It’s 2nd down and about 10 yards to go, and Harry Reid decided he might as well punt.
With today’s news that any upcoming energy bill won’t include climate legislation or even a renewable portfolio standard, cleantech entrepreneurs and investors are left scratching their heads. Yet more uncertainty.
I continue to see pitches from companies with smart, low-cost approaches to carbon emissions, but lacking more of a certain price and market for carbon credits, they’re having a really hard time raising capital. Ditto for anything related to carbon capture and storage. And in many other areas of cleantech, the lack of certainty around energy and carbon pricing is a killer. I’m even seeing smart grid companies include carbon emissions related savings in their sales pitches to utilities. But if the utilities can’t expect regulatory clarity, they can’t value that.
So what’s a startup CEO to do? Avoid mentioning carbon if at all possible. Everyone knows the U.S. will have to deal with it sooner or later. But no one knows if it’ll be sooner, or later. So try not to mention it at all. And if you have to mention it, try not to make any assumptions about pricing. If you send me a business plan which includes a price per carbon as part of your economic value proposition, I’m going to have to mentally reset that value to $0/ton and assess your value proposition through that lens.
It sounds like HomeStar is still in, which is good for the residential energy efficiency retrofit industry, and perhaps some small other cleantech-focused programs will be included. But basically there’s not much in what’s being discussed in the upcoming energy bill that will do anything to clear up all the uncertainty.
And it’s not just startups and their backers that are affected by this. Large utilities and large energy consumers need more price certainty as well, and they’re not getting it. They can’t do capital budgeting effectively, and they can’t make affirmative decisions to invest in new technologies and systems if they don’t know how to value it. It’s a weird situation where everyone pretty much knows SOMETHING will have to happen at some point, but lacking more information about what that something is, and when it will be, nobody can do anything significant. Even the electric utilities sound like they’re getting impatient for some clarity.
If there’s one thing the energy industry learned from the cyclical subsidies for the wind industry over the past decade-plus, it’s that uncertainty is an absolute industry-killer. Especially for young industries having to sell to large, slow-moving incumbent industries.
Meanwhile, the U.S. industry exported about $7.7B in cleantech products and services last year, compared to China’s $22.7B and Germany’s $19.6B — according to a US Senate report from January.