A123 Runs Out of Juice

Out of juice.

Not so long ago, I was long A123 Systems. But over the course of 3 years, I went from long to wrong.

I was enthusiastic about the company's products, its lineup of investors (GE, Qualcomm, Sequoia Capital), and its partnerships with leading electric vehicle manufacturers, such as Fisker.

And, back on October 2, 2009, when $AONE stock hit its all-time high of $25.77, I along with others felt pretty good about it.

That is, until the stock started its long, slow dive towards .06 a share. (I sold the last of my holdings in July at a pretty significant loss.)

Yesterday, A123 joined an illustrious list of US government-backed companies seeking bankruptcy protection, a list that includes Abound Solar, Ener1, Beacon Power, Open Range Communications, and Solyndra.

Not very good company, I'm afraid.

What happened?

It all comes down to price. The cost of producing A123's batteries didn't come down fast enough so that, it "cost them more to make them than the could sell them," according to an industry analyst quoted by Bloomberg this morning. "The more they sold the more they lost."

Coupled with the still too-high costs of electric vehicles and consumer "range anxiety" and you have a volatile mix of factors that led to the company's failure.

But that's not all. The company had been plagued by contract and warranty issues over the last couple of years, competition from Asian giants like Panasonic, LG, and others, along with increasing potential safety concerns.

AONE Flatlined.

In August, a Fisker Karma caught on fire in Woodside, CA. The fire was apparently unrelated to the car's A123 battery pack, but it nevertheless fueled concerns about Lithium-ion battery safety. A earlier recall of Karmas for a battery coolant leakage issue didn't help matters.

Even a Chinese lifeline couldn't save the beleaguered company, as "unanticipated and significant challenges to its completion" scotched a deal with Chinese automaker Wanxiang.

Now Johnson Controls (another company whose stock I once held) has agreed to purchase A123's automotive business assets for $125 million and the rest of the company may be sold at auction on November 19th.

Consolidation happens. Companies fail. A123's bankruptcy is just another example of a bet gone bad.

For every cleantech failure, however, it gets tougher and tougher to recharge investor and consumer confidence.

C3 Summit: Alternative Energy vs. Fossil Fuel Supplies

There is little doubt that we are going to run out of fossil fuels one day. Yet, our demands for energy will not decrease. Despite the promise of renewable energy, collectively renewables provide only about 7 percent of the world’s energy needs. So where do we go from here?

A few weeks ago, I participated in a panel at the C-3 Summit in New York. The Summit is "an exclusive event dedicated to building new relationships, fostering existing partnerships and exchanging best practices between the U.S. and the Arab world by building a cohesive global community through collaboration and international commerce."

The panel was moderated by Dan Nelson, a former ExxonMobil executive who now runs a consultancy called International Strategic Insights.

It was a great panel, with particularly smart insights coming from the other panelists, including Ambassador Jarl Frijs-Madsen, Royal Danish Consulate General, Mark Fulton of Deutsche Bank, David Pursell of Tudor Pickering Holt & Co, and Peter Gish of UPC Renewables.

My own modest contribution focused on the price and perception issues related to renewable energy and what I learned from spending time with Tom Hicks of the US Navy earlier in the week.

Here is the video of the panel:

Cleanweb Hackathon Returns to NYC

Cleanweb Hackers Hacking in NYC, January 2012

The Cleanweb Hackathon returns to NYC tomorrow, Friday 9/28, at AlleyNYC.

I can't make it this time around, but you can read my thoughts on the January Cleanweb Hackathon here. 

The Hackathon brings together software developers, designers and entrepreneurs to brainstorm solutions to vexing problems in energy, waste, water, energy efficiency and many other issues facing our resource constrained world.

Those of you familiar with the Hackathon concept know it is an intensive developer session in which apps leveraging web 3.0, mobile, and social media technologies are built in a little over a 24-hour period. 

As in previous Hackathons around the country (and across the pond), the teams will be plied and supplied with APIs and pizza, datasets and coffee as they race against the clock to get their app built. On Sunday, the teams will present their apps to a select panel of judges.

The Friday night kick-off features a presentation by Mark Grundy of the Carbon War Room to focus developers on solving big issues in key sectors that align with the city's long-term sustainability plan, PLANYC. 

This event is part of the Cleanweb Hackathon series that was started in San Francisco in September 2011 by Blake Burris and Sunil Paul and later mushroomed into a global movement with Cleanweb communities and events in cities throughout North America, the UK and Europe in 2012.

For NYC hackathon details and registration: http://nyc.cleanweb.co/

For an overview on Cleanweb, check out: http://www.slideshare.net/blake/why-cleanweb-will-beat-cleantech

Wish I could be there! Hack-on!

Man the Lifeboats and Consider the Hype Cycle

I had an email exchange the other day with my friend John Moore of Acorn Energy, a long-time energy entrepreneur and investor, who wrote to me, almost as an afterthought, "FWIW, I am seeing interest in cleantech crumble with the Indexes."

"I'm beginning to think that cleantech may have to wait until my kids' generation takes over," I responded. 

Then John reminded me of the Gartner Hype Cycle for Technology and added, "Usually big things happen after the parade has passed." 

Gartner Hype Cycle for Technology

"I strive to dwell on the slope of enlightenment," I responded.

Later in the week I spoke with a cleantech investor who was bemoaning the state of things.

Usually an optimist, this investor said it was getting harder and harder to maintain that position.

While family offices, strategics, and international investors (read China) are entering the game, from this investor's perspective, the cleantech investing scene looks pretty bleak. 

The funds still investing seem to be doing follow-on rounds to shore up their existing portfolios. And a number of investors have left or are leaving funds and flocking to positions at companies (or even big four accounting and advisory firms -- ahem).

