Nat Goldhaber: CleanTech Remains Hot In A Post-Solyndra World


Pessimism about the clean tech space has been on the rise recently, thanks in part to a pair of high profile failures of government-backed companies. Congress and the media have pounced on the carrion like starving scavengers.

In the frenzy of sensationalism, it is hard for the public to derive a reasoned understanding of the facts and even more difficult to feel comfortable about the future. An attitude of pessimism is understandable, given current events. Yet it’s short sighted. The “doom and gloom” scenarios being posited by some parties are wildly overblown.

The bankruptcies of Solyndra and more recently Beacon Power, after receiving Department of Energy loan guarantees, are disappointing. But the call to abandon the government funding of clean technology and the perceived demise of clean tech is wrong.

The failure of two clean tech companies is hardly a reason to slam federal government support of clean tech. Entrepreneurship is defined by bold, unproven, risky ideas and relatively high failure rates are inevitable. Stumbles like Solyndra’s and Beacon’s are simply part of the process of “creative destruction.” One business model will fail, replaced by another that leads to newer and better clean technologies.

It’s because of that tech “circle of life” that I remain upbeat about the future of clean tech and of the government backing of clean technology. Some government programs will be trimmed and some will disappear in the wake of the Solyndra. But overall they will remain intact because they have a compelling future and a strong constituency.

Such government programs are backed by clean technology supporters, of course. But they also have the support of many who realize that without clean energy, energy independence is impossible. No matter who is elected president in 2012, grant and loan programs will likely remain available for clean tech startups.

Government financing, after all, helps support a fertile development area, giving America a chance to continue as a technology and innovation leader. Innovation in clean tech will spur our struggling economy, something both Democrats and Republicans are eager to do.

Bear in mind that the United States faces global competition on clean tech development from many other countries, especially China, which offers plenty of support, both financial and non-financial, to clean tech companies. Overall, in fact, the Chinese government invests about $35 billion per year in clean technology, roughly double the amount that the United States does. By backing off or abandoning its backing of the cleantech industry, the U.S. government would put America at a significant disadvantage in the global marketplace.

To appreciate the challenge we face from China, consider the stark contrast between the construction of the hydroelectric Three Gorges Dam spanning China’s Yangtze River and the development of the Ivanpah photovoltaic solar energy plant in the Mojave Desert. China relocated 1.3 million people to make way for the dam, the world’s largest renewable power system. By contrast, development of BrightSource Energy’s Ivanpah plant, a far smaller project, was stopped for months earlier this year because it endangered the protected desert tortoise, even though steps to protect the tortoise had been officially approved in an environmental impact statement.

People tend to forget that government support of selected projects has historically paid enormous dividends in the commercial sector. Projects at the Defense Advanced Research Projects Agency led to the ARPAnet and, later, the world-changing Internet and to GPS. Many years later, the National Science Foundation, DARPA and NASA finance some of Google’s R&D in the tech giant’s startup days. And on the energy front, the Department of Energy did early R&D work to extract natural gas from shale rock, paving the way for a huge new industry and greater hope for energy independence.

The fundamental R&D that at times is required for these companies isn’t something linked to the bottom line and often exceeds the ability of what private companies can readily manage. And, the truth is some clean tech investments are too big to be handled by the private sector alone. Capital-intensive deployments are necessary to kick off a commercial deployment of new technologies and can wind up costing more than a startup can afford, even a startup backed handsomely by venture capital.

Claremont Creek Ventures is certainly not giving up on the commercial potential of clean technology, and it doesn’t look like other top-tier venture capital firms like Khosla Ventures or Vantage Point Ventures are either. We made seven new and follow-on investments in cleantech this year, including in Energy Cache and Project Frog. Existing companies Clean Power Finance and EcoFactor are getting major market traction.

According to Ernst & Young, VC clean tech investing shot up 73% from the third quarter of 2010 to the third quarter of 2011, coming in at $1.1 billion. And the faith of venture capitalists doesn’t appear to be misplaced. According to a poll by Kelton Research, 89% of Americans believe solar energy is important to the country’s future. These are the people who make a market, and the market is what supports the investments.

You really don’t need to look beyond Tesla Motors, the electric carmaker, to see this. The company has already sold out all of next year’s production of its soon-to-be-unveiled Model S sedan. Tesla is on course to become a successful carmaker, or at least a successful battery maker, and it will repay its $465 million government loan along the way. The company may, in fact, become representative of a new, advanced class of American manufacturing.

There’s no question about the promise of clean technology, or that it’s making progress in our country. The DOE is hardly the only reason for this, but it is an important part of the developmental foundation and a source of funding that the clean technology industry cannot afford to see eliminated.

Nat Goldhaber is a co-founder and managing director of Claremont Creek Ventures. He is the firm’s resident expert on energy conservation and management systems. He tweets here and blogs here.

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