold will be tablet-style, Forrester says.

COMPETITION'S COMING
As popular as the iPad may be for businesses now, it may soon face competition from rivals including Hewlett-Packard, Dell (DELL), LG Electronics (066570:KS), and Samsung Electronics (005930:KS), which plan their own tablet computers. Cisco said on June 29 it too will release a tablet that will be able to handle high-definition videoconferencing and may be available in early 2011.

Some companies may also be reluctant to entrust their data to the iPad after a breach on the AT&T (T) website revealed the e-mail addresses of as many as 114,000 iPad users. Apple takes pains to keep its products secure in part by carefully vetting the applications that can be downloaded onto it. Still, the process is "not foolproof, it will be subverted eventually," says Mikko Hyppönen, chief research officer of Helsinki-based security firm F-Secure.

Reservations aside, Wells Fargo saw early on how quickly the iPad might take hold among business clients the weekend the device was released. Finance executives of large companies—those that generate more than $50 million in revenue—accessed corporate Wells Fargo accounts with iPads, says Amy Johnson, a Wells Fargo vice-president who works on the company's online portal and mobile strategy. A finance official or account representative could use a mobile device like the iPad to approve multimillion-dollar wire transfers, she explains.

Johnson used one of the iPads bought by Wells Fargo to demonstrate financial products during a May 13-14 conference. She says she now carries the iPad with her everywhere.

VERSATILE TOOL
The same goes for Rob Enslin, North America president at SAP, the world's largest maker of business-management software. Enslin says that when he travels, the only device he carries besides a Research In Motion (RIMM) BlackBerry is the iPad. "It's allowed me to almost run a paperless office," says Enslin, who uses it to access business applications, briefing documents, customer information, and other data.

SAP, based in Walldorf, Germany, also works with clients to put its products on mobile devices including the iPad. Tellabs, for instance, collaborated with SAP and Sybase on an iPad application that lets managers more quickly approve shipping of customer orders. "We also have three or four different applications lined up behind this that will help us with better inventory control," says Jean Holley, chief information officer at Tellabs, based in Naperville, Ill.

Other companies using the iPad at work include Daimler's Mercedes-Benz. Sales representatives in 40 U.S. dealerships in late May began using iPads on showroom floors to order on-the-spot financing options for customers, says Andreas Hinrichs, vice-president of marketing at Mercedes-Benz Financial. In October, Mercedes-Benz had released an application for the iPhone that lets customers manage accounts and make payments. Up to now, customers have made $5 million in car payments through the application, Hinrichs says. The company now is considering doling out iPads to all of its 350 U.S. dealerships.

At Wells Fargo, Minich is waiting for an iPad after her boss made off with the one she expected to be assigned to her.
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ple's iPad Wins Corporate Converts at Wells Fargo, SAP
The tablet computer, designed for video and book-reading, is making inroads at companies as varied as SAP and Mercedes-Benz

By Rachael King

Wells Fargo (WFC) spent two years studying the iPhone before letting bankers use the device at work. Apple's (AAPL) iPad, released in April, took just weeks to get cleared.

This time around, safeguards against security breaches are stronger from the start, according to Megan Minich, a senior vice-president at the San Francisco-based bank. Her colleagues used two of the first shipment of 15 iPads to demonstrate financial products at an investor conference in May. More are on the way, Minich says. "We've got a bunch ordered that we can't get yet," she says in an interview.

Apple, known for courting consumers with sleek designs and easy-to-use software, is making inroads with corporations that say the iPad can make workers more productive without putting sensitive customer information at risk. SAP (SAP), Tellabs (TLAB), and Daimler's (DAI:GR) Mercedes-Benz are using the tablet-style computer for tasks as varied as accessing work e-mail, approving shipping orders, and calling up on-the-spot auto-finance options.

Apple Chief Executive Officer Steve Jobs announced the iPad in January, touting its ability to deliver games, video, music, Web access, and digital versions of books and magazines. Yet companies say it's widely applicable at work, too. "This iPad thing has taken the world by storm," says Ted Schadler, vice-president and principal analyst at Forrester Research (FORR) and author of Empowered, which explores how employees use new technologies. "It came in as a consumer product and very quickly the people who actually bought them were businesspeople."

