Rooftop solar: Solar City installed the solar panels on this house. Lately, investors would rather fund companies that put solar panels on roofs than ones that manufacture the solar panels.
Credit: Solar City
Energy
Venture Capitalists Back Away from Clean Energy
Their shift toward low-risk projects could strand innovative renewable-energy technology in the lab.
- Thursday, August 11, 2011
- By Kevin Bullis
As governments around the world are scaling back support for renewable energy, venture capitalists are shifting their clean technology investment strategy. They're focusing less on high-risk technologies and more on ideas that could have a faster payoff but a smaller impact, such as technologies for improving energy efficiency. The shift is raising concerns about how innovative energy technologies will be commercialized.
Venture capitalists have traditionally focused on companies with low capital requirements that can quickly get bought up or go public. Many Internet startups fall into this category. But in recent years, many venture capitalists have been enticed to risk longer-term, high-capital energy investments in clean energy, thanks to generous government subsidies in renewable energy markets. In particular, they spent hundreds of millions of dollars on solar-cell startups that need to build expensive equipment and factories to prove their technologies, and can take many years to generate a return on investment.
Now many venture-capital firms are going back to their roots. Dozens recently stopped making initial investments in clean technology companies, according to Dow Jones Venture Source. Many that continue to invest in clean technology are shifting to areas such as energy efficiency, which includes low-capital projects such as software for monitoring and reducing energy consumption, according to an analysis by the Cleantech Group.
The money that still goes to the solar industry is now directed to companies with small capital requirements. Rooftop solar panel installers are one example. (In June, Solar City got $280 million from Google to fund solar installations.) There's still some funding for solar-cell companies, such as for 1366 Technologies and Alta Devices, that are developing technology that the companies say can compete with fossil fuels. But "it's a harder place to raise funds for new ventures," says Sheeraz Haji, CEO of Cleantech Group.
The shift has been propelled by a number of factors. There are fewer good companies available. Many of the most promising companies—those based on technology developed over decades in labs—have already been funded. Large investments in conventional technologies, such as silicon solar cells, are also driving down prices and making it more difficult for new companies to enter the market.
And now government support is being cut, and some analysts doubt that the fast growth of the clean energy markets can be sustained. Germany, Italy, and Spain are cutting back subsidies for renewable energy. In the United States, funding for clean energy from the 2009 stimulus legislation is running out. Next month is the deadline for projects to get funding from a loan-guarantee program worth tens of billions of dollars. The program is important for companies that want to build large-scale projects using technology that private investors would normally consider too risky. Budget cuts in the United States could also hurt funding for R&D and new energy technologies.
Globally, nearly seven-eighths of clean-energy funding—including financing for wind farms—goes to established technologies, says David Victor, director of the Laboratory on International Law and Regulation at the University of California, San Diego. "We're on the cusp of a severe challenge for energy innovation," he says.
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zrzzz
84 Comments
- 649 Days Ago
- 08/11/2011
As long as we remain such a viciously profit-driven society, all you will see are cautious re-packagings of tried and true technology. It's the same reason Hollywood does so many comic-book remakes. They are too risk averse to venture out into growth areas that have as many opportunities for failure as success. We'll exhaust these "sure-bets" eventually and then innovation will begin again.
falstaff
275 Comments
- 648 Days Ago
- 08/12/2011
Yes! N. Korea, Cuba, that's where the real innovation in this world takes place, where the vicious profit people can't get them.
erbium
343 Comments
- 646 Days Ago
- 08/14/2011
they really have 'innovated' there.
The people are taught that the leader invented everything.
Food is 'optional' for the starving peasants (which is most of the population).
The rest of the world are 'the enemy'.
They traded nuclear technology and devices with Khan, giving Pakistan nuclear weapons.
They are friends with every creepy regime worldwide, including Syria where people are shot for just about any reason.
