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Renewable Energy: Not Just Another Investment Bubble

By Mark Braly, Contributing Writer
September 13, 2007 | 16 Comments

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Davis, California [RenewableEnergyAccess.com] Renewable energies and demand-side technologies have become the third largest investment class for venture capitalists (VC) in the U.S. This was just one of the messages heard by the more than 700 investors and entrepreneurs who convened on the campus of the University of California Davis this week for a three-day conference that showcased the newest in clean energy technologies.

"We have got to be smart about not replacing the old bad guys -- oil and coal -- with new bad guys. If you provide the right incentives you'll find the guys who will cut down all the trees for ethanol."

-- Ray Lane of Kleiner, Perkins, Caulfield, and Byers

The event, which ran Sept. 10-12, kicked off with a panel of Silicon Valley venture capitalists in a session entitled "The Green Energy of Tomorrow." The panel agreed that VC pros have expanded their notoriously short exit horizon to as much as seven years in recognition of the complications of getting these green technologies to large scale markets—and not looking for the overnight turn-arounds of the internet bubble era.

It was also apparent that personal concern about global warming was driving a new kind of due diligence among venture investors.

"We have crossed a threshold where we can talk about this differently," said Bill Green of Vantage Point Partners. "Up to now we [the U.S.] have been brain dead, which you know if you've ever traveled in Europe."

"We have got to be smart about not replacing the old bad guys—oil and coal—with new bad guys," cautioned Ray Lane of Kleiner, Perkins, Caulfield, and Byers. "If you provide the right incentives you'll find the guys who will cut down all the trees for ethanol."

Samir Kaul of Khosla Ventures said that incentives from the government will be important in the early stage of a clean tech start up, but that $40 to $45 a barrel oil allows a range of technologies to be competitive with oil. (Oil is now hovering at a record $78.)

In addition to sessions, presentations and high-level debates, organizers of Going Green 2007—Always On and KPMG—announced the top 100 green start ups in categories ranging from solar to bioenergy. Over 3,000 companies were nominated by a survey of investors, and the winners were selected by a panel of venture capitalists.

Packy Kelly, who heads KPMG's venture practice in Silicon Valley, said that the companies were judged on the basis of novelty of idea, size of market, value created for investors, potential impact on environment and communities, and media buzz.

Despite the west coast tilt of the winners, the number one company was Grid Point Inc. of Washington, D.C. Grid Point's president and CEO Peter L. Corsell said the company's energy management systems can make "negawatts" (energy efficiency) and distributed energy sources, such as photovoltaics, an integral part of a utility's assets.

Thus, the company is working with utilities, such as Duke Energy, in pilot projects around the country. Distributed energy sources, storage and management could replace costly, dirty peaking generating plants with utility operating rooms able to call up these resources when needed. Meaning a major objection of utility grids to distributed energy sources could be resolved.

A survey of attendees conducted prior to the "GoingGreen 2007" conference showed that three quarters expected to see an increase in funding for greentech in the coming 12 months. Nearly half of those surveyed feel that this will be a sustained investment cycle, not another investment bubble.

According to KPMG's Kelly, when asked where the funding would flow, 75% of those surveyed felt that one area of the U.S. would see a substantial increase, with the western U.S., particularly California, noted most often. Outside the U.S., 57% see the increase focused on a particular region. China, India and southeast Asia were considered the most likely destination for future greentech funding.

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16 Reader Comments

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1 of 16

reed-richerson-69789

September 13, 2007

Hey Jim, How many TVs does one guy need?  What he meant by the 'brain dead' comment was people in Europe have been more aware of the affect our fossil fuel consumption has on the environment.  The U.S. still has politicians, many of whom are high profile, that continue to regurgitate false and misleading information about global warming; or in their words, the lack thereof.  Europeans adopted the reality and severity of the global warming predicament before Americans. Do Americans, in fact, get more but pay less?  Is renewable energy more expensive?  The important thing to look at is the comparison of actual cost of renewable vs. traditional fossil fuels.  Remember to factor in gov't incentives & tax dollars (fossil fuels are dramatically more federally funded, the cost/price of environmental damage, and the value of energy independence.  The picture might start to look a little clearer... My comment did not have a crash-landing final paragraph like yours...