BUSINESS "EXPERIMENTATION"
Last month, Apple said it sold 3 million iPads within 80 days of its release. The company may sell 9.7 million iPads in 2010, says Shaw Wu, an analyst at Kaufman Brothers in San Francisco. More than half—52 percent—of 770 smartphone users surveyed by Zogby International said they would most likely use a tablet device like the iPad to do work. The study, commissioned by Sybase (SY), was released Mar. 23. "A lot of businesses right now are in experimentation with these devices," says Dan Shey, practice director for enterprise at ABI Research, which is based in Oyster Bay, N.Y.

Many companies may keep their distance from tablet-style computers, which boast smaller screens and won't let businesspeople switch back and forth between tasks as quickly as bigger machines. Apple rivals including Hewlett-Packard (HPQ) and Cisco Systems (CSCO) are getting into tablets, too—so the iPad maker's lead may narrow.

For now, workplace adoption of the iPad stands to benefit Apple while undermining rival makers of computers that run Microsoft's (MSFT) Windows operating system. Many companies initially chafed at letting employees use iPhones for business amid concerns that it may not keep corporate data secure. That resistance ebbed after Apple in 2008 released a version of iPhone software with beefed-up security and better support for corporate e-mail. Similarly, a growing number of companies have begun letting employees use Apple's Macintosh computers in addition to, or in place of, Windows-based PCs. Apple spokesman Simon Pope declined to comment, referring instead to remarks by Jobs, who said on May 31 that "customers around the world are experiencing the magic of iPad."

With their smaller screens, inability to multitask, and lack of keyboards, tablets may not soon replace bigger computers for many work-related tasks. The iPad's display, for example, is 9.7 inches (25 centimeters). By 2015, less than one-fourth of personal computers sold will be tablet-style, Forrester says.

COMPETITION'S COMING
As popular as the iPad may be for businesses now, it may soon face competition from rivals including Hewlett-Packard, Dell (DELL), LG Electronics (066570:KS), and Samsung Electronics (005930:KS), which plan their own tablet computers. Cisco said on June 29 it too will release a tablet that will be able to handle high-definition videoconferencing and may be available in early 2011.

Some companies may also be reluctant to entrust their data to the iPad after a breach on the AT&T (T) website revealed the e-mail addresses of as many as 114,000 iPad users. Apple takes pains to keep its products secure in part by carefully vetting the applications that can be downloaded onto it. Still, the process is "not foolproof, it will be subverted eventually," says Mikko Hyppönen, chief research officer of Helsinki-based security firm F-Secure.

Reservations aside, Wells Fargo saw early on how quickly the iPad might take hold among business clients the weekend the device was released. Finance executives of large companies—those that generate more than $50 million in revenue—accessed corporate Wells Fargo accounts with iPads, says Amy Johnson, a Wells Fargo vice-president who works on the company's online portal and mobile strategy. A finance official or account representative could use a mobile device like the iPad to approve multimillion-dollar wire transfers, she explains.

Johnson used one of the iPads bought by Wells Fargo to demonstrate financial products during a May 13-14 conference. She says she now carries the iPad with her everywhere.

VERSATILE TOOL
The same goes for Rob Enslin, North America president at SAP, the world's largest maker of business-management software. Enslin says that when he travels, the only device he carries besides a Research In Motion (RIMM) BlackBerry is the iPad. "It's allowed me to almost run a paperless office," says Enslin, who uses it to access business applications, briefing documents, customer information, and other data.

SAP, based in Walldorf, Germany, also works with clients to put its products on mobile devices including the iPad. Tellabs, for instance, collaborated with SAP and Sybase on an iPad application that lets managers more quickly approve shipping of customer orders. "We also have three or four different applications lined up behind this that will help us with better inventory control," says Jean Holley, chief information officer at Tellabs, based in Naperville, Ill.

Other companies using the iPad at work include Daimler's Mercedes-Benz. Sales representatives in 40 U.S. dealerships in late May began using iPads on showroom floors to order on-the-spot financing options for customers, says Andreas Hinrichs, vice-president of marketing at Mercedes-Benz Financial. In October, Mercedes-Benz had released an application for the iPhone that lets customers manage accounts and make payments. Up to now, customers have made $5 million in car payments through the application, Hinrichs says. The company now is considering doling out iPads to all of its 350 U.S. dealerships.

