Analyst Report: 7 Things That Spell Growing Pains for 2011 Greentech


The greentech industry’s 2010 showing wasn’t so bad, especially for a year that saw the world recovering from a once-in-a-generation economic meltdown. An unprecedented flood of government stimulus support for clean energy, green vehicles, smart grid rollouts and energy efficiency campaigns — combined with the resilience of China’s economic growth — helped bridge the chasm. So did optimism that the U.S. and the international community might come to some resolution to combat climate change by limiting or putting a price on carbon emissions.

But that doesn’t mean that the world’s economy is out of the woods, that there’s an international consensus on combating carbon emissions or that the U.S. and China can resolve tricky trade issues. Amidst much uncertainty, here are some predictions about what the greentech community can expect not to expect to happen next year.

Venture capitalists won’t be investing in greentech like they used to. In 2008, VCs put $7.6 billion into greentech startups. But a lot of that money was headed to capital-intensive biofuel and solar startups — and many of those investments have had trouble making the leap to full-scale commercial competition in a weak economy. Now many of those startups struggle to find exits in a down economy, or they are going back to investors for some carry-through investment. There’s no doubt that the days of billion-dollar raises by the likes of Nanosolar and Miasole aren’t coming back next year. Now the question is, where will corporate venture investment make up for the difference? General Electric has given out $55 million of its $200 million Ecomagination program in conjunction with venture capital partners, but it still has three-quarters of it to go.

Government greentech stimulus won’t reach the heights seen in 2010. In the United States and Europe, government stimulus managed to pick up much of the slack from a recession-stricken private sector last year. But the tens of billions of dollars handed out in grants, loans and loan guarantees in the United States aren’t likely to be matched in 2011. That’s despite calls from the likes of Bill Gates, John Doerr and Energy Secretary Steven Chu that the country needs to triple its R&D support for cleantech to keep up with China. That could be a problem, given the huge impact of government backing on the greentech IPO market over the past year. Working at an unprecedented pace, DOE pushed out half-billion dollar loan guarantees. In the case of Tesla, DOE’s $456 million loan guarantee led to a successful IPO, but its backing of Solyndra seems, in hindsight, risky. Certainly DOE will be keenly watching the fortunes of other high-flying startups to see if they can convert that backing into success.

Progress on carbon controls will remain out of reach in the U.S. and in the doldrums internationally. A Republican-controlled House of Representatives will make passage of Waxman-Markey, Kerry-Graham-Lieberman or any other variety of carbon controls very difficult to get through Congress next year. In the absence of cap-and-trade, the EPA is pushing ahead with regulations on carbon under its Clean Air Act authority — but with industry lawsuits pending, it won’t have an easy time imposing those terms. On the international front, the lack of progress at the U.N. meeting in Cancun, Mexico on an agreement to replace the Kyoto Protocol leaves in doubt the future of the already shaky international accord on carbon emissions reductions.

U.S.-China trade relations will not get any easier. The greentech competition between the United States and China isn’t limited to industry and government rhetoric. It has also surfaced in the form of a complaint from the the United Steelworkers union, alleging China’s government subsidies and unofficial quotas for domestic greentech industries are breaking a host of World Trade Organization rules. U.S. and European companies playing big roles in clean energy, smart grid, electric vehicle and battery manufacturing projects in China are doubtless watching developments with a keen eye.

Cybersecurity is another potential trouble spot between China and the U.S. An August New Yorker article by Seymour Hersh laid out some of the worries in U.S. intellgence circles about Chinese infiltration of the nation’s power grid, for industrial espionage as old-fashioned spying. That could complicate the efforts of companies like IBM, General Electric, ABB, Siemens, HP, Cisco and others hoping to work on China’s massive smart grid buildout.

Solar market growth won’t outpace 2010. Predictions of next year’s solar market range all over the map, and there’s no doubt that it’s going to grow. The question is, how fast? Research firm iSupply predicts a pretty steep drop to 42 percent growth, down from 97 percent growth in 2010. Greentech Media sees an even steeper drop as Germany and other key European markets reduce feed-in tariffs for solar power. That’s good news for project developers, who are expected to see 5 to 10 percent drops in prices over the next year; it isn’t such good news for solar startups trying to compete with the likes of First Solar and Suntech.

Home energy management will see a shakeout. When it comes to smart grid investing, venture capitalists have focused on the neighborhood — smart meters, mainly — and, in particular, on the home. Scores of startups are offering home energy management dashboards, thermostats, plug-in adapters, orbs, alarms and other gadgets, crowding a market that doesn’t really exist yet outside expensive customer home automation jobs and utility pilot projects. Pike Research predicts home energy management dashboards or web-enabled PC or mobile displays will reach some 28 million homes by 2015; just how contenders will get there remains unclear. Some noteworthy ones include Control4, eMeter, Energate, Energy Inc., Green Energy Options, People Power, GridPoint, Onzo, AlertMe, OpenPeak, EnergyHub, Consert, Powerhouse Dynamics, Silver Spring Networks and Tendril Networks. These companies, however, are competing against offerings from GE, Honeywell, Cisco, Intel, Belkin, Microsoft and Google, to name a few of the giants looking at the home as the next energy frontier.

Real estate and construction doldrums will affect green building and energy efficiency. Doing more with what you’ve got is the name of the game for green building in 2011. With construction in a post-recession slump, most of the energy efficiency action has been in retrofits — a category that stretches from multi-billion dollar stimulus grants for state efficiency grants and home energy audits to solar-shading windows for high-end office buildings. Still, falling real estate values and recession-cheapened natural gas and electricity prices are making energy efficiency spending tough to pencil out; the property-assessed clean energy (PACE) programs once thought to be a key route to broadening the bankability of greentech have run into trouble with Fannie Mae and Freddie Mac.

Table of Contents

  1. Summary

Join Gigaom Research! Become a subscriber and get reports like these, plus our collection of over 1,700 reports from world-class analysts for just $995 a year.