CNet Editor’s note: This is the first in a series of articles discussing how people in the tech industry are working with or around federal and state governments.
NEW BEDFORD, Mass.–Bill Davis has the unenviable job of selling people on the benefits of garbage.
Six years ago, Davis, the president and CEO of Boston-based Ze-gen developed high-tech tools to measure the effectiveness of advertising and marketing campaigns. Now, the 52-year-old entrepreneur can talk at length about waste: the amount of waste Americans produce (over 250 million tons a year), the energy content of different types of waste streams, the character of waste in India and other countries.
It’s a quest to reinvent people’s relationship with waste. Ze-gen has raised nearly $30 million in funding from venture capitalists, a state-run fund, and a Middle East industrial conglomerate. In September, the company opened a demonstration facility that converts woody debris from construction sites into usable energy through gasification. But like many energy start-ups, Ze-gen hasn’t yet landed its first big customer. Suffice to say, financial success still eludes Davis and the company’s investors.
Complicating matters is U.S. energy policy. The Department of Energy under Obama has been a boon to green technologies of all kinds, pumping billions into developing plug-in auto battery manufacturing, the so-called smart grid, and potentially disruptive energy research. Even with all the interest in promoting energy entrepreneurship, though, Ze-gen’s “advanced waste gasification” is something of an orphan in Washington, where there’s already a long line of energy lobbyists.
“The problem is nobody really cares. The Department of Energy is primarily concerned with technologies that can deliver a quadrillion units of energy and we’re not one of them. We’re not solar, not wind, not clean coal, and not ethanol,” Davis said from the control room at Ze-gen’s facility in New Bedford, Mass. “It’s easy to have a technology category that basically falls through the cracks of the traditional funding mechanism.”
If Ze-gen does fall through the cracks, it won’t be for lack of trying. Davis took nearly 20 trips to Washington D.C. in the past year to meet with staffers from members of Congress and pitch waste, along with other types of biomass, as a form of renewable energy. In an April trip, a group of New England entrepreneurs and investors traveled en masse, squeezing in about 20 meetings in one day in an attempt to influence the House energy and climate bill.
Back home, the state government has been supportive by providing the permits to build Ze-gen’s demonstration and pilot facilities. In addition to promoting energy technologies, the state is eager to revitalize the New Bedford area on the southern coast of Massachusetts, a region looking for new industries to replace the jobs lost by declining fishing and manufacturing industries.
But it’s not all smooth sailing there either: Ze-gen is fighting a proposed state regulation that would ban construction and demolition debris–the waste stream Ze-gen wants to mine for energy–for use in other types of waste-to-energy plants. The company has lobbied, unsuccessfully, to qualify for renewable energy certificates, a system of attaching a premium for electricity generated from clean sources. Consumers who install solar panels or wind turbines, for example, get a stream of revenue from these certificates, which provide an incentive to use renewable energy.
Getting a helping hand from the DOE or the Massachusetts Statehouse won’t necessarily make or break Ze-gen. But favorable policies sure would help. A financial incentive, in the form of a tax break or subsidy, would make Ze-gen’s technology that much more attractive and the return on investment more predictable for any would-be customer. Right now, industry’s only incentive is to use the cheapest form of energy possible, but policies that encouraged low-carbon technologies, for example, could lead them to consider alternatives.
Steel in the ground
For an entrepreneur schooled in the traditional high-tech scene of software coders and enterprise customers, the change to energy can be dramatic–and difficult. But Davis has adjusted, says Nick d’Arbeloff, president of the New England Clean Energy Council.
d’Arbeloff, who also migrated from high-tech to energy after the dot-com bust, notes that in 25 years in the software business he himself had little professional concern with what went on in Washington. But navigating policymakers and regulators is required in the energy business. Rather than try to push his agenda on lawmakers in the hopes of “shoving the appropriate clause in a statute,” Davis has calmly argued why it’s logical to favor his technology, said d’Arbeloff.
“Bill’s an incredibly even keel guy,” said d’Arbeloff. “Impacting the process is a pretty tough row to hoe, but he’s brought this quiet tenacity to Washington because he knows it takes a heck of a long time to achieve things.”
Persistence has been needed on the technology side as well. When he started Ze-gen, Davis started with the idea of using liquid metal to gasify waste and hired a handful of experts in the field. But in five and a half years of development, engineers have had to make a number of significant technical changes, often through trial and error. The company was also sued for alleged patent infringement but settled earlier this year. Davis can’t comment on the record about the suit but says the episode didn’t slow Ze-gen down significantly.
If Davis is calm and methodical in his business dealings, he’s not afraid to speak his mind. During a conference panel earlier this year with other waste-to-energy CEOs, he was blunt about the industry’s lousy track record, calling it “a bit of a minefield. We all run companies where 40 companies have failed before.” He’s not particularly effusive about government bureaucrats, either, saying the government is “particularly bad at being a VC (venture capitalist).”
