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Panel Detail:

Wednesday, April 30, 2008
9:25 AM - 10:40 AM

Investing in the Future: Accelerating the Clean-Tech Revolution

Moderator:

Jeffrey Lipton, Managing Director and Head of CleanTech Practice, Jefferies & Company

Jonathan Bloch of GKM Ventures (left) and Daniel Weiss of the Angeleno Group highlight the most promising technologies in the clean-tech sector.

The broad definition of clean technology refers to a vast set of technologies in the sectors of bio-fuels, renewable energy, energy storage, and water and air quality. Daniel Weiss of the Angeleno Group suggested that "the numbers say it all," with $200-$300 million invested in clean energy seven or eight years ago vs. $3 billion dollars invested in 2007.

This growing sector is of special interest to policy makers, investors and companies -— but could the hot pursuit of solutions lead to a bubble? Margot Wirth of CalSTRS observed that we may be seeing a bubble on a sub-sector level, especially with ethanol. Jonathan Bloch of GKM Ventures argued that the clean tech sector is moving in the right direction but cautioned that peaks and valleys are still to come.

How is the current credit crunch affecting the clean-tech sector? Joanne Yoo of NY State Common Retirement Fund stated that no sector is completely immune from the crisis, and that this could affect important issues of exit opportunities. But she also noted the opportunity to recruit high-profile executives in such times. Wirth agreed with Yoo, but felt that this sector is less affected by the current crisis than most. Frances Arnold of Cal Tech observed that she sees enough capital available to start with, but she questioned who will take the risk and invest in taking things to a truly large scale when the time comes.

The panelists turned their attention to the role of major players such as GE and Honeywell, which are strategically investing in clean technologies. Weiss believes the decision is made on a case-by-case basis. "Strategic partners are looking for value," he said; if there are profitable opportunities, they will consider investing. It is critical for the clean-tech sector to have large, established corporations willing to commit capital. Bloch added that collaborating with the major players and understanding how the market operates is vital to ensure successful exits in the future. Yoo warned that strategic partners sometimes don't share their entire plan, and "strategic priorities sometimes turn out to be strategic public relations."

The involvement of strategic partners is related to the fact the sector requires massive capital investment to achieve large-scale implementation. Bloch offered a point of comparison: software companies need $40 to $50 million these days in order to sustain their future and become profitable, while clean-tech companies need $75 to $100 million just for proof of concept. He added that only solid returns will generate interest with investors. Yoo agreed, emphasizing that "this is not a social exercise" and these firms are subject to the same investment criteria as any other sector.

The panelists predicted that we will see strong growth not only in alternative energy but also in water, green materials, agriculture, health care, remediation, solid waste, carbon sequestration, transmission and distribution infrastructure, batteries, lighting, bio-fuels and other alternative liquid fuels. Public policy can help foster opportunities. For example, the spread of renewable portfolios at the state level is a powerful tool.

Another key factor will be the future price of carbon. According to Yoo, making carbon a financial issue is critical when looking from cost perspective. It is currently not incorporated into baseline calculations and will not be among the considered factors until legislation is in place, according to Weiss. Companies cannot count on profits from carbon reduction at this point.

The panel agreed that the clean-tech sector must be global in nature, especially when competing against more traditional investments. The track record of a management team, the regulatory environment, the path to commercialization and scalability are all important issue to combine with proven technology.

In conclusion, the panelists were asked for their personal outlooks on the near-term future of clean tech. Bloch emphasized his belief that all of the components for long-term success are at hand; he hopes to see growth without the sector becoming overheated. But speaking for everyone, Yoo expressed her hopes that we will see science move from the lab to the market quickly to serve our future needs.

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