I’ve been partly trying to ignore it, but it feels like a slump has set in across various greentech sectors. Yes, that’s a broad generalization, as greentech covers a very wide array of energy technologies, from clean power, to energy efficient data centers, to smart grid tech to greener transportation. But the combination of a dozen of so factors, including the nuclear disaster in Fukushima, the still weak economy, and cuts in solar subsidies in European countries recently, have been forming a hazy cloud over greentech opportunities — at least temporarily.
But as inventor and entrepreneur Saul Griffith put it in the kickoff talk for our Green:Net event last month (embedded below), “the future needs to sound awesome,” for 10 year olds, while shaped by optimistic realism and backed by science. The reality is the transformation of the world’s energy and transportation infrastructure is going to take decades, and there will be slumps and booms for various technologies within this time period. These types of ebbs and flows have happened for energy tech at various points over the last couple of decades, as an investor friend reminded me during a coffee last week.
This overall up and down, is why the future still needs to look bright for the next generation of energy innovators. Before we know it the current generation of kids is going to be moving into universities and will be the next in charge of solving the world’s energy problems. So here’s 7 reasons why I’ve been worried lately during a seeming slump, followed by 7 things to still get excited about.
1). The U.S. Government & Funding for Energy R&D: Bill Gates has said he’s stunned that his efforts with the American Energy Innovation Council — which includes VCs like John Doerr, and CEOs like GE (s GE)’s Jeff Immelt — to get the federal government to boost spending on energy research and development to $16 billion per year, has not worked. In fact, in light of all the support in the stimulus package for clean power, the budget for energy R&D is going to have a hard time maintaining its current levels of federal support. Gates thinks in a better economy the federal government might have responded better to the group, and “maybe it will be two or three years before we get it done.” This is a problem because energy research and development and basic science is what is needed to develop technologies that can be game changers. Government research led to the creation of the Internet, and GPS, and will be needed to solve problems for things like energy storage and reducing the cost of clean energy.
2). Revised European Solar Subsidies: Everyone in the solar sector has been expecting it but European countries like Italy are finally starting to revise their solar subsidies, curbing explosive growth of solar project installations in recent years and lessening the burden on consumers who pay for those incentives through their electric bills. Earlier this month the Italian government finally approved a new set of solar electricity rates that utilities must pay. The new incentives start in June and could cut solar spending by up to 33 percent in 2011 and 2012. SunPower (s SPWRA), First Solar (s FSLR), Trina and Yingli are all feeling it.
3). Electric Cars Moving Slowly and Are Expensive: Last week lithium ion battery company Ener1 wrote down its investment in Norwegian electric car maker Think, citing the fact that Think had halted its vehicle production in Finland for longer than expected, has been unable to raise the funds needed to continue production, and because the overall market for EVs has been moving slower than expected. Lithium ion battery maker A123 Systems (s AONE) posted a $53.6 million loss for its first quarter 2011 financials, announced last week, in part because it’s just not making money off of EV deals yet. Electric car startup Fisker has now raised more than $1 billion to get its inaugural car, which has already been delayed, to market.
4). Oh No Nuclear: The nuclear disaster at Fukushima is looking to be worse than even previously thought, and could now take months, if not years to contain. The problem has caused a temporary halt, by the Nuclear Regulatory Commission, for nuclear projects in the U.S., and NRG Energy was forced to write down its investment in the expansion of a nuclear project in Texas. Japan and Germany also seem to be pulling back on new nuclear projects. Nuclear power — given it’s carbon free — has been included as a significant energy source for many low carbon energy plans, which will now need to be revised.
5). Next-Gen Biofuels Are Creepin’: Despite a series of successful biofuel IPOs and more biofuel IPOs in the pipeline, along with U.S. government support and attention from incumbent oil makers, the production of next-gen biofuels, in any kind of volumes that would make a dent in the transportation sector, seems to be creeping very slowly forward. Some investors might be making money in the short term, but biofuels are not changing the game right now, and don’t seem to be on track to do so for many years.
