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What 60 Minutes got right and wrong in its story on the “cleantech crash”

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As soon as 60 Minutes aired its story on “the cleantech crash,” on Sunday night, my Twitter feed immediately erupted in hand wringing and complaints (and yes, my feed is filled with a mix of environmentalists, cleantech advocates and investors). Full disclosure, I spoke with the producers of the 60 Minutes piece on background a few times over the past few months as they were putting it together, just to try to help them go in the right direction.

Contrary to the reaction of many of my Twitter friends, I think 60 Minutes got some key things right in the story, but they also got a couple of things wrong in there, too — most importantly they’re overlapping the Valley story with the government funding story. Here’s my take on their piece, which — to their credit — is one of the more comprehensive mainstream media looks at what was the VC cleantech phenomenon:


1). RIGHT: From a purely venture capital perspective, cleantech has been ugly and it has “crashed.” I don’t think you can argue rationally that this hasn’t happened; again, only in the venture capital, Silicon Valley ecosystem. And yes, there are a couple exceptions that emerged from the Valley that made it through, like Tesla.

As I’ve covered many times over the past six years, venture capitalists lost a lot of money on cleantech (Kleiner Perkins being the poster child of this), and many have now left the sector. At the same time, entrepreneurs widely know there’s very little money available for early stage “cleantech” startups anymore, and the limited partners that back venture funds don’t want the VCs to invest their money in anything called cleantech these days.

There was a very real bubble and bust that happened, though there are still firms around that have evolved and are sticking with it. Will it come back like the second wave of the internet? There will be some more successes in the future but I don’t think the equivalent massive amount of money from VCs will emerge again.

Green:Net 2010: Michael Copeland – Senior Writer, Fortune; Vinod Khosla – Founder, Khosla Ventures
Green:Net 2010: Michael Copeland – Senior Writer, Fortune; Vinod Khosla – Founder, Khosla Ventures

A lot of the 60 Minutes piece was trying to cover this Valley aspect and I think they did a good job of that. The VCs did lean on government connections and support at times, and they made a lot of mistakes.

Vinod Khosla is also the right guy to talk to, as he’s the enigma that says his firm is going to continue to fund the cleantech sector at an aggressive pace, despite the difficulties. It was probably pretty hard to find a VC that would admit on camera that she or he made a bunch of weak investments in cleantech and now, hat in hand, is exiting the scene.

2). WRONG: Unfortunately, playing up the taxpayer-funded government green-flop angle in the piece was both stale and overblown. It’s been covered ad nauseum not only in the political arena, but also in more mainstream pieces like the Wired one two years ago.

There were a few companies in manufacturing that were backed by the Department of Energy loan program that were clear mistakes — Solyndra and Fisker — but some of the other companies mentioned in the piece were either very minor losses or also still have promising tech that is being developed under a different owner. Leslie Stahl named 9 companies that didn’t do well for various reasons (not all from the loan program) and then dramatically declared she’s exhausted from naming them all.

An aerial view of Ivanpah with towers 2 and 3 in the background

As Michael Grunwald has pointed out in his book The New New Deal, government support — from the Department of Energy through the stimulus — has created a large amount of jobs over the years. Beyond the stimulus, solar panels and wind power have reached record levels in the U.S. in the last year and that’s also thanks to U.S. government support. Even within the loan program, there were more wins than the 60 Minutes piece let on, like the Ivanpah solar farm that created a lot of jobs outside of Las Vegas. The U.S. government needs to give more support to next-generation energy technologies, not less.

Part of the problem with the 60 Minutes piece is that it’s combining the story of U.S. support for clean power and energy efficiency, with the Silicon Valley story. They’re totally separate and different. The subhead of the piece is a prime example of the confusing aligning of those two things:

“Despite billions invested by the U.S. government in so-called “Cleantech” energy, Washington and Silicon Valley have little to show for it.”

Um, does that include the huge gains in wind farms and solar panel projects in the U.S., or does that just mean that Solyndra didn’t work out? Because, Solyndra happened in the summer of 2011; two and a half years ago. The underlying problem is that “cleantech” is a convoluted term that can mean many things, and isn’t all that helpful as an organizing group. Let’s figure out in 2014 if we should kill that term or not.