At Wells Fargo, Minich is waiting for an iPad after her boss made off with the one she expected to be assigned to her.
--

Tim Markley recently ordered three Apple (AAPL) iPads for his warehouse. He put them on the forklift and the carts that workers push down aisles while they pull items off the shelves to fill orders. Previously, employees would carry lists (on paper) and once they completed an order they'd find a computer on the 20,000-square-foot warehouse floor to update the inventory database. That meant a lot of time spent walking around looking for a computer, then entering data—not filling orders. "In a warehouse, your travel time to pick orders is 50 percent of an employee's time," says Markley, president of Elkhart (Ind.)-based Markley Enterprise, a 75-person firm that designs marketing displays for stores and trade shows. "We put pedometers on our people and we actually saw steps decrease by 30 percent with the iPad," he says. Another benefit: Markley now e-mails orders to each iPad, eliminating the need for paper.

Markley isn't the only small business owner to embrace the iPad. Others have begun experimenting with the lightweight tablet computer, using it to outfit delivery staff and salespeople, as well as to dramatically reduce the amount of paper used. At the Rydges Hotel in Sydney, Australia, diners are handed iPads instead of more traditional menus. In New York City, De Berardinis Salon gives clients iPads rather than magazines to keep them entertained during beauty treatments.

As a device to cut down on paper costs, there's certainly a large market for the iPad. In the U.S., companies spent about $8 billion on paper in 2007, not counting costs for ink or toner, according to John Maine, an analyst with RISI, which tracks the global forest products industry. Copier giant Xerox (XRX) estimated that for every dollar spent on printing documents, companies pay an additional $6 in handling and distribution costs.

DELIVERY DEVICE
No wonder going paperless can save a small company a small fortune—if they use a lot of paper. Arhaus Furniture estimates it will save $100,000 in paper costs annually when it gives its 50 drivers iPads to use when delivering furniture from its stores. Arhaus uses software from TOA Technologies to track drivers on their routes and to predict within a one-hour window when they will arrive at a customer's home. TOA is now creating an iPad app for Arhaus.

"The unique features of the iPad are the ability to use the built-in GPS function and the ability to collect electronic signatures," says Irad Carmi, co-founder of TOA Technologies, adding that the size of the device is just right for drivers to carry. TOA may add a piece to the app that lets Arhaus drivers show customers photos from the catalog so they can sell accessories during the delivery process. Arhaus wants to have its drivers equipped with iPads in time for the holiday season.

Some small business owners say that the combination of the device's ease of use, always-on capabilities, and large screen size could help them improve business processes. That is, if there's an app—or someone willing to write one—that will let them streamline current operations.

"In the long term, it [the success of the iPad as a small business tool] is going to be very dependent on the availability of apps," says Dan Shey, an analyst with ABI Research, which forecasts trends in communications and emerging technology. "Some of these devices are going to be designed so they are specific to a worker's task, almost like an appliance," he adds.

To make the iPad work, Markley needed an application that would properly display data from an online order-management service on the iPad's large screen. He didn't want to create his own app, so after a thorough search of Apple's App Store he finally found one for $1.99 written by a Japanese developer. "For years, we've used Apple products and that's put us at a disadvantage because most [business software] is written for PCs," says Markley. The iPad may be changing that.

--
SMART GRID TECHNOLOGY October 5, 2009, 7:28PM EST
Making Meters Smarter, Home by Home
California's PG&E is installing two-way meters in 5 million homes, but consumers aren't yet convinced it will save them money

By Rachael King

A sweeping overhaul is coming to the 157,000 miles of high-voltage electric transmission lines that crisscross the U.S., delivering energy to 130 million homes. But the changes are happening one laptop-sized machine at a time.

These small computers, being installed in homes and businesses around the country, will essentially create a two-way line of communication between energy consumers and the utility providers that dispense power. Known as smart meters, they're designed to give users greater control over electricity bills while helping power companies better manage fluctuating electricity demand. But the verdict remains out on just how much they're helping end users trim bills.

In the most ambitious deployment yet, California utility Pacific Gas & Electric (PCG) has installed 3.6 million smart meters across its territory in the northern part of the state. PG&E is spending $2.2 billion to install a total of 5 million advanced digital electric meters from Silver Spring Networks in its operating territory, the northern and central part of the state, by 2012. Each day the company installs 12,000 to 15,000 meters.

