Going With The Flow

In recent months, I’ve come across more work being done in flow batteries than I’ve seen in the prior decade.

I’ve been known in the past to say that fuel cells are kinda like fueled batteries.  Well, flow batteries really are fueled-batteries.  A traditional chemical battery is one sealed system that charges and discharges chemical elements through a set of electrodes, and the amount of charge/discharge is dictated by the type and volume of chemistry within the battery.  In contrast, a flow battery separates the electrodes from the chemistry, which is stored externally from the electrodes in tanks.  In so doing, a flow battery delinks the relationship between power (an instantaneous concept) and energy (power over time) that is essentially hard-wired within a chemical battery.  In a flow battery, it’s straightforward to expand the energy of a system by adding more to the storage tanks.  And, it’s straightforward to add more “fuel” by injecting more of the reactants into the storage tanks.

Because of this, it is natural to think about how flow batteries can improve the range of electric vehicles, which is the focus of this 2009 article from The Economist.  However, energy density remains a challenge that could limit the utility of flow batteries for vehicular purposes. 

Several flow battery concepts involving different chemistries are being worked on by a number of academic researchers.  DOE’s advanced energy R&D shop ARPA-E awarded a team from Lawrence Berkeley Labs to pursue flow batteries.  Commercially, perhaps the three most well-known flow battery technology development companies are ZBB (NYSE MKT: ZBB), RedFlow and Primus Power.

Most of these efforts are targeting to apply flow batteries in grid-scale electricity storage at the substation level.  This could be an even more impactful role for flow batteries than their use in vehicles:  if flow batteries can provide an economic solution for grid-storage, the implications for expanded renewable energy deployment — enabling intermittent wind and solar energy to achieve more than 15% share of power generation — are possibly massive.

A Tribute to our Blogger and Cleantech Venture Capitalist, David Anthony

As previously reported by GigaOm and others, one of our bloggers, cleantech venture capital investor, David Anthony, of VC firm 21 Ventures, took his own life last month.  We are saddened he is no longer with us.

For those who are able to attend, there is a Facebook announcement of his memorial service on the May 31.

Details:

Thursday, May 31, 2012, 5:00pm in EDT

First Christian Church at 4954 Valleydale Road, Birmingham, Al 35242

RSVP to Holly Wagner 68holly at gmail dot com

 

A couple of the articles he wrote for Cleantech Blog:

Billion Dollar Opportunities in Cleantech

On grid energy storage

Residential solar

David’s own blog is DavidAnthonyVC.com

 

 

Separation Anxiety

When Home Performance with Energy Star launched in Maine in 2006, we defined the energy improvement process as test-in, upgrade, test-out. The parenthetical testing was part and parcel of the process, similar to a physician talking with a patient and running diagnostics to glean what’s going on – before prescribing remedies or lifting a scalpel.

Coming into home performance, energy auditors, home energy raters, and home inspectors had a predisposition – for different reasons – to distinguish the ‘test-in’ as a separate, billable service.

Now that home performance (HP) programs offer subsidized, or free, ‘test-ins,’ the mindset separating the ‘test-in’ assessment from the actual upgrades is even more pronounced. Problem is, without the upgrades, there are no energy savings to claim, not for the homeowner, the renter or the government agencies that sponsor the programs.

Residential energy efficiency programs – whether administered by utilities or non-profit community-based organization – are contending with the “stuck” factor. That is, homeowners sit on their assessments and do not move ahead with energy improvements (in HP vernacular, conversions).

Call it separation anxiety. And I’m as guilty as anyone. Earlier this spring, Sustainable Structures in Hallowell, Maine conducted an assessment of my home, for a sum; they ran the data through RemRATE to produce a home energy rating, and have mailed me a CD of their findings, including infrareds and digital photos. I have yet to open the envelope. Cite a reason, and you’re probably right … money, other house maintenance and life priorities, fear.

One solution – amidst many – to the ‘stuck’ factor is to teach home performance contractors how to better sell HP. That is, how to sell the upgrade, not just ‘test-in’ assessments.

