The Beacon BK: The Cleantech Annus Horribilis Continues

The cleantech annus horribilis shows no signs of respite yet, as industry darlings keep dropping like flies. So far this year we’ve lost a bucket of solar companies (Solyndra, Evergreen Solar, SpectraWatt, and Stirling Energy – and I suspect nobody knows what’s going on at First Solar anymore), as well as two EV manufacturers,  Green Vehicles and Th!nk. I guess Range Fuels isn’t technically bankrupt, but they’re functionally dead.

BCON’s been rolling downhill since the DOE loan guarantee announcement in mid-2009 [Google Finance].

(I actually want to write off Solyndra from that list, because frankly the whole idea of building millions of dollars of custom equipment to put CIGS on a weird form factor never made sense to me in the first place.)

The big news this week is the Beacon Power bankruptcy, which I have no doubt will fuel the anti-green energy crowd. The WSJ is sure to continue getting cheap hits out of its series of hand-rubbingly gleeful editorials crowing over cleantech failures. Beacon’s financial woes are well documented, however the company was by far the market leader in the flywheel electricity storage sector. This lead to questions about the viability of flywheel storage in particular and grid-scale energy storage in general.

The big thread running through all these disasters is pretty simple. It’s fundamentally about the race between your burn rate and how fast you can break into the market and start generating revenues. Sure, every business is different and has differing amounts of technology risk. Irrespective of how great your technology is, if nobody’s buying your products and you’re spending millions of dollars per month, you’re a dead duck. And as I argued in a prior column, the energy industry doesn’t like new technology, so avoiding this trap is hard. I think Evergreen Solar was a pretty good example of this, and I certainly think the same applied to Beacon.

Speaking specifically to Beacon’s problems, I personally think they couldn’t convince customers of the value of buying short-term storage (a chasm-crossing problem). (The DOE press release on the bankruptcy states that “declining natural gas prices and increased competition from additional generation bidding into the regulation market” ruined Beacon’s value proposition.) Walter Nasdeo at Ardour Capital, in a slightly different take, thinks they fell into the proverbial valley of death. He was quoted by REW stating that “the problem was that it could not find the financing to build any subsequent plants.” In any case, whether you blame the utilities for not buying or their financiers for not helping them sell, Beacon’s commercialization efforts just couldn’t keep up with their high burn rate and rapidly diminishing sources of credit.

Does this latest bankruptcy also indicate that government intervention isn’t economically worthwhile in cleantech? Frankly, it doesn’t matter much in the long run. Personally, I think market-based incentives like feed-in tariffs and cap-and-trade mechanisms can be great, and are far preferable to having the government pick winners and losers on a pork-barrel basis. However, it’s hardly a secret that both types of assistance are set to get slashed globally as governments trim their budgets. (The U.K. and Germany are disemboweling their popular FITs, it’s just been revealed.) So either way, these businesses are going to have to stand on their own two feet. Beacon got a nice FERC ruling a while ago, but that clearly paled into insignificance next to its clamoring hordes of creditors.

The many flavors of electricity storage [Electricity Storage Association].

Getting back to energy storage, its market benefits are well-researched, and Beacon was hardly the only game in town. Just in the flywheel space, I can list Temporal Power, Velkess and Amber Kinetics. Temporal uses rare earth permanent magnets, which could save them operating losses, but also opens some supply chain criticism. Velkess uses a flexible rotor and Amber Kinetics seems to be hiding in stealth mode, but I believe uses some sort of steel wire rotor (the advantages of which I’m uncertain). All three, of course, claim to produce a solution with lower cost and dramatically less standby losses than Beacon’s. The next month will be interesting for all three of them.

Raphael Bouskila is an Associate at Inerjys Ventures. Send him questions or comments at raphael@inerjys.com, or follow us @Inerjys.

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  • Raphael Bouskila is an Associate at Inerjys Ventures, a Montreal-based renewable energy strategic investment fund, where he specializes in technical due diligence on solar energy technology, electricity storage and smart grid startups. Follow him @Inerjys.

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Raphael Bouskila is an Associate at Inerjys Ventures, a Montreal-based renewable energy strategic investment fund, where he specializes in technical due diligence on solar energy technology, electricity storage and smart grid startups. Follow him @Inerjys.

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