Ideas on Energy: Mid-Atlantic Energy Technology Forum Looks to the Industry’s Future

(Note: This is reposted from my friends at Pepper Hamiliton LLP, co-hosts of the Mid-Atlantic Energy Technology Forum with the Cleantech Alliance Mid-Atlantic, of which I am co-founder.)

The future of the energy industry; the technologies with the potential to impact energy exploration, delivery and efficiency; and the energy industry investment climate were on the agenda at the 6^th Annual Mid-Atlantic Energy Technology Forum.

Pepper’s Energy and Emerging Company Groups hosted the April 3, 2014 event in Philadelphia, along with the Academy of Natural Sciences of Drexel University (which served as the event venue) and the Cleantech Alliance Mid-Atlantic. Nearly 300 energy industry professionals were in attendance.

The Forum kicked off with an investor panel moderated by Pepper partner Thomas P. Dwyer that discussed the current strategic and financial climate and what to expect in the energy sector in 2014. The featured panelists were George Coyle, manager, investments technology ventures, ConocoPhillips Company; Bill Kingsley, managing director of EnerTech Capital; Michael Smith, vice president, head of Constellation Technology Ventures at Exelon; and Annie Theriault, vice president of the Northwater Intellectual Property Fund.

Dwyer asked the panelists how the long-term viability of energy technology is perceived in the marketplace, to which Coyle responded, “Energy technology has always been there and will continue to be. While we saw a drop in cleantech investment, we’re still invested in a number of cleantech companies, including the first commercial carbon capture plant in Texas.”

“Oil and gas are booming, and those industries continue to drive the need for technologies that help them to be more efficient and sustainable. It’s difficult to supply energy and it takes energy to do that, so there’s no shortage of need for technology that streamlines those processes,” Coyle said.

Smith said that as an electric power provider, his company is seeing a paradigm shift in how businesses and individuals make and use power, which will likely change the way energy and related services are provided going forward. “Disruption in our industry is coming from the outside. People are making devices to make buildings smarter, and those innovations are coming from technology people, not energy people,” Smith said.
Dwyer then posed a thought-provoking question to the panelists: Will there be a Google or Apple of the energy space, or is the industry too regulated for that to happen?

Kingsley said, “It won’t happen in the next two or three years. The utility system in the United States is brilliant in the way it was set up in the 1920s and 30s. But, that investment model is now creaky. Everyone is looking at doing something with natural gas – there wasn’t much going on in that space 15 years ago. Utilities can’t plan effectively in that environment.”

“That’s right from my perspective,” Smith said. “Customers increasingly determine their fate, and we’re seeing an erosion of the energy paradigm that’s been around for 100 years.”

Coyle added, “We’re seeing a reversal of roles. Instead of creating more devices to take power off the grid, we’re seeing new ways of putting power back on the grid.”

Dwyer asked the panelists about trends in exits in the energy space, and Theriault said that exits involving IP in the software space are doing well. “On the M&A side and public company exits, energy is still a tricky market and will continue to be challenging,” she said.

Kingsley said, “We had people who walked away from the cleantech sector who are now coming back, so it’s a cyclical market. I like it – there are fewer investors, so the deal prices are better.”

The discussion closed with the panelists’ thoughts on opportunities and challenges for energy technology in the Mid-Atlantic region. Coyle said that while there are many very good energy technology professionals in the region, the challenge is getting the best and brightest minds to care about energy and see it as a career path, as it is seen in Houston and other parts of the country where the energy sector is more dominant. He also said that perspective may change now that Pennsylvania is one of the largest energy production states, thanks to the Marcellus Shale.

“There is no dearth of activity in this region, and I am not at all concerned about the viability of energy technology in the Mid-Atlantic,” Smith said.

A company showcase followed the panel discussion, and featured five innovative companies, which each presented a snapshot of their company’s energy-focused technologies. Kevin Brown of Hobbes & Towne introduced the presenting companies:

• Applied Communication Sciences has developed an innovative grid technology product that is getting traction in the marketplace. For example, the company’s utility pole sensors are deployed in the Sacramento Utility District to better monitor its network.
• Essess is a mobile thermal imaging technology company that can map a building’s energy loss – identifying leaks in a building envelope undetectable by the human eye – and provide remediation services.
• Infinite Invention LLC provides the ConnectDER, an electric power meter that mounts between a standard utility meter and the meter case to provide a quick, safe, inexpensive way to connect solar homes to the grid.
• Preferred Technology, LLC provides environmentally friendly resin-coated sand products to the fracking industry; coated sand prevents wells from clogging during the fracking process.
• Solar Grid Storage LLC “makes solar better with batteries,” providing a containerized storage solution that changes solar power into grid power by adding batteries to solar photovoltaic installations.