Enter Dale Carnegie. On Thursday and Friday last, contractors representing 14 weatherization companies attended Dale Carnegie sales training in Stratford, CT. Connecticut’s Neighbor to Neighbor program sponsored the class, aiming to infuse the Dale Carnegie “buyer’s mindset” into the companies’ sales processes.

The class trains contractors to do things a different way, encouraging them to get out of their comfort zone which is, often, to talk about building science (stack effect!) and products (heat pumps, insulation, air sealant!) With lots of role-playing, the class taught contractors how to ask questions, how to engage homeowners about their homes and their true wants. Questions for the homeowner are conversational, situational, and broad. “Ask what wakes up the customer in middle of the night,” said trainer, Scott Laun. “Ask a few questions, and listen. Do not talk, let them talk.”

Daniel Martins, of Santa Energy and a veterinarian in his previous profession, participated in the class, saying, “it trains your brain to behave. What not to do when we are selling. We have to naturally talk about ourselves, and less about selling the product, and know how to relate to customers’ needs.”

These lessons are helpful for conversions, but are also useful once the subsidies have gone away and contractors find themselves in a competitive marketplace.

Danger: Silly Season Ahead

Here’s a musical experiment for you:  play a song such as “Penny Lane” from The Beatles (or, if you prefer classic rock, “Whole Lotta Love” by Led Zeppelin will do nicely) on your sound system…but with the balance set all the way to one side or the other.  There will be enough recognizable content for you to still recognize the song, but you will not be able to hear the whole song, and will miss many important elements.

This is like getting your information on topics of the day from Fox News or MSNBC:  significant portions of the story being reported upon will simply not be heard.

If you play “Penny Lane” (or “Whole Lotta Love”) through an old monophonic transistor radio, you will hear both “sides” (as it were) of the song.  But, the fidelity will be very poor, and you won’t hear the nuances and richness of the song.

This is like getting your information from the USA Today, or most local newspapers:  any deep appreciation of the underlying issues will remain out of reach, because it is inherently lacking from the reporting.

As we move into the so-called “Silly Season” of election politics, in an era of “sound-bites”, incumbents and aspirants — and perhaps more importantly, thanks to the Citizens United decision, the flotsam of PACs and SuperPACs that wallow around the political discourse — are flinging about half-truths about all sorts of important issues. 

Most of these issues — health care, fiscal policy, immigration, “values” — are ones in which I claim no sort of expertise, and accordingly I will not render any public assessments on them. 

However, a large number of polemical skirmishes on the 2012 political battlefield are shaping up to be based on energy and environmental topics.  The list is long:

Keystone XL pipeline.  High gasoline prices.  EPA regulations.  Fracking and shale.  Nuclear energy.  Energy independenceSolyndra.  Extension of the wind production tax creditSubsidies to fossil fuels.  Dumping of solar panels from China.

The airwaves are crackling with a cacophony of messages for and against these issues…and I’m hearing lots of misstatements and oversimplifications.

I’ve been ruminating on the advent of Politifact, that aims to prove or debunk political claims in as unbiased a fashion as possible, and thinking that there ought to be some similar effort focused on the issues of importance to us in the cleantech community.  Maybe someone will take this on…

…But, in the absence of such an effort, and lacking the personal will to tackle it comprehensively on a topic-by-topic basis, I will use the remainder of this post to offer general advice to thoughtful citizens wishing to weigh energy and environmental issues in something other than a knee-jerk or dogmatic fashion. 

First, I am reminded of some advice from mentors upon beginning my career in the late 1980’s, as an economic analyst of various energy and environmental policy issues on behalf of (primarily) Federal clients:  “Be an ‘equal-opportunity offender’.  If you’re pissing off people on both sides of an argument, then you’re probably close to the truth.”

In my experience in the energy sector over the intervening 25 years, this is so much more a truism than can possibly be imagined.

The implication of this insight is that any message you might hear or read from any one source — unless that source is doggedly determined to be unbiased — is likely to in fact be highly biased.

