When a friend of mine who follows clean power and greentech closely sent me Bloomberg’s story on Rocketjet, I burst out laughing. We have an unspoken contest over who can send each other the worst scams in the energy and green industries. Rocketjet’s hopes for perhaps crowd-funding its water atomic engine that will kick off a “Free Energy Era” is one of the more obvious ones — enough to draw the attention of the often straight-laced Bloomberg, and also to become a mini-symbol of all that could go wrong with the new crowd-funding act.
But after the initial guffaw, Rocketjet got me thinking: why are there so many snake oil salesmen and scam artists in the energy space? Other gems that have emerged in recent years are the solar developers at Matinee Energy (awesome piece by the Phoenix New Times on these folks), biofuel company Cello Energy, which was sued in court for fraud, the oft-discussed capacitor maker eeStor, which has over-promised and never delivered, and the biochar ponzi scheme Mantria, whose lead investment broker funnelled other people’s funds into, among other things, his own penchant for prostitutes (another amazing local report covered those guys).
And yes, I know all sectors have their own charlatans. The web, in particular had more than its fair share in the 90′s dotcom boom. But the green energy sector has its own specific brand of snake oil salesman that benefit from the difficulties of knowing and proving breakthroughs in science; the optimism of investors who want to give their funds to investments that have a higher aim; and the fact that a major breakthrough in the trillion-dollar energy markets could actually be a massive financial opportunity.
Some of these energy scams have the imaginative do-gooder power and infrastructure buildout of the monorail scheme. Put the money into building out the infrastructure-heavy project and it’ll bring jobs, revitalizing a depressed area, and also save the planet (misplaced clean power projects or factories come to mind for this type).
Other energy scams involve a breakthrough that is so large that it’s, well, not scientifically possible. Things that tout free, infinite clean energy are often too good to be true. And these companies aren’t even necessarily scams, but perhaps over eager or incorrect scientists. There’s been more than a few times when scientists have called BS on venture-backed green startups.
The problem with these colossal-sounding breakthroughs is that they are near-impossible to prove even to other scientists. Take eeStor, which probably wouldn’t consider itself a scam, but which promised huge gains for its ultracapacitor yet never publicly proved its technology nor showed off or commercialized its tech.
Even for a seasoned energy investor, it’s hard to distinguish between an outright scam, a really bad idea and a high-risk project. The majority of some investors’ green portfolios could be allocated to super high-risk startups, which probably won’t work and won’t ever make money. But those wouldn’t necessarily be scams — just investors with a high tolerance for risk (and it’s easier if it’s high risks with other people’s money).
There’s also just the reality that energy entrepreneurs that are trying to crack the very difficult greentech world are sometimes a little “out there,” to begin with. As Bill Gates put it, the world needs hundreds of “crazy energy entrepreneurs” that think their idea alone can solve the energy problem. The energy problem is really, really hard, and will need quite a few amazing breakthroughs to deliver progress.
That’s the real problem with the outright energy scams. The crazy energy entrepreneurs we so need and love won’t be able to get the funding or partnerships they need if the bad apples tarnish the sector. But at the end of the day, they do make for some pretty fun reading.