Scott Anderson of Ernst & Young’s Global Cleantech Center then introduced keynote speaker Bob Inglis, a former congressman from South Carolina and executive director of the Energy and Enterprise Initiative (E&EI) at George Mason University, to close out the program.

Inglis founded the E&EI in 2012 on the conservative principles of free enterprise and economic growth, limited government, liberty, accountability and reasonable risk avoidance to solve the country’s energy and climate challenges.

“At E&EI, we believe that free enterprise can fix climate change,” Inglis said. “Our proposal involves cutting income taxes and replacing it with a carbon tax – in effect, reducing taxes on income, which you want more of, and taxing something you want less of.”

The event program is available online at http://www.pepperlaw.com/pdfs/Energy_Tech_Forum_Program_Book_2014.pdf.

Know Your Audience (and Its Bite Size), Say Corporate VCs to Cleantech Entrepreneurs

Grant Allen of ABB TechnologyVentures

"Get your stuff together before you meet with us," said Grant Allen of ABB Technology Ventures to an audience of entrepreneurs, investors, and corporate leaders gathered at the offices of Pepper Hamilton in Philadelphia last Thursday. "Do your homework. We're quite clear on our web site what we do. And make sure you have a crisp, compelling script, and a strong, committed management team."

This sentiment was echoed by Michael Smith, head of Constellation Technology Ventures at Exelon. "You need to know your audience," Smith said. "Talk to us like an energy company. We're looking for ways to keep Exelon relevant."

The event, "Energy Giants: Looking for Innovative Investments," was jointly sponsored by Pepper Hamilton and the Cleantech Alliance Mid-Atlantic, and featured Sumit Sarkar of NRG Ventures, in addition to Smith and Allen, on a panel that I moderated.

Michael Smith of Constellation
Technology Ventures

"Large companies aren't good at innovation," Allen offered, "our goal is to be a thorn in the side of internal R&D."

Sarkar suggested that the venture arms of corporations can sometimes be nimbler in response and are constantly scanning for technologies that offer improvements.

Each outlined what they look for in a company and how much they want to invest, their “bite size.”

There was, of course, some discussion about capital "light" companies or technologies, but given the range of their investment thresholds -- from $3M-$250M -- they understand the need for some capital outlay.

While traditional Venture Capital (VC) has been pulling out of the sector, corporate VC (CVC) has picked up some of the slack.

In 2012 for example, according to a recent study, of the total $6.46B investment in the sector, $2.7B came from corporates, up from $2.55B in 2010 and $1.7B in 2006. Q2 of 2013 saw CVC rise to 14% of total venture investment in the sector vs. only 8% in Q1. And 107 CVCs made an investment in the sector in the 1st half of 2013, versus 148 in all of 2012.

Sumit Sarkar of NRG Ventures

Corporate VCs are a little less risk averse than traditional VCs, in part because such companies are full of engineers who can scrutinize a technology's before an investment is made, but there seemed to be consensus that if the technology enables an existing technology perform better, it is going to be worth a look.

All three investors agreed that networking and investment pitch events can serve as a feeder for companies, but having an executive sponsor is best. 

The entrepreneurs in the room, representing everything from energy storage to software that helps increase the efficiency of long-haul truck drivers, seemed to nod in understanding or agreement.

At the cleantech CEO Retreat that I help manage for EY’s Global Cleantech Center this fall, a recurring meme developed around elephants dancing with mice. As small companies (the mice) began to dance with corporates (the elephants) either as strategic partners, customers, or investors.

Some of the concerns for the mice, obviously, were around how not to get crushed while dancing with elephants. But from the elephant side, how can mice get noticed and have something relevant to share?

Hopefully, the panelists at last Thursday’s event helped alleviate some of the stress between species on the dance floor.

(Disclosure: the author is co-founder of the Cleantech Alliance Mid-Atlantic.)