By Rob Day

Many cleantech investors were cheered by the successful IPO of A123 (AONE) this past week.

By Rob Day

Cleantech could really use some venture-backed exits to help both further validate the sector as an investment area, and generally boost investor spirits in this tough time. Plus, it would be great to see some big IPOs out of subsectors other than solar. Thus, here's hoping A123's (AONE) IPO happens smoothly and successfully.

By Rob Day

That big sucking sound you hear... is the sound of China deciding to become a big player in solar project installations, overnight.

By Rob Day

Everyone pays attention to oil prices as their first cut on energy prices. I see numerous Wall St. analysts comparing oil price changes to solar stock price changes and showing strong correlations, and I scratch my head. Oil prices shouldn’t really drive the fortunes of solar companies. Very little of our electricity generation mix in the U.S. or in Europe or Japan (or other solar markets) comes from oil-fired generators. And yet investors seem to view solar as a hedge on oil prices, probably because oil prices are highly visible and volatile. We pass by gas stations all the time in our daily lives and see the prices go up and down. Oil prices are reported on in the evening news. VCs are often asked what their oil price “breakeven” is when looking at cleantech opportunities (ie: “what long run oil price do you invest based upon?”). Oil, oil, oil.

By Rob Day

Happy new year, everyone!

A big thank you to the few thousand of you who regularly read this column, and thanks for the kind words many of you have sent my way over the past few years. I hope these rambling writings continue to be useful for you…

‘Tis the political season, and so we’re treated to scenes of one group happily chanting “Drill, baby, drill!” while another group pledges more support for solar and wind power, while clean coal industry lobbyists throw convention parties for delegates and an oil billionaire buys ads to promote wind and natural gas.

It’s generally great to see all of this attention on energy issues, which have been too long neglected.  But all the rhetoric about “Energy Independence” has been focused predominantly on finding new sources of supply, whether it be incumbent types (fossil fuels) or alternatives (solar, wind, etc.).

Any venture capital financing deal is typically the result of a very thorough diligence process, where any business model or technology that can't withstand deep scrutiny will not pass muster. And VCs are by nature pretty jaded on all this kind of wild-eyed stuff. So the "Huh" companies typically don't get venture funding, and cleantech VCs don't pay much mind to them. But as the cleantech sector grows, VCs are going to need to be concerned about the "Huh" companies, simply because when they inevitably implode it can have negative impacts on the overall market acceptance of related, serious approaches -- many of which the VCs have actually backed.

Both companies are venture-backed efforts in the DR space, so it's a good sign to venture investors that the public market exit option should be open to "boring" energy efficiency technologies going forward. It probably reflects a recognition of the strong economics presented by energy efficiency -- the best way to make a kilowatt-hour is not to use one in the first place (admittedly, we've been beating this drum for a while now, apologies for being repetitive). Hopefully these companies continue to provide strong comps going forward.

The thing to note about both companies and their competitors is that they will need to continue to build an ecosystem of smart grid/ energy automation technologies in order to support their growth. DR services are gaining acceptance by major utilities (and no less importantly, their governing Public Utility Commissions). But right now, most DR services (speaking only about all such providers overall) entail literally picking up a phone or paging or emailing a facility manager, who then individually turns down power usage (or turns on a backup generator) during the period of the "event."

But what impacts do these differences have in the burgeoning markets for these somewhat competitive products?

To start with -- what are carbon credits, and what are RECs, and why are they different? It's a confusing issue right now. You can get some useful descriptions here, but let's break it down into the differences from an investor's perspective:

Interestingly, out of 47 deals tracked in North America, five deals (Cilion, Altra, Ion America, Renewable Energy Group, and Newmarket Co.) made up 60% of the total funds invested. It's a very good indication of what we've talked about before, in that there is a bit of blurring of project finance and traditional VC in the market figures, especially when it comes to biofuels. Cilion, Altra, REG and Newmarket raised their large financings in order to build out or acquire new production facilities... This has implications when thinking about the importance of cleantech within the overall VC industry. The press release points out that the dollars tracked in cleantech was 14% of overall VC investment in the quarter, but that the number of deals tracked was 5% of the overall total VC dealflow. Perhaps the latter figure is a good way to think about the positioning of the sector right now.

Note in the PR that the language is a bit confusing when it states that "Cleantech investment YTD is running 20% behind last year YTD," which apparently actually relates only to European investment totals, according to Craig Cuddeback at CTVN. As the below chart shows, it was actually another up quarter for the sector in North America.

The AAMA panel session was moderated by John Denniston of KPCB, and also included Bryant Tong of Nth Power, Vikas Desai of SunPower (SPWR), Dave Pearce of MiaSole (as always when I mention MiaSole, I'm compelled to note that I've got a minor vested interest in seeing them succeed), and David Wooley of The Energy Foundation. Given this group, the conversation naturally focused on solar markets and investment opportunities, but also touched on a wide range of clean energy topics.

Aventine Renewable Energy Holdings filed for a $50mm IPO (proposed symbol: AVR), which appears to be aimed in part at supporting a $60mm expansion of their Pekin, IL ethanol plant.

One of the more interesting speeches, among several interesting talks and presentations, was Don Paul's. As the CTO of Chevron (ticker: CVX), Don was able to speak to several interesting questions -- where is Chevron putting their R&D and investment efforts, how do they expect to bring new technologies to market, and have we reached "peak oil"? Some notable statements (as always, I'm not a reporter, so these are directionally correct but not 100% accurate):

Relative to the billions-of-dollars-per-year market that solar power is fast becoming, the amount being invested is still a small amount. But it's important to recognize that almost every investment in solar technology (with some rare exceptions) is someone making an investment in a proprietary generation technology, all from the same basic source of energy - the sun. A natural assumption would be that for any given energy-generation situation (ie: rooftop panels), there will be one, single most-economic technology. With some solar investors declaring that they are "looking for the next Google," it is tempting to think of solar technology as a zero-sum game, with one winning technology (perhaps already invented, perhaps not) and a lot of lesser approaches that will either be subsumed or that will outright fail.

Consider that this year there were at least 10 different solar-technology venture fundings (probably a lot more, just did a quick scan), plus other IPOs, plus the presence of well-established major players such as GE and BP Solar, etc. If solar is indeed a zero-sum game, it makes it a bit tough to understand the level of investment in solar right now. Is there going to be one "home run" and a lot of money-losers in the segment? Is there a bubble in solar?

Also of note is the soon-to-be-released article on clean energy in Red Herring, which should be hitting newsstands on Monday.

The Company is providing these manufacturers with samples of Power Glass thin films and plans to adapt the on-going results of these working relationships into its manufacturing process line to meet the needs of its future licensees. [ more ]

XsunX has been getting a great deal of press recently and it looks like the PR engine is going full steam. They are also featured in a Business 2.0 article about their technology.

Pacific Ethanol, which is publicly traded, is building sites in the west coast to try to capture first-mover advantage in building out ethanol production capacity in what they see as an untapped region. This points to the fact that much of ethanol production (and biofuel production in general) is a very well-understood, mature process, so the competitive advantages for winning players are more likely to be due to location, feedstock costs, financial engineering, operational excellence, customer relationships, etc., rather than a proprietary technological advantage. Also, the investments tend to be project-oriented by nature. It can make it tough for technology investors (ie: VCs) to participate -- with exceptions, of course.