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Posted on 09/13/2007 7:19:00 AM PDT by Uncledave
September 13, 2007 Renewable Energy: Not Just Another Investment Bubble by Mark Braly, Contributing Writer Davis, California [RenewableEnergyAccess.com]
Renewable energies and demand-side technologies have become the third largest investment class for venture capitalists (VC) in the U.S. This was just one of the messages heard by the more than 700 investors and entrepreneurs who convened on the campus of the University of California Davis this week for a three-day conference that showcased the newest in clean energy technologies.
The event, which ran Sept. 10-12, kicked off with a panel of Silicon Valley venture capitalists in a session entitled "The Green Energy of Tomorrow." The panel agreed that VC pros have expanded their notoriously short exit horizon to as much as seven years in recognition of the complications of getting these green technologies to large scale markets—and not looking for the overnight turn-arounds of the internet bubble era.
It was also apparent that personal concern about global warming was driving a new kind of due diligence among venture investors.
"We have crossed a threshold where we can talk about this differently," said Bill Green of Vantage Point Partners. "Up to now we [the U.S.] have been brain dead, which you know if you've ever traveled in Europe."
"We have got to be smart about not replacing the old bad guys—oil and coal—with new bad guys," cautioned Ray Lane of Kleiner, Perkins, Caulfield, and Byers. "If you provide the right incentives you'll find the guys who will cut down all the trees for ethanol."
Samir Kaul of Khosla Ventures said that incentives from the government will be important in the early stage of a clean tech start up, but that $40 to $45 a barrel oil allows a range of technologies to be competitive with oil. (Oil is now hovering at a record $78.)
In addition to sessions, presentations and high-level debates, organizers of Going Green 2007—Always On and KPMG—announced the top 100 green start ups in categories ranging from solar to bioenergy. Over 3,000 companies were nominated by a survey of investors, and the winners were selected by a panel of venture capitalists.
Packy Kelly, who heads KPMG's venture practice in Silicon Valley, said that the companies were judged on the basis of novelty of idea, size of market, value created for investors, potential impact on environment and communities, and media buzz.
Despite the west coast tilt of the winners, the number one company was Grid Point Inc. of Washington, D.C. Grid Point's president and CEO Peter L. Corsell said the company's energy management systems can make "negawatts" (energy efficiency) and distributed energy sources, such as photovoltaics, an integral part of a utility's assets.
Thus, the company is working with utilities, such as Duke Energy, in pilot projects around the country. Distributed energy sources, storage and management could replace costly, dirty peaking generating plants with utility operating rooms able to call up these resources when needed. Meaning a major objection of utility grids to distributed energy sources could be resolved.
A survey of attendees conducted prior to the "GoingGreen 2007" conference showed that three quarters expected to see an increase in funding for greentech in the coming 12 months. Nearly half of those surveyed feel that this will be a sustained investment cycle, not another investment bubble.
According to KPMG's Kelly, when asked where the funding would flow, 75% of those surveyed felt that one area of the U.S. would see a substantial increase, with the western U.S., particularly California, noted most often. Outside the U.S., 57% see the increase focused on a particular region. China, India and southeast Asia were considered the most likely destination for future greentech funding.
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How many of these “investments” would be profitable without government (tax) subsidies?
Some, but not most. Right now.
Of course, it's hard to find an industry sector that doesn't benefit from govt. subsidies, not that I'm defending pork.
Something useful to keep in mind is that the vast majority of support for utility scale wind energy is from the production tax credit. This isn't a handout in the sense a check is being written. It's taxes that aren't collected on a portion of energy generation revenues. I'd rather the money stay in the hands of businesses generating something useful than go to Reid Pelosi LLC.
If you think about it, all commerce is about windmills. All those factories making food and cars and planes are supporting windmill designers, builders and end users. More directly and more and more the factories are making actual windmill components and crane components and trucks and trains to haul them and power line equipment to move the electricity. But maybe I have a slightly strange perspective.