If the only source of information you use to develop a perspective on energy issues is, for example, Americans for Prosperity, you will arrive at a selective and skewed view.  As noted in this articleThe Guardian recently reported on how AFP, and other groups of its ilk, are making a deliberate effort to discredit many policies to promote renewable energy, and so are unlikely to present any evidence that paints renewable energy in any positive light. 

Then again, it should further be noted that The Guardian is pretty well-known to have an agenda it seeks to advance.  Indeed, even most highly-respected newspapers known for excellent reportage — from the Wall Street Journal to the New York Times — have editorial boards that are widely-recognized to have a distinct political philosophy that they aim to espouse.  So, one must always take what information is obtained, even from the most reputable of sources, with a grain of salt. 

Alas, there is little substitute for decades of direct experience in an industry, examining issues from multiple angles, working productively (or at least trying to) with people from across the spectrum of interests.  It could be argued that this is the only professional asset and advantage I have accumulated over the years.

In addition to being slanted and aiming to press forward a position — regardless of whether the facts fully support it or not — most reportage of energy and environmental topics suffers from woeful lack of basic understanding of science and economics.  Publishers and journalists are approximately equally guilty. 

And, with its grave innumeracy — and the consequent inability to make tradeoffs — the electorate is subject to being swayed and stuck to a position only because it sounds right, best “fitting” their pre-existing and fairly unmalleable mental model, coming from a source they unblinkingly accept.

In energy and environmental issues, just about everything involves tradeoffs.  There is no perfect solution, no silver bullet.  There are benefits, but there are also costs, to all possible options.  When confronting a world of this much complexity, it may be comforting for many to resort to idealistic dogma.  However, those positions — which tend to be on the extremes — is not where reality usually lies, and it’s not where the action is.

If you were to limit my intake to one and only one general information source, I would choose (drum roll, please) The Economist.  OK, this is surely no surprise to those who have followed me for awhile.  Sure, I was trained as an economist,  but that’s not why I endorse the publication.  Simply, I find its weighing of all the diverse factors, and its understanding of the underlying facts and evidence, to be more thorough and — yes, actually — fair and balanced than other outlets.

Even so, The Economist can’t cover all energy and environmental matters.  A better approach to developing a healthy and informed perspective on these topics involves more work, accumulating from a variety of sources from across the spectrum.  It is unfortunate but seemingly the case that certain media — and especially, the blogosphere — has joined politics in becoming an adversarial contest of opposing views, where one side or the other will not let certain facts get in the way of telling the story they want told.

In the upcoming Silly Season, I urge conscientious voters to weigh all sides of energy and environmental issues, from multiple sources of information, before coming to any conclusions.  Don’t take what is said by the Democratic or Republican candidate, or their PACs, as gospel.  Don’t blithely assume that what environmental advocates or industry trade groups are reporting is the truth, the whole truth, and nothing but the truth.

It’s a very rough generalization — and as Alexandre Dumas once said, “All generalizations are dangerous, even this one” — but I submit that most pro-environmental positions underweigh economic considerations.  It’s simply naive to argue for tighter environmental control and then dismiss any possibility of negative economic consequences.  And, environmentalists are sometimes prone to “sky-is-falling” hyperbole, which undercuts their credibility in legitimate policy debates.

On the other hand, self-interested messages from the conventional energy sector are often disseminated through the filter of so-called “astroturf” (phony grassroots) organizations, that sound as if they’re representing the views of Bob & Betty Buckeye but instead actually are reciting the scripts of oil, gas, coal and utility companies.  The old adage from Watergate still applies:  “Follow the money.”  It’s incumbent upon the citizen to pierce the fog and see through to who is paying a lot for these media buys so you can hear their opinion.  Also:  don’t forget that the conventional energy sector has a lot more money to throw around than the other side in telling the stories they want you to hear.

And, in the end, to maintain your sanity in the face of inanity, it’s a good thing to fall back on this gem of folk wisdom.