But he also has a sense of humor and seems legitimately interested in making a contribution to the world’s energy and waste problems. In late November, Davis gave me a tour of Ze-gen’s waste gasification plant. As we said goodbye, I looked over at the plant and searched for words to describe the experience. “It’s…”
“It’s different,” Davis chimed in with a smile before hopping into his Prius and driving off.
Different it is. Walking into Ze-gen’s demonstration facility has the feel of walking into a giant Rube Goldberg science experiment. The core gasifier–a long steel vessel–fills about half of a barn-size room. The additional equipment piles two stories high, with an automated feeding system dropping wood through a chute from above, huge pipes snaking around the top of the unit, and a series of shiny machines to “scrub” the outcoming gas before it’s vented through the ceiling.
The plant is located adjacent to a garbage transfer center, where waste from different sources, including paper that can be recycled, is sorted and processed. Ze-gen’s primary interest is a waste stream called construction and demolition debris which, once ground up, looks something like wood chip mulch. As the system works around high heat, it was a balmy 80 degrees inside even on a cold night with the doors open.
At the beginning of the process, the waste feedstock is dropped into the gasifier, which houses a bath of molten copper kept at over 2,000 degrees Fahrenheit. In a gasification chamber, the amount of oxygen is restricted so material doesn’t burn and produce carbon dioxide. Instead, the material breaks down into its elemental components in the form of a gas, mostly carbon monoxide and hydrogen. The “syngas” that comes out of this process can be burned to make electricity or to create heat, much like natural gas is used.
Being a start-up, it’s had to make adjustments on the business model a few times. Originally, Davis envisioned Ze-gen’s plants would be co-located with trash-handling stations and supply electricity to the grid. Now, it’s seeking corporations looking for an alternative distributed energy product. A manufacturer, for example, that produces lots of waste is a potential customer if it’s looking to reduce its waste-handling cost and find a less carbon-intensive way to make power and heat on-site. Because the technology can reduce carbon emissions compared to other on-site power and heat systems, it could help corporations comply with oncoming carbon or other environmental regulations, Davis said.
Davis versus Goliath
Policymakers may not be conversant in gasification technology, but interest is perking up at the municipal level. A number of communities are considering waste gasification as an alternative to incinerators, which face public opposition, according to Ted Siegler, a principal at DSM Environmental Services in Windsor, Vt., which authored a report on the potential energy in construction debris.
In theory, waste gasification diverts waste from landfills, which give off the potent greenhouse gas methane as garbage decomposes. The technology is also flexible in that it can produce electricity, heat, or a liquid fuel such as ethanol. But is it a cleaner alternative to incinerators? Not necessarily, said Siegler. “Gasification is one of those technologies people are looking at, but I think the data really aren’t in (because) there aren’t enough full-scale operating plants anywhere in the world to adequately judge what the emissions are going to be at full scale,” he said.
The picture here is familiar to many energy start-ups. The incumbent technology has a long, well understood track record, which means that breaking into the business with an alternative process–be it electricity from solar cells or heat from biomass–is tough because the incumbent technology has the benefits of scale and cost.
This is where policy can play a role, either by creating incentives to, say, reduce air pollutants or favor domestic industries. In Ze-gen’s case, the rules for what qualifies as a renewable energy source are not even sorted out yet. As a result, waste gasification projects will likely move along on a case-by-case basis, as state regulators try to sort out the economic and environmental profile of the technology, Siegler said.
Davis’ next lobbying effort is educating policymakers and environmental advocacy groups on the environmental benefits of diverting waste from landfills and using it for energy, which he says make it a clean fuel on balance. He’s more comfortable calling himself a capitalist than an environmentalist, but he clearly has the green-energy bug: he recently installed a very large 10-kilowatt solar array on his garage.
If Ze-gen’s Davis has strong opinions on the need to reduce waste and find alternative fuels, he’s not counting on any hand-outs from the state or Washington. A number of energy start-ups have been given a lease on life by government-funded loans or grants for demonstration projects. That’s extremely important in energy because, often, venture capitalists simply aren’t equipped to finance expensive pilot plants, and project finance companies shy away from new technology risk.
Still, Davis is confident that things are going in the right direction at Ze-gen. During an interview, he hinted the company was close to signing a partnership with a global corporation that would help “legitimize” its technology in the real world after six years of development. He’s learned how to play the game in Washington, but he’s more focused on technical progress and commercial acceptance, even if it’s by small steps.
“My view is that this is the hard part right now. We’ve taken a bunch of small steps and now we’re going to build something bigger. That’s the leap because it’s at scale,” he said. “Is there technology risk? Yeah, because we don’t have a five-ton unit built. Is there a lot less technology risk than two years ago? You bet, considerably less.”