A123 Goes 3,2,1,0

On October 12, the lithium-ion battery maker A123 (NASDAQ: AONE) essentially ran the white flag up the pole:  filing for Chapter 11 bankruptcy, agreeing to sell its automotive-related assets to Johnson Controls (NYSE: JCI), and fielding bids for its grid-storage business.

This is a big come-down from a company that not long ago had a market capitalization of over $2 billion, and was viewed as a high-flyer in the cleantech sector, having been one of the few VC-backed cleantech companies to achieve an IPO.

Alas, the markets for A123’s batteries — both in electric vehicles and on the electricity grid — didn’t grow as rapidly as many had anticipated.  Frankly, that isn’t terribly surprising, given how risk-averse and conservative the automotive and electricity industries are in adopting new technologies.  Not to mention, the economics just aren’t there yet, and while battery costs have come down and battery performance has gone up, continuing subsidies on fossil fuels makes the breakeven point challenging.

A few months ago, A123 had announced plans to obtain financing from Wanxiang, a Chinese manufacturer of auto parts, that would have kept A123 afloat (although may have only postponed the inevitable).  The proposed deal produced a din of objections that American-funded battery technology shouldn’t end up in foreign (especially Chinese) hands.  So, now it won’t, though I’m sure that holders of A123 equity aren’t particularly happy about the consequences.

As noted in this reportage by Forbes, the demise of A123 as a company doesn’t mean the demise of its technology — or of the benefits to American customers from using its technology or American employees in making products based on its technology.  This point is no doubt lost on those who bitterly complain about A123 having received U.S. government financial support as yet another bad investment and more evidence that the public sector is lousy at and therefore ill-advised to “picking winners and losers”.

As is often the case, only time will tell.  It will be interesting to report in a few years on how much value Johnson Controls will have been able to generate with A123’s technology.  And only then can a true reckoning be made of the cost-benefit of U.S. public financial support for this technology.

Midwestern Sensibilities: Report from North Central Cleantech Open

Last week, I served as a judge for the North Central regional contest of the Cleantech Open in Minneapolis.

The Cleantech Open is a annual contest to identify the most promising cleantech ventures from across the U.S. (along with some foreign entries).  This year’s event will be held on November 8-9 in San Jose.  Advancing there from the North Central region — which includes much of the Midwestern U.S. — will be the following three ventures:

  • HEVT, a Chicago-based venture commercializing technology developed at the Illinois Institute of Technology to eliminate the need for volatile-priced and environmentally-damaging rare earth metals in high-efficiency motors.
  • IrriGreen, a Minneapolis-based company offering an elegantly-simple solution for lawn sprinkling that is much lower cost and uses much less water for more thorough coverage.
  • SiNode, a Chicago-based student-led spin-out from Northwestern University working on superior anodes for batteries that promise longer talk-times and shorter recharge times for smartphones.

These ventures were selected from 20 that made pitches to a team of judges (including myself).  As you might expect, there was some variation in quality among the 20:  the above-noted (and a couple more) were pretty darn interesting, whereas probably ten of the 20 would likely be of interest only to few potential investors.

In addition to the 20 ventures in this year’s regional contest, some winners from the North Central region in prior years of the Cleantech Open participated in an open-house.  Three of these especially stood out to me:

  • Atmosphere Recovery, from the Minneapolis area, which is selling a unique Raman laser gas analyzer to facilities with industrial gas processes, allowing for much more efficient operations.
  • Earth Clean, also from the Minneapolis area, which offers a very promising fire extinguishing material called TetraKO that is far more effective than either water or foam while also being entirely biodegradable.
  • Whole Trees, from Wisconsin, which sells components based on small diameter trees to provide cheaper, stronger and more aesthetic structural building systems than steel.

According to several judges who’ve been involved for several years, the progress made by alumni since their participation in the Cleantech Open suggests that they benefited from the rigor involved in participating in a venture competition.  So, it will be interesting to see how this year’s winners — HEVT, IrriGreen and SiNode — evolve and appear in future years.

