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special report 2009
the future of cleantech in europe
forewords
Simon Walker, head of cleantech group, Taylor Wessing
Europe is rightly regarded as the centre of cleantech development.
This has not happened by chance. For many years, several European countries
have had in place incentives and infrastructure to encourage the use of cleantech. This has
created an environment that is the most conducive in the world for its development, and an
acceptance among many consumers of the need to use those technologies. So while cleantech
has achieved prominence only in the past few years, its origins have deep roots in Europe.
Those roots are important because they will help to ensure that what some like to describe
as a fad, with dotcom bubble-like similarities, will in fact go from strength to strength. Indeed,
nine years on from the bursting of the dotcom bubble, the use of technology predicted back
then has in many cases even surpassed those expectations. It is likely that this will also be the
case with cleantech. And, just as the last quarter of the 20th century was dominated by
technological innovation in Silicon Valley, so the first quarter of the 21st century could well be
dominated by cleantech innovation in Europe.
However, while having deep roots and winning hearts and minds is important, they will not be
the catalyst for the success of the cleantech sector. That catalyst is the absolute need to succeed
to combat the consequences of climate change, and finite energy resources and water supplies.
To date, much of the focus has been on revolutionary changes, whether they be sourcing
power from the elements, running vehicles on non-fossil fuels, or storing carbon in redundant
mines and oil wells. However, the current economic turmoil has turned the spotlight on less
capital-intensive projects, and highlighted the fact that there is no silver bullet to combating
climate change. Rather, it will be the combined effect of many initiatives that will reverse the
effects of climate change, and deal with energy and water shortages.
There is a fear that the state of the world economy will result in a significant reduction in
the funding available for cleantech. This has been substantiated by the recent decisions of
certain multinationals to reduce – or even stop – funding the development of renewable
energies. However, governments around the world have stated that the current economic
turmoil will not dim their resolve to combat climate change. Furthermore, many have been
quick to commit to creating “green jobs”, which can only benefit the cleantech sector.
It is this backdrop that makes this report so opportune. It provides an overview of where
cleantech in Europe has got to and where it is going, and places it in the wider context of the
fight against climate change and the consequences of energy and water shortages.
As with the cleantech industry, Taylor Wessing’s involvement in the sector in Europe is
deeply rooted. We have been advising those funding and developing cleantech for many
years. Accordingly, we are delighted to be so involved in this report, which will contribute
greatly to a wider understanding of the cleantech sector.
Editor Amy Carroll Lead author Scott Payton Co-author Peter Kneller Chief sub-editor Dom Tait Creative director Nick Dixon Art editor David Twardawa Head of production Karen Gardner Publishing director Dan Brennan
Founder & editorial director Stuart Rock Founder & communications director Matthew RockCaspian Publishing Limited, 198 Kings Road, London SW3 5XP Tel +44 (0)20 7368 7100 [email protected]
The fuTuRe of CLeANTeCh iN euRoPeThe Future of Cleantech in Europe is published by Caspian Publishing Ltd. All rights reserved. The views expressed by contributors and correspondents are their own. Reproduction in whole or in part without written permission is strictly prohibited. Colour transparencies, manuscripts or disks submitted to the magazine are sent at the owner's risk; neither the company nor its agents accept any responsibility for loss or damage. Unsolicited material should be accompanied by a stamped addressed envelope. Printed by Ormside Press Ltd. Repro by Zebra. ISSN 1468-9154.
forewords
Amy Carroll, editor of Real Deals
Throughout the history of humanity, altruism has given way to self-
preservation whenever push comes to shove. Charity all too often flies
out the window when money gets tight – morality gets bent out of shape.
And so, as the world braces itself for a recession of monumental proportions, it might be
reasonable to expect the distant threat of the destruction of the planet to start playing
second fiddle to more pressing economic pressures. Thankfully, this is not the case.
The election of the first “green” president to the White House coincides with a tidal wave of
popular opinion. Europe has long led the way in clean technology, but the conversion of the world’s
biggest gas-guzzler can only provide a boost to cleantech companies everywhere. Furthermore,
government bailout packages have the power to enforce ecological as well as economic change. The
message is clear. Preserving the planet is not only compatible with profit; the two go hand in hand.
Cleantech is also one of the few asset classes that institutions are continuing to support and
where opportunities continue to proliferate. Governed by inexorably long-term drivers, the
explosion of clean technology looks set to continue – knocked by recession, perhaps, but not felled.
