However, I recently received the May 2011 newsletter from 21Ventures, and found the commentary by David Anthony on cleantech public equities an interesting complement to Neal’s most current take – sufficiently so to expound upon it herein.
According to David, “by the end of Q1 2011, we will have seen the bottom of cleantech investing and valuations”, with three key subpoints:
1. “Oil seems stuck above $100/barrel.”
2. “Nuclear energy may be too ‘radioactive’ as a source for baseload grid power.”
3. “Renewables will fill the void left by dwindling nuclear capacity.”
It’s a nice newsletter, well worth reading, though I think David’s analysis is a bit too sanguine. Oil prices will remain volatile, and each time they go down somewhat, the rank-and-file will think (again) that our energy crisis has passed, thus reducing the pressure for change or action in moving towards cleantech. David overlooks the growing sense of many that natural gas from shale will represent the answer to most if not all of our future energy supply challenges for years to come, thereby mitigating the need for renewables and/or energy efficiency. And, David neglects to discuss the future role of coal, which I believe will hang on for a long time to come, and whose benefactors will rain on the parade of cleantech as much as possible whenever possible to elevate coal’s relative position in the energy scene.
All of these factors will mean that cleantech investing will still experience more than its fair share of bumps along the road. It will be a tough and choppy market to navigate, and I don’t think the public markets lend themselves well to companies unless and until they have very sizable and stable earnings — which most purely cleantech firms (including publicly-traded ones) do NOT have. Thus, cleantech is an industry that, for awhile, will mainly be capitalized through private equity and venture capital markets, with liquidity events through sales to major corporate acquirers that have sufficient scale to float well on public markets, rather than IPOs for the most part.
But, I do share David’s closing summation: “We have always believed that dwindling low-cost fossil fuel reserves, climate change, growing middle classes in emerging markets, and urbanization will converge to create some of the best investment opportunities in our lifetime.” I think Neal would share this conclusion too.