Archive for April, 2010

As posted to CleanTechBlog.com

As a class, new energy technologies have proven to be quite difficult to commercialize successfully. Often, they must surmount substantial technical, scientific, and engineering risks to get from concept to the market. And to prove at scale and expand to broad application, very large sums of capital are typically required. 

Accordingly, many private-sector capital sources – venture capitalists, private equity firms, corporations, and banks – are wary of funding new energy technologies on their own.  Put another way, for the clean energy economy to emerge in a major way in the coming decades, the public sector will have to participate in new and significant ways in financing the development and deployment of new energy technologies. Innovative public-private partnerships in the capital arena will be essential. And given the massive amount of dollars required, these programs will have to be federalized to score any major successes.

For the most part, federal engagement in the financing of new energy has been historically limited to various subsidies embedded in the tax code, such as the production tax credit for large-scale renewable energy projects or investment tax credits for customer-sited renewable energy or energy efficiency investments.

More recently, stemming from the Energy Policy Act of 2005, the Department of Energy has been authorized to provide loan guarantees underlying private-sector loans for projects employing new energy technologies.

Although somewhat effective, clearly the federal programs to complement the private sector in financing new energy technology development and deployment have not had impact anywhere near the magnitude that pretty much everyone but guardians of the status quo desires.

To that end, both the Markey-Waxman bill that passed the House last year and the Bingaman bill being floated in the Senate include the creation of a Clean Energy Development Administration (CEDA), the purpose of which would be to provide debt capacity that is otherwise inaccessible to innovative energy technologies.

Ordinarily, I’m not a big fan of new government bureaucracies. Indeed, a CEDA might not be necessary if the pricing signals for clean energy were set in a manner that induced the appropriate level of investment in RD&D. However, without political will to take on energy pricing (i.e., taxes and carbon policies) it’s clear that finance capacity for clean energy is currently inadequate, and that only a player of the heft of the federal government can make any meaningful dent in improving the situation.

Perhaps Wall Street agrees. Two finance industry leaders – Eric Fornell, vice chairman of investment banking for J.P. Morgan Chase, and Mark Heesen, president of the National Venture Capital Association – recently wrote a thoughtful article providing both support and words of wisdom in establishing a CEDA.

As posted to CleanTechBlog.com

Remember the white soul group on the Motown label, Rare Earth? If you do, sorry: this posting isn’t about them…

Nope, it’s about the fact that rare earth metals represent a unique problem – and opportunity – in the cleantech realm.

As PBS reported on “Newshour” a few months ago (transcript here), rare earth materials are important commodities essential to the production of many environmental technologies, from batteries to wind turbines to solar panels. Unfortunately, many of these materials are highly toxic and thus pose significant environmental hazards if mismanaged.

Regrettably, since most of the world’s endowment of these rare earth materials is found in China, the extraction of these materials from the ground is often done with little concern for environmental protection.

In addition, to the extent the world becomes reliant on technologies that depend upon rare earth materials, substantial geopolitical issues emerge as these elements become strategic inputs for economic activity. (In other words, replace “Saudi Arabia” with “China” and “oil” with “rare earth metals,” and you get the idea.)

So, cleantech innovators would do well to find economical, widely available, and environmentally friendly substitutes for rare earth metals…or to re-engineer cleantech widgets so that they don’t require these scarce and nsaty materials. There’s a lot of money to be made, and a lot of headaches to be saved, if we don’t become stuck over the rare earth barrel.