Rethinking the Role of Government in Cleantech

Another year, another wringing of the hands over tax credits and incentives for clean technology.

Lobbyists and vendors in the U.S. are once again singing the blues, calling for continued and expanding government investments in clean technology. At the same time, political challengers continue their Solyndra hootenanny, raking the current administration for how it spent hundreds of millions of taxpayer dollars.

One can’t help but wonder whether it’s time for a different tune when it comes to government involvement in cleantech.

Perhaps conversations about policy support should be less about giving more taxpayer money to prop up the space, and more about elected officials setting long term market stability and enabling the private sector to deploy capital to assume risk in cleantech.

Why? First, some background…

Down with incentives
Every time U.S. tax credits for renewable energy development come up for renewal, the cleantech sector cringes at having to once again “play chicken” with whichever administration is incumbent at the time.

The U.S. Production Tax Credit (PTC), which provides a 2.2-cent per kilowatt-hour benefit for the first ten years of a renewable energy facility’s operation, was born in 1992. But it’s had a hardscrabble life, clinging to life support after seven one and two-year extensions bestowed alternately by Republican and Democratic Congresses. Neither major American party has been willing to show long term incentive support for renewable energy.

The PTC for incremental hydro, wave and tidal energy, geothermal, MSW, and bioenergy was extended until the end of 2013. But the production tax credit for wind expires at the end of 2012. And that’s got wind lobby groups girding up. In a recent statement, American Wind Energy Association (AWEA) CEO Denise Bode cited a study suggesting Congressional inaction on the PTC “will kill 37,000 American jobs, shutter plants and cancel billions of dollars in private investment.” The same study suggested extending the wind PTC could allow the industry to grow to 100,000 jobs in just four years. Expect this battle to simmer all summer.

The unpredictability around cleantech incentives is taking its toll. “The U.S. is hitting a brick wall with the cessation of benefits,” remarked John Carson, CEO of Alterra Power, on the subject at a recent cleantech investment conference I co-chaired in Toronto. He wasn’t happy, and do you blame him? Nobody likes living hand to mouth. But that’s what happens when you rely on credits and incentives like the PTC or its loved and loathed counterpart in the U.S., the Investment Tax Credit (ITC).

And then there are the cleantech subsidies provided by the American Recovery and Reinvestment Act of 2009 (ARRA), which are now winding down.

If it feels that clean technology vendors and lobbyists are spending an undue amount of energy and resources chasing such subsidies worldwide, they likely are.

Up with mandates and standards
Rather than funding and administering subsidies to help the clean and green tech sectors find their footing, a case could be made that governments should focus on passing aggressive policy mandates, standards and codes.

Instead of using taxpayer money to make technology bets, regional and national governments could focus on passing laws, including broad brush stroke ones like the renewable portfolio standards in the U.S. that mandate a certain percentage of power from renewable sources by certain dates, and then step back and let the private sector figure out how to deliver. Or mandate change more granularly—for example, that coal power plants need to meet certain efficiency or emissions standards by certain dates, and, again, let the private sector figure out how. (Ironically, if there were more public support to actually clean up coal power instead of simply disingenuously parroting, beginning in 2008, that “there’s no such thing as clean coal” and throwing up our hands because environmental ads told us “clean coal doesn’t exist today”—and if that translated into political will and a mandate—cleaner coal power could exist today. Yes, there’d be a penalty on the nameplate capacity of plants’ output, but there’d also be billions saved in health care costs. But we digress.)

Taxpayers should take their politicians to task for trying to play venture capitalist, i.e. by investing their money in trying to pick winners (a la Solyndra) in complicated markets. Professional venture capitalists themselves, who focus on their game full-time, barely pick one winner in 10 investments.