Algae Fuel via Aurora Biofuels

3). WRONG: The piece had a very, very light touch on Kior. The company’s stumbles are far bigger than explained in the story, from missing its volume production goals, to having a stock hovering between $1.50 and $2, down from an IPO price of $15 per share, to having a law suit from investors. Yes, it’s possible that they’ll pull through and meet expectations, but more likely is that they won’t. That’s just the realities of the difficult business.

4). RIGHT: Because it’s 60 Minutes they end on an upbeat aspirational note, with a statement from Khosla on being a dreamer:

In fact you need dreamers to stretch. I probably have failed more times in my life than almost anybody I know. But that’s because I’ve tried more things. And I’m not afraid to fail because the consequences of avoiding failure are doing nothing.

As I said in this piece about Kleiner Perkins, I think the VCs that put money into some of these cleantech innovations actually deserve a bit of our admiration, despite that some of the investments weren’t so wise, and many haven’t yet proven to be good for their funds.

They tried to bring us jetpacks, and they hoped to create some real fundamental innovation in sectors like energy that are super important for the world. The rest of their peers made money off of sectors that don’t necessarily have a direct benefit for society like gaming, social media, or online commerce.

Money is the goal in the end either way, but the Valley has always been about risk taking, and the cleantech VCs took the biggest risks out of anyone in the Valley of the past half decade. Hopefully there’s a next wave of these investors that are making smaller, quieter, and more informed bets and will some day show there’s a model in the Valley that will work.

29 Responses to “What 60 Minutes got right and wrong in its story on the “cleantech crash””

  1. Miner49er

    “Cleantech is a Potemkin village that will collapse as soon as subsidies and mandates are withdrawn due to voters’ green fatigue. Cleantech is unaffordable, unsustainable, unreliable, and intrusive.

    It relies on the police power of the state for its market. Not THAT’s a marketing program for you.

  2. Rohit Makharia

    Katie. A good piece. This is coming from someone who has worked on clean tech technologies (fuel cell, batteries), both VCs and the govt do not know how to deal with the ‘valley of death’. As always, both, a dynamic market and a superior product (read: advanced tech that works) are needed to get out of the valley of death. This takes time. In my view, govt (and investors with a long term view) needs to invest in good companies that are in the valley of death, and VCs need to identify companies that are ready to swing out from the valley of death. I think, as a whole, everyone is learning and results will improve over time. Rohit Makharia. Fuel cells and battery experience at GM.

  3. Paul Scott

    In all of the stories and comments on the “60 Minutes” piece, the elephant in the room remains the negative externalities of our current energy systems. Oil, coal and natural gas have massive externalities in health, environmental degradation, climate change and national security.

    As commenter, John Smith57, says, “The last thing we need is the U.S. government picking winners and losers and giving out prizes.”

    But that’s precicely what has been happening all along. The lobbying force funded by the carbon-based energy industries makes sure that no taxes are levied to cover the health costs of dirty energy, no taxes levied to cover the environmental damage done by massive oil spills and toxic pollution, and no taxes levied to cover the military costs of protecting oil, a cost estimated to be $80 billion per year by RAND.

    Clean energy does enjoy some subsidies that help bring its cost closer in line with dirty energy, but a full accounting of all costs would propel renewable energy far more quickly than any VC funding or subsidy program such as the ITC for wind and solar. The right constantly harps about letting the market determine which energy source people should buy, I’m all for that, but no market will determine the best energy until a full accounting of all costs are internalized into the price.

  4. William Klun

    As someone who has been in energy and energy technology for some time, I don’t think Silicon Valley VC money should have been in this sector in the first place; they have neither the cash, nor the bandwidth nor the staying power to achieve a true technology breakthrough.

    Cleantech and Silicon Valley VC was doomed from the get-go; not because there is not exciting stuff going on out there, but the current VC model can’t handle it. It’s too much money and it’s too hard.

    What we need is Bell Labs. Remember those guys? A skunk works funded by a regulated utility who invented the transistor. I doubt a modern Silicon Valley VC could handle that.

    Government money? A mixed bag. Incidentally, it is not as “free” as some people think; in fact, the fees are quite stiff and the credit criteria aren’t that easy. Still. governments are not very good at commercialization. They should stick to basic research.

