30 April 2013

My Three Take-Aways from BNEF Summit 2013

Last week was the BNEF Summit (Bloomberg New Energy Finance), the annual gathering of the clean energy faithful curated by Michael Liebreich.

BNEF puts on a good show. Their analysts have a deep understanding of their particular focus area and they know how to present data, and the other panelists and presenters are always top-shelf.

Having been a part of the Summit two years in a row now, I see the value in getting such a group together for an annual sit-down to have a look under the cleantech/new energy hood.

Survey says, "It's the policy, stupid."
As one attendee, @electricityyoda, Tweeted during the event, "Yoda once said 'Always pass on what you have learned.'" Taking his advice, here are my three take-aways:

1.) Gas is now part of the "clean energy" mix.

Whether you like it or not, natural gas, specifically in the US, but increasingly elsewhere, is now part of the conversation.

Frack-water aside, gas has had a huge impact.  For some, gas is a bridge to cleaner technologies; for others it's a pier, and for still others, gas appears to be a destination.

It remains to be seen whether the impact on renewables will be net-negative or net-positive. If gas "hooks up" with solar, as NRG's David Crane suggested, it could dominate the future electricity supply in the US.

(On the subject of fracking, I think there are still plenty of opportunities and needs for technologies to address the fracking chemicals, clean up the water, and to capture the CO2 emissions generated from the process.)

2.) Policy (or lack thereof) still breeds uncertainty.

Seventy-nine percent of BNEF Summit participants answering an onsite poll said policy and regulation were the largest uncertainties for energy investment. (See photo.) And this doesn't show any signs of changing any time soon. Especially in the US, where very few expect major energy legislation.

Small wins will have to do for now, such as the legislation introduced by Senators Lisa Murkowski (R-Alaska) and Chris Coons (D-Delaware), that would extend the master limited partnership program to clean energy companies.

The program, which Murkowski indicated has bipartisan support in both the Senate and the House, allows companies to raise funds like acorporation and pay taxes as a partnership. Currently, the program provides favorable tax status only for oil and gas projects and other fossil fuel companies.

3.) Costs continue to come down, making renewables more affordable...but is the grid ready for it?

As BNEF reported, "the cost of installing a gigawatt of renewable energy capacity is now about 10 percent lower during the period through 2030 than it projected in 2011," but is the grid ready for it? We have an aging infrastructure and our delivery system is out of whack.

As NRG's Crane quipped, "the 21st Century economy should not be based on wooden [utility] poles."

For more on the BNEF Summit, and to see some of the speeches from the event, check out the Summit videos here.  

(Disclosure: my employer, Ernst & Young LLP is a sponsor of the BNEF Summit, through our Global Cleantech Center. Opinions mine.)

18 April 2013

Focus on Teams, Customers, and Going to Market, Investors Tell Mid-Atlantic Energy Forum

Dr. Cheryl Martin Addressing
Mid-Atlantic Energy Tech Forum
"We focus on teamwork," Cheryl Martin, Deputy Director of ARPA-E (Advanced Research Projects Agency-Energy) in her keynote address to the Mid-Atlantic Energy Technology Forum last night. "There has to be a strong team and if we need to bring in a CEO to take the company to market, we will."

Dr. Martin, in her second year with the research and commercialization agency, spoke to a crowd of around 200 energy enthusiasts, investors, and entrepreneurs at Philadelphia's Academy of Natural Sciences of Drexel University.

"We look for high-potential, high-impact energy technologies that are solving real problems, and the dedicated teams that can bring them to market," Martin noted. "We just celebrated our fourth anniversary. We've got more to do."

Marking its own 5th year, the Mid-Atlantic Energy Tech Forum (formerly Cleantech Investment Forum) is a partnership between the law firm of Blank Rome and the Cleantech Alliance Mid-Atlantic, which I co-founded in 2008 with Kevin Brown of the search firm Hobbes & Towne.

The Forum has grown into the premier showcase for the region's most promising companies in energy technology, cleantech, and resource efficiency.

Last night's presenting companies ranged from software as a service offerings such as Propel IT, which uses data and incentives to reduce fuel consumption in trucking fleets, to Rentricity's plug-in microturbine that captures energy generated by pressure reducing valves in the nation's water distribution system.

The CEO presenters included serial entrepreneurs and a former banker who each explained their solutions in 7-minutes pitches. All highlighted their management teams as well as their revenue structures and some spoke of the importance of customers.