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jim-berry-51310

September 13, 2007

"Up to now we [the U.S.] have been brain dead, which you know if you've ever traveled in Europe."I beg to differ. The people in Europe think they get a bargin when they pay 3 to 8 times the going rate for electricity so long as its from a renewable source. The people in Europe think its good for the people (peasant classes) not to be able to afford automobilies do to gov't tax. Depending on who you ask, America is either inferior or is superior to Europe. In America, we, including the poor, have bigger homes, more cars, more TVs and cheaper power rates (California might be an exception). We get more and pay less. It is those people who are denied access to cars for own good and like it who are brain dead (still peasant)..

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brian-herndon-46096

September 14, 2007

Not to pile on, but I think Mr. Berry's comment "we get more and pay less" is possibly the root of the larger global issue.  I think if we change slightly the wording here to  "we use more and pay less" we'll begin to understand the problem or at least why we are viewed a certain way by most of the rest of the world.

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acellier

September 14, 2007

And, may I add, in some cases our American arrogance and ignorance is amplified by poor spelling and grammar.

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dave-trigg-71405

September 14, 2007

Jim, you claim that the rich and poor alike benefit from modern conveniences. This may be true in some areas, but it contrasts what I have seen. It was the poor who suffered and continue to suffer as a result of hurricane Katrina. It is the poor that live in slums in many American cities. Many of the poorest can't afford cars or TVs. America is a capitalist society in which money is required to live well. Many people in the US can't even afford proper health care. Europeans have social programs to take care of each other. They may not have as many cars or TVs, but the difference between rich and poor is much smaller.

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claude-courtemanche-48252

September 14, 2007

Assuming that J. B. is being sarcastic in his comment. I think he makes a very strong comment on the choices that are being dictated by the Big Money interests.Of course, if he means what he says, he shows very clearly why the rest of the world thinks the Americans's priorities need to change. Either way, he proves the point made in the original article.Claude Courtemanche, Ontario, Canada

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gamessier

September 14, 2007

We should be less fearful, less disdainful of taxes as an instrument of social policy.  Taxes can be (and are) used to shape and influence social policy for the common good.  The mortgage interest deduction for homeowners is a case in point, although it can be argued that deductions for second homes, and mortgages far exceeding a national average might be curtailed.  In another vein, high taxes on cigarettes help to influence personal behavior which exacts a frightful toll on the nation's health and medical system.    Capitalism and the profit motive have their place in society.  They are nevertheless human constructs, and come with their own inherent flaws.  Oil-producing corporations, along with OPEC nations, are reaping tremendous, albeit unsustainable profits.  But as can be seen with declining oil production in the lower 48 US states, the environmental legacy is left to future generations.  When the petroleum era is behind us, and the investors and stockholders have moved on to greener pastures(pardon that), who gets to clean up the mess?

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john-carr-65731

September 14, 2007

Jim has his point."The people in Europe think they get a bargin when they pay 3 to 8 times the going rate for electricity so long as its from a renewable source." We shouldn't tax our way into the economy.  Furthermore, it wouldn't be fair to the poor in this country to do so.  Fuel and coal are cheap because they have a hundred years experience at extracting energy and huge economies of scale.  The emphasis should be on the scale.  Solar manufactures are certainly doing their best.  However, in order to get the price down to a "Jim Berry" level they need to be at least 10 times larger (depending on who you talk to).  Once the price becomes marginally competitive, production levels need to ramp up some 10,000 fold.  Scale-up can be done without raising taxes.  But non-recourse financing, and loan guarantees would certainly help make the leap.There is one thing...If we wait to do something major until oil gets so expensive it competes with small scale solar we will wreck our economy.  Long before then coal oil will return, and tar sands are not far behind.