    The real problem is that everyone is relying on venture capital to make things happen. They can’t. Companies need to have substantial R&D budgets again. This is economy-wide, but energy industry R&D is particularly pitiful.

  5. Felix Hoenikker

    They interviewed Khosla, one could argue contributed to the cleantech crash more than most. Calera bigger than GE yet? He is comfortable making claims about technology he doesn’t understand and taking public companies that can’t provide value like Kior and Amyris… two among many in his portfolio.
    Another aspect not really covered was Chinese subsidies (not what caused Solyndra downfall) cornering technology development in solar, LEDs, batteries etc.

  6. There are so many sides to this one. An unbiased and objective view is Utopian and almost impossible. Here are some factors:

    1. From an environmental cost stand point there is no argument. It is a good investment.

    2. All energy fuels get subsidies so why not solar and clean tech.

    But here are things against:

    1. In MN all of the solar has been for the last 4 + years ONLY because of STATE SPONSORED parochialized solar. Two hand picked companies are given subsidies and they took up almost 80% of the solar industry in MN. Both of them would not have survived a true market potential environment.

    2. No body knows where this investment stands “Fraunhofer CSE’s 5-year, $11.7M research project focuses on the development of “plug and play” solar photovoltaic (PV) systems that can be purchased, installed, and connected by homeowners without the need to engage outside consultants or contractors. “.

    3. Chinese entrepreneurs seem to understand capitalism despite being in a controlled economy. What does this mean philosophically about capitalism? Am not sure?

    In all I think the theme of 60 minutes was right. The main reason for cleantech was missed – that is – “ENVIRONMENT WILL BE PROTECTED”.

  7. Katie,
    That was a good summary, but I take issue with the 60 minutes report for the following reasons:
    1. It is out of date, Greentech is here and getting cheaper by the day. The second boom is already underway. Wind is picking up, Solar is dirt cheap and new innovations for 2014 promise some surprises there. Investors and Wall Street are already racing for a pieces of the action as seen in Solar and other company valuations have doubled or even quadrupled.

    2.Silicon Valley lives and dies by failure and success, each leads right into the other, there is no shame in failure if your failure leads to another success. Witness how companies like Sun Microsystem failed and paved the way for the Googles and Facebooks of today

    3.Boom and busts, are the DNA of silicon Valley which was left for dead in 2001, only to rise like a phoenix many times higher than before. The collective valuation of Silicon Valley is in the Trillions, I hate to say it but Greentech will by 2020 collectively generate North of 500GW and $Trillions in revenue. It has already begun and we still have a full 6 years to go.

    4. Everybody knows 60 Minutes’ reporting is not what it used to be, Their investigative reports will only reveal the mystery of why you need to carry a plastic bag when you walk the dog in the streets

  8. joan michelson

    Great job, Katie! Pointing out that the gestalt of Silicon Valley is different from that of Washington is a key point that was totally missed. Bravo! I’m curious why no one from the government side spoke up, because they have a strong story to tell, as Joe Romm pointed out in his Think Progress blog in response too. The former Under Secretary seemed like a bitter man who was fighting his own battle, siding with the “flop” angle. The most important thing he said was that “energy is a tough business” (or words to that effect).

    But there’s a larger point that was missed and Khosla alluded to it when he asked if we should give up on finding a cure for cancer because we haven’t yet: it’s government’s job to take a risk on big ambitious goals. “Energy is the lifeblood of the economy,” as the World Economic Forum’s energy outlook stated it so well. Because it’s so crucial, as Dr. Cheryl Martin, Deputy Director of ARPA-E said on my Greenbiz VERGE SF panel last year, it’s government’s role to absorb the technical risk so that private capital can then step in and take the new innovations across the 50 yard line. That’s how we got to the moon. That’s how we got many of the innovations in the treatment of cancer and many other diseases. We can’t leave energy innovations solely up to the marketplace, because it’s too capital intensive and too risky and too essential, including to national security.

    Personally, I was screaming at the tv while this piece aired. Full disclosure: I worked at “60” briefly in the past and I don’t think Don Hewitt would have let that piece air this way. It was way too lop-sided (maybe they were reacting to the pushback they received on the “love letter” they gave Amazon and Jeff Bezos with Charlie Rose’s segment a few weeks ago).

