$2 Bil Wind Acquisition

The cleantech sector received a huge boost this week from the news that Portugal’s EDP anounced the acquisition of Texas based Horizon Wind for a price of over $2 Bil. EDP operates globally in Spain, Portugal and Brazil.

One of the intriguing aspects of this deal is the history. Horizon Wind was formerly Zilkha Renewable Energy, before it was purchased by Goldman Sachs in 2005.

According to their websites Selim and Michael Zilkha were the previous owners of Zilkha Energy, which started in the mid 1980s and grew to be one of the largest privately held independent E&P companies in Texas, before selling it to Sonat in 1998 for $1.04 billion plus debt. Zilkha primarily operated in the shallow water Gulf of Mexico, and was one of the early users of 3D seismic on a large scale.

Starting after that 1998 sale they moved into renewables, and built Zilkha Renewable Energy into a sizeable player in the wind market before selling to Goldman Sachs in 2005. The Zilkhas are now involved in a biomass power business. It is interesting to note that both Zilkha Energy and Zilkha Renewables’ claim to fame was having gotten in early and built an aggressive leasehold position. In some respects, they grew their wind business in many respects like a traditional oil exploration company, build a large lease portfolio first, prioritize your development resources, apply best available technology, build out your infrastructure.

It is also highly instructive to see traditional energy capital plowed into a wind company, only to sell it to a major Wall Street firm, which after additional investment subsequently flipped the business in less than 2 years to a major European utility. Texas oil money makes good in renewables? No wonder Texas has passed California in wind energy generation. Perhaps we are finally entering a new era of maturity in renewables.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.

Cleantech: The Problem and Solution

Two interesting cleantech reports came out in the last couple of days. One talking about the problem, the other the solution.

On the problem side, as reported in USA Today, a team of researchers working at Texas A&M found that increased pollution in Asia, primarily from the rise of industrialism in China over the last 10 years, is affecting weather patterns over the Pacific and even into the US West Coast.

I guess the last 10 years of environmentalists harping over the growth in “dirty Chinese coal plants” had some real merit.

On the solution side, the 2007 Clean Energy Trends report authored by Clean Edge, came out this week.

The highlights from my review of their document:

$2.4 Billion in clean energy (as distinct from cleantech) venture capital investment in 2006, up 2.4x from 2005.

They project $220 Billion in market for Clean Energy by 2016.

Their 5 Trends to Watch:

  • Carbon Finally Has a Price…and a Market – They note the major advances including California’s GHG law push. We agree. But like wind and solar, we pioneered it, but Europe is leading it today.
  • Biorefineries Begin to Close the Loop – They are big on the advances of cellulosic ethanol. We remain cautious here.
  • Advanced Battery Makers Take Charge – They note the coming rise of lithium ion in the automotive sector. We agree.
  • Wal-Mart Becomes a Clean Energy Market Maker – They note major moves by Wal-Mart to go green. Long a shareholder of Wal-Mart myself, I definitely agree. We have been saying for a while that when it comes to cleantech, startups talk the talk, the big boys walk the walk.
  • Utilities Get Enlightened – They note that utilities are getting on the climate change band wagon. We would add that corporate venture is back, in a new and possibly smarter form.

You can download their report from the Clean Edge website. We have written on each of these topics before. Onwards and upwards in cleantech.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.

Will Small Wind Get the Love that Solar Has?

Investment and growth in the cleantech sector has been driven in the last 2 to 3 years by the solar photovoltaic, large scale wind, and ethanol sectors. For years solar PV has, on a per kw basis relative to other technologies, received massive rebates and tax credits that underpinned its growth, and large scale wind power has had its production tax credit to anchor the industries’ rise, but solar thermal and small wind systems have been largely left out in the cold in this cleantech boom.

Perhaps that is changing for micro wind?

The CEO of Mariah Power, one of the micro wind turbine startups we follow, turned me on to a recent bill in Congress that might even the playing field for small wind. I’ve excerpted his notes in quotes below.

“Recently, Senator Ken Salazar (D-Colo.), along with Senator Gordon Smith (R-Ore.) introduced a bill that would provide $1500 per 1/2 kilowatt (kW) of capacity to customers seeking to purchase a small wind turbine, the same credit that solar is currently pursuing. In addition to this credit, the bill would provide accelerated 3-year depreciation and an Alternative Minimum Tax exemption.

