Clean-Energy Rebirth Parallels to the Internet

Most of us vividly remember the rise and fall of the Internet. In the late 1990s, Netscape and Amazon went public and saw their initial public offering stock prices rise to unimaginable levels. Dozens of newly created Internet companies soon followed Netscape and Amazon and went from start-ups to multi-billion-dollar market-cap public companies in a matter of months.

Everything seemed possible. Large Fortune 500 companies rushed to develop an online capability for fear of being overrun by upstarts. College dropouts became multi-millionaires almost overnight. A new era of growth was upon us. The business cycle was a thing of the past. The price/earnings multiple—which had been a traditional means for valuing public companies— was no longer used to value companies because Internet companies going public did not have earnings. Indeed many had no revenue at all. New valuation metrics such as “clicks and eyeballs” were devised.

We all know what happened. The Internet bubble burst, companies worth billions went to zero almost overnight, and the Internet became a “four letter” word.

But something else also happened. During the darkest days of the Internet bust, a rebirth was occurring away from the glare of the media and popular press. New companies such as Google were being formed and new business models based on sound economic principles were being created. Today the Internet is everywhere and is a core part of our lives. Many start-ups such as Google, Amazon, and Yahoo have become household names and all of the Fortune 500 companies such as GE, Wal-Mart and others have used the Internet to grow and transform their businesses.

Sound familiar?  It should. The clean-energy industry is going through the same boom, bust, and rebirth.

Do you remember the excitement after the 2008 Presidential election? Everything seemed possible: carbon-cap legislation; new companies and a new industry being created; the public wanting environmentally friendly products; young people clamoring for jobs in the sector; and venture capitalists rushing to make investments in clean-energy companies. Until it all came apart. The economy had its worst downturn since the Great Depression. Investors pulled back and clean-energy companies did not have the capital to survive. The lack of progress in Copenhagen and the realization that carbon legislation would not occur any time soon was the last nail in the coffin for many people. 

However, much like the Internet went through its rebirth during its darkest days, the clean-energy sector is also going through a dramatic rebirth when all appears bleak. The rebirth of the sector is not being driven primarily by government policy. Nor is it being driven by consumers. It is, in fact, primarily being driven by Corporate America. Big business has not necessarily become “green” or more “socially conscious.” Rather, Corporate America has figured out how to make money from clean energy and clean technology. And that is what will make clean energy a sustainable, stand-alone industry that does not rely on government support forever. Like the Internet sector, the clean-energy sector is finding business models that work. And Corporate America is leading the way. Combine that with the fact that clean energy is one of the few potential growth sectors in a growth-challenged economy, and you have the rebirth of an industry. It’s everywhere, but not always in the press or evident on the surface.

Some examples include:

  • Wal-Mart has taken the lead in “greening” not only their operation but those of their suppliers.  Among their goals:
    • To be supplied 100 percent by renewable energy
    • To create zero waste
    • To sell products that sustain people and the environment
  • Boeing is leading an industry effort to develop alternative sustainable jet fuels
  • Shell Oil invested in Prometheus Energy, a start-up that takes stranded methane gas in landfills and coal mines and converts it into liquid natural gas
  • Areva, a leading French company, focused on development of nuclear energy, recently purchased the U.S. solar company Ausra as the lynchpin of their effort to enter the solar industry
  • ABB, a Swiss-based leader in power and automation technologies recently purchased U.S. smart-grid company Ventyx for $1 billion

The list goes on and on. Virtually every Fortune 500 company either (1) has in initiative around sustainability/clean energy, (2) is making investments in companies that can help them achieve their corporate goals, or (3) is buying companies to help them achieve their goals.

The unprecedented investment in this sector by Corporate America will also stimulate the wider clean-energy ecosystem. They will buy products, services, and enter into power purchase agreements with companies supplying clean energy and other carbon-neutral products and services thus creating a virtuous cycle and giving young companies a market in which to sell their products.

I firmly believe that we will look back in five to10 years and remember this period as the time when the Googles and Amazons of clean energy were created and an industry was reborn. Much like the Internet today is an integral, commonly accepted part of our lives that we don’t think much about, clean energy in five to 10 years will have reached the same all-encompassing, ubiquitous status.

Michael Butler is Chairman and CEO of Cascadia Capital, an investment bank based in Seattle, Washington. 

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The co-founder of Cascadia Capital, Michael Butler leads the firm and is an emerging thought leader in the New Energy Economy. His recent focus on sustainable technology has helped propel Cascadia into some of the most important transactions in this market. Prior to co-founding Cascadia Capital, Butler served as a Managing Director at Lehman Brothers responsible for global equity sales and equity syndicate. He also served on the firm's Equity Commitment Committee, Equity Syndicate Committee and Private Equity Commitment Committee. Before joining Lehman Brothers, Butler was a Principal with Morgan Stanley & Company, where he was responsible for divisional global product and risk management and was a member of the division's Operating Committee. He has been involved in numerous equity financing transactions for both public and private companies. Butler holds a B.A. in Political Science from the University of Washington and an M.B.A. in International Finance from the Wharton School of the University of Pennsylvania.

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