  9. Did you catch the ironic use of a Gigaom headline in the piece?

    They were trying to show “headlines” about cleantech failing and had the Gigaom piece about “Cleantech is dead, just like the Internet was in 2000” on the screen.

  10. @Steve Geiger, I respectively disagree with your comment on a few points.

    1). What cleantech investors learned is that the sector is very hard to invest in and make money on the quick time table that VCs need. That’s why “cleanweb” has become such a trend because its basically just Internet and digital investing but with an energy/resource theme. From a VC perspective I think cleantech investing will look more like biotech, smaller, and with specialty investors. Other types of investors, like private equity (like the Silver Lake Kraftwerk guys) could take a different more long-term approach.

    2). VCs turned to government support as a way to help their portfolio companies get ahead, particularly if they were struggling. But most government incentives from US government don’t pertain to VC-backed startups, they support large companies building solar and wind farms, and go to science projects at universities. So talking about VC cleantech investing, and talking about US government support for clean power are two very different things.

    3). The gains are that there were a record amount of solar wind farms and solar panel systems built in the U.S. That’s important for lowering carbon emissions in the U.S. and moving the U.S. off of coal. Its also a win for solar investors.

    • Steve Geiger

      please allow some clarifications:

      1. seems we disagree on whether we’ll ever again see previous VC cleantech volumes; fair enough, time will tell.

      2. yes, the US government’s support for VC-backed cleantech startups is a subset of its overall support to the sector, so if that’s what you mean by “different things”, ok. This doesn’t change the fact that many of these startups’ business models depend extensively on government support, and VCs make decisions based on this support, which sounds pretty entwined to me.

      3. Didn’t SV teach the world the difference between being a producer of technology and merely a user of it? Would be nice to see the US solar sector re-learn this.

      Question: does installing other people’s solar panels make the US a “solar leader”?

  11. JohnSmith57

    “The U.S. government needs to give more support to next-generation energy technologies, not less.”

    Give support with what? The U.S. government has run huge deficits for years and is projected to run huge deficits for the foreseeable future. And you suggest that it invest money it does not have in supporting technologies that may or may not do anything to help?

    There are plenty of rewards awaiting those who develop next-generation energy technologies. The last thing we need is the U.S. government picking winners and losers and giving out prizes.

  12. Steve Geiger


    disagree on a few points.

    1. “I don’t think the equivalent massive amount of money from VCs will emerge again”. Trust me, we will see even MORE massive amounts, and in the very near future. Industries always fall in and out of favor in SV. Investors lost their shirt in early cleantech, just like early Internet, yet we see VCs plowing massively back into that space once again (with a mobile twist).

    Cleantech will come roaring back because a) energy/environment problems are only growing, b) a good piece of the painful cleantech learning curve is now behind us, c) investors are seeing homeruns again (eg. SolarCity 7x post-IPO), and d) hard times have pressured business models to be more rational and economics more compelling.

    2. Washington funding of cleantech and SV stories are “totally separate and different”. Let’s be honest and not try to ring-fence the losers. Government support programs were, and continue to be, a big part of the SV cleantech story.

    3. And “big gains in wind farms and solar panel projects”? Big gains for whom? If additional renewable capacity regardless of source and economics is the goal, perhaps. But with the current system of jacking up solar system costs to milk the ITC and other subsidies, layered with additional “investor tax efficiencies” of leasing, and topped off with creating an additional capital export + energy import dependency to the already debilitating US dependency for transport fuels…..cui bono?

  13. Katie, agree with your piece, why confabulate the two? The goals of Silicon Valley investors and Washington are not aligned; Washington’s actions and funding are and should be about practical solutions to our energy sustainability issues, no matter how long term those solutions are in the offing. SV investors are about making a big score in the short term (with notable exceptions such as Khosla who has a principled philosophy). The only time these come into alignment is when startups use Washington’s backing of the sector to make their companies appear more valuable and thus attractive to investors.

  14. Dave Pearson

    Nice review Katie,

    I don’t have an issue with anything you have said and you will probbaly agree with what I would add as it is inherent in some of the successes you mention, but hopefully you can take a minute to review the detail of my observation.

