INVESTING
IN ALTERNATIVE ENERGY AND ENERGY EFFICIENCY
Notes for Haskayne Executive Education Group March 17,
2006
Jim de Wilde
March 2006
Some starting thoughts about investing
in new energy:
Dubai Oil’s a Means, Not an End,
at Dubai Inc. (www.nytimes.com)
By Heather Timmons February 17, 2006 this provides an
excellent view of a diversification strategy, relevant
to discussions of Alberta and Norway in the kind of
debates going on right now. Written before the Dubai
Ports World debate became a global page One story, this
shows the way in which significant capital market performers
are exploring diversification strategies for a world
of declining oil
Samsoe, A Danish island moves to clean
power by Mary Jacoby (www.wsj.com)
February 9, 2006 This article shows the effect of removing
the Danish government subsidies on the development of
alternative energy (biomass, wood chips) on one of the
Danish archipelago islands.
Gulf Venture Capital Association Malaysia
and Bahrain (www.gulfvc.org)
shows diversification strategies for Gulf economies
GE’s energy strategy Investors are Tilting Toward
Windmills by Claudia H. Deutsch (www.nytimes.com)
February 15, 2006 An excellent discussion of the strategies
required by GE to develop profitable alternative energies
besides wind power, Biofuels create logistical difficulties,
biomass is developing as an area of focus.
Alternative fuel attracting venture
capital February 2, 2002 www.wsj.com
Amp Resources, Nanosolar (Focuses on Vinod Khosla, partner
at Kleiner Perkins in looking at ethanol and the shift
of other venture capital firms towards alternative energy
investing. Cites the success of AmpResources being acquired
by Raser Tech www.rasertech.com for its geothermal expertise
and Nansolar www.nanosolar.com
LEARNING FROM BEST PRACTICES: ALTERNATIVE ENERGY VENTURE
PORTFOLIOS
Portfolio NORSK HYRDO www.ntv.hydro.com
Portfolio Nth POWER www.nthpower.com
Portfolio ENERTECH www.enertechcapital.com
Portfolio CHEVRON TEXACO www.chevron.com/technologyventures
The development of the new energy technology
market has grown in great rapidity in the past two years.
One of the most important categories of venture capital
investing is energy alternatives, and the category needs
to be extended to include all those areas of energy
usage which can be reengineered or “disrupted”
by technological innovations. New areas of lighting
technologies have created a category of investment which
can radically transform product areas. The success of
Canadian companies like Carmanah (www.carmanah.com)
shows how innovations in a space like solar-based warning
lights can create a dynamic company. Under the broad
category of energy efficiency, innovations in lighting
technology receive considerable attention. Advanced
Lighting Technologies www.adlt.com constitutes another
case study of this kind of investing in energy efficiency.
One can look at a number of companies
which exist outside the usual paradigms of investing
in solar power, grid management technologies and fuel
cells and flywheels. The search for the new categories
of cleaner or cheaper power under categories like distributed
generation, portable power are creating a demand for
newly commercialized innovations in a variety of portfolios,
including the extremely interesting and relevant portfolio
strategies of Siemens, whose venture capital investments
(www.siemensventurecaapital.com)
includes a growth portfolio which I recommend as critical
to the understanding of new patterns of technological
innovation and economic growth.
CONCLUSION
If we look ay these four companies’ portfolios,
I think we can achieve some kind of a discussion of
the venture capital strategies for alternative energies
and what patterns are shaping the new global market.
I think it is important to understand that innovations
in China and India like the development of the miniaturized
Chinese nuclear reactors have the potential to add new
disruptions to the contemporary energy mixture. I think
it is also important to add that a radical change in
activities like the nanotechnology-driven research on
flywheels have the potential to reshape the market if
they come on-line more quickly than is currently anticipated.
I assume that the key issues confronting investors these
days require more engineering analytical skills than
I possess. But these skills do exist within the Canadian
investment community. The question of how we sell decentralized
portable power back to the grid in a profitable business
model is extremely significant. The question of how
we use environmentally-sound incineration to replace
landfills in municipal waste management also is in search
of the right business models. There are many emergent
players in this area.
But these portfolios reveal a great
deal about emerging and converging growth markets:
There is ample opportunity to go around
for aspiring venture capitalists. I have written elsewhere
that three underexploited areas of investment about
which I am bullish is
(i) incineration technologies,
(ii) commercialization of electrochemistry which looks
to new kinds of batteries, building on flywheels, whose
primary commercial application is as a short-term power
storage to manage power disruptions in manufacturing
or energy-critical activities, and
(iii) Strategies that facilitate power-choosing through
the web and power inversion by selling small amounts
back through the grid.
My suspicion is that in the 2016 science
fiction projection, incineration technologies will be
widespread and organized though municipal activities
and that there will be significant usage of batteries
as energy storage technologies. Private windmills and
photovoltaic cells will commonly be used to offset energy
costs by selling back to the grid from portable and
small scale producers. None of this is intended to denigrate
investment in solar power, wind and wave turbine technologies
or innovation in turbo designs, especially mircoturbines.
It is just that these areas are already the recipients
of significant strategies investment. GE has a commitment
to solar power which will build significant new product
opportunities within its development portfolio.
The current focus is on solar power.
The hottest IPOs in the tech sector this year are solar
power related Suntech (www.suntech-power.com)
Q-Cells (www.q-cells.com)
and Conergy (www.conergy.com)
are the best performing technology IPOs of the year.
Two of these are German, one Chinese.
If one does a cluster map of the Nth
Power, Enertech, Chevron and Norsk Hydro portfolios
above and eliminates the strategic investments (oil
exploration technologies, for example), one sees three
distinct patterns: (a) distributed energy, which is
consistent with grid inversion; (b) smart metering and
technologically enhanced energy efficiencies; (c) new
materials that are a play on nanotechnology with the
assumption that nanotechnologically-designed new materials
will find more efficient forms of conducting and transmitting
energies.
Other companies demonstrate the range
of investment plays in new fuels and energy efficiency
space:
www.comverge.com
(energy metering)
www.adventsolar.com
(solar power)
www.enerwise.com
(enhancing energy efficiency including lighting)
www.intellon.com
(intelligent networks)
www.currentgroup.com
(the search for smart grid and single home port-of-entry)
AN IDEAL PORTFOLIO
A mixed portfolio starts with smart
metering, smart grid, solar power, wind and wave turbines,
but takes its risks in areas like:
Portable power and grid inversion - selling back to
the grid: In terms of decentralized power, some very
interesting work being done in California, with Scott
Mize of the Foresight Institute (www.foresight.org)
worth reading. A good recent discussion is in the San
Jose Mercury News.
http://www.mercurynews.com/mld/mercurynews/business/12684496.htm?template=contentModules/printstory.jsp
.
Incineration technologies: A good analysis
of how far Scandinavian engineering has come in making
this technologically viable can be found in the following
article:
http://www.i-sustain.com/learningCenter/Publications/District%20Energy%20Systems%20-%20DJC%20Article.htm
Flywheels and early-stage longer term
energy storage: Some of the more interesting research
in new battery sources includes the following: Energy
Innovations, Pentadyne, Angstrom Power, Beacon Power
and Manhattan Scientifics. The potential for a seriously
disruptive technology exists in this science although
the risks of each area of commercialization are obvious
and significant. Manufacturing reliable battery source
abased power is one obstacle to commercialization and
the technology for lengthening the period of storage
remains elusive, but with all the imperatives to develop
a clean, reliable power, this category of innovation
is key to a longterm growth horizon.
www.energyinnovations.com
, www.pentadyne.com
, www.mhtx.com, www.angstrompower.com
, www.beaconpower.com
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