VentureBeat

With the market for hybrid electric vehicles (HEVs) finally starting to heat up in earnest, several companies are making big bets on advanced rechargeable battery technologies. One of these is PowerGenix, a San Diego, Calif.-based startup that makes nickel-zinc (NiZn) batteries.

Another is ZPower, a startup that hopes to oust lithium ion as the dominant technology by developing advanced silver-zinc (AgZn) batteries. While they offer greater power density, AgZn batteries haven’t been used much because they allow for far fewer recharges than lithium ion batteries. ZPower has now succeeded in increasing the number of times its batteries can be recharged to be competitive with the latter.

NiZn batteries are smaller, lighter and more powerful than competitor technologies, such as nickel-cadmium (NiCd) and nickel-metal hydride (NiMH). Because they contain no toxic materials, they are environmentally safe and easy to recycle. PowerGenix’s CEO, Dan Squiller, said his company’s batteries are 50 percent cheaper than lithium-ion and 20 percent cheaper than NiMH. Not only that, they also offer a major power boost over the latter: 30 percent more — which, for HEVs, could translate to a 30 percent mileage increase.

Squiller believes his firm’s consumer AA batteries could grab a large share of the roughly $400 million rechargeable battery market. Unlike its rivals, whose batteries’ output typically peaks at 1.2 V, PowerGenix’s rechargeable batteries boast a 1.65 V output — even higher than standard throwaway batteries’ 1.5 V output. The company plans on inking several distribution agreements within the next 2 - 4 weeks.

Though he was coy on the details, Squiller told me PowerGenix had already secured over $40 million in supply agreements with several major power tool companies in Asia and the U.S. When I asked him what his game plan was to take on the industry’s heavy-hitters — companies like Sanyo, Panasonic and Johnson Control — he readily admitted that he didn’t foresee PowerGenix competing on the same plane anytime in the near future.

PowerGenix’s business strategy is two-fold: It plans on licensing its D-cell battery pack technology to OEM partners for the HEV market and, for all other device applications, will manufacture the batteries itself. One benefit of this strategy is that it avoids the need for PowerGenix to invest a lot of money in its own costly manufacturing processes: Because NiZn batteries are designed to use exising NiCd and NiMH processes, the firm will rely on its partners to build the batteries and incorporate them into a range of devices.

Squiller gave a blunt assessment of the battery industry’s future landscape, predicting prices for lithium ion batteries would rise and deeming most emerging technologies, including nanowires and supercapacitors, still too early for commercial-scale production. Though he commended A123 Systems‘ decision to switch to a nanophosphate lithium ion technology for safety reasons, he said the move had come at a performance cost for its batteries.

He predicted his company would reach full-scale production by the second half of 2009. PowerGenix plans on raising a fourth round of funding this summer and is seeking another $15-20 million to help it scale up its production capacity. It will start the round in early June and expects to wrap it up by the end of September. Squiller said he was looking for one lead investor with experience in the cleantech sector. PowerGenix has raised $31 million so far and has received support from Angeleno Group, Advent International, Technology Partners, Granite Ventures, OnPoint Technologies and Braemar Energy Ventures in the past.

His ultimate ambition is to replace all NiMH batteries with NiZn batteries — a decision he says makes sense from both a performance and financial perspective. Not too shabby for a technology that last saw its heyday in Thomas Edison’s time.

Everyone knows the name Tesla Motors. High-profile VC fundings, a high-performance sports car and its layoffs have gotten the company endless coverage. However, there’s also a slew of lesser-known electric car companies. One of the handful with real potential (and real funding) is Miles Electric Vehicle, a Santa Monica, Calif. company with plans to release a highway-speed electric car, the XS500, in 2009.

