Thinking About the Here and Now
Yes, there’s a future in solar and wind, but as long as we must use coal and nuclear, John Moore wants to make it better.
John A. Moore’s first major investment was in a knitting mill, Tultex, in Martinsville, Virginia, where he lived in the mid-1970s. Moore figured the sweatsuit craze then sweeping the nation might make the local mill a good investment. So he bought some Tultex shares, then decided to get an up-close look at the company by attending the annual meeting. First, however, he had to be excused from school for the day. John Moore, you see, was in the sixth grade.
Tultex went on to become a Fortune 500 company. Moore went on to validate his wunderkind beginnings over the next 30 years with shrewd investments that gave him controlling interests in companies that spanned several industries. Today he is something of an entrepreneurial legend, one who espouses a counter-intuitive view of the energy and environmental crises while heading up Acorn Energy in Montchanin.
Moore lives with his wife and four school-age children in Greenville. He has a relaxed, self-effacing style that runs counter to the image of the ruthless business magnate. Take, for instance, the way he explains that first investment. “I wasn’t good in school. I wasn’t good at sports. I had to be good at something, and I felt if I got a lead on the other kids by learning about business and the stock market at a young age, I could find some success.”
While claiming that he brings no special intellectual prowess to the table, there’s no denying his three greatest assets: an ability to spot and take advantage of trends—like the ’70s sweatsuit craze—his work ethic and his willingness to take risks. His first major deal, which occurred a few years after his Tultex investment, is a case in point.
First, a little background: Moore’s father, John W., was a DuPont engineer who was transferred to several locations during Moore’s youth, including Martinsville and Switzerland. After Moore graduated from high school in that country, DuPont transferred his father to Wilmington. Fulfilling a promise to his dad, the 18-year-old Moore enrolled as a history major at Rutgers University—“I really didn’t want to go to college,” he says—attending night classes and living in New Brunswick, New Jersey. But during the day, he commuted to New York and pursued his real passion, Wall Street, where he worked at Lehman Bros. as a cold caller. “Smile and dial,” he says. “A miserable job, but an amazing experience.”
Page 2: Thinking About the Here and Now, continues…
On weekends, Moore would scour Lehman’s extensive financial library for companies that looked ripe for takeover. By then, he had accumulated about $20,000 from his investments and odd jobs. His research turned up CGS Scientific, a manufacturer of thermocouples on U.S. 202 in West Chester, Pennsylvania, whose publicly traded stock had plummeted from $17 to two cents a share. The experienced cold caller phoned the CGS CEO and told him he had the solution to the company’s problems. Amazingly, the CEO agreed to meet with Moore at the CGS plant.
Here is Moore’s full disclosure about that meeting: “I had never been in a factory in my life, and I certainly had no idea what the solution to his problem was. And my mother had to drive me to the meeting because I didn’t have a driver’s license—Switzerland didn’t allow anyone under 18 to drive—but I did have a suit.”
After his mother dropped him off, Moore met with the CEO and, to make a long story short, they devised a plan to restore the company’s health. Moore became the largest shareholder, got a seat on the board, helped get the firm listed on the Philadelphia Stock Exchange, and made 50 times his $20,000 investment. With typical modesty, he says, “I’m terrible at running companies, but I had a good management team.”
With the profit from that deal, he was off and running—and he’s going stronger than ever today. He attributes much of his success to a willingness to take risks. “Most things fail, so you have to have a willingness to fail,” he says. “And [the other key is] recognizing that the quality of the people you associate yourself with determines your success.”
His resume reflects his restless and creative mind. Early on, he partnered with his father, who had left DuPont, in Optimer, Inc., which developed Dri-release, a blend of natural and synthetic fibers that rivaled Under Armour T-shirts in the affection of athletes. In 2004 Dri-release made Reader’s Digest’s list of America’s Best Discoveries. Moore later acquired a large stake in a film company that made three films shown at the Cannes Film Festival. He was the major player in one of the most successful IPOs of 2007, Comverge, which develops software and wireless systems that reduce electric utility consumption during peak times.
Until recently, Comverge was among Acorn Energy’s portfolio companies, which now number four, all of them “green.” They focus on three energy problems: making the energy infrastructure, or “grid,” more effective, reducing the risk for owners of large energy assets and reducing the environmental impact of energy.
Driving Acorn is Moore’s contrarian approach, shared by his management team, which posits that we are not suffering from an energy crisis but an infrastructure crisis.