CONSUMERS: SMART METERS, HIGHER BILLS
Unlike conventional residential meters that let utilities charge a single rate regardless of the time of day, smart meters let power companies charge varying rates, based on demand. For example, demand peaks between 4 p.m. and 7 p.m. when people return from work and start to make dinner, so utilities could charge a higher rate to give customers an incentive to run appliances such as clothes dryers at a different time of day. "Right now the only reason you would not use electricity between 4 p.m. and 7 p.m. is because you're being a good citizen; there's no economic incentive," says Andrew Tang , senior director of PG&E's smart-energy Web division.

Smart meters and variable pricing would give consumers the added incentive of saving money, PG&E says. Yet some customers have complained that they've seen only markedly higher bills since they had smart meters installed, according to California State Senate Majority Leader Dean Florez. To that end, Florez held a hearing on Monday, Oct. 5, in Bakersfield to hear from concerned consumers, utilities PG&E and Southern California Edison, and the California Public Utilities Commission (CPUC) about complaints since the devices were installed.

After looking into thousands of accounts, PG&E says it found that most customers in Bakersfield who contacted the utility this summer with concerns about bills are suffering the combined effects of exceptionally hot weather and two rate increases that took effect in March and last October, says PG&E spokesman Paul Moreno.

ENERGY CRISIS PUT PG&E IN BANKRUPTCY
The utility has come a long way in the past decade when it comes to energy-efficiency programs that give consumers incentives to use less energy. PG&E learned some hard lessons during the electricity shortage of 2000-2001, which left hundreds of thousands of California residents without power. "The need to put in smart meters stemmed from the energy crisis in the 2001 time frame," says PG&E's Tang.

The California energy crisis had several causes. Primarily, there weren't enough power plants to keep up with demand that had surged amid strong economic growth and unusually warm weather. To meet demand, PG&E and other utilities had to buy electricity from outside suppliers at high rates. But thanks to consumer rate freezes imposed by the state, utilities couldn't pass along those increased costs, according to a report by the Federal Energy Regulatory Commission. Skyrocketing wholesale prices led PG&E to file for bankruptcy protection on Apr. 6, 2001. The company exited Chapter 11 three years later.

Since then, PG&E and the CPUC have been looking for ways to promote energy efficiency and conservation. PG&E has started so-called demand-response programs that give corporate customers financial incentives to use less energy during the 15 hottest days of the year, Tang says. Those programs require sophisticated meters that can read energy consumption in time increments as small as 15-minute blocks. Since the meters are expensive, they were initially used only by corporations.

ENERGY- AND COST-SAVING DEVICE APPS
Five years ago, the CPUC asked PG&E to see whether it could build a business case for installing these meters in consumers' homes. PG&E started with a technology called automated meter reading, which was a way for the company to simply read customer meters remotely, without dispatching employees to travel door-to-door each month. That has since evolved to something known as advanced metering infrastructure—essentially smart meters capable of two-way digital communication with the utility.

These smart meters will serve as a bridge to home networks that will eventually include dishwashers, washing machines, air conditioners, and other appliances. A chip in the smart meter will let third-party developers create software to build products and services that take advantage of that two-way communication with the utility—such as dishwashers that can be programmed to run only when rates are below a certain threshold, Tang says.

For example, there are already electric-based clothes dryers that can respond to a price signal, says Tang. When prices are high, they turn off the heating cycle and increase the spin cycle. By doing so, "they eliminate 95% of the electricity consumption," he says.

But first, advanced appliances will need to be more widely available—and before that, smart meters more broadly deployed.
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The Smart Grid Needs Smart Regulations
Coming federal stimulus billions meant to spark the power grid's overhaul will miss their mark without state incentives to boost efficiency

By David J. Leeds

It's the night before Christmas in the energy sector, with the Energy Dept. expected to announce $4.5 billion in federal stimulus awards soon for projects aimed at ushering in the smart grid. The aim of the money is a far-reaching upgrade of the system that distributes energy to homes and businesses across the U.S., adding two-way communications and control technologies throughout the newly networked grid.

But those investments may have little impact if they're not accompanied by new state-level regulations that give both utilities and customers strong incentives to better manage and reduce their electricity consumption.