While perhaps not as widely-recognized as other geographic areas, promising cleantech innovation is occurring in the Midwestern U.S.  Reflecting the no-nonsense pragmatic ethos of our region, this entrepreneurship is less of the “swing for the fences” variety associated with the bold cleantech gambits made in batteries, electric vehicles, biofuels or solar.  But, as many investors have experienced all too painfully, some of the ventures pursuing big ideas in these spaces may have been “bridges too far”.  Much better, in my humble opinion, to bite off opportunities that are easier to chew — and that’s what largely seems to be happening here in the Midwest.

Stunning Cleantech 2012

It’s been a busy, ummm interesting year.  We’ve tracked profits to founders and investors of $14 Billion in major global IPOs on US  exchanges and $9 Billion in major global M&A exits from venture backed cleantech companies in the last 7-10 years.  Money is being made.  A lot of money.  But wow, not where you’d imagine it.

5 Stunners:

  • Recurrent Energy, bought by Sharp Solar for $305 mm, now on the block by Sharp Solar for $321 mm.  Can we say, what we have here gentlemen, is a failure to integrate?  This was one of the best exits in the sector.
  • Solyndra Sues Chinese solar companies for anti-trust, blaming in part their subsidized loans????????  Did the lawyers miss the whole Solyndra DOE Loan Guarantee part?  It kind of made the papers.
  • A123, announced bought / bailed out by Chinese manufacturer a month ago, now going chapter bankruptcy and debtor in possession from virtually the only US lithium ion battery competitor Johnson Controls?
  • MiaSole, one of the original thin film companies, 9 figure valuation and a $55 mm raise not too long ago (measure in months), cumulative c $400 million in the deal, sold for $30 mm to Chinese Hanergy just a few months later.  (Not that this wasn’t called over and over again by industry analysts.)
  • Solar City files for IPO, finally!

 

My call for the 5 highest risk mega stunners yet to come:

  • Better Place – Ummmmmmmmmm.  Sorry it makes me cringe to even discuss.  Just think through a breakeven analysis on this one.
  • Solar City – a terrifically neat company, and one that has never had a challenge driving revenues, margin, on the other hand . . .
  • BrightSource – see our earlier blog
  • Kior – again, see our prior comments.  Refining is hard.
  •  Tesla – Currently carrying the day in cleantech exit returns, I’m just really really really struggling to see the combination or sales growth, ontime deliveries, and margins here needed to justify valuation.

I’m not denigrating the investors or teams who made these bets.  Our thesis has been in cleantech, the business is there, but risk is getting mispriced on a grand scale, and the ante up to play the game is huge.

 

Cleantech VC Etiquette

Being a venture capitalist is not easy.  Being a cleantech venture capitalist is especially not easy.

I remember Ira Ehrenpreis of Technology Partners, one of the deans of the cleantech VC community, commenting archly several years ago at one of the too-many cleantech investment conferences:  “We need a poster child for cleantech venture capital success.”  Well, generally speaking, we’re still waiting.

There aren’t that many cleantech venture capitalists.  You know who you are.  I know, or know of, most of you.  We need to work together, to help each other, achieve some good successes in cleantech venture financing, so as to improve the well-being of our sector.  This will be to our collective benefit.

So, I write a simple plea to my fellow cleantech VC practicioners:  can you at least respond to emails?

I’ve worked on both sides of the cleantech venture finance table — both in trying to raise capital for ventures, and in making investments in ventures — for nearly 15 years.  And, I submit that the courtesy of most investors in the cleantech space is pretty appalling.

Too frequently, when I send an email to an investor claiming to be interested in cleantech deals, inquiring if they potentially would consider looking seriously at one of the deals with which I’m involved, I encounter deafening radio silence.  Nothing.  Not a peep.  As if my message went into a black hole.