Page 3: Thinking About the Here and Now, continues…
“The grid is built for peak production, but we’re only using about 40 percent of the capacity,” he says. “Compare that business model against other asset-intensive businesses like hotels or airlines. They typically operate on 75 percent capacity utilization.” If we can get to 45 percent or 50 percent, he says, “that’s where the white meat is.”
He believes that generating power isn’t the problem. “It’s distribution. Instead of spending on high-hanging fruit like solar and wind power, we should be concentrating on low-hanging fruit, like putting intelligence on the systems we have and making them smarter.”
Case in point: Comverge’s smart thermostats and load switches, which reduce electric utility consumption during peak times. This frees up electric capacity for utilities, saving as much as 40 percent compared to the cost of building and running additional gas-fired “peaker plants” to handle excess demand. Comverge has more than 500 electric utility customers, including Duke Energy, Progress Energy and Delmarva Power.
The system reduces the temperature on an individual house by about one degree, according to Moore. Multiplied by 10,000 homes, the energy savings is dramatic. “What you’re doing,” he says, “is putting a layer of intelligence onto what is really a big, dumb network for about $125 per home.”
Instead of investing in the high-ticket solar and wind technologies, Moore says, America should focus on three areas:
-
Reducing the environmental impact of coal, a resource he believes is viable. (It supplies about 50 percent of our energy.) “About a third of every coal-fired plant is devoted to air pollution control systems,” he says. “We need to do more in that 30 percent of the plant to reduce the environmental impact.”
-
Expanding nuclear power. “We have 104 nuclear power plants in the United States that are coming to the end of life. They provide 20 percent of our total electricity. We need to be thinking about how we are going to replace that 20 percent.”
- Improving the grid through smart systems and replacing worn-out components. He claims the average circuit breaker in the Delmarva Power Service area is 50 years old. Nationally, most transformers have reached the average life expectancy of 40 years.
Moore knows coal and nuclear are unpopular, anti-environmental technologies, but he doesn’t care because he’s not a politician. In fact, he admits that he doesn’t understand politics and, not surprisingly, he doesn’t think politicians will solve our energy problems. “I think it’s great that we have a lot of excitement around energy,” Moore says, “but because energy is such a subtle concept, it’s inevitable that Washington’s going to get it wrong.”
He believes the government is too focused on creating green jobs and technologies like wind power, which he calls “intellectually elegant, but completely impractical” because of its capital costs. His solutions—efficiency and productivity—often eliminate jobs. He points out that other countries are dealing with energy problems more efficiently than the United States. “In Japan there is a major power outage every 18 years,” he says. “Here there’s one every 18 months.”
Page 4: Thinking About the Here and Now, continues…
Moore’s business acumen seems to be universally admired by those who have worked or dealt with him.
“John is very much a global thinker,” says Stuart Sedlack, an executive vice president with Amarin Corp. who has known Moore since 2002. “He’s very much a renaissance man in that he enjoys having a breadth of experiences and capabilities, so that puts him in a position to think through trends and opportunities and be prepared to act on them. He always seems to be ahead of the curve, not spinning his wheels trying to come up to speed.”
Of his many friends in the business community, at least one says his affable, relaxed style hides a serious side. “He’s a very determined, very driven guy,” says Tom Pew, board member of ImaRx Therapeutics, of which Moore was once chairman, and which he calls “one of my disasters.”
“He’s quick to adapt, and when he spots a trend, he just keeps going forward,” Pew says. “He has that typical American entrepreneurial spirit.”
Right now Moore is going forward with the firm belief that we are not running out of energy. He is fond of recounting the dire predictions of Thomas Malthus during the second half of the 18th century. A famous political economist, Malthus was sure that wood, the primary fuel at that time, would soon be gone because entire forests were being chopped down.
“What Malthus couldn’t predict,” says Moore, “was the invention of the steam engine, and our main source of fuel evolved from wood to coal, and it would be the catalyst for the industrial revolution.”
He believes that the microprocessor is having a similar impact “because it’s helping add intelligence to our energy infrastructure and cause huge increases in productivity.”
Moore plans to pursue his basic philosophy—to take existing technologies, including the microprocessor, and scale them up, make money off them, and use that capital to keep funding businesses. He says he hopes solar and wind will be our future—in 30 years. In the meantime, he says, “We have to worry about the present, and the present is a real problem.”