Drawbacks of incentives
How could government grants, loans, tax credits and other subsidies possibly be bad in cleantech? Free money is good, right? Here’s a list of drawbacks to these incentives, some of them not as obvious as others:

  • They can go away and cause market disruption – to wit, the points earlier in this article.
  • The existence of loans and grants silences critics – Few speak out against pots of free money, because they might want or need to dip into them in the future.
  • Incentives favor only those willing to apply for them – and therefore are often missed by companies working on disruptive, fast-moving tech, or who are focused on taking care of customers’ needs.
  • Criteria are often too narrowly defined – Criteria for incentives often favor certain technology (solar photovoltaic over other solar, or ethanol over other biofuels), and as a result, lock out other legitimate but different approaches.
  • Picking winners means designating losers – Recipients of government grants or loan guarantees get capital and an associated halo of being an anointed company. Those that don’t are comparatively disadvantaged.
  • Not the best track record – Incentives go to companies best staffed to apply for and lobby for them. And those aren’t necessarily the companies that could use the capital the most effectively, e.g. to compete in world markets, or create the most jobs.

What governments could and should be doing
In the cleantech research and consulting we do worldwide at Kachan & Co., we’ve come to believe that governments are best focused on activities to create large and sustained markets for clean technology products and services.

Doing so gives assurance to private investors that there will be continued demand for their investments—one of the most important prerequisites to get venture capital, limited partners and other institutional investors to write large checks.

Given that objective, governments should, in our opinion, pursue:

  • Setting mandates and standards – e.g. the amount of power generated from renewable sources, new targets for fuel efficiency, green building or other dimensions.
  • Improving codes and other regulations – making building codes more stringent could drive energy efficiency, green building and smart grid investment.
  • Building the talent pool
  • Stabilizing the economy
  • Fostering political stability
  • Commitment to infrastructure projects – including water, transportation and grid.
  • Building showcase projects – regions wanting to foster local cleantech can do as Abu Dhabi has done with itsMasdar initiativeas Saudi Arabia is now doing with solar, or as China has done with hundreds of green development zones; in doing so, all three of these countries have sent strong signals to large corporations and investors that they view clean technology as strategic.
  • Rolling back so-called perverse government subsidy support today of the fossil fuel industry, including direct and indirect subsidies.

Cities as test beds of policy innovation
Interestingly, cities are emerging as petri dishes of progressive cleantech policy, and are increasingly where such innovation is taking place.

For instance, Barcelona has established that large companies need to create as much as 30% of their power from solar thermal technologies. The city of Berkeley, California pioneered what is now known as Property Assessed Clean Energy (PACE) financing, wherein property owners are able to pay for energy efficiency and renewable energy improvements on their property taxes. This month, Phoenix, Arizona introduced what it calls the largest city-sponsored residential solar financing program in the U.S. And New York City is taking the lead in residential demand response by trialing a program to curtail the consumption of 10,000 room air conditioners at times of high demand.

Given the world’s current financial malaise, and especially in light the Occupy momentum globally, I’m surprised more folks aren’t questioning how their governments spend their money in cleantech. Because, as described above, there are other arguably more effective ways elected officials can help usher in a cleaner, greener future than throwing around billions in incentives.

After all, how much fun would a pristine planet be if we’re all destitute because governments have crumbled under crushing debt?

This article was originally published here. Reposted by permission.

 

A former managing director of the Cleantech Group, Dallas Kachan is now managing partner of Kachan & Co., a cleantech research and advisory firm that does business worldwide from San Francisco, Toronto and Vancouver. The company publishes research on clean technology companies and future trends, offers consulting services to large corporations, governments and cleantech vendors, and connects cleantech companies with investors through its Hello Cleantech™ programs. Kachan staff have been covering, publishing about and helping propel clean technology since 2006. Details at www.kachan.com. Dallas is also executive director of the Clean Mining Alliance.

The Geopolitics of Energy

“The Geopolitics of Energy”:  that was the title of a talk given at the Opportunity Crudes conference in Houston last week by Guy Caruso of the Center for Strategic and International Studies.  It’s an endlessly fascinating and urgent topic, as very few sectors of the economy shape the world in which we live as much as energy — and particularly, oil — does.

