Cleantech 2.0: It’s Time to Get Lucky

on April 10, 2014 at 10:00 AM


For many of us who have been in the cleantech industry for the past decade, together we are trying to build the new energy economy. We are coming from an era where an adolescent industry tried to push technologies that weren’t mature into the hands of early adopter customers who were willing to pay a premium for clean. We saw the incredible hype in the 2004-2008 timeframe, followed by the consolidation, shakeout, and sharp drop in cleantech investments in the subsequent years. But as you know, we play in the energy industry and that is a commodity industry where nobody is willing to pay a premium for clean.

However, since then we have seen clean energy technologies start to mature while at the same time large corporations figured out that they could use these innovations in a very positive way. And with that, we have also seen the total addressable market for sustainable innovation and energy tech, which was around US$500 billion in the early days of cleantech, is now approaching US$3-4 trillion as these innovations become cost effective.

I believe that we have a huge opportunity in front of us.

Sustainable innovations and energy tech are increasingly ready for primetime and contributing to the core business of large industry verticals. PWC’s recent Global Energy CEO survey indicates that 80% of energy CEOs believe that technological advances will transform their business profoundly over the next five years.

While investment banking giant Goldman Sachs recently declared the renewable energy sector to be one of the most compelling and attractive markets – and is backing up its talk with US$4 billion of made and planned investments. They are not the first big bank to tout the renewable energy sector, or even sustainable investments, but they are one of the first to put real money behind it. “Goldman goes Green” stated Stuart Bernstein, who heads the bank’s clean technology and renewables investment group. “It is a transformational moment in time.”

But where are the returns, you may ask?

In the pure cleantech renewables of solar, wind and biomass: (1) costs are down, (2) the shakeout is ending, and (3) installations have actually gone up tremendously in the past four years. Of course some investors lost their shirt on companies like Solyndra or MIA Sole and others. But they were part of the normal evolution of building a new energy industry. They were actually positive points on the cost curve of solar coming down. And the customer profits. No wonder that winners like Solar City have emerged.

In the public markets we also see that the clean energy stocks have bottomed out. On the stock market, all clean energy stocks were up 18% on average in the last year. And the WilderHill Index, which tracks a basket of leading clean energy companies, was up by 58% in 2013.

We also see Fortune 500 companies reporting billions of dollars in cleantech revenues, such as General Electric’s Ecomagination projects. And we see the first new leaders in this sector emerging, like Tesla, Silver Spring, and of course Nest. It is clear that financial rewards in this space are becoming very real.

For those of us in the cleantech industry, this is the time to position ourselves to “get lucky”.

I don’t mean luck in the form of a winning lottery ticket. I mean carefully positioning yourself so that you are ready to benefit from the positive change that is coming.

To small companies, make sure that you understand what is going on in the large industry verticals in which your innovation may play a role. Know how to enable hardware innovation by non-capital intensive software solutions and other sustainable innovations. Understand the value chain.

And to large companies, reach out to innovative young companies. Use an effective matchmaker to help facilitate and expedite this process. Those large companies that really embrace external innovation will become the clean energy giants, or what I like to call the Green Elephants, of the future.

There is lots of work to be done, but a WIN-WIN for both innovative companies and large industrial giants is emerging. We are about to see the beginning of a successful and profitable new energy paradigm.

Wal van Lierop, President & CEO, Chrysalix Energy Venture Capital. Wal has a 35 year career in energy, including 20 years working with startup companies and 13 years in venture capital with Chrysalix EVC. He is responsible for the overall strategy and leadership of the firm, as well as fund raising and strategic partnerships with leading financial and industrial companies worldwide. Wal has a significant track record as a VC and has had hands-on involvement in dozens of innovation companies. Between Chrysalix EVC and its 19 portfolio companies, Wal has been directly responsible for raising more than $1 billion for early stage technology ventures.