Of course, most of these investors probably want to say “No, thank you,” and don’t want to take the time to respond or the effort to come up with a gentle gracious turn-down.  But, really, how hard is it to reply?  I would appreciate some kind of an indication to my emails, to at least ensure that you received the email (i.e., I’ve got the right address), and maybe get some useful feedback.

Not to pat myself on the back inordinately, but I try damn hard to be responsive and make useful suggestions to anyone who sends an email to me seeking financing, in the aim of building goodwill and helping the sector as a whole.  You might even call it trying to foster good karma.

Look, I’ll make it easy for you:  here’s a generic email response that you may feel free to use.

 

Dear Richard,

Thanks for your email regarding [venture name].  I appreciate you thinking of us.  Unfortunately, we are not in a position to consider an investment, because [choose one or more of the following]:

a)  It’s too small

b)  It’s too big

c)  It’s too early

d)  It’s too late

e)  It’s geographically inconvenient for us

f)  We have a competing investment in this space

g)  We’ve had a similar investment before that didn’t work out well and thus are not attracted to this space

h)  We’re in-between funds and don’t have capital to deploy at present (bonus points for candor!)

You might consider contacting [insert cleantech VC name/firm here], as he/she/they might find this opportunity to fit nicely into their sweet-spot.  Good luck!

 

See, that wasn’t that hard, was it?

San Diego’s Smart Grid

I have to admit:  it’s hard for me to be terribly enthusiastic about electric utilities.  I know a fair bit about them; by my count, I’ve served about ten utilities in various consulting roles during my career.

While generalizations are always dangerous, for the most part, I think it’s safe to say that electric utilities can be characterized as highly protective of the status quo.  Utility executives and employees are typically competent, and take their mission for “keeping the lights on” very seriously, but they tend to be averse to change — the opposite of visionary.

For those of us who are trying to forge a new and better future, who see the eventual emergence of new and more environmentally-friendly technologies as natural and unstoppable as water flowing downstream, utilities can be large boulders in the river.

So it was with some skepticism that I began reading a couple of recent articles about the technology deployment efforts of San Diego Gas & Electric (SDG&E), an operating unit of the utility holding company Sempra Energy (NYSE: SRE).

In August, Power presented its 2012 Smart Grid Award to SDG&E, largely for its smart grid deployment plan (SGDP), which (in its own words) “empowers customers, increases renewable generation, integrates plug-in electric vehicles (PEVs) and reduces greenhouse gas emissions while maintaining and improving system reliability, operational efficiency, security and customer privacy.”

With this plan, SDG&E is aiming to enable a “smart customer” that is able to make more choices and have more control over energy decisions, a “smart utility” that manages a host of ever-advancing supply- and demand-side resources and the grid that integrates the two, and a “smart market” for customers and energy suppliers that preserves power quality and reliability on the grid while increasing price transparency.

In a separate article in EnergyBiz, a Q&A with SDG&E’s President & COO Michael Niggli reveals how extensive the SGDP roll-out has already been in San Diego.  All customer meters — 1.4 million electric, 850,000 gas — have been upgraded.  18,000 rooftop solar units totaling 138 megawatts (3% of peak demand) have been installed.  1600 PEVs are driving around town and plugging-in at various charging stations, bringing new meaning to the phrase “San Diego chargers”.

On top of this, a host of other less-visible advancements — extensive deployment of updated SCADA systems, weather sensors, wireless communications infrastructure — are bringing the grid in San Diego out of the 20th Century to the 21st Century.

All of this will help SDG&E meet the goal of supplying 33% electricity of its electricity from renewable (mostly intermittent) sources while also accommodating potentially 200,000 PEVs by 2020 — which would be difficult if not impossible to achieve without advanced technologies such as those being deployed as part of the SGDP.

As impressive as this all is — and kudos to SDG&E for their accomplishments — it should be noted that San Diego citizens and California regulators were critical to this outcome.  SDG&E may have rolled out the SGDP effectively, but they may not have developed the plan at all unless there was strong push and pull from outside forces.