Highlights of Caruso’s presentation — many of which are not novel or unique, but are worth restating:

Oil is currently inseparable with transportation:  virtually 100% of mobility — whether by car, truck, rail, boat or plane — is fueled by petroleum-based products.  Demand is flat or even shrinking in the U.S. and Europe, but this is more than offset by explosive demand growth in the developing world — especially China, but also India, and the Middle East.  “The center of gravity of the oil industry is moving East.”

Most of the lowest-cost endowment of oil resources on the planet are concentrated in the Middle East, subject to great political instability.  A scary thought:  many leaders, especially in the lynchpin Saudi Arabia, are over 80 years old — what happens when they die?

Reliability of delivery is threatened by geogrpahic chokepoints.  For instance, over 15 million barrels per day — nearly 20% of world oil supply — passes through the Strait of Hormuz.  Although most of the oil passing through goes to Asia, the U.S. military remains the key protector of this vital trade route.

Meeting global demand growth in the face of declining conventional resources means two things:  a shift towards unconventional resources (which are more expensive to produce, and face significant environmental/technical challenges) and an almost insatiable need for ongoing additional capital investment.

Although technological leadership may remain with the “supermajors”,15 of the 20 biggest oil companies in the world (i.e., the ones with the most reserves/resources) are now state-owned enterprises, such as Saudi Aramco and PDVSA.  While some of these companies like Lukoil (LSE:  LKOD), PetroChina (NYSE: PTR) and Petrobras (NYSE: PBR) do have minority stakes that float on stock exchanges, make no mistake:  they are not being managed for the purposes of shareholder value maximization.  These companies trade on stock exchanges solely to access global capital markets so as to finance immense expansion programs.  Otherwise, their motivations are far different than profit-maximization as expressed so effectively by the supermajors:  these organizations are arms of nationalistic pursuits.  In other words, the oil game of the future will be driven less by money and more by geopolitical moves on the global chessboard.

There are more upward pressures on oil prices than downward pressures.  Note that the oil industry is running at over 95% of capacity — there’s almost no spare or excess capacity to cope with any perturbations.  Even so, most companies are using $60-80/bbl as the reference price in determining long-term capital investments:  big bets require conservative assumptions. 

Shale gas is a game-changer — not just in the U.S., but in many parts of the world.  More gas will be used for power generation, which will displace coal.  Indeed, without carbon capture and sequestration, coal will be under threat for both economic and environmental reasons in most places of the world.  (Exception:  China, which is growing so fast that it will build as much as possible in a true “all-of-the-above” energy strategy.)

Caruso closed by noting, humbly, that in his 40 years in forecasting the energy sector, there was a consistent tendency to underestimate the impact of technological advancement, which in turn renders long-term predictions subject to big errors.  Not only will the finer points of his analysis be inaccurate, but some of the overarching conclusions — which seem so obvious today — will no doubt be wildly off a few decades from now.  The key is figuring out which ones will be right and which ones will be wrong.  Black swans are hard to see when they haven’t yet flown to the horizon.

Conducting Home Performance

“Home Performance” used to sound like something musically-inclined parents forced their children to do in living rooms.
It’s catching on, slowly, for what it really is, and that is tightening up houses – with an ear for proper ventilation, humidity controls and other riffs on indoor air quality, and fuel-efficient climate controls. (There are geographic oddities; in Westchester, New York a common refrain of homeowners is to call all heating appliances furnaces, even if they are, in fact, boilers, and builders here have grooved on locating air conditioner handlers in attics.. That’s hot … and not in a good way.)
A long-time friend invited me to a fundraiser Sunday night for Canticorum Virtuosi at the old JP Morgan estate in South Salem which is now home to Le Chateau, a French restaurant. Harold Rosenbaum is the founder and creative director for Canticorum and he conducted two choirs’ performances during dinner.
Two flutes of champagne into the evening, somewhere between Harold’s amateur and youth choirs, a handsome, lighthearted man to my left asked me the difference between closed cell and open cell foam, and did one need to apply a fire retardant to both? His attractive wife sitting between us said nothing, and later, I asked how it was that her husband knew so much about foam. (Of all things? Really?) She said she was as surprised as I was. He said he’d been doing a lot of reading online about making his house more energy efficient, and that he was about to call an insulator to give him an estimate.
I’ve read that musical conductors have different styles, some use ‘point of the stick’ and others a more fluid arm gesture that creates a time lag between conductor and choir or orchestra.
Sitting at Le Chateau in black lace and pumps, it felt, not strangely, that the invisible home performance conductor was using the latter method — that this concept was slowly catching on, with fluid gestures and yes, time lags.
I gave the man to my left my business card, urged him not to call an insulator but to look at the Energize NY website (energizeny.org), where he could fill out an application for an energy assessment by a trained home performance contractor. Energize has just the right contractors to conduct his home energy improvements.