Richard Youngman, managing director, Europe, the Cleantech Group
For seven years, the Cleantech Group has tracked the ever-upward rise
of the investment category cleantech, which we played a catalytic role in
creating. With a severe global downturn, capital has become so constrained so fast
that it is clear that 2008 will represent the height of the first peak in cleantech venture
investment. The long-term drivers all remain intact, but we expect 12 to 24 months of
pullback, consolidation and washout, from the position we had reached at the end of 2008.
This report comes at an interesting time, therefore.
We are in uncharted waters geopolitically, facing an unprecedented global recession. The free-
market ethos is under fire, and appetite for government intervention is back in favour. We are not
going back from where we came, but where we are going is unclear. In the cleantech world, we
are all watching Washington DC and Copenhagen in 2009 for new direction and leadership.
Europe has pioneered cleantech. However, the weight of US venture capital, and the apparent
policy change of the Obama presidency, challenge that position. And across Asia, ambitious and
well-funded initiatives show that the race has truly begun for cleantech’s economic prizes.
How Europe weathers the storm ahead politically and economically, be that in unison or in
disjointed and short-term national interests, will define the degree to which its head-start is
capitalised or squandered. Meanwhile, in spite of the significant challenges, the 40 or so
experts interviewed for this report seem united on one thing: there are still opportunities to
make money in this time of disruptive change and creative destruction. The uncertainty and risk
levels are higher, but then so should be the rewards for the brave.
Cleantech lives on.
executive summary5-7
Section 1: The investment story so far Theglobaleconomiccrisisisreducing
overallVCinvestmentinEuropean
cleantech–especiallyincapital-intensive
technologies.Butcleantech’scutof
overallVCinEuropecontinuestorise.
Economicstimuluspackageshave
movedcentrestageassourcesofnew
opportunitiesforcleantechinvestors
andentrepreneurs.
AcrosstheVClandscape,cleantech
fundsremainthemostlikelyvehiclesto
securecommitmentsfrominstitutional
investorsinthenearterm.
Energyefficiencytechnologiesare
settoattractthehighestinvestor
interestwhiletheglobaleconomic
downturncontinues.
8-17
Section 2: Sector trends
Solar Opportunities:Germanyremains
theworld’ssolarleader.Solar
offerseconomicaswellas
environmentalbenefitsinemerging
markets.PVisexpectedtobecome
price-competitivewithfossilfuels,
eveninnorthernEurope,within
aroundfouryears.
Challenges:Larger,capital-intensive
solarprojectsarebeinghitbythe
globaldownturn.Thethin-filmPV
markethasbeenover-heated.
Consolidationisexpected.
Europeanfirmsfacegrowing
competitionfromlow-cost
Chineserivals.
Wind Opportunities:Windsawthree
outofthetoptencleantech
dealsinEuropeduring2008,
includingthelargestdealofthe
year.Small-scalewindcompanies
areexperiencingasurgein
customerinterest.
Challenges:Lackofstorage
technologyandunreliabilityof
windflowsrenderwindan
unpredictablesourceofgrid
power.Planningpermission
disputesaredelayingtherollout
ofonshorewindinmanycountries.
Marine energy
Opportunities:Tidalpowerismore
predictablethananyotherformof
renewableenergy.TheUKandFrench
Atlanticcoastlinesboastsomeofthe
mostpowerfulwaveandtidalstreams
intheworld.
Challenges:Capital-intensiveR&D,
plusthedifficultyofcreatingdevices
capableofwithstandingtheharsh
marineenvironment,arereasonsfor
investorcaution.
Biofuels Opportunities:Second(andthird)
generationbiofuelinnovationsare
overcomingmanyoftheobjections
overfirstgeneration,foodcrop-
basedfuels.
Challenges:Recentfallsinoilprice,
patchypolicysupportandongoing
concernsovertherelationshipbetween
foodpricesandbiofuelsproduction
continuetocauseproblems.
Fuel cells Opportunities:Fuelcellswith
applicationsoutsidethetransportsector
aregainingsignificanttraction.
Challenges:The“hydrogeneconomy”
willtakedecadestocomeabout.
Energy efficiency Opportunities:Energyefficiency
technologiesareparticularlyattractive
inthecurrenteconomicclimate.
Challenges:Thedownturninthebuilding
andconstructionsectorsishavinga
detrimentalshort-termimpacton
“greenbuilding”technologies.
Recycling & waste Opportunities:Therisingglobalneed
foranalternativetolandfillsecures
thelong-termfutureofthissector.
Challenges:Recentfallsinthe
internationalpricesofrecycled
materialhasdestroyedtheshort-
termeconomicbenefitsofmany
recyclinginitiatives.
Energy infrastructure Opportunities:TheObama
administrationrecentlyannounced$11bn
insupportfor“smartgrid”technologies,
presentingnewopportunities.