Not to be too cynical but perhaps it’s more investment BABBLE than investment bubble. We’ve all seen this green energy nonsense come and go over the years and yet nothing ever makes it into the energy marketplace as a succesful competitor. No, the answer lies elsewhere for high energy density sources, it isn’t here.
I agree that it is investment babble, but it is babble that is not likely to stop anytime soon. The greens and their dim allies have plotted to partially nationalize the energy industry. These subsidies and mandates will lead to much higher energy prices and energy shortages. Without the subsidies and mandates, it would be an investment bubble. Ironically, the subsidies and mandates are increasing the cost of these alternative energy projects, in direct contrast to the claims of the alternative energy supporters. Without the mandates, the prices of alternative energy projects would be much lower.
Probably about the same percentage as private roads vs. public roads. Not many would thrive, but that doesn’t mean it shouldn’t happen.
I know you are kidding. You couldn't possibly thing windpower is a passing fancy.
Where the population is, the wind isn’t. And vice versa.
None. The bubble can be better described as “a rat hole”
Towers are tall because wind speeds increase with height -- therefore, you generate more power there at a lower cost per kWh. Why install a < 1MW turbine at 30m when you can have a 2.5MW one at 80m, using the same land footprint and gaining tremendous economies in equipment,transport and construction costs? You wouldn't -- actually, you couldn't if you were looking to fund such a project.
Wind turbines all around the world are installed at this height -- this has nothing to do with something unique about US geography
There's some impressive VC firms putting billions into these technologies. As with the internet rise, most will go nowhere and a few will be successful, some of those perhaps spectacularly so.
The point is -- I wouldn't imagine all this private equity is blindly and willingly tossing money down the toilet.
If you think about it, all commerce is about windmills. All those factories making food and cars and planes are supporting windmill designers, builders and end users. More directly and more and more the factories are making actual windmill components and crane components and trucks and trains to haul them and power line equipment to move the electricity. But maybe I have a slightly strange perspective.
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maybe but you’re business model calculations in the end always have to be that the money you spend is less than the money you take in. Bottom line, whatever the business activity its a numbers game in which the outflow has to be less the inflow.
The principle joke of Don Quixote was that the world had changed and he had not. So his methods were inappropriate for the times.
Not to mention that the car went to town once a week for some groceries, and to sell eggs and go to the movie. They didn’t mow two acre yards with sprinklers twice a week.
Energy independence was more in the hands of individuals rather than monopolies now.
The old timers didn’t leave lights on all night. They were up at Dawn and retired at Dusk or shortly after to conserve kerosine. The simple life was also an energy efficient life. Granted, the work was harder and the pay was less. But so were their problems because they didn’t have to depend on everyone else for everything they needed to survive.
I think it might be. I haven't seen any hard numbers on how profitable this energy source is by itself. I know it's really expensive to build and pretty expensive to maintain, and a complete PITA to repair when things go bad. Additionally, what happens to it's profitability if/when subsidies go away? I'm not saying its any more risky than other investments, but theres no way to tell if this dog will hunt more than another right now, IMO.
If the venture capitalists are getting interested, that’s a good thing. The more profitable the venture, the less likely the need for government subsidy. As the price of setting up a photovoltaic or solar hot water system goes down, as a result of advances in technology, the more folks will be willing to buy them, even without the subsidy.
Good wind projects are generating electricity in the range of 5-7 cents/kWh, based on it's capital costs (20 year project lifetime) and O&M against power revenues. Any power past 20 years is only against the O&M cost. And new technologies are going to drive this down further.
and a complete PITA to repair when things go bad.
Well sure, what power plant isn't expensive and a pain to fix. New turbine designs are increasing durability and making repair simpler -- less need to bring in cranes, in nacelle service winches, etc.
They get the PTC subsidy which is worth 2 cents per kwhr. That only works against a tax liability. The subsidy ends at the end of this year or maybe next I forget. What one wonders is what would happen if the subsity ended. In the world market there is a shortage of windturbines so they would love it if we quite buying them for a while. The real issue is what is driving the market to continue to grow at a rate of 25 percent per year for 10 years. It is obvious that someone is making money or this simply wouldn't be the case.
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