Though he has conquered several industries, he says he could spend the rest of his life in the energy business. “After all, do you know what the number one use of energy is in the world?” he asks rhetorically. “The extraction, refining and distribution of energy.”
Page 5: Taking the Long View
Taking the Long View
Dr. John Byrne says the evidence is incontrovertible: The planet is warming due to our energy use. But even the debate over the best of policies for addressing the issue can get really hot.
Yes, there is definitely an energy crisis, and yes, global warming is real, so we had better get our environmental act together—and soon. But no, the sky is not falling, and through new, cleaner sources of energy, a fresh national mindset, and something called the Sustainable Energy Utility (SEU), we just might be able to pull ourselves through this crisis. But we’d better hurry.
So says Dr. John M. Byrne, whose energy and environmental credentials are impeccable: distinguished professor of energy and climate policy at UD, recipient of a 2007 Nobel Peace Prize (along with other members of Working Group III of the United Nations-sponsored Intergovernmental Panel on Climate Change), author of 17 books and more than 150 articles, director of UD’s Center for Energy and Environmental Policy (CEEP), and last, but certainly not least, co-chair of the oversight board for and primary architect of the SEU, an innovative public-private partnership created by the Delaware General Assembly that uses public funding sources and consumer savings, combined with private sector funds and management skills, to address consumer energy issues.
Though he was born in Chicago and spent his early high school years in Pennsylvania, Byrne is Delaware to his core. His father, Michael, an Irish immigrant, worked for DuPont in agrichemicals, but John was the first in his family to attend college. After graduating from Salesianum in 1967, he entered UD, where he has stayed ever since. He earned his undergraduate, master’s and doctoral degrees there, and he entered the university’s pioneering program in solar energy. His work in related economics and policy analysis led to CEEP, established in 1980 at UD for interdisciplinary education, research, and advocacy in energy and environmental policy. Byrne and his wife, Beth, a special education teacher—“the real teacher in the family,” he says—live in Newark. They have two grown children.
According to Byrne, we are in an energy crisis for a couple of reasons.
Page 6: Taking the Long View, continues…
“The existing energy system is already costly. It’s taking up one of the highest percentages of this gross domestic product in recent history and is likely only to get more expensive because it’s built on a fuel base that is, by definition, since it’s non-renewable, depleting in stock. According to the laws of supply and demand, as supply decreases, price will go up,” he says.
“The second reason is that that energy system also is the principal source of greenhouse gases that contribute to climate change. This is the largest environmental problem I think humanity has ever faced. We have roughly until the mid-century to reduce our emissions of greenhouse gases by 60 percent to 80 percent. We can only do that by dramatically changing our energy system.”
In the United States in particular, Byrne says, the crisis has been exacerbated by the lack of “a national energy policy that looks at all of the energy needs of our society, as well as all of the technology options available” to address those needs.
As for global warming, it’s a verifiable and alarming fact, he says, and those who doubt it are ignoring the research.
“I’ve done a number of inter-governmental panels on climate change with about 1,500 scientists from around the world, and we’ve issued four assessments,” he says. “The weight of evidence from those assessments, I think, is clear, that we are experiencing warming of the planet. We are having ice melts in Greenland and both poles that are out of the range of experience our planet has seen. And the rapid increase in greenhouse gases associated with the exposure of tundra, as well as the rise in sea level, are substantial in terms of their impact to our ecosystem and to humanity. [The fact that] about 70 percent of the human population lives in or near coastal areas presents a serious threat to the way in which we have settled our communities around the planet.”
Surviving this crisis requires just two basic but extremely difficult changes, according to Byrne. “We must promote energy efficiency and energy conservation. That’s the demand side,” he says. “And we must begin to shift from non-renewable energy sources to renewable ones: solar, wind, low-head hydro, geothermal.”
Byrne believes geothermal, which doesn’t have the cachet of solar and wind, nevertheless has excellent potential. It uses the temperatures in the upper 10 feet of the Earth’s surface, which hold nearly constant between 50 degrees and 60 degrees. For most areas, this means that soil temperatures are usually warmer than the air in winter and cooler than the air in summer. Geothermal heat pumps use the Earth’s constant temperatures to heat and cool buildings by transferring heat from the ground (or water) into buildings in winter and reversing the process in the summer.