Challenges:Deployingnewenergy
infrastructuretechnologiestakesyears
ratherthanmonths.
Materials Opportunities:Thevariedpotential
ofnovelmaterialandnanotechisjust
startingtoberealised.
Challenges:Investorinterestinthis
sectorhasbeenlimitedtodate.
18-19
Section 3: Corporate engagement in cleantech
Strategicpartnershipsbetween
cleantechfirmsandcorporateswill
proliferateinthewakeoftherecent
drop-offinprivateequityandVC
firms’appetiteforrisk.
Suchpartnershipsoffercleantech
firmsmanufacturinganddistribution
muscle,whileofferingcorporates
exclusiveaccesstohigh-levelinnovation.
However,thefirstquarterof2009saw
evidenceofascale-backinrenewable
energyinvestmentbytheworld’soil
andgasgiants.
20-21
Section 4: Copenhagen and beyond – policy, government stimuli and the prospects for a green recovery TheObamaadministration’sAmerican
RecoveryandReinvestmentAct
presentsawiderangeofopportunities
forcleantechinnovatorsonbothsides
oftheAtlantic.
However,manyarenowconcernedthat
Europeisatriskofbeingleftbehindas
theUSembracesthecleantechagenda
withrenewedvigour.
AsuccessfuldealattheUNClimate
ChangeConferenceinCopenhagenthis
Decembercouldprovideaparticular
boosttogovernmentfundingofcapital-
intensivecleantechnologies.
22-23
Section 5:The long view Investorsremainlargelyoptimisticabout
thecleantechsector’sabilitytowithstand
theglobaleconomicdownturn.
Specificcleantechsub-sectorswitha
brightlong-termfutureincludethe
smartgrid,waterandcarboncapture.
Theyearsaheadwillseeanincreased
interconnectednessoffood,waterand
energyinnovations.
Cleantechisalong-termsector.The
migrationtoalowcarboneconomywill
dominatetheinnovationenvironment
forthenexttwodecades–andbeyond.
May 2009 REALDEALS 5
The fi nancial disasters witnessed during
2008, and their aftershocks, have had
a profound impact on private equity.
The debt markets have been brought
to their knees, and many LPs, starved
of distributions, have been unable to re-
allocate to already weakened private equity
fi rms. Venture fundraising too has suffered.
But the picture is not all bleak. Though
the problems in the wider market are a
major cause for concern, the relatively
recent emergence of various venture
cleantech investment vehicles in Europe, and
evidence of some continued appetite from
institutional investors for access to those
and other funds, has meant that there is still
a growing pool of venture money available
for investment in the cleantech sector.
Debut, pure-play cleantech funds that
closed in 2008 include the London-based
£110m Environmental Technologies Fund,
which closed in March, and Brussels-
based Capricorn Venture Partners, which
marked a successful change from a multi-
sectoral investment strategy with the
¤100m fi nal close of its fi rst dedicated
cleantech fund in May.
Other fi rms which raised funds in 2008,
include Sustainable Technologies Fund, the
Nordic cleantech specialist launched in 2007,
which raised ¤58m in September; UK-based
WHEB Ventures’ £150m second fund, which
had a fi rst close at £58m in September and a
second close at £74m in December; and the
Carbon Trust, which, alongside the Qatar
Investment Authority, is in the process of
establishing a £250m Qatar-UK Clean
Technology Investment Fund to invest
predominantly in UK start-ups.
Going forward, cleantech is providing
a near solitary ray of hope in a fundraising
wasteland. “If you’re an LP surveying the
devastation around you, it doesn’t take a
big leap of faith to believe that growth
will come from the cleantech sector,” says
Environmental Technology Fund partner
Patrick Sheehan. “It’s rare to have
presidents and prime ministers lobbying
on behalf of a sector, and promising to
put money in, but that’s clearly what’s
happening now.”
The Foresight Group is just one fi rm
looking to raise a UK-focused institutional
fund this year, while Middle Eastern group
Masdar is rumoured to be planning a
¤500m vehicle to invest in European
cleantech businesses.
Generalist venture houses, some of
which had until recently expressed
reservations about the hype being shown
in the sector, have also been increasing
their focus on cleantech. While Wellington
Partners has continued to add to its
cleantech team, bringing on board Apax’s
Christian Reitberger as venture partner last
year, others, such as Index, have begun to
mention the sector more vociferously as
an investment focus.
Parts of the sector will now be hit hard –
including areas that require signifi cant
infrastructure spending in the short term –
but looking forward, the focus on cleantech
is certain only to intensify, and renewed
enthusiasm from governments will play a
part in this.