"But perhaps," this investor offered. "Perhaps cleantech investing will be stronger with a smaller group of dedicated people."

I couldn't help thinking of that Gartner Hype Cycle and especially the through of disillusionment. Perhaps that's where we are now and maybe, just maybe, we'll climb the slope of enlightenment to reach the plateau of productivity.

May it happen in our lifetime.

Is the Sky Falling for Cleantech Investment?

As Henny Penny cried, "The sky is falling, the sky is falling."

And to look at the latest report on quarterly cleantech venture investment released last week by Cleantech Group, one might think the same is true for this sector.

"Measured by dollars invested, cleantech venture investment fell 14 percent compared to the previous quarter ($1.88 billion) and was off 25 percent from 2Q11 ($2.15 billion),” according to the Cleantech Group. “The number of deals recorded in 2Q12 was 155, compared to 197 in 1Q12. The tally may rise again once all investors have reported all deals."

But does it really mean the sky is falling?

“Despite headwinds facing the sector and global economic instability, we continue to observe top tier funds such as Khosla Ventures, Kleiner Perkins, NEA, and others actively investing into cleantech,” said Cleantech Group CEO Sheeraz Haji in a press release. 

“While some may be ducking ‘cleantech’ as a label in North America," Haji noted, "growth in technologies addressing resource and energy challenges remains strong and both corporate and investor interest remains high.”

"The dip in cleantech venture capital this year is not unexpected," Dallas Kachan of Kachan & Co., wrote in an email to me last week. "We forecasted a decrease in cleantech VC in 2012 due to a tightening in the investor fundraising climate, waning policy support in the developed world, perennial concerns about IRRs in cleantech and macro-economic turbulence and other factors.”

Another factor may be that investors who were dabbling in cleantech the past couple of years have fled the sector, which may have artificially inflated the numbers in previously quarters and years.

I've also been hearing from several investors and entrepreneurs with whom I speak to regularly, that there's still an overall belt-tightening in the investor world.

Other investors may not be convinced the sector will thrive without a carbon price, which we won't see any time before the November election -- if then!


The news isn't all grim, however, and venture capital is not the only money in the sector.

Increasingly, big companies are filling the gap from the venture community and those firms that are in it for the long haul are making follow-on investments. 

"The largest companies in the world are buying their way into clean technology markets," Kachan noted in the same email exchange, "supplementing the role of traditional private equity and evidencing a maturation of the cleantech sector. A decrease in venture is being made up for by a rise in corporate involvement in cleantech."

Still, there has been a shakeout in cleantech companies as subsidies get pulled and follow-on money ceases its flow.

"A lot of cleantech startups have been getting shaken out and will continue to do so," wrote Rob Day in his excellent take on the Cleantech Group findings.

Day also noted some positive news, however, that Limited Partners (LPs) "finally appear to be slowly getting   back into the habit of funding cleantech venture capital firms. So I think we'll see a pickup in deal flow in the second half of the year. But probably not enough to forestall the ongoing shakeout."

As Day and others have noted, deal counts may be more indicative than dollars when it comes to judging the overall health of investing in the sector.

The top two sub-sectors in terms of deal counts in the Cleantech Group report? Energy efficiency and water.

How to Save a Planet - On a Budget: New ebook featuring The Green Skeptic

My insights on cleantech investing are featured in a new ebook from The Energy Collective. How to Save a Planet - On a Budget. 

Built from the webinar we did last November, the book offers insights from over a dozen experts in the field and includes pertinent information for companies, investors, and clean energy advocates. 

The book asks the critical question, How can we drive progress to a clean energy economy when governments are broke and investment is scarce?

My thoughts can be found in Chapter 3, "The Changing Shape of Clean Tech Investment."  

Download it free here: How to Save a Planet - On a Budget

For those concerned about the planet’s well-being, it’s one of the crucial questions of our time, one that may have implications for our environment for generations. In a time of financial scarcity, our goal at TheEnergyCollective.com is to figure out how companies and governments can shift to greener, cleaner consumption of energy, and, most importantly, how they will pay for the infrastructure projects that are essential to limiting our output of climate change-causing greenhouse gases.

To that end, we conversed with a diverse group of experts and examined case studies that describe viable solutions to our climate crisis in the midst of an economic crisis. We hope this content will be of interest to energy professionals looking to learn about where the industry is going, those in cleantech interested in financing solutions, those in government hoping to improve local infrastructure, and advocates, journalists, policymakers and policy wonks looking for the latest insight on market solutions to climate problems. 

We cover:

• Paying the true cost of energy through carbon pricing
• Can carbon markets drive green innovation and infrastructure?
• Public-private cooperation for a greener economy
• The economic case for green infrastructure
• Cleantech startups and the venture capital funding climate
• Federal policy and cleantech

Featuring Input from:

• Gernot Wagner, Environmental Defense Fund
• Marc Gunther, FORTUNE
• Jesse Jenkins, Breakthrough Institute
• Will Coleman, Partner, Mohr Davidow Ventures
• Thiemo Gropp, co-founder, DESERTEC Foundation
• Andrew Carman, Head of Americas for Project & Structured Finance - Infrastructure, Cities & Industry, Siemens Financial Services, Inc.
• Jo Danko, Global Director for Sustainable Solutions, CH2M HILL
• Lucas Merrill Brown, Rhodes Scholar, Oxford
• Kirk Edelman, President and CEO, Siemens Financial Services U.S
• Lane Burt, Technical Policy Director, USGBC
• Lee Thiessen, Executive Director for Climate Change Policy and British Columbia’s Climate Action Secretariat
• Janet Peace, VP of Business and Markets Strategies, C2ES
• Dan Shugar, CEO, Solaria
• Scott Edward Anderson, founder, VerdeStrategy

Download it free here: How to Save a Planet - On a Budget