Page 7: Taking the Long View, continues…
The downside of renewable sources, of course, is the high initial or capital costs of building wind farms, installing solar panels and employing other technologies. Once in operation, however, these sources have little or no variable costs, which is the downside of non-renewable sources like oil and coal, whose costs, because they are being depleted, continue to rise.
Byrne and others place much hope in Delaware’s Sustainable Energy Utility, one of two such entities in the United States (The other is in Washington, D.C. Philadelphia Mayor Michael Nutter is pursuing one for his city.) The SEU helps homeowners who invest in solar, wind and geothermal technology to generate electricity for their own use, thus reducing what the grid provides them now. SEU money is also spent to conserve energy through new appliances, new insulation, new housing designs and more.
While generally applauded by Delaware’s environmental community, the SEU has been a source of some controversy. One concern: Senator Harris B. McDowell, D-Wilmington North, who co-chairs the SEU with Byrne, is generally regarded by environmentalists as too friendly to Delmarva Power. In turn, Byrne’s connection to McDowell has been viewed with suspicion.
“The CEEP (of which Byrne is director) has received grants from Delmarva Power,” says Alan Muller, executive director of Green Delaware, a hard-line environmentalist. “In many ways Byrne is an example of an academic entrepreneur. He’s got to raise money to keep his shop open. And what’s going on there is kind of hard to tell. My central response to Byrne is one of deep distrust.”
The other issue, at least until recently, was that the SEU has not been transparent and has not been accountable to the public.
“Until last year the SEU was being run by a group of people who didn’t have a whole lot of public accountability,” says blogger Tom Noyes of tommywonk.com, chair of the Delaware Environmental Summit Organizing Committee. “Last year a bill was passed giving the governor appointing power over the SEU board, which is what environmentalists were looking for. We liked the idea [of the SEU]. We just wanted accountability. So that went a long way toward reducing any suspicion we might have had.”
Environmentalists also view Byrne as an opponent of the Bluewater Wind project, which they almost unanimously support as a good deal for Delawareans, with its guaranteed 25-year price for energy as opposed to the volatility of fossil fuel prices. They also feel that he sometimes favors solar energy, his special area of expertise.
Byrne contends that he never opposed Bluewater Wind. “I joined a task force created by the Delaware General Assembly in 2006,” he says. “One of its purposes was to evaluate alternative energy resources. Upon joining the task force, I agreed to neither speak in favor of nor oppose any specific bid for a new power plant to be built in Delaware under a filing organized by the Delaware Public Service Commission. At the time of the agreement, no bid had been received by the PSC. I have not issued a statement in favor of or opposed to the Bluewater Wind contract.
Page 8: Taking the Long View, continues…
“But,” he adds, “when asked about offshore wind, I cite the evidence that capital costs are roughly 1.7 to two times higher than land-based wind, and [operation and maintenance] costs are much higher. Therefore, significant subsidies will be needed to develop this resource.”
Most observers give Byrne and the SEU high marks. “Sustainable Energy Utility, first of all, is a great idea,” says Noyes, noting that it “really hasn’t gotten very far in terms of implementation, but it’s getting closer.
“Investing in energy efficiency and renewable energy, as the SEU will do, creates long-term value by reducing energy costs, slowing demand for increasingly expensive fossil fuels and cutting carbon emissions,” Noyes says.
Even Muller admits, “If you look at the technical work behind the Sustainable Energy Utility, where they compare the amount of power used in Delaware per person with surrounding states and the potential that exists for efficiency, that’s good work.” (Amazingly, the research showed that a Delaware household uses twice as much energy as a household in New York.)
Still, SEU is not the end-all when it comes to addressing Delaware’s reliance on carbon-heavy energy.
“The one weakness that I see is that it is really only focused on what’s called distributed, which means small-scale renewable energy sources like solar panels on people’s roofs or small-scale wind turbines,” says Chad Tolman, a former DuPont scientist and an expert on global warming. “It really doesn’t address major utility-scale sources like Bluewater Wind.” He and other environmentalists agree that we will have to develop all of the renewable energy sources available to us.
They will get no argument from Byrne. He is encouraged to see a similar attitude from the Obama administration, which emphasizes renewable energy and energy efficiency and conservation. Byrne calls it “our cheapest and best resource from an environmental standpoint. The energy you don’t use is the cleanest energy option that you have.”
The question remains: Can the administration’s policies, along with experts like Byrne, find the answers to energy independence while solving “the largest environmental problem humanity has ever faced?” We have little choice but to stay tuned.
