Paul Deninger, Vice Chairman, Jefferies & Company Inc.
Government should help encourage clean-tech investment, according to, from left, panelists James McDermott of US Renewables Group, Michigan State Treasurer Robert Kleine, Lynde Coit of Plasco Energy Group and Jonathan Bloch of GKM Newport.
"The United States is the Saudi Arabia of waste," said Jim McDermott, managing director of US Renewables Group, pointing to some calculations that the top 10 U.S. waste haulers could produce between 20 billion and 30 billion gallons of ethanol via waste gasification. America is full of green BTUs just waiting to be harnessed, panelists agreed.
Robert Kleine cited a study that said 80 percent of the electricity in the nation could potentially be provided by wind generation around the Great Lakes. Given the enormous potential for clean energy and other clean tech sectors, moderator Paul Deninger asked panelists to discuss the benefits and pitfalls that face investors.
While all panelists were enthusiastic about possibilities for enormous growth in the clean tech sector, Steve Westly suggested that "there is still too much hyperbole" and that investors and venture capitalists must focus on fundamentals. The panel generally agreed with Deninger, who said clean tech is becoming the "third leg of the stool of venture capital after IT and health technologies." But McDermott said, "Reliability trumps novelty." In many other areas of venture capital, novelty is key to allowing companies to mark up their prices and generate more revenue; in clean tech, "low-cost providers rule the day."
Lynde Coit pointed to the difference in the investment climate today vs. a year ago. Investment normally goes through several stages — from venture capitalists to private equity to other investors, but with the economic downturn, investors are no longer comfortable that the next person in the chain will be there.
Panelists agreed that government should play a role in encouraging clean-tech investment and providing some incentives against the backdrop of sometimes extreme volatility in commodity prices.
Jonathan Bloch called clean tech a good repository for money from the stimulus plan, as it is neither a straight financing deal (which would be done by a bank) nor a traditional venture capital deal. McDermott warned, however, that until the government makes the rules of the game clear and gives guidance for the markets, simply writing checks will not solve anything.
Investors will be leery about lending if they don′t know what the regulatory landscape will look like in future. Non-economic "green" mandates rather than tax incentives or other direct cash transfers may be more effective, Westly said, adding that the government would be well-advised to follow California′s lead in environmental mandates. Rather than mandating that car companies produce so many plug-in hybrids or electric vehicles, Westly and Bloch said, just mandate "fuel-efficient vehicles" and let the market determine which technology is the winner based on price competitiveness.
Clean technology is heavily dependent on government regulation and financing, making investing in the technologies unattractive to some despite the potential for large upsides. McDermott said what's missing are a coherent U.S. energy policy and a global framework for pricing carbon. "Until rules are clear and pricing mechanisms are there, I think it′s going to be a hodge-podge," McDermott said.
Global Conference 2013
Former Prime Minister Tony Blair, philanthropist Bill Gates and Strive Masiyiwa of Econet Wireless discuss advancing prosperity in Africa.
