By Eric Huebler
17-03-04
Betting that the age of big, grimy power plants is nearing its end, some venture capitalists see money to be made by thinking smaller and cleaner. Investors are increasingly gambling on clean-energy technologies, such as hydrogen fuel cells, small-scale wind turbines and solar generation gear. Depending on who's doing the talking, green can be profitable, or profitable also can be green.
"You can rest assured venture capitalists would not be investing in any of
these companies unless they thought they were a good investment
financially," said Rona Fried, editor of the Progressive Investor
newsletter in New York.
Investment in clean energy as a percentage of overall venture-capital funding
increased to 2.4 % in 2003 from 0.8 % in 1999, according to Clean Edge, a San
Francisco energy consulting company. Worldwide, venture capitalists poured $ 526
mm into clean-energy companies in 2003, down from $ 584 mm in 2002. Investments
averaged about $ 6.26 mm.
About $ 100 mm went to companies outside the United States, according to Nth
Power Technologies, a San Francisco venture firm that invests only in energy
companies. The California Public Employees Retirement System -- the nation's
largest pension fund -- launched the CalPERS Environmental Technology Program,
which will invest $ 200 mm in clean technology over several years.
Denver's Altira Group typically backs oil and gas technology companies. But recently it pledged more than $ 2 mm to Southwest Windpower, a Flagstaff, Arizona, maker of wind turbines that is about 18 months from debuting a turbine small, quiet, pretty and cheap enough for widespread home use.
Southwest Windpower president David Calley started looking for venture capital
for the new product -- code-named Storm -- in late 2001.
"Some of them don't take it seriously at all, and some of them came looking
for us believing that the market existed," Calley said.
Altira invested because "just as the world is moving to other
technologies, so are we," managing partner Dirk McDermott said. Going green
is good economics because it's good thermodynamics, said Nth Power managing
director Maurice E.P. Gunderson. The link between efficiency and economy was
established two centuries ago, but the logical conclusion -- making energy where
and when it's needed - only now is becoming profitable, he said. The concept is
called distributed generation.
"But the reason that people want those products and services usually has to
do with business reasons, economic reasons," Gunderson said.
Nth Power has $ 250 mm under management in 22 companies, including several
developing hydrogen fuel cells. Nth Power's investments typically return
averages of 15 % annually, about the same as venture capitalists in general,
Gunderson said.
Calley said the market for home turbines is "incredibly small" --
maybe $ 50 mm -- and big utilities aren't running scared. "But they should
be," he said.
Many states allow net metering, meaning that if consumers can produce
electricity safely, they can push it into the grid instead of drawing it out,
causing their meters to run backward and reducing their utility bills. Colorado
has net metering in the territories of Xcel Energy, Holy Cross Energy and
Gunnison County Electric. State-wide net metering would need legislative
approval.
The Storm wind turbine should allow electricity to be produced more cheaply than
if it's bought, and will let the customer feed power back to the local utility,
Calley said. It will cost about as much as a high-end refrigerator.
"You can do it for purely economic reasons instead of just environmental
reasons. Previously the only justification was environmental," Calley said.
Doing good and doing well are not opposites, said Altira's McDermott, who
predicts home turbines could become as common as air conditioners.
"Our social conscience is that if America ever wants to be
energy-independent, it's going to depend on entrepreneurs like David (Calley)
and having enough capital in play," he said.
Source: Denver Post