Venture Firms Hope High Oil Prices Will Spur Cleantech Interest

It takes a special kind of optimist to see spiking oil prices as an opportunity.

But for venture capitalists placing their bets on renewable energy, the two-year high in oil prices is a chance to re-engage the public with the potential of emerging clean technologies. But increased attention doesn't necessarily mean increased investment -- at least not right now.

"The venture investor community has not increased deal flow because of this recent development," said David Cheng, senior research analyst at the Cleantech Group, though he noted the price of oil has gotten "mainstream people" talking about hybrid cars and electric vehicles.

If oil spikes haven't spurred an equivalent spike in venture deals, at least part of the reason is the long time frame associated with developing clean technologies. Many projects will take over a decade, and a great deal of capital, before turning out a product ready for the market.

"When we're investing in early-stage companies it's not about what oil prices are doing today, this week, or this month," said Ira Ehrenpreis, general partner at Technology Partners, a venture firm with a cleantech focus. "It's about what technologies can leapfrog and become important players in energy -- many will take years to develop and evolve. It's about the long-term trends that we see."

And for venture capitalists, those forecasts have always included rising oil prices. Investors funding renewable energy startups already operate on the assumption that the reality of high oil prices will one day give alternate sources of energy a much more important role to play.

"It's an old saying, but the solution to high commodity prices is high commodity prices," said Steve Goldby, partner at venture firm Venrock.

But renewable energy isn't just competing against oil. Solar energy, for example, would also have to be cost-competitive with natural gas and coal. Though the prices of natural gas and oil used to move together, discoveries of massive amounts of shale gas in the U.S. have led to lowered prices for gas, even as oil prices rise.

Still, for the average driver confronting $4 gallons at the pump, rising oil prices could be a provocation to begin considering the merits of hybrid and electric vehicles. Cost-competitive alternative vehicles could not only lead more consumers to buy electric, but also make the sector more attractive to venture firms. More generally, it emphasizes the immediate, tangible effects of oil dependence.

"It makes investors, limited partners, realize that energy is going to continue to be a big issue," said Dennis Costello managing partner of Braemar Energy Ventures. "It recommits them or reinvigorates their commitment to the sector, even if it's long-term."

But while higher oil prices can serve to make renewable sources more cost competitive, many in the venture world say that there is no upper price limit that will serve as a tipping point for the industry.

Rather, they hope that the situation will encourage the public to think more carefully about energy--where it comes from, what it costs, and what alternatives are out there.

"It's a strong reminder for the country that it's almost 40 years since the Arab oil embargo and the first big spike in the early '70's," said Goldby. "The U.S. still doesn't have an energy policy of any kind. It's time to hunker down and really focus on sources of fuels that can be domestic and can be scalable."

Comments

[Genders]

11:27 PM on 03/28/2011

As it should, unfortunately the invisible hand of the market can afford to bribe the republic for favours. For instance Rahm and Axelrod lobbied for the nuclear power industry, and Chu uses 4 year old green numbers versus 20216 future fantasy nukes and fossil numbers. The fix is in, and you can't afford to the ante.

[Kenz300]

02:18 PM on 03/18/2011

The cost for nuclear energy just went way up. Safety concerns and live impacted
are just too great.

The cost of oil (PEAK OIL) and coal keep going up with more increases projected as
China and India use more oil every year.

The cost of wind and solar have gone down dramatically in the past two years as
additional research and development improves the efficiency and economies of scale
bring down unit costs of production.

It is time to transition to safe, clean alternative energy.

Wind, solar, wave energy, geothermal and second generation biofuels made from
waste, cellulose and algae are the future.

It is a shame that Peak Oil and a nuclear disaster is what it takes to begin the
transition in ernest.

[Kringle]

06:36 AM on 03/13/2011

Cleantech interests have been in global economic demand for quite some time now. We are still trying to shake the grasp of economic controls and corruptions by major corporate interests who are opposed to the occurring paradigm shift.