True innovation, as most other countries are not doing these things.
hippo55
5 Comments
- 648 Days Ago
- 08/12/2011
It's about the cost of the technology not the profits. Electric utilities are the most heavily regulated industries in the US. This includes the prices they can charge for the product they sell.
What you really want is more rich people that are willing to invest in new tech. I can go out right now and buy a 60 watt solar rig for a couple hundred bucks. The problem is that I have to live in relative darkness and thats why I'm more than willing to pay the electric utility to give me more watts!
Go on Internet and see how people "live off the grid". It's not cheap and it's most likely not the lifestyle you're accustomed to.
tomgarven
43 Comments
- 647 Days Ago
- 08/13/2011
Venture Capitalist make money by taking higher risks than say a bank would be accustomed to. Although after the 2008 financial crisis that probably isn't very true any more, LOL.
Solar PV, Concentrated Solar PV and solar thermal are becoming what I would call early stage mature industries. Solar is where the nuclear power industry was in 1970 and the coal industry was in the 1800's. We have been burning coal since the stone age you know.
The price per kW of solar PV for example has dropped between 25% and 40% in just the last year depending on who and what you read. I don't follow wind energy costs very closely but it has probably also decreased in price. I don't think you can say the same for nuclear, coal or any other form of fossil fuel used for electricity generation except maybe for natural gas. Nature gas is cheaper but the jury is still out on how and what is used to get it and the consequences we MIGHT suffer sometime in the future. Now I am not here to tell you that fracking is bad, only that it MIGHT be since we really don't know do we.
There are a couple of sources of energy that are pretty 'clean' and I use that word loosely since even the sun can give us skin cancer. But both solar and wind are pretty high on my list of clean energy sources. Hydro is also up there near the top. I haven't heard of anyone getting black lung or emphysema from solar, wind or hydro. Nuclear - well that is another story. Based on the studies that I read SOME radiation can actually lengthen your life and treat certain diseases. BUT like anything else, too much can kill you.
I sincerely wished some individuals who constantly say that renewable energy systems cost too much would consider all the facts. We pay $3.50/gallon for gas because we don't add in the military costs of protecting overseas supplies. We don't factor in the cost of all of the health and environmental issues associated with burning coal either do we. How much of OUR money has gone to the EPA Super Funds to help clean up environmental messes. Want to guess what we have paid? What if those billions would have been spent on cleaner energy sources?
Public utilities have spent billions from YOU and ME so the government could development a storage site for the long term storage of our nuclear waste. Well actually it's not really waste, it still has 93% of it's energy remaining. Everyone of us if we have an electric bill are paying this hidden tax.
What do you think the true cost of renewable energy would be today if we had spent these hundreds of billions on renewable energy? Would be have cleaner air and water? Would we have fish in the streams of Kentucky that we could still eat? The same goes for hydro. Utilities have spend billions modifying hydro plants to meet new environmental regulations. And don't even get me started on how much we have spent on trying to make Carbon Capture and Sequestration [CCS] WORK COST EFFECTIVELY. We can make is work but it is going to cost us dearly.
When people say the wind doesn't blow in TX at night [or when it's hot] that might be true since I don't live there and haven't taken the time to look at the weather data. It is also true that it probably doesn't make a whole heck of a lot of difference to you as a rate payer or even your utility.
The electrical grid in the United States extends from Canada to Mexico from California to New York. When ever the wind turbines are turning in TX it is quite possible that the power isn't even being used in TX. It might be going to California, Minnesota or Florida.
Someone, anyone, and every utility in American knows this - you don't put all your eggs in one basket. You try to design systems that are diverse and diversified. In short you use a combination of various different generation sources in different locations. You balance cost, loads and improve grid reliability using these techniques.
California utilities HAVE and CURRENTLY ARE installing hundreds of megawatts of concentrating solar and solar PV. There are many reasons why this is true. SOME of it has to do with electric rates. Some because of tax incentives. Some for environmental reasons/regulations and we can discuss any of those topic someday.