6). Greentech Venture Not Working For Many, Particularly Generalists: A significant amount of venture investors that began to invest in cleantech companies several years ago, are realizing that their bets are not making money in the time frame they’ve wanted. Last month Mass High Tech published an interesting article looking at 10 venture firms that made five or more new cleantech deals between 2003 and 2008, and then completely pulled back from new cleantech investments after 2008. At the same time greentech investors that did have some exits are raising new funds, and other new funds are shifting more towards later stage growth investing.
7). Smart Meter Issues: Earlier this month PG&E said it will replace 1,600 of its smart meters, which were manufactured by Landis+Gyr, because of a defect that causes the miscalculation of customer energy bills. It’s the latest problem for the utility, which has one of the most aggressive utility smart meter rollout plan. PG&E’s CEO Peter Darbee has now stepped down, and some in the industry have told me Darbee was part of the problem of a mentality not focused on strong customer service. The larger issue is that given PG&E’s pioneering nature, problems for its smart meter rollout, will only cause overall communication problems for the rest of the industry.
Bright Spots in Greentech:
1). Power Gear Companies Building/Buying: While there haven’t been a lot of exits in the greentech space (compared to infotech) power gear companies like ABB (s ABB) are appearing as some of the shining sources for M&A. ABB has invested in and acquired dozens of energy companies over the past few years, including most recently taking a controlling equity interest in DC power company Validus DC Systems, and investing in Power Assure, which sells software for managing energy consumption of servers.
2). Greener Data Centers: More and more data center operators and Internet companies are paying attention to the energy footprint of their data centers. It’s become a competitive advantage to be able to save money on energy bills. Facebook, Google (s GOOG), Yahoo (s YAHOO) and others have made a lot of public moves around data center sustainability over the past year.
3). Google: Hats off to Google for standing on its own in terms of its attention to clean power and overall energy. Google knows that it wants to increasingly control where and how it gets its power for its data centers, so is investing in seemingly indirect ways to figure that out, from its subsidiary Google Energy that can buy and sell power, to its venture arm Google Ventures investing in energy companies, to the company investing in clean power projects. Beyond energy from power plants, Google has also been giving a nod to energy use in the home. Last week Google unveiled that it is working on an open source wireless standard that would enable its Android platform to connect a wireless-connected LED bulb to other devices in the home.
4). India’s Solar Boom: Now that European countries have been cutting solar subsidies, here’s the next hot market (beyond the obvious one in China): India. Large solar players such as First Solar (s FSLR) and Suntech Power have both recently emphasized increasing sales in India. India published a policy called National Solar Mission in January 2010 that calls for adding 20 GW of grid-tied solar energy generation capacity and 2 GW of off-grid projects by 2022. In addition, the Indian state of Gujarat also has its own solar incentive program.
5). Corporate Investors: Corporate investment in greentech companies has been picking up. Companies, from GM to BMW, to ABB (s ABB) have launched venture funds over the past year or so, and are looking to use the strategic investing model to help add a dose of innovation into their firms. We’ll see how well their investments do, but given these companies have more incentive than to only make returns (like R&D, marketing and building innovation), corporate investing could be a major bright spot for greentech investing.
6). Duh, China: No greentech optimism list could be complete without the world’s largest backer of energy infrastructure: China. China is looking to add power generation capacity at a rapid pace, whether that’s clean or dirty power, to provide energy for its quickly growing economy. It’s an ecosystem that could deliver far more clean power capacity than any other.
7). Web Sharing Economy: The web sharing economy that has built up around car sharing (Zipcar), apartment sharing (Airbnb) and stuff (Thredup) is changing both the minds of consumers and entrepreneurs. People are becoming more comfortable with the idea of using resources (even if they belong to others) on a service basis, and only when needed. This change in behavior could help convince people to use overall resources — from energy to water to food — more efficiently.