    I think CleanTech has on the whole been too ambitious. We are trying to jump from million year old fossil fuel to extracted oil from a banana skin.Why we should be aiming for that is an interesting question not unrelated to the Silicon Valley mentality. Also related to patents and protection and VCs wanting to deliver zillions of dollars of earnings.

    The article did also touch on the disconnect between maturity periods which was interesting. In effect, even the longest term investors were too short term and that brings me back to my observation.

    Why do we need energy?

    For electrical devices, for transport and for heating. Cooling as well depending where you live in the world. Other segments exist too involving industrial processes.

    Whilst the UK is a relatively cool climate versus the southern states, heat will still play a part in energy mix and if similar, in the USA will be around 50% of consumed energy demand.
    Is it not odd therefore that our CleanTech industry has focussed on clean electricity and clean transport fuel when either are smaller than heat?

    Consider also that heat is generally consumed at 21C (70F) and 60C (140F). The former for heating homes and offices and the latter for wash water.

    Why then do we need a fuel source that deliver heat at around 1000C (1800F)?
    The answer is we don’t but we do need 21C and 60C.
    Heatpumps are not new. They were being talked about in 1852 by Lord Kelvin, a Professor at the University of Glasgow. He was also involved in the Niagara Falls power company and in laying the first transatlantic comms cables. 1852!
    What a guy!

    Whilst we have seen the refrigeration industry grow from Lord Kelvin’s ideas, the heatpump industry has languished behind more convenient techniques relating to combusting coal, oil, gas, even biomass.

    Heatpumps are somewhat inconvenient, especially if sourcing the heat in a small quantity from air, (which is coldest when you need most heat from it) or need lots of expensive holes in the ground.

    Where some companies have realised this in Scandinavia is to use district heating and source low grade heat from surface water on a large scale. Waste heat from power stations, from sewage treatment plants, from rivers or even industrial processes and data centres is extremely valuable.
    Where we have taken this one step further is to use high integrity equipment and use the industrial working fluid ammonia. Aside from being more environmentally friendly than HFCs (hence their imminent phase down being 1400x as potent as CO2) we also get efficiencies around 25% higher than HFCs.

    Where does this fit CleanTech?

    Simple; the technology which whilst progressive, but hardly revolutionary could harness waste heat in any major USA city and deliver it as useable district heat at upto 184F. Enough for the entire city!!

    This would reduce the demand for fossil fuel, e.g. gas by nearly 60%. Yes we need electricity to drive the heatpumps, but as we are pumping heated water around a community we can make the systems demand side managed i.e. switch on when it is sunny or windy and off when not.

    Add a further twist that the same large 184F heatpumps can deliver desalinated water and district cooling at the same time, and maybe there is a warm weather solutions too.

    So; CleanTech needs to calm down a bit and deliver easier solutions before getting too adventurous.

    With returns on investment of around 25% quite feasible, I’d have thought that was enough to get the VCs interested.

    Check this out; hope the above was interesting.

    Dave Pearson
    Director of Innovation
    Star Refrigeration
    [email protected]

  15. Who would have forecast that Solyndra would file for bankruptcy when loans were made? No person would have said, “Wait a minute! China will finance its own solar panel industry and beat the price of every other manufacturer in the world.”

    Investors are in for the immediate profit, so of course they stopped financing most of the ‘clean-tech’ companies.

  16. Domenick_Y

    Personally, I’m not convinced any of the “cleantech” companies Khosla invests in fit the description, so I’m disappointed they used him instead of someone like Steve Jurvetson.

    With Khosla Ventures, I see a bunch of energy companies that depend on finite resources that toss around words like “biofuel” and “fuel cell”, but I’m not convinced the technologies will ever make more than a relatively miniscule reduction in CO2.

    Sorry, I don’t believe the hype.

  17. Albert Hartman

    Of course there’s a model for cleantech that will work. It’s unreasonable to think that in 100 years we’ll still be burning coal for the majority of our energy. And somewhere between now and then, cleantech comes into being. And it’s the dreamers and their backers, not the government and public opinion that will bring the cleaner energy future about.