But it all boils down to this. Even without any incentives, the cost of solar PV is NOW NEAR the cost of coal and nuclear power when done at the utility level. It is still expensive for homeowners but the costs do keep falling. It is far less expensive when some of the associated environmental considerations are factored in for coal like CCS and nuclear waste disposal. The value of solar PV as an energy source is the fact that it very closely matches the peak loads on the grid. When people get up and go to work, so does solar. When they go home and go to sleep so does solar.
If you live in many areas of California you pay dearly for peak energy use. Electric rates of $.25-.40/kW are common. At that rate if you were a homeowner, solar panels suddenly become cheap. If you are a business, it also pays to put the panels on your roof and businesses are by the hundreds.
rreinecke
10 Comments
Globe99
28 Comments
- 602 Days Ago
- 09/27/2011
Cut the graybeards, see real growth
First of all, it's glad to see this issue getting the coverage that it needs. As someone with a science Ph.D who has interviewed (unsuccessfully) at these companies, let me tell you what the problem is: It's the graybeards running the shots.
No matter how "disruptive" or "innovative" these companies claim to be, if you look at who's actually directing the research within the companies, you'll see a common thread: Ph.D + 10 years industry experience minimum. This is a requirement that (as far as I know) the VC's lay down to minimize their risk. But what's the result? Well, the science that they know really well is 10 years old!
Case in point, I interviewed at a "disruptive" clean-tech company where my heavy nanoscience background was clearly seen as a liability, not an asset. Why? Because the guy making the decision on whether to hire me has never heard of "nano" before except in the popular press. He certainly has never worked in the area, therefore he's bewildered and scared by it.
I'm not saying we need more "Zuckerburg" college dropouts, but cleantech could do a lot better with more entry-level Ph.D's in positions of power. Right now, the industry uses these people basically as worker drones, relying instead on the "received wisdom" of academic professors and industry graybeards.
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andrewpaterson
2 Comments
VC financing
There are a host of reasons for what is the perceived weak finance market for clean energy. As noted 7/8ths goes to high capital projects - not the traditional VC investment anyway. Every VC thinks only the next Google/Facebook - not the next electric utility. Competing traditional low cap investment opportunities abound today in mobile app world (can you say bubble?). Government policy especially in the U.S. is ,,, wishy washie - how can you describe any other way? The federal tax incentives are passed by congress almost on a year to year basis for projects that are more than two three four years to get going into production - so the tax incentives aren't even a sure thing - a hard environment to commit millions to, it would seem. And the lack of a national policy (dare we say 'feed in tariff'?)doesn't help either. The RPS laws vary in the individual states - some helpful and some political window dressing - the politics of the state and the relative strength of the local utility lobby or the coal lobby - makes the state laws wildly different. The bad economic environment has slowed the rest of the world's rush into alternative clean energy.
So all in all, direction isn't there and leadership isn't giving any direction or the brakes are being put on. It isn't only VCs that are not stepping in to finance clean energy.
Reply
R Sweeney
72 Comments
Re: VC financing
Expensive energy kills jobs.
Expensive feed-in tariffs for green-approved sources is economic suicide.
Technology needs to stand on its TRUE economics.
Reply
hippo55
5 Comments
Re: VC financing
Very well said.
Reply
dkohn
49 Comments
Re: VC financing
Yeah. I always thought that much of the VC interest in the first place was just about getting in on government was spending. I am not surprised at all that once that started to dry up, VC started going elsewhere.
Reply
hippo55
5 Comments
Re: VC financing
In Texas we help out the wind farms with tax dollars. Lots of tax dollars.
The problem is that when it's very hot the wind is most likely very calm. Same for cold weather. Hot and cold air masses aren't really known for high winds.
Wind is many times more expensive than Coal so I really doubt we'll see much more of this since Texas has been burned by the technology.
Reply
erbium
343 Comments
Hot in Tx
So should put in solar panels or modular solar thermal dishes by the windmills. Then when is hot will make juice from the sun instead of wind.
Reply