Miles already sells a few low-speed models, but the XS500 will be the most acceptable to Americans — with a top speed of over 80mph, a range of over 120 miles, and the looks and features of a normal car, unlike some all-electric designs that many people find downright bizarre (see some examples here). The planned price is in the $35,000 to $40,000 range, cheaper than Tesla’s Whitestar, which is aiming for $50,000. The company caught my attention with a recent $15 million financing, so I called up CEO Jeff Boyd for a quick interview.

Do you think you’ll get competition from bigger companies?
We hope that there is a lot of competition. A decade ago, the all-electric car failed for a variety of reasons. But at this point, we’ve got the catalysts: The homeland security issue, the emissions issue — this is no longer a fad, a niche market or a matter of curiosity. We think it’s a revolution, and we hope manufacturers all over the world are working in the area. It’s going to take a lot of work and money to make the dream come to fruition. There’s plenty of market to go after, and we anticipate being one of many.

Will you be competitive with larger automakers?
From a technology standpoint, we feel that we can compete. As far as branding and distribution, the traditional automakers are very advanced and mature. But there’s plenty of room in the market when there’s an emerging business. If you look at the US selling 16 million new cars a year, Europe doing a similar number and about 50 million total around the world, there’s no reason we shouldn’t have enough sales to make a business. We welcome competition. We want everyone to jump in so we can reduce our reliance on foreign oil and change how we handle transportation.

Tesla has taken a lot of money — nearly $150 million to date, with more than twice that planned in the future. Will you need to take less money than Tesla has to commercialize?
We don’t anticipate needing anywhere near that amount of money. Our original private funding and the first round of our equity financing looks like enough to continue research on the XS500 and expand our distribution model.

Where does design come in?
There are three keys to our business model. First and foremost, we want to be all-electric. Second, we want to be completely safe and meet all the regulations. And third, we want to be low-cost. In order to be low cost, we’ve adapted chassis that have already been manufactured. Rather than starting with a clean sheet of paper and coming out with a completely new chassis design for our low or high-speed vehicles. This is allowing us to keep our costs down. If we’re going to bring a car out that will really change our reliance on oil, it needs to be cheap. [editor's note: It's also worth noting that Miles manufactures its vehicles on cheap production lines in China. Tesla also used a pre-existing chassis for the Roadster, but it was a very expensive model from Lotus.]

The cost is still high for the XS500. Will prices come down?
The cost of lithium ion [batteries], which is right now still a fairly expensive technology, will come down over time. We also have a five-year development plan with a variety of models in it. The next model after the XS500 is a small cross-over unit that will be priced lower. Whether we can reduce the price on the XS500, we’re not sure. But even if we don’t, we’ll be bringing out lower-cost models over the next two to three years that will expand the market for all electric vehicles.

Speaking of design, what do you think of the Think?
I think it’s an interesting concept, but it might have more application in Europe. For one thing, fuel costs there are far higher there than they are in the US. They have shorter commutes, more congestion, and they’re used to a smaller chassis. We’d be happy for it to come to the US, but based on the size of the chassis and the stringent safety requirements, they’ll have challenges.

Will electric cars be competitive with plug-in hybrids?
I’m not aware of any [plug-in] hybrids that are very close to production. We’re a little over a year away, so we think we’re maybe two or three years ahead of most plug-in hybrid vehicles. We applaud the efforts of the ethanol, hybrid and hydrogen fuel cell communities, but fundamentally, we think those are transitional technologies toward all-electric. In effect they [all-electric cars] have zero emissions. About half of our electricity is from coal, but the technology exists to change that. It’s within our grasp to generate electricity without any emissions. We also like all-electric because the US electric utility grid is capable of handling the charging requirements of a lot of vehicles without expanding greatly.

You took funding from a private equity firm, Angeleno Group, rather than a venture capital group. Why?
The principles [directors] of Angeleno Group have been associated with Miles Rubin [the company's founder] for many years, so it was natural as we developed for them to reach out to us. We weren’t seeking investors, but upon engaging we were impressed with their true commitment to alternative energy. When you enter a partnership like that, it’s helpful if it goes beyond the cash infusion. If they can help with planning and business development, it can really be meaningful.