A press release on this bill, S. 673, the Rural Wind Energy Development Act, can be found here.

This bill will provide an investment tax credit for the purchase of small wind systems (rated at 100 kilowatts and below) for homeowners, small businesses, and farmers. This credit is critical to sustaining the growth of this clean, renewable, and emissions-free energy technology while helping individuals and communities become more independent from unpredictable prices and supplies of traditional sources of energy.

Currently there is no federal support for small wind systems. Residential solar and fuel cell systems, however, which share the same competitive market as small wind, have been receiving a 30% federal tax credit. The federal Production Tax Credit (PTC) applies only to large utility-scale wind projects, not to individuals who want to install their own wind systems for on-site power. Federal support would help broaden the industry on a national scale.”

The growth of our cleantech and alternative energy industries have always been heavily influenced by the policy and subsidy environment, so how the debate plays out is critical to understanding where the product and investment opportunities may lie for any given clean technology.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.

A (Re)Birth for Offshore Wind

by Richard T. Stuebi

In the early 2000’s, much of the interest of the worldwide wind energy community was focused on offshore opportunities. This was because the world’s largest wind market — Europe — was getting developed towards saturation, and the best wind resources were offshore where population density was not going to be a factor. Several high-profile projects — such as Middelgrunden off the shores of Copenhagen, and Ireland’s Arklow installation by GE (NYSE: GE) — generated arguably more publicity than kilowatt-hours.

In the past few years, the momentum for offshore wind has reversed. Completed projects cost more than expected to developers and manufacturers alike, and — in the U.S. — the siting controversies associated with the ignominious Cape Wind project have cast doubt on the near-term viability of offshore wind. In the meantime, the fortunes for onshore wind have never been better, especially in what is now the world’s largest market: the U.S., where population density and land availability is not a constraining factor for the foreseeable future. The wind industry overall is booming, the current opportunities are all onshore, and everyone’s making hay while the sun shines. Correspondingly, offshore wind has been shunted to the back burner.

Here in Cleveland, a contrarian view is emerging. The Cuyahoga Regional Energy Development Task Force recently issued Building a New Energy Future, a report outlining the concept of a Lake Erie Wind Energy Center. This would be comprised of two components: a 5-20 megawatt demonstration project 3-5 miles offshore downtown Cleveland, and an affiliated research center to enable the invention and testing of next-generation wind energy technologies optimized for offshore application.

The next step is for a team of advisors to be retained to perform a detailed feasibility study to ensure that there are no truly insurmountable obstacles — technical/engineering, economic/financial or legal/regulatory — to its completion. If/when completed, the vision is for the Cleveland area to seize leadership in offshore wind, tackling the fully-acknowledged challenges now while the rest of the wind industry is preoccupied with capturing the onshore opportunities, so that when (not if) the offshore wind industry really blossoms, Cleveland will be the acknowledged center of offshore research, deployment and manufacturing.

I was privileged to serve on the Task Force that developed this report, and am pleased that its release has generally been well-received. However, there are some who wrinkle their brows and question the sanity of focusing on the offshore wind opportunity at this time.

Why not focus on onshore wind? Because the private sector is aggressively pursuing good onshore wind opportunities already, because Ohio’s onshore wind resource is modest, and because onshore wind deployment even in large volumes does not generate many ongoing jobs. Economic revitalization for our region will only come with high-paying research and manufacturing jobs, which in turn will come by addressing the needs of the wind industry that others are avoiding for the time being.

We cannot afford to wait until others start focusing on offshore wind. We will break down the barriers of offshore wind development on the Great Lakes to build the market demand. We will work with manufacturers and researchers to break down the technical and engineering barriers and improve the economics of offshore wind supply. In so doing, in decades to come, we can see gigawatts of wind offshore in Lake Erie, generating a large portion of our region’s energy requirements without producing any air emissions, built with equipment supplied by local manufacturing operations, installed and maintained by offshore wind service companies (akin to the base of expertise in offshore oil/gas E&P that resides in Houston and New Orleans).

It’s a bold vision, certainly with risk, but it’s doable, and worth doing. Wish us well and keep your eyes on us.

Richard Stuebi is the BP Fellow for Energy and Environmental Advancement for The Cleveland Foundation, and is the Founder and President of NextWave Energy.