San Diego residents have been very proactive in installing new renewable and efficiency technologies in their homes, and have been actively seeking engagement with SDG&E on how to get the most benefit from them.  In Sacramento, California”s ambitious set of energy policies — a renewable portfolio standard (RPS), greenhouse gas reduction legislation (AB32), distributed generation goals, demand response mandates, and improved building and appliance efficiency standards — made it untenable for SDG&E to stand still with aging equipment based on decades-old technologies.

Lacking these external forces, I doubt that SDG&E would have made anywhere near as much progress in the smart grid and wouldn’t be far ahead of most other U.S. utilities, who do generally lack these forces.

The moral of the story is that electric utilities, as regulated companies, are reactive rather than proactive.  SDG&E should be applauded for being highly responsive, but let’s not confuse that with being visionary.  Indeed, it’s naive and maybe even unreasonable to expect utilities to be visionary.  All we, as cleantech advocates can do, to “get” utilities to “get it” is to ensure that there’s enough outside pressure for them to “get it”.

If more places across the U.S. were more like San Diego, the transition to the cleantech economy would probably be further along than it is.

A Cleantech State of the Union

With October now upon us, data providers are beginning to issue their preliminary analyses of cleantech investment in the third quarter of 2012 that just closed. This quarter, the Clean Energy pipeline service of London’s VBResearch is the first to weigh in, counting cleantech venture capital & private equity investment (excluding buyouts) as approximately $1.7 billion.

Data from other providers, like Dow Jones VentureSourceBloomberg New Energy FinancePwC/NVCA MoneyTree, and Cleantech Group will follow in the coming days. No two providers’ numbers will be the same, given differences in how they define cleantech and what exactly they track.

Based on latest quantitative and qualitative data we at Kachan & Co. have access to, here’s our own analysis of the state of the union in the global cleantech market, and why.

Consider the following a snapshot of the current health of the cleantech sector, informed by—but not simply an analysis of—the third quarter numbers.

3Q12 investment is expected to be approximately the same as the one previous. Venture investment in cleantech is going to be down overall this year over last.
The second quarters of the year in cleantech are usually down, if you look at historical data—so a relatively poor 2Q12 was no surprise—but third quarters are historically usually the best quarter of the year for global cleantech investment. Based on deals we’ve seen, we’re expecting about $2b in venture investment in global cleantech in the third quarter of this year once all the data is in, and that sometimes takes a few month after the quarter closes. $2b is not great, as compared to previous years on record, but it’s okay. It’s not as if cleantech investment has halted. Cleantech is still one of the world’s dominant investment themes.

For interest, some of the largest deals of the quarter:

  • $200m to China Auto Rental, efficiency/collaborative consumption, Beijing
  • $136m to Alarm.com, efficiency/smart grid, Virginia
  • $104 to Elevance Renewable Sciences, biochemistry, Illinois
  • $104 to Fiskar Automotive, transportation, Irvine CA
  • $93M to Element Materials Technology, advanced materials, the Netherlands

Venture #s aren’t just down because of natural gas.
Last year, we predicted global venture and investment into cleantech to fall. Not dramatically. But we expected cleantech venture in 2012 to show its first decline following the recovery from the financial crash of 2008. Why? Three big reasons: the lag time of negative investor sentiment towards cleantech that started in 2011, waning policy support for cleantech in the developed world and an overall maturation of the sector that’s making it arguably less dependent on venture capital as corporations take a more significant role.

When you the continued low price of natural gas undermining clean energy innovation and project deployment, it should be no surprise that cleantech metrics are down.

But while the price of natural gas is one of the reasons cleantech is depressed, it doesn’t mean the end of the line for the whole of the space. Natural gas is eroding the compellingness of clean energy, but cleantech is more than just energy. Cleantech, as defined, is much broader, and includes transportation, agriculture and other categories that may actually see benefit from lower natural gas prices.