Electric cars and dinosaurs were featured outside the Forum.
The focus on customers was raised earlier in the evening by the investor panel, which I moderated.

"In my years engaging with cleantech companies, most firms don't make delivering a superior customer experience the top priority like Apple does," Diana Propper de Callejon of Expansion Capital Partners noted.

As for opportunities in the sector, panelists Andrew Garman of New Venture Partners and Purnesh Seegopaul of Pangaea Ventures, each suggested the funding ecosystem for research and development has expanded and that sustainable solutions are needed in everything from buildings to fossil fuel use require advanced materials.

There has also been a boon in corporate venture capital, which has helped fill the investor syndicate pool as other VCs have left the water.

Success breeds success, however, as in most investing.

"We look for patterns of successful companies and want to replicate those patterns in other disruptive industries," said Seegopaul.

As one attendee told me during the cocktail reception after the program, his key takeaway was that business model innovations that can scale, focus on the customer, and disrupt their industry will win in the current market -- as long as they have a strong team and financial rigor.

Good lessons for any business, but especially in the current cleantech and energy environment.

(DISCLOSURE: The author is co-founder of the Cleantech Alliance Mid-Atlantic, one of the hosts of the event describe herein.)

09 April 2013

What's Going On: My Remarks from Cleantech Open Northeast

Investor panel at Cleantech Open NE Kick Off in Philly. 
Cleantech startups, like any new venture, need a leg up. That's where accelerators like Cleantech Open come in.

If you don’t know Cleantech Open, it’s an accelerator that has been helping cleantech startups and entrepreneurs launch, improve, and fund their businesses since 2006.

Last night, I delivered the keynote to kick off Cleantech Open NE in Philadelphia.  My remarks centered around three areas: ten trends and drivers, four reminders, and five things I’d like to see in the cleantech sector or hopeful signs.

First, the 10 trends and drivers:

  1. The VCs have left the building. Well, some of them. There’s been a capital “Shakedown Street” as VCs/LPs are backing out of cleantech. (Tucker Twitmyer offered the statistic that there were 184 investors in the cleantech space a few years ago; now there are a dozen.) And even CALpers is complaining publicly about getting burned in cleantech at the 2013 ECO:nomics conference. 
  2. Reduced government subsidies, at least in Europe and US, if not China. 
  3. Yet, natural resources, the environment, and food are among the top business risks called out in the WEF 2013 Global Risk report.
  4. And the food-water-energy nexus is one of top mega trends identified in the US National Intelligence Council report Global Trends 2030. 
  5. While Renewable Energy is becoming more cost competitive with "traditional” energy sources, and costs are coming down, particularly for solar, we may yet see a temporary increase in solar prices as the industry rationalizes. But the overall trend is down. Good for you and me; may not be so good for companies. 
  6. According to a recent EY survey, the resource use and the “energy mix” are becoming “C-suite” issues, but few companies have long-term strategies to deal with resource scarcity. 
  7. China, China, China: Both their own development & investment outside of China (in US companies; elsewhere) is something to behold…but, guess what, it’s largely fueled by coal and oil. Sure they are making huge advances in RE technology adoption, yet it's Old King Coal is driving their merry old economic growth. 
  8. Corporations increasingly see cleantech as an innovation pipeline, not just for strategic investments and M&A. 
  9. Consolidation happens: M&As, flame-outs, and bankruptcies, but wait…we’ve even had a couple of IPOS! 
  10. Natural gas is displacing coal slowly for generation, chiefly for new cogen development, which may provide an opportunity to accelerate the most promising, available renewable energy technologies. On the other hand, some argue it is largely damaging RE prospects. 

Next, 4 things we need to remember:

  1. As I wrote on The Green Skeptic back in August: we need to remember Gartner’s Hype Cycle for Technology. We’re currently sitting in the trough of disillusionment, somewhere between the peak of inflated expectations and the slope of enlightenment. (Hopefully, it’s not a slippery slope.) 
  2. We need to remember that energy transition is dynamic and full of risk. There will be flame-outs and successes. 
  3. We need to stop bickering about Tar Sands and Natural Gas – these are part of the transition away from a fossil fuel based society, In some ways, they may buy us time to get the best technologies to maturity. 
  4. We need to focus on adaptation, with a capital A. The die is cast, and smart government leaders like Christie, Bloomberg, and Nutter are working on adaptation as much or more than avoidance. It IS too late to turn back now and there is no global will to stop the carbon train. So, if it ain’t gonna stop, let’s figure out what we can do to adapt and deal. 