The prohibition of cannabis is a clear example of how economic competition has been stifled through corruption of policy and law. If you think our petroleum addiction was "natural" demand, you need to do some research about the history of the diesel engine:

http://www.youtube.com/watch?v=MGZEMwMx2vk

[BigDaddyWow]

12:39 PM on 03/12/2011

Sadly, Americans will pay dearly for gas over the next year and then; boom! another oil crash and prices will be back down again. Given the huge financial industry built around commodities gambling true supply/demand economics no longer exist. And, as far as I am concerned gas prices can't go up fast enough.

Independent and locally grown power is the only way to kill the madness. Through solar, wind, tidal and other natural energy sources coupled with real advances in storage America can begin to supplement the grid and eventually get out from under oil.

The biggest problem is the very short-term mindset of Americas investment class where any risk on 10-20 year investments is considered intolerable. If the gov wants to help they can match green investments.

[matthewhgrant]

05:41 PM on 03/11/2011

how stupid are people. we wouldn't even be having this discussion nor would we be worried about oil prices had we been more proactive about solar and wind. but folks, it's not about the investors, it's about BIG OIL. simply put, they don't want it and so we won't get it. they have the right in their pockets (witness wisconsin, duh) and that's the story. until we revolt, nothing will change.

[Longtimeliberal]

04:27 PM on 03/11/2011

If we don't want to be left behind in this competative and growing industry we better get going and build this technology here.

[matthewhgrant]

05:42 PM on 03/11/2011

china doesn't have the influence of big oil. not like we do. we allowed it, we must live with it.

[Overtone]

08:01 PM on 03/10/2011

In Nassim Taleb’s brilliant book, The BLACK SWAN: The impact of the HIGHLY IMPROBABLE, he writes: “in some domains – such as scientific discovery and venture capital investments – there is a disproportionate payoff from the unknown, since you typically have little to lose and plenty to gain from a rare event. …The strategy for the discoverers and entrepreneurs is to rely less on top down planning and focus on maximum tinkering and recognizing opportunities when they present themselves. ..The strategy is then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can.” After many years seeking and nurturing revolutionary energy technologies, I could not agree more.

A couple of Black Swans have emerged in the energy arena. One states power can be produced for one cent per kilowatt hour. Invented by Andrea Rossi, it is in production. No venture capital firm is involved.

The second promises diesel for $30/barrel. It has been backed by venture money.

For more about both see Black Swans and other blogs at www.aesopinstitute.org

These illustrate the need for adventure capital. Unfortunately, that is not often found in the venture community. Although, fortunately, there are exceptions.

A 24/7 program of validation, development and production of a small flock of Black Swans is pregnant. The faster it can come into being the more rapidly we can begin to supersede fossil and uranium fuels.

Where are the venture capitalists with that outlook?

[Longtimeliberal]

04:42 PM on 03/11/2011

A super secret biotech company in Mass just announced they can now make diesel using sunlight, water and CO2 for $30.00 a barrell I have no doubt the technology exists now and big oil is trying to keep new technologies down but it is too late. This and other programs are already being expanded. Why continue to drill which takes 10 years and is polluting when we can own the future and pay less with jobs here.

[Overtone]

05:03 PM on 03/11/2011

Although they were under the radar until recently, Joule Unlimited, the firm in Mass has two issued and at least three pending U.S. Patents.

And see Moving Beyond Oil on the Aesop Institute website for other potential Black Swan alternatives that can help us to supersede our dangerous and expensive dependency on petroleum.

After Pearl Harbor was attacked, within months a bomber rolled off the Ford assembly line at Willow Run every 59 seconds.

The U.S. unemployment rate fell to 2%.

Black Swan technologies are much simpler to make.

There is a huge potential for jobs in creating the cheap green energy revolution that is now clearly possible.

And several factors suggest we must respond to a largely unrecognized series of enormous threats.

The Angel community supplies much of the adventure capital in our economy. Far more than Venture Capitalists.