What sort of future do you envision? Acquisition, IPO, staying private?
We really don’t have any plans to do any more than continue on the path we’re on, as a private company.

Konarka, yet another company experimenting with new-fangled technology to produce more efficient solar cells, hasn’t been able to articulate a clear business strategy in the six years since it started.

However, solar technology is hot, and the company has raised $45 million more in capital to give it more time to keep trying. It has now raised more than $100 million.

Like several other start-ups, the Lowell, Mass. company has been using non-silicon material to produce a more flexible thin-film solar cell to convert light into energy. However, it has continued to dabble on a number of solar projects, while its competitors have remained laser-focused on producing a producing a workable cell for the roofs of large buildings and other expansive areas. Even with focus, those other companies have been delayed.

The financing was led by Toronto investment firm, Mackenzie Financial, along with Good Energies. Other investors were Pegasus Capital and existing investors Draper Fisher Jurvetson, Asenqua Ventures, New Enterprise Associates (NEA) and 3i.

Konarka is using a plastic, or “polymer” for its technology, and is testing it in a variety of areas, including portable and consumer products such as powering PDAs or recharging batteries on the battlefield, and in various parts of housing (windows, for example) other than rooftops. The products aren’t expected to hit the market until next year.

Other participating current investors include Vanguard Ventures, Chevron, Massachusetts Green Energy Fund, NGEN Partners, Angeleno Group and Asenqua Ventures.

Verdiem, a growing Seattle company that makes computer networks use less energy, has raised $8.33 million from seven investors including big-name venture capital firm, Kleiner Perkins Caufield & Byers.

It is one of many companies riding a wave of public commitments by cities, companies, universities and other organizations to make their IT operations more energy efficient. The City of Boston and the City University of New York are two of Verdiem’s clients.

The company has been “toiling way for four years under the radar,” chief executive Kevin Klustner told us, but has noticed a huge recent up-tick in interest from companies. As the debate about global warming heats up, corporations are giving their IT departments stronger mandates to be more environmentally friendly.

Verdiem says it saves an average of $20-$65 per computer per year by moving each machine into a lower power state — hibernate, sleep or shut down — when it is not being used. For some organizations this can mean a five percent to 15 percent reduction in consumption immediately. For example, CUNY expects to save $3 million over the next five years — or 26 million kilowatt hours and 22,000 metric tons of greenhouse gas emissions. Over 300,000 licenses for its flagship product, Surveyor, have been sold in North America to a wide range of organizations. Here’s an example of what that might look like, provided by the company:

Boston said in late April that it had saved 44 percent on PC electricity consumption since February, when it had installed Verdiem.

We’ve covered the “Climate Savers Computing Initiative,” an effort by leading tech companies, from Google to IBM, to lower the energy usage in machines they produce and use in their workplace. The initiative wants to change consumer behavior by encouraging users to manually power down their computers when not in use. Verdiem is a charter member.

There are an increasing number of startups working on variations of this idea. For example, we’ve mentioned Snap’s CO2Saver, which offers a downloadable tool that automatically adjusts power consumption when your computer is idle, and shows you how much CO2 you’re saving.

Verdiem’s latest Surveyor 4.0 software targets organizations: It lets IT managers centrally control the power-state of a computer from a central location. It says the software solves a concern that this kind of technology will interfere with other regular updates that need to be made across local networks. The software also includes business-focused functionality, such as security, work-group management features, and Microsoft Vista support (a Seattle connection?)

Like many startups we cover, Verdiem is not profitable and is taking on money to finance growth. Klustner says it had little trouble raising money.

The company has received a total of $15 million in funding.

Others include the Westly Group, Phoenix Partners, Falcon Partners, Catamount Ventures, Angeleno Group and Trevor Traina

Bonus: an audio interview with Klustner in May.