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gamessier

September 14, 2007

The author (Mark Braly) commends investors for lengthening their horizon for what constitutes an acceptable ROI.  That's accurate.  RE simply cannot compete against cheap energy, the biggest hindrance to the growth of RE.  Deplore it, lament it, wring your hands if you will, but the RE boom we are witnessing stems from the fact that, owing to the shifting balance between supply/demand, conventional energy resources are now priced at a level which makes RE both environmentally wise AND economically sensible.Unfortunately, high oil prices are also making possible the colossal environmental destruction we are seeing in Alberta, as companies and nations compete to extract and process that region's bountiful oil sands.  Ditto for Nigeria, and elsewhere (conventional oil).          More must be done to curb demand, or investors will clear the Amazon rain forest to grow sugar cane.  The imposition of european-like energy taxes decades ago would have moved US towards efficiency long ago, and simultaneously reduced the flow of dollars to OPEC nations.  It's not too late.  Higher energy taxes, offset by reductions in other taxes (hence revenue-neutral +/-), would send the necessary signals to both industry and consumers.

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dimitar-mirchev-14630

September 14, 2007

Hello, Jim, I missed the opportunity to comment your previous comment where you basicaly stated that the ONLY important thing for the humanity is to increase this year GDP compared to the previous year GDP as much as you can. Once again I stress on ONLY. You may know how many things are not included in the GDP like for example: access to fresh water, enviromental protection, human happiness, basic health care, education, helping the disabled, voluntary comunity work, giving a hand to a person that needs little help, be polite to others, human rights, extinct of speeces, ect, ect. I believe you are getting the idea. Search the net for what is wrong with GDP. Now you may think that when you have made a single percet, ie the economic growth, bigger than other countries same percent makes you superior to them but I belive not many ppl share your views. Simply because you ignore all the things I mentioned above and maybe a lot more. Keeping economy growing exponentially is not the most important thing. Preserving our ONLY habitat is much much more important.

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shamil-ayntrazi-63190

September 15, 2007

<a target="_blank"></a><a target="_blank"></a>ELECTRICITY FROM SEA WAVES  Renewable Energy Wave PumpsWAP & WWPwww.renewableenergypumps.com     Hundreds of devices had been proposed.•         None of these devices meet all requirements of generating dependable power at competitive rates and with minimal environmental impact.  To review World wide developments, visit : <a href="http://www.peswiki.com/index.php/Directory:Ocean_Wave_Energy" target="_blank">www.peswiki.com/index.php/Directory:Ocean_Wave_Energy</a> PROPOSAL            Two systems are herein proposed.  They excel all others. <ol><li class="EC_MsoNormal" style="text-justify: kashida; direction: ltr; unicode-bidi: embed; text-align: justify; text-kashida: 0%; tab-stops: list 36.0pt">Wave Air Pump - WAP: Compresses air and feed it into the air inlet of a turbine, add fuel as needed to maintain turbine output irrespective of wave heights. </li><li class="EC_MsoNormal" style="text-justify: kashida; direction: ltr; unicode-bidi: embed; text-align: justify; text-kashida: 0%; tab-stops: list 36.0pt">Wave Water Pump - WWP: Lifts a small quantity of water to a high head and feed it to a hydro-turbine to produce power, or compressed air to feed another turbine and act as a WAP.</li></ol>            A set of pumps up to ten may be installed in line with the incoming waves and a mile wide to extract most of its energy.            The proposed systems can generate electric power at a cost less than 2 Cents per kilowatt-hour.NOVELTIES<ol><li class="EC_MsoNormal" style="text-justify: kashida; color: blue; direction: ltr; unicode-bidi: embed; text-align: justify; text-kashida: 0%; tab-stops: list 36.0pt">Simple construction, low capital and maintenance costs, efficient energy extraction, auto-adjust to varying wave heights and sea levels, and provide dependable power output. </li><li class="EC_MsoNormal" style="text-justify: kashida; color: blue; direction: ltr; unicode-bidi: embed; text-align: justify; text-kashida: 0%; tab-stops: list 36.0pt">Resist storms, and are safe to navigation. </li><li class="EC_MsoNormal" style="text-justify: kashida; color: blue; direction: ltr; unicode-bidi: embed; text-align: justify; text-kashida: 0%; tab-stops: list 36.0pt">Zero emissions; do not disturb marine life or shoreline scenic view, and provide a Free Floating Break Water Structure.</li></ol>

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eric-rowland-37633

September 15, 2007

US citizens are spending about $180MM a day in Iraq and importing about 6MM barrels of oil from OPEC countries each day.  That works out to about $30 a barrel or about a dollar a gallon for gas. If you put little value on life and no value on the enviroment that's a good deal. If you care about these things, there is no value in comparing US values to European values.  I'd rather we work to make substantive changes to both cultures and help save us from a destiny we're likely closing in on more quickly than most of us understand.