If they helped to launch the missing 24/7 program to accelerate the birth of a flock of Black Swans, a small handful of wise VCs would almost certainly take notice and follow.

[theobserver4]

06:24 PM on 03/10/2011

Does anyone else remember when Wall St. used to allocate capital to innovators and those with sound business practices instead of running a giant craps table?

Yea me neither; good luck to all those trying to scrape together the capital to get this world on better footing with alternative energy.

[Sarah Armstrong]

04:03 PM on 03/10/2011

Has anyone taken a look at the addition of ethanol to gasoline? We are discovering that burning gasoline laced with ethanol destroys our boat motors, our weedeaters, our blowers, etc. We began to wonder why all these things started gumming up and learned from mechanics that the additive is harmful to these small engines. Not only that, ethanol reduces fuel efficiency and we have to pay more for this stuff!

[Pandoras Folly]

04:27 PM on 03/10/2011

yea my wife kept wondering why her mpg kept dropping and mine held steady. my care is rated to run on e85 and her's isn't so mine burns the ethanonl fine.
it has two problems with it. One it burns differently than regular gas so with unsophisticated engines like lawn equipment so it produces excess exhaust gasses
two its chemically very different: it acts like a solvent, for example oil companies can't ship ethanol thru pipelines anything else uses because it strips all the grime and muck like its Mr. Clean's obssesive compulsive brother and clogs any bottle necks, pumps, valves or filters with the stuff. so yeah don't use it in small engines or anything cars pre2003ish.
Even then you'll still loose gas mileage unless it was specifically made to run ethanol mixed fuels.

[realitybaby]

03:27 PM on 03/10/2011

Here is the line I am sure u will all APPRECIATE - how many freaking committees on ENERGY HAVE WE HAD IN THE LAST 40 YEARS?

"The U.S. still doesn't have an energy policy of any kind. It's time to hunker down and really focus on sources of fuels that can be domestic and can be scalable."

[SaveWillowpark]

02:48 PM on 03/10/2011

The oil will stop flowing. Most likely sooner than they think. It would be so incredibly wise for us to start trending away from oil consumption in serious ways. Just think, its not just the cars.

How much plastic do you have in your house? What would you do for storage if not for Rubbermaid containers, zip lock baggies and teflon utensils in the kitchen? Just look around you right now, what do you see, what is everything made from? What about your clothes? Cosmetics? Fertilizer? It all has oil in it and/or oil is involved in manufacturing/supply chain. If it weren't for oil based fertilizer our planet could only support about 1 billion people. We obviously we need to find a way to continue to feed our growing population. Every part of our lives will change as oil becomes unavailable or cost prohibitive. Think, even the milk cartons...all the plastic. What would you do without it? There is lots of opportunity to recreate our world here and this is a perfect time to use good old fashioned American ingenuity to innovate our way out of this planetary mess!

I'm putting my money on renewables!

[Pandoras Folly]

04:28 PM on 03/10/2011

AND special toilets that collect urine. sireously no snark

[theobserver4]

06:30 PM on 03/10/2011

The stat about how many people the planet can support without massive "subsidies" in oil based agriculture is indeed shocking. It is the global security threat that dwarfs all others and oddly enough only the highest levels of our governments are really carrying on discussions about it.

The Pentagon is terrified about it so it's not able to be written off as a silly liberal concern. Then again they're worried about global warming too, but that hasn't sunk in yet either. :)

[Longtimeliberal]

04:46 PM on 03/11/2011

I wonder how far the research the Pentagon has gone?? I bet there is a whole lot done we don't know about and I have no doubt they will pass on some of it to the commercial sectors. There is so much opportunity.

[DFD CPA]

02:21 PM on 03/10/2011

This is the future.

I'm sure just like Big Oil is with renewables, the Big Candle lobby was out in full force to discredit the light bulb and electricity.

[Pandoras Folly]

04:28 PM on 03/10/2011

actually DC based power stations did try that with AC power.