The first area in need of change is how utilities are compensated. An electric utility's revenue is tied primarily to the amount of power it sells. That was fine 50 years ago, in a world with seemingly unlimited resources and little evidence of climate change, but not today. As it stands, utilities have little motivation, if any, to encourage customers to find ways to reduce demand or to practice energy efficiency themselves—two core tenets of the smart-grid vision.

To encourage utilities to foster energy efficiency, we'll need regulations that establish new rate structures and business models. These will create incentives for utilities to earn revenue in ways that are not entirely linked to additional sales. Otherwise, asking a utility to sell less power is analogous to asking Starbucks (SBUX) to sell less coffee. Furthermore, since utilities are granted monopolies at regulated rates, a reduction in sales is equivalent to demand (and profit) destruction.

FROM DEMAND DESTRUCTION TO DEMAND RESPONSE
Smart grids aim to replace demand destruction with a practice called demand response. Utilities intentionally reduce overall demand by sending signals to customers to turn down energy use in exchange for financial rewards. For example, a utility might offer a discount to users who run their dishwashers in other than peak-demand hours.

The second challenge is overcoming the user's passive relationship to energy. In the U.S., customers have long been numb to energy costs because prices were dirt cheap. This resulted from flat rates that didn't really express the true, variable costs of energy generation and delivery. However, significant increases in the cost of electricity are coming, and fast. According to the Energy Dept., electricity prices are forecast to rise 50% over the next seven years, while the Energy Information Administration, which compiles energy statistics for the government, expects nationwide demand for electricity to grow by 30% by 2030.

The reform needed to encourage consumer energy management: eliminating the single fixed retail rate for electricity. Until dynamic rates that reflect current market conditions are implemented, smart-grid technologies such as smart meters and smart appliances, and home-energy management systems like those being developed by Google (GOOG) and Microsoft (MSFT), will have little effect in altering consumer power usage. Customers will have no impetus to shift their consumption to off-peak hours. A smart meter without a smart rate schedule is not smart at all.

Just because the cost of electricity per kilowatt-hour will jump doesn't mean a customer's bill has to rise. If a single customer is willing to shift demand from peak to off-peak (when more, and thus cheaper, supply is available), that change can cut costs for all parties, including the utility and every other customer. But today those savings are not passed on, providing no incentive to curb energy use. The win-win-win (for the utility, the consumer, and society at large) will not be created until dynamic prices are introduced.

FIFTY PUBLIC UTILITY COMMISSIONS
The elephant in the room in initiating what will be a paradigm shift in the electric power market is that the federal government can't currently address these regulatory issues. The fact is that each state's public utility commission (PUC) regulates the retail price of electricity and rate of return a utility will earn. Therefore, these changes cannot be made with the stroke of one pen but will need approval by 50 different PUCs. The good news is that PUCs are responding to the Energy Dept.'s statements about the need to explore dynamic pricing and new business models that reward demand-response initiatives. As an example, the Ohio PUC recently announced it will give Duke Energy (DUK) incentives to put energy-efficiency programs in place.

This is the promise of the smart grid: moving from demand destruction to value creation. While utilities may be loath to reinvent a business model that has served them for decades, the revolution in information technology that has transformed other industries—such as desktop computing, enterprise networking, and wireless communications—will have a similar effect on the electric-power business. The smart grid, which in large part sits at the intersection of energy, IT, and telecommunications, is a market that, according to John Chambers, CEO of Cisco Systems (CSCO), "may be bigger than the whole Internet."

At Greentech Media, we interact every day with startups and utilities that envision energy marketed less as a commodity and more as a suite of services. Just as cell-phone plans now bundle voice, SMS, and data, the smart grid will lead to energy-pricing plans that include basic service plus add-ons such as smart charging of electric vehicles during off-peak hours, distributed renewable energy services, and countless other new services and applications. The Energy Dept. stimulus represents a massive investment in the smart grid, but technology can only take us so far. There's plenty of money to be made, but we can't go from iPhone to iHome, from Facebook to Gridbook, without the right state policies.
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labNet Fosters Group Innovation in the 'Cloud'
From corporations to the U.S. Defense Dept., organizations are embracing a new software tool that facilitates remote collaboration and communication

By Jennifer L. Schenker

Open-source software pioneer Brian Behlendorf, who sports a ponytail and organized an online music site called SFRaves, is the unlikely architect of a new technology being embraced by the U.S. Defense Dept.

