This past Sunday's New York Times Magazine (10/5/08) contains an outstanding article by Jon Gertner on what it takes to bring a clean energy project from concept to commercialization (aptly, from C to C - get it, sea to sea?!). The article doesn't mention marine renewables at all, and it's lengthy, but worth a read because it offers an excellent view of the process, and the hurdles that new clean technologies must overcome.
Here's a segment of the article that sets forth a four factor test that all clean energy technologies must meet to succeed:
To begin with, there is technology risk. As Ted Schlein, a Kleiner partner, put it one morning: “Can it be built? How hard is it to build it? And if you can build it, can other people build it just as well?” Next, Schlein said, is what he and his partners call “people risk.” How good is the team pitching the idea, and can its members execute their idea well? The third risk involves selling a product in the market, which most Kleiner partners believe is the hardest to gauge before making an investment. In Schlein’s words: “O.K., let’s say we can build it and get great people. Will anyone buy it?”
The final risk is financial. Venture capitalists who back a company in its earliest stages, as Kleiner did with Bloom, typically invest only a fraction of what it takes to bring a business to market; as the company grows, the rest of the financing necessary comes at later stages — known as “B rounds,” “C rounds” and so forth — from other V.C. firms and outside investment funds. Companies that have problems with their technology, management teams or marketing have difficulty attracting more financing. With green tech, this may prove especially dire. Software or Web-site development can be fast and relatively cheap — a couple of years, say, and a total of $50 million before a company can go public. A medical venture can cost double that amount and take up to a decade to mature. Green tech may well require more time and money than either.
For marine renewables, these four factors are just a start, and indeed, may underestimate the true risk. That's because the financial risk for marine renewables is greater than most. While other clean energy ventures may have an easy time finding later stages of investment, marine renewables often face difficulty here, because much of that funding goes towards the cost of permitting and compliance. And many companies are loathe to pay for these costs, particularly, where the licensing process takes so long.
I'm certain that marine renewables can overcome the first three risk factors that Gertner identifies. The financial risk may prove more difficult, and that may be the point where government support - either in the form of subsidizing permitting compliance for early projects or removing regulatory barriers - might make the biggest difference.
What are your thoughts on this article? Do marine renewables face other risk factors that Gertner failed to identify? And can marine renewables succeed through private capital alone, or do they still require government support? Please post your comments below.