Venturing Into The Future

Last week, I attended a breakfast hosted by the Michigan Venture Capital Association, at which the President of the National Venture Capital Association, Mark Heesen, made some comments and fielded Q&A about the state of the U.S. venture capital sector.

Mark presented a mixed picture.  On the one hand, the VC industry is clearly contracting:  about half of the firms that existed at the peak in the early 2000s have withered away.  Moreover, distressingly, venture capital investment outflow has exceeded capital raised by venture capital firms each year for the past several.  As Mark noted, “this is clearly not sustainable.”

According to Mark, it appears that the venture capital industry is coalescing around two models:  (1) mega-firms with >$500 million funds, multiple offices/geographies, and spanning most vertical segments and stages, or (2) niche firms with <$100 million funds that specialize either in geography, stage, or vertical markets.  The firms that fall between these extremes are the ones that are vanishing, presumably unsuccessful. 

Turning to the cleantech sector specifically, Mark noted that – contrary to what is sometimes alleged by naysayers – cleantech VC activity is holding its own, accounting for roughly 15-20% of all U.S. VC investments.  However, what is changing is the nature of cleantech investments:  whereas big/bold bets in game-changers to save the world were the rage a few years ago, it has become abundantly clear that such possibilities are extremely capital-intensive and subject to very long maturation cycles.  Accordingly, rather than investing in the next electric vehicle, battery, biofuel or photovoltaic technology, cleantech VCs have ratcheted down their aspirations somewhat and are seeking more modest incremental  or enabling technology improvements.

Another trend in VC highlighted by Mark, one that is critically important for cleantech, is the re-emergence of corporate venture groups.  Corporate VC activity seems to come in and out of vogue every few years, and at least for the moment, it’s back on the rise again.  Notably, it is increasingly common for (1) corporates to invest in a technology without having the view of being the eventual acquirer, (2) corporate venture investors to take Board seats, and (3) multiple corporate venture groups to be in the same deal. 

I just reviewed the portfolio of one of the most significant cleantech venture capital firms in the U.S., from which I culled the following roster of corporate co-investors:  GE (NYSE: GE), Intel (NASDAQ: INTC), General Motors (NYSE: GM), DuPont (NYSE: DD), ConocoPhillips (NYSE: COP), Dow (NYSE: DOW), Waste Management (NYSE: WM), Valero (NYSE: VLO)Bunge (NYSE: BG).  And, it’s not just American giants:  also MitsuiUnilever (NYSE: UN), Cenovus (NYSE: CVE).

Consistent with the main message of a recent article in Technology Review called “Can Energy Startups Be Saved?”, it’s becoming apparent that partnering with corporations to gain access to their financial, technical and marketplace heft is virtually essential for cleantech venture success.  Or, put another way, traditional venture capital may be necessary but alone may not be sufficient to build a great cleantech venture.

Interacting with companies that are literally many thousands of times larger than a start-up company can accurately be called “dancing with elephants”:  one must be creative to capture the attention of the big beasts, strong enough to harness their power, and yet deft enough to avoid getting squashed.  It’s pretty clear that this is an important skill to cultivate in the cleantech sector — VC and entrepreneur alike.