[sheila]

12:27 PM on 03/11/2011

Big Oil (and Big Bank Speculators) are actually pushing desperately for handouts of public land and taxpayer money so they can monopolize OUR sunshine and wind, then overcharge us for it. And they are being hugely successful! tens of millions of acres of public land are being considered for Big Solar installations, and tens of millions more for Big Wind. Billions in cash and loans are already in the pipeline for Chevron, BP, Google, Goldman Sachs, Morgan Stanley, and a bunch of foreign companies (we get nothing for rooftop systems except a speculative tax credit).

If you want energy independence and not just a lateral move from the pricing and supply manipulations (and dead wilderness) of Chevron Oil to the pricing and supply manipulations (and dead wilderness) of Chevron Solar, you need to speak loudly and clearly in favor of DEMOCRATICALLY OWNED point of use solutions like rooftop solar, which are getting CRUSHED in the Big Energy avalanche of heavily subsidized, very destructive, remote wasteful boondoggles.

Unlike Oil, Gas, Coal or Nuclear, solar PV (and some wind) is ideally suited for DECENTRALIZED applications in the built environment. the net power production after transmission losses and reduced output on hot desert days is the SAME in the urban areas being forced to buy the remote desert power from generation monopolists. It's such a scam!

We need PACE loans restored and feed in tariffs implemented now, so WE can participate in the renewable revolution as more than piggy banks for Big Energy!

[Kenz300]

02:20 PM on 03/10/2011

The price of oil and coal keeps rising.

The price of wind and solar keeps declining every year.

Wind, solar, wave energy, geothermal and second generation biofuels from algae and cellulose are the future.

Bring on the electric, flex-fuel and hybrid vehicles.

[DFD CPA]

02:23 PM on 03/10/2011

"The price of wind and solar keeps declining every year."

But it's already free! Mother Nature doesn't charge for providing wind and sun.

[jwoww]

03:29 PM on 03/10/2011

soon enough it will be on the commodities charts

[Pandoras Folly]

04:29 PM on 03/10/2011

you still have to build a leverage machine to take advantage of it and maintain it.

[Darlene1029]

02:11 PM on 03/10/2011

"Cleantech" should have started back in the seventies or before. Now if it can be pushed through without the control of big oil it'll be a miracle.

[SaveWillowpark]

03:17 PM on 03/10/2011

At some point they will decide that now is the time to start profiting from green energy. The big energy companies know that we are running out of oil. They are simply squeezing us for every penny they can. As the demand starts to rise on electric cars they will sell them to us at $40,000.00 a piece. They will do that for as long as they can. It's just like computers or any other new technology for that matter. They are companies, it is there job to produce revenue, consistently, year after year. All of these issues that we have strong feelings about for about for personal reasons are nothing but dollars and cents to them. They are not bad people, not in their world. They have families and bills and risks and struggles too. Granted, their issue is how am I going to cover my $6,000.00 per month in expenses (starting executive) $20,000 per month in expenses or $10,000 per month in expenses or $1,000,000.00 per month in expenses but they are expenses nonetheless.

I think we need to change our angle in terms of how we see "the rich," after all, they are the lucky ones, they ARE living the American Dream. Maybe if we all admit that we can start to be real and have real conversations that way we can separate the ones of us who are good people trying to live the American Dream from the criminals who are abusing power.

[rusty apache]

10:03 PM on 03/10/2011

Nothing wrong with making it big as long as you stay honest. Wealth is an irresistable compulsion for a few. They will stop at nothing to get, and stay on top once they have it.

They need to be taken down just a few notches. Somewhere between obscenely stinking filthy rich, and just plain old outrageously massively wealthy.

Even Henry Ford was practical enough to realize that his workers needed to be able to afford to participate as consumers.

They are cutting their' own throats as well as ours'.

[Chevalier Dupin]

02:07 PM on 03/10/2011

"It takes a special kind of optimist to see spiking oil prices as an opportunity."

...Or your average wall st. futures trader!