“Policy has always been important; but
governments and their stimulus packages
have now moved centre-stage,” says
Richard Youngman, European managing
director for the Cleantech Group. “It is not
overly dramatic to say that the choices
governments make in the coming 12 to 18
months in trying to both nurture and
stimulate their economies back to health,
and to secure a post-Kyoto global deal to
combat climate change, could either
dramatically
accelerate the
low carbon economy or
prolong the status quo – and the life
of companies and industries that have
contributed to the mess we fi nd ourselves in.”
The factsLast year was a record one for cleantech
investing in Europe and Israel, with 202
deals done and a total disclosed amount
invested – covering 161 deals – of $1.8bn,
according to the Cleantech Group. This
represents an increase of 48 per cent on
the amount invested in 2007, and a 25
per cent rise in the number of deals done.
While Dow Jones VentureSource data
showed that venture capital investment
across all companies in Europe fell from
$7.6bn in 2007 to $6.5bn in 2008, the
increase in cleantech venture capital
investment goes against this trend. Based
on the same fi gures, cleantech’s cut of
overall venture capital in Europe rose from
19 per cent to 24 per cent over the same
period. Many cleantech investors expect
this trend to continue.
“If in four to fi ve years’ time the world
economy is thriving again, it may well
be that people are willing to spend a lot
more money on drug development, and
information technology, and therefore the
cleantech proportion may fall, relatively.
But for the time being it’s set to rise,”
THE INVESTMENT STORY SO FAR
section 1
dramatically
accelerate the
low carbon economy or
Source: Cleantech Group
Cleantech investment by sector in Europe and Israel
Transportation
Agriculture
Energy infrastructure
Materials
Air & environment
Water & wastewater
Energy storage
Manufacturing/Industrial
Recycling & waste
Energy efficiency
Energy generation
2000
1800
1600
1400
1200
1000
800
600
400
200
0
2004 2005 2006 2007 2008
Data in $m
p04-07 Section 1 RD Cleantech 095 5 24/4/09 10:25:08
saysWHEBVentures’managingpartner
JamesMcNaught-Davies.
Thefinancialcrisishasnowstartedto
haveaneffect,however,withQ42008
investmentinEuropeandIsrael–$317m
across34discloseddeals–dropping
significantlyfromQ3levels,according
totheCleantechGroup.Andthe
CleantechGroupreports$281min31
disclosedroundsforQ12009,down11per
centfromQ42008,andasizeable31per
centonQ12008.
Despitetheoverallreductioninthe
amountinvested,Europe(andIsrael)
increaseditsshareofoverallglobal
investmentto28percent,upfrom19per
centinQ42008and21percentinQ1
2008.“Nothingcouldbeasurersignof
theshifttolesscapital-intensiveplays,”
saysYoungman,“thantheincreasein
Europeanproportionoftheoverallfigure.
TheUSventurenumbersinQ1have
droppedoffdramaticallyincomparison.”
Themediandealsizeofthepasttwo
years–at$4.3m–issignificantlyhigher
thanthatof2006andearlier,showinga
trendtowardslargerdeals.Todate,thishas
beenexplainedbytheriseoflargesolar
deals–andaGoodEnergies-led$72.33m
fundingroundinNorwegiansiliconwafer
manufacturerNorsuninMarch2009
suggestscapitalisstillavailableforsuch
investments–however,adrop-offinround
sizesisalreadyevidentintheQ1numbers.
Onereasontobelievethenumbers
couldholdupmorestronglythanone
mightexpectcanbefoundinthewidely
reporteddropinvaluationsforlater-stage
companies,withventurecapitalistslikelyto
shunearly-stageriskandtakeadvantage
oftheseopportunities.Furthermore,firms
thathadtendedtoveertowardearly-stage
dealsin2007-2008,notleastdueto
overheatedpricesatalaterstage,now
haveachancetobalanceouttheir
portfolioswithmorematurecompanies
withsolidrevenues.
“Opportunityaboundsforthosewitha
cleanslateandsomefirepowertopickup
later-stageriskatearly-stagepricing,”
saysYoungman.
Thoughanewrecordquarterduring
2009or2010isnowunlikely,manyVCs
areneverthelessviewingthecurrent
economicclimateasanopportunity,with
morecompaniesseekingequityfunding
becauseofalackofdebtoptions,
accordingtoAndrewThomson,senior
analystattheCleantechGroup.
Thereisthereforearealdangerthat
manypromisingearly-stagecleantech
companieswillfallbythewayside.“We’re
movingintoanareaofcapitalscarcity,
inEuropeanventurecapitalatleast,so
Idon’tthinkitwillbejustbadcompanies
thatwillfail,”saysSheehan.
section 1: the investment story so far
Until recently, cