About a month ago, I posted about how renewables are Silicon Valley's Next Big Thing (NBT), with investors eying the green industry as they once did dotcoms. Don't think it's a phase, however, because the past week brings another pair of articles on the financial interest in green power. First up, is this article from the SF Gate, Green Valley: environmentally minded ingenuity drives the latest business wave (3/4/07) on how green technology is driving investment in companies in Silicon Valley, which along with Austin, Texas and Boston are the hubs for green energy company. From the article:
Green tech is not about the digital ones and zeroes on which Silicon Valley was built. It's a major departure into the world of energy, largely foreign to the valley until now. Green tech companies develop new energy sources, devise ways to use existing resources more efficiently, or design products that help the environment. High oil prices and concern over global warming have fueled their rise.
Many green technologies so far exist only in the lab. But investors are betting that green companies will one day make serious money. Venture capitalists pumped an estimated $3 billion into the industry nationwide last year.
And in the Independent in the UK, expert Chris Goodall writes in Here we go again: a carbon copy of dotcom fever (3/4/07) that climate-change industry is going through the early stages of the same cycle of the high tech industry. Of course, if you can remember companies like dogfood.com, that's not an entirely positive comparison, and Goodall cautions against wildly optimistic expectation:
We can already recognise the signs from the era of internet hysteria - exaggeration of the investment opportunities and wildly over-optimistic projections of the speed with which industries will change. European venture capital investment in what Americans call "'clean tech" totalled some $500m (£255m) in the first nine months of 2006, but a single UK fund raised $1bn in the last few months of the year to address opportunities in low-carbon technologies.A tidal wave of money is chasing a few good deals. Too many hopes rest on speculative new technologies, such as carbon capture and storage, that are untested, expensive and years from commercial development.The much-derided "incubators" are back. Anyone who invested in the early years of the internet will remember those buildings that teemed with intelligent young people trying to find a new idea that would change the world. They didn't know what they were doing, and neither did their investors.
I agree with Goodhall's realism. The dotcom companies could have used this dose of reality, and it's even more important in the energy business where the eventual barriers to entry, e.g., changing over to a hydrogen economy or connecting new renewables to the grid, are far higher than they ever were in the high tech industry. In the marine renewables field, nothing will kill a technology or a company faster than making fantastical claims (power at 1 cents a kilowatt! Enough energy to power the entire earth!) that never come to fruition. Indeed, many believe that inflated claims about the potential of Ocean Thermal Energy Conversion (which received substantial government funding for many years, and was the subject of the OTEC Act of 1980) tarnished the reputation of ocean renewables when it was realized that the cost of constructing large scale OTEC plants was prohibitive and the technology worked only in tropical waters with substantial surface and sub-surface temperature differentials.
All the new renewables on the horizon hold great promise to reduce carbon emissions and help make our country more energy independent. But in the energy biz, there's no "killer app" that's going to make anyone rich quickly. As long as we're realistic about the promise of the green energy, we can remain optimistic about its future growth as well.
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