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john-carr-65731

September 17, 2007

Conventional wisdom is to get the best deal and go down the path of least resistance leaving others to foolishly struggle to find another way.Hmmm... I'm thinking Lemmings. Economically speaking PV is a GROWTH industry.  Capitalists love growth because it makes money.  I don't mean to be too sarcastic because I am a capitalist.  Hey, who's smarter, the fools haggling over the price of the car or the manufacturer who makes a buck at either price?  If Europe wants to pay too much, is it unkind to let them?  Shouldn't we in America make a product that soothes the guilt of Europeans while pocketing the dividends?  Or is that dumb?

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christopher-repinski-69136

September 17, 2007

Jim, I now understand u much better. thanx-seriously. It has been my experience that those eager to reduce anlaysis down to such things as A & B and using such strong language are themselves being blinded by their own biases and create confusion in the holographic projection that is life. It also perpetuates an understanding of human interaction devoid of spirit. The same religious 'zealot' may relate differently to person A than person C or D. It's nice to have u out there though cuz it really does serve a great purpose. It tends to pull what is necessary for people to focus their inner chi's-energy. It makes me wonder if you are trained to do that. It's like a jedi mind trick. Distract and contradict your apprentice in order to watch them grow and advance quickly. I have seen the light and it is not u it is this great big ball in the sky that sends massive amounts of energy to this planet continously and our challenge is to learn to harness it without completely corrupting the delicate balance of systems that are necessary for life to exist here. Moving towards sustainability requires change and that is one thing that A and B and C can all agree on. <a href="focusthenation.org" target="_blank">Focusthenation.org</a> <a href="afors.org" target="_blank">AforS.org</a>...currencies crashing...<a href="knowmore.org" target="_blank">knowmore.org</a>.......CAN U STILL GROW YOUR OWN FOOD-look in the mirror and eat your green plastic. Bottled water is more expensive than oil. Another inconveinent truth. Money and value are arbitrary and useles as a tool to compare unless u can really agree that the EARTH itself has value.Is the real problem with our planet the fear of death? Maybe that is why time and convenience are more important to some. It could be lack of essential fatty acids that has made our culture so debilitated. Maybe that's why the DEA spent three years pursuing a ban on hemp foods. The widespread adoption of an Omega rich grain source could be a threat to the 'Dark Side' worried about death and obsessed with control of time and $$$. At least they can't steal music.Did I digress again I can't tell cuz I'm such a Zealot eating my hemp granola

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jim-berry-51310

September 17, 2007

I realize that my point may some how be too abstract for some to follow, so I will dumb it down a little.Who is Smarter:Person A buys a car, selling for an average price of $15,000, for $14,000, by using a series of rebates and factory promotions.Person B buys a car, the same as above, but declines all the rebates and promotions so as to give a "fair" profit to the company and its union work force. To further enhance the "fair" profit, Person B pays $16,000 for the same car as Person A.Which person is smarter?  Person B does not even know whether his over payment will even affect or reach the intended people, though he feels better and thinks he is morally superior to Person A. Person A knows reasoning with Person B is similiar to reasoning with a religous zealout.

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andrew-swensson-57536

September 18, 2007

When is the Renewable Energy people going to start looking at the needs of the over all needs of the power grid industry?  To get a ROI one has to within the design of Renewable Energy create sell-able spin-off benefits that the masses have shown that they are willing to pay a premium for.   As long as one looks at the solution coming in with many very small suppliers there are NO sell-able spin-off benefits & grid power prices skyrocket.

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