And finally, 5 things the sector needs now or hopeful signs:

  1. Cleanweb – or as I see it, get the best minds of the younger generation to apply the same creativity and excitement to energy and resource efficiency that they do to gaming and social web distractions. We need more business model innovation rather than technical innovation. 
  2. Level the playing field. Subsidy free, for all! Rather than subsidy free-for-all! If it’s a free market, let it be free. And let the winners win and the losers lose. 
  3. Get government out of the business of picking winners and focused on R&D. Solyndras will happen, but it shouldn't be on the public dime. 
  4. Get the partisans out of the picture. Cleantech, the environment, and energy are neither Republican nor Democrat issues. We can’t let this partisan divide tear this sector apart. 
  5. Now, more than ever, we should focus on the killer app or business model innovation of today not the platform “game-changer” of tomorrow. As my pal Tucker says, this is a game of incremental progress punctuated by breakthroughs that will take 50 years to commercialize. The good news is, the increments are meaningful.

Those were my thoughts shared with the audience last night in Philadelphia. Let me know what you think.

04 April 2013

Review: NATURE'S FORTUNE by Mark Tercek and Jonathan Adams

I remember when I first learned that some guy from Goldman Sachs was taking the helm at The Nature Conservancy.

I had left TNC already and was meeting a former colleague and friend who has also since moved on from TNC.

"Hank Paulson?" I asked, assuming the former TNC board chair was unhappy at Treasury and that the CEO spot at TNC would have been a nice swap.

"No, Mark Tercek," my friend informed me. "He used to run some environmental unit at Goldman."

"That's a bold move," I answered, thinking it complemented the trajectory that John Sawhill started back in the 1990s. "In some ways it legitimizes what John was saying that companies had to be part of the solution."

My friend was more worried about how it would impact management of the organization, which had long operated more like a Fortune 500 company than a non-profit, but we agreed the new guy would have to adapt as much as the organization.

Then I met Mark in Aspen where we were both speaking at the Aspen Institute's Environment Forum, and heard him speak about his journey and what he saw as the challenges for the environmental movement. I was impressed by his humility, candor, and sense of purpose.

In his short tenure at the Conservancy, Tercek's taken some bold steps to build on Sawhill's legacy of corporate engagement, developed new financing mechanisms for conservation, and brought transparency and authenticity to his role through social media.

While there are still grumblings in the ranks at TNC that things haven't changed all that much or that there is still a disconnect between the field and the "Home Office," from my view, Tercek seems to be making the tough choices, living with the consequences, and course-correcting where need be.

Now, with science writer Jonathan Adams, Tercek has published his thoughts on the new direction TNC and other environmental groups must take to achieve real, lasting results in conservation.

Not everything in Nature's Fortune: How Business and Society Thrive by Investing in Nature is new -- the writers trot out some old saws like the protection of the NYC watershed, the water funds in Ecuador, and the concept of accounting for "natural capital” that have been around for over a decade -- but Tercek's banking imprimatur, a different kind of green roots, may legitimize to the business community that business can be a beneficial environmental partner.

More activist oriented greenies may not like this approach. There have been a number of attacks on the organization for its work with Dow Chemical, taking money from Monsanto, and some of its management of specific projects over the years.

Tercek and Adams are careful to thank the activist organizations for their role in calling attention to issues and keeping TNC and its corporate partners honest.

It is refreshing to see the Conservancy turning its attention to urban conservation in New York City and elsewhere, which it has traditionally shied away from preferring to view cities as “major markets” for philanthropy and marketing purposes.

More radical perhaps is Tercek's assertion that more basic business thinking familiar to corporate analysts should be part of the environmental organization's toolkit, such as maximizing returns, investing in assets, managing risk, diversifying portfolios, and promoting innovation.

Nature's Fortune is not a perfect book. I'd prefer a little more poetry, which Tercek studied in college and continues to be involved with as a reader, in the mix.

But the book is a good primer for business readers and will sit nicely on a shelf next to Ray Anderson’s Mid-Course Correction and Business Lessons from a Radical Industrialist, Paul Hawken’s The Ecology of Commerce, and other books about the relationship between ecology, economics, and how the two are increasingly interdependent.