Plus, there are natural gas innovations that could be key to the success of future renewable energy. Renewable natural gas—gas from non-fossil-based sources—could end up the most important form of renewable energy, because it could be distributed in today’s transmission infrastructure, and help utilities generate baseload renewable power without solar or wind, or expensive renewable energy storage. Kachan & Co. has published a report in conjunction with a gas company that profiles seven firms at the forefront of generating large quantities of pipeline-grade renewable natural gas from biomass, based in Germany, the Netherlands, Norway, Switzerland, the U.S. and Canada.

With venture down, pay attention to the increasingly important role of corporations in cleantech. Large global multinationals are increasingly participating as clean technology investors, incubators and acquirers. With the largest companies worldwide sitting on trillions in cash, the climate is right for increased corporate multinational M&A, investment in and purchases from cleantech companies. Corporations have become the source of cleantech capital to pay closest attention to going forward.

Investors are worried about returns in cleantech; some are distancing themselves from the sector. Will that leave governments and large corporations to help companies through the valley of commercialization death?
Not all cleantech investments have worked out as planned. Investors are still waiting for their cleantech portfolios to produce expected returns. Why? Many cleantech investments are still sitting in managers’ portfolios waiting for an exit.

The cleantech exit environment is indeed suffering. The North American and European IPO markets remain shut, while public exits are alive and well in China. There were 9 clean technology IPOs raising a total of $1.79 billion in 2Q12, the last quarter for which data is publicly available at this writing, and ALL of them took place in China. We first raised alarms about this trend a couple of years ago. It’s the major area of concern for investors currently. And cleantech mergers and acquisitions are still depressed. Global cleantech M&A activity totaled $16.3 billion in 3Q12, according to VBResearch. That’s a 68% increase on the $9.7 billion in 2Q12 but a 30% decrease on the $23.2 billion recorded in the same period last year.

Of the capital that is being deployed, less of it is going to early stage deals. Venture investment in early stage cleantech rounds fell to a mere $382 million in 3Q12, the lowest quarterly volume since 2009, by today’s Clean Energy pipeline numbers. The large year-on-year decrease was caused by an absence of large solar deals, according to the company.

Limited partners (LPs), the institutions that fund venture capital firms, are less enthusiastic about cleantech today. Why? Mixed returns. The 5-year old CalPERS Clean Energy and Technology Fund, a fund-of-funds-type program, had a net internal rate of return since inception of -10% on $331.7 million invested as of Dec. 31, 2011, the last period for which data is available, according to data obtained by Pensions & Investments. Contrast that with the performance of Riverstone/Carlyle Renewable and Alternative Energy II. While only some $172 million of its $300 million commitment in September 2008 has actually been invested, the pension fund has seen a 12% net IRR from the investment as of Dec. 31, 2011. CalPERS’ $25 million commitment to VantagePoint CleanTech Partners LP, made in 2006, has earned a 12.4% net IRR—again, according to Pensions & Investments.

Most cleantech investors will have heard of Moore’s Law. Now some are learning, if they hadn’t known of it by name previously, of Sturgeon’s Law, that ‘90% of everything is cr*p.’ Which, unfortunately, but clearly, also applies to cleantech investments.

It begs the question: If venture investing is down and large corporations are taking more of a role in fostering cleantech innovation, can they and governments (which we argue should get out of the business of funding cleantech companies) be trusted to support emerging cleantech innovation as it struggles to reach meaningful commercial scale and availability? Increasingly, venture investors are proving reluctant to play this role in cleantech, given the large sums required.

What will propel cleantech’s success.
While much has been written about how global policy support has waned in cleantech, a silver lining is to be found in Japan. Japan’s new feed-in tariffs are among the most impressive the planet has yet seen, even more so than Germany’s former solar support. Japan is showing signs of helping breathe life back into the solar sector in an important way (download this free report that details Japan’s newfound commitment to cleantech.)

