The February CORE Sustainability Lunch provided three perspectives on expectations for investment in clean technology. Andrew Fowler offered thoughts specific to wind power and his company RES Americas, while Dave Gold of Access Venture Partners and Peter Edwards of Fairfield and Woods (formerly of Altira) offered more general views.
Fowler, the Senior Vice President of Construction and Engineering, highlighted RES Americas’ involvement in wind power. The company recently moved its headquarters from Austin to Broomfield, in part to “be in the middle of the wind corridor” which runs from the Pacific Northwest to Texas, but also because of the attractive potential workforce. RES installed 1400 megawatts of wind power last year, representing 22% of total wind installations in the US for 2008. Prospects are not as strong this year – with only 500 megawatts of planned installations to date – but Fowler remained optimistic about longer term opportunities, noting expectations for 57,000 megawatts of wind power installation by 2015. Fowler ended by stating that wind power, like other renewable options, is a cyclical industry highly dependent on regulations and subsidies (e.g. production tax credits and renewable portfolio standards) as well as the price of oil.
Gold provided a reasonably optimistic perspective on the future of clean tech investing by reassuring the crowd it is “not a fad.” But in these early months of the recession he does predict funding to become more scarce, as venture capitalists are likely to reserve more money for their existing investments given future prospects for exit remain uncertain. Companies that could see particular difficulty are those that will need significant access to the debt markets before generating cash flow (e.g. biofuel companies that need to build refineries) because of the current credit crunch. Gold noted that investors’ “interest areas are shifting” away from projects that may require large infrastructure investments to areas that may be able to get a product to market without hundreds of millions of dollars in investment, including energy efficiency plays. Despite the downturn, however, deals are still getting done: Access Venture Partners will be closing a round with an LED manufacturer this quarter.
Edwards focused on how recent and expected legislation might impact renewable energy investments. Edwards noted a last minute change in the stimulus bill that reduced smart grid allocations from $32B to $11B – although either amount would likely prove insufficient to create the system with estimates running close to $100B. Also of note is the potential for the passage of a federal renewable portfolio standard (currently 28 states have standards in place) that could require 25% of power generation from renewable sources by 2025.
Edwards then went on to discuss the prospects for cap and trade which he “believes will become a reality this year.” He expects initial government allowances for carbon dioxide emissions to be set at non-restrictive levels on businesses. Yet even with non-restrictive allowances, this legislation would establish a marketplace for trading metric tons of carbon dioxide emissions that would function similarly to a commodity or currency market. Edwards cited near term price expectations of around $10 per metric ton of carbon dioxide rising to $50 per metric ton sometime near 2030 to 2040. A key threshold may be reached when the price per metric ton climbs to $45, as at this cost many renewable alternatives including wind and utility scale electric storage are financially competitive with traditional fossil fuel sources. Interestingly, solar technology would still not be cost competitive at this level. With installation costs running about 50% of the total cost to implement a solar system, Gold expects challenges to solar’s financial viability will continue even as technology efficiencies improve and the cost of parts comes down.
CORE is the oldest and largest trade association in the Rocky Mountain Region dedicated to promoting sustainable business practices and a more responsible global economy. CORE’s Sustainable Opportunities Summit will take place at the Colorado Convention Center from March 17 to 19 and feature speakers including Richard Sandor of the Chicago Climate Exchange and Governor Bill Ritter. For more information on the organization and other CORE programs, visit their website.