The DOD has started using technology from CollabNet, a Brisbane, Calif., company that Behlendorf co-founded with Bill Portelli, another open-source veteran, to provide an online meeting place in the Internet "cloud" for U.S. military agencies to build software through "crowdsourcing".

Parceling out computing tasks and storage to remote servers across the Internet, rather than to local desktop PCs or an organization's own servers, is referred to as "cloud. The emerging technology—as well as the groupthink open-innovation model called "crowdsourcing—is catching on not only with corporations such as Deutsche Bank (DB) but also with even more staid customers such as the DOD.

The Pentagon's most active CollabNet project is a new military meeting place in the cloud called Forge.mil. It's an online service that will let the Joint Chiefs of Staff and other senior defense officials use Web 2.0 mash-up tools in times of crisis to confer quickly and share a common picture of a situation. The service brings together Web conferencing, instant messaging, geospatial mapping information, and data feeds from intelligence agencies, the Homeland Security Dept., and other sources. Think of it as a souped-up portal for generals, with a decidedly unsexy name: the National Senior Leader Decision Support System (NSLDSS).

BEHLENDORF LED APACHE SERVER PROJECT
CollabNet is one of 26 companies named on Dec. 3 by the World Economic Forum as 2010 Tech Pioneers that have dreamed up new technologies or business models that could advance the global economy and have a positive impact on peoples' lives.

Software development has been moving for some time away from a traditional "silo" approach, in which companies acted on their own to build standalone systems, toward a more distributed and shared model. Indeed, one secret of CollabNet's success can be found in the Apache open-source Web server project in the 1990s that Behlendorf is credited with having led. The free software was developed by a very small set of software programmers—most of whom never met each other—collaborating around the world. It managed to quickly seize the leading Web server market position away from giants IBM (IBM) and Microsoft (MSFT). (CollabNet itself is also competing in a sense with collaboration tools from both companies, IBM's Lotus Notes and Microsoft's Sharepoint.)

When Behlendorf and Portelli started CollabNet in 1999, they aimed to harness the same open-source model. It turned out that the success of Apache wasn't due so much to its low cost as to the fact that its development (and continued improvement) tapped into the collective intelligence of a global community of mainly volunteer developers. So they set out to create a set of tools for companies and governments that would facilitate a similar sort of collective software development. Behlendorf served as CollabNet's chief technology officer until 2007, and now maintains an active role on the company's board.

Today, CollabNet has more than 800 customers, with over 2 million users in more than 100 countries. The company generates subscription revenue through software licensing, as well as fees earned for support, services, and add-ons for its software.

FORGE.MIL: 3,700 USERS, 160 PROJECTS
The Pentagon started talking to CollabNet about building this sort of system in 2002. Progress was slow until about 15 months ago, when two things changed, says CollabNet chief executive Portelli. First, the Defense Information Systems Agency (DISA), the Defense Dept. agency responsible for providing IT and communications services to the White House and the military, was encouraged to move in this direction under the Obama Administration, says Portelli. Secondly, the "notion of centralized cloud computing has became an accepted and understood way of doing software development and deployment," he says. "So the path to reducing the cost of developing defense weapons and supporting IT systems in DOD became clear."

Portelli is no stranger to the Defense Dept. In a previous job he helped streamline the economics of building F-22 fighter planes in the 1980s by introducing the DOD to the benefits of simulation software.

The Pentagon contracted with CollabNet to build Forge.mil in order to build better software faster and cut costs, says Rob Vietmeyer, project director of Forge.mil, which is operated by DISA. The secured site, accessible by DOD personnel and supporting contractors, has 3,700 registered users involved in some 160 projects.

Forge.mil not only helps software developers collaborate, it also aims to cut down on duplication of IT efforts in military branches. Services can check to see if a component has already been developed elsewhere before commissioning it, says Vietmeyer. What's more, it can serve as a hub for software that was developed for the U.S. government and can be legally reused. Until now, different government departments were often unaware of the availability of such programs.

"Major software programs for the DOD took too long and cost too much, and we couldn't rapidly adapt new technologies to mission needs," says Vietmeyer. CollabNet's tools, he says, "give us greater speed and greater agility."

CollabNet says that in general it can offer productivity improvement of 10% to 50% and reduce the cost of software development by up to 80%. That's bound to be welcome news for a military fighting wars on two fronts.
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