Say what you will about the murkiness of the future of clean energy, the fundamental drivers of the wider cleantech market persist. The sheer sizes of the addressable markets many cleantech companies target, and the possibilities for massive associated returns, will continue to spur innovation and support for the sector. Why? The world is still running out of the raw materials it needs. Some countries value their energy independence. More than ever, economies need to do more with less. Oh, and there’s that climate thing.

Cleantech is the future, undeniably. It can’t NOT be. We need to reinvent every major infrastructure system on the planet, from energy to agriculture to water to transportation and more. And we have to live more efficiently to accommodate more people than ever. Large corporations see record opportunity for profits in doing this—and that’s what’s going to be the biggest driver of clean technology, we believe, institutional investment hiccups aside.

Don’t focus too much on quarterly ups and downs.
Finally, note that quarterly numbers are a good leading indicator of transitions. But there’s a danger in reading too much into quarterly figures, and lumpiness of individual quarters, which are easily skewed by large individual deals.

This article was originally published here and was reposted with 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. Kachan & Co. staff have been covering, publishing about and helping propel clean technology since 2006. Kachan & Co. offers cleantech research reports, consulting and other services that help accelerate its clients’ success in clean technology. Details at www.kachan.com.

Look What’s Now Patently Obvious in Cleantech

Anyone can look up at the sky and make a guess at tomorrow’s weather. But having actual data informs your opinion and makes your guess a little more accurate.

Which is why, as a managing director of a leading cleantech data provider and responsible for the presentation of its quarterly global cleantech data, I developed a real respect for venture investment figures.

Because while everyone’s got an opinion about the health of the cleantech space, as in weather forecasting, data matters.

Venture investment, the rationale goes, is one of the best leading indicators of the health of the cleantech sector. Where venture investment goes, so eventually goes private equity, corporate investment, and—if all goes well—exits, ultimately. Venture investment serves as a sort of proxy for what tech sectors are hot, what geographies are up and coming and is an indication (though not the only one) of which companies and investors to watch.

In presenting this quarterly data, however, I’d always been interested in other data types so as to be able to offer a fuller picture of the overall health of cleantech globally. I’d always wanted insight into patents, specifically. So I’m pleased that Berkeley, Calif.-based IP Checkups, a longtime collaborator, just introduced its CleanTech PatentEdge service—an online searchable database of international patent data.

IP Checkups has performed custom patent searches in cleantech since 2006. It has supported us at Kachan & Co. with data in our cleantech advisory consulting engagements, such as the competitive assessment project abstracted here that leveraged patent data to find companies quietly pursuing ethylene from methane.

And now, with its new service, anyone can access the patent database IP Checkups has built, query 1.5 million patent grant and application entries from the US, EP, WO and JP patent databases and produce attractive charts and tables.

Why do we believe this patent service is a big deal?

  • Cleantech vendors can use this data to learn about competitors
  • Large corporations can find emerging or established companies with strong patent portfolios for strategic partnership and/or acquisition
  • Investors can verify the protection (and defensibility) of their portfolio companies’ IP and potentially find new investment opportunities in cleantech sectors rife with innovation
  • Market research firms can study cleantech patent trends over time, compare technology sectors and research individual companies

Doesn’t patent information want to be free?
With free data available from patent offices, and in a world where digital information is chomping at its virtual bit, why pay for the PatentEdge service? Because it’s not easy to search the multiple free online patent databases around the world and normalize the results you get back. When importing into Excel, you’re limited to pasting 65,000 records at a time, and can only have 1,048,576 rows total (and there are a lot more than 1,048,576 patents in cleantech.) Then you then need to cut the data and develop the charts you seek, and even run the risk of the data being out of date by the time you’re done.

By contrast, PatentEdge pre-sorts patent data in a nice online interface, features analytic tools, monthly updated results and enterprise sharing capabilities.

The relationship between cleantech funding, products and patents
I’d long wondered whether the quarterly velocity of patent filings in cleantech mapped to quarterly venture investment. Could they also be used as a leading indicator of where the industry was heading?

Unfortunately not. There’s a lag in being able to access patent filings because patent offices insert an intentional 18 month delay between filing and publishing so as to give entrepreneurs a head start in commercializing their innovations from the time of filing. As a result, patents only appear in the PatentEdge database a year and a half after they’re filed. But they give insight into where to expect cleantech products, according to IP Checkup President Matt Rappaport.

 

Cleantech investment and patents quarterly

Is there a correlation between venture investment and patent filings? Does one lead the other? Historically, the two are correlated, as these two graphs show, but while an 18-month lag in patent data prevents it being used as a leading indicator of innovation, patent data is a good indicator of where to look for market-ready products. Sources: Cleantech Group and IP Checkups.

Cleantech products, Rappaport notes, generally emerge soon after the 18 month hold period. Cut the patent data by sector or geography, and you suddenly get educated insights about whether a bevvy of new thin film solar offerings are about to emerge from China, say, or what exact types of new biological drop-in biofuel processes from algae you should start to expect to see written about in the press soon. Those are different types of insights than you get from cleantech venture data.

Which sounds like it might help make the business of cleantech market weather forecasting a little more interesting.

CleanTech PatentEdge annual subscriptions begin at $180/month for individual users, and $450/month for 3-5 users. Month-to-month plans, corporate and educational group rates are also available, according to IP Checkups.

This article was originally published here and is 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. Kachan & Co. staff have been covering, publishing about and helping propel clean technology since 2006. Kachan & Co. offers cleantech research reports, consulting and other services that help accelerate its clients’ success in clean technology. Details at www.kachan.com.

Big Data Meets Big Energy

One of the most hyped trends in high-tech is “big data”:  the accumulation, integration, synthesis and interpretation of enormous amounts of data from disparate sources.

Big data is being touted not only as a driver of increased efficiencies for companies, but also increased revenues:  as customers indicate or reveal their preferences through their behavior and choices, companies can then develop new products or services to offer in a very targeted and efficient manner to those most likely to purchase.

With technology enabling faster mass-computation at lower cost, and a growing set of data available from all sorts of places and easily collectable from a thoroughly-connected world, big data could be a boon — especially for those industries for which cost reduction and efficiency opportunities are limited, and for companies desperately searching for new revenue streams.

Energy is a sector potentially well-suited to be mined with big data.  The industry is largely quantitative already, with scads of measured (and if not measured now, measurable) parameters across vast geographies with innumerable supply sources, processing facilities, transportation nodes, and consumption points.  And, for the most part, energy companies are largely stuck in a mode of selling commodity products, and need new twists and differentiators for which a premium can be charged.

Proactively, I went searching the Internet for the best insight, wisdom and perspective on the incursion of big data into energy.  Frankly, I didn’t find terribly much — which tells me that the space at the intersection of big data and energy is ripe for innovation.

One of the better pieces I found was this posting from early 2012 by Katie Fehrenbacher, “10 Ways Big Data is Remaking Energy”, which identifies the 10 types of data that will increasingly be mined in the energy sector:

  1. Weather
  2. Cell phone usage
  3. Thermostats
  4. Hadoop
  5. Solar/wind sources
  6. Electric cars
  7. Power lines
  8. Real estate
  9. Variable energy prices
  10. Behavioral analytics

Although this is a good list of the innovative places from which data will be gathered, it still leaves open for entrepreneurs to identify specific customer needs to be met and value propositions that can be developed from big data.

It seems that a big challenge will be in making data from disparate sources mesh accurately.  As this article from Intelligent Utility indicates, integrating “unstructured data” — especially from hand-written and other manually filled out forms — will be particularly difficult.

Big data in the energy sector will likely be a large opportunity for the major players in the IT sector — IBM, Intel, SAP, Oracle, Google, Microsoft, and so on.  My advice to them is that they will need to be patient:  the big players in big energy move glacially, and big data will take a long time to penetrate in a major way.  But, the opportunity is vast, so it’s probably worth the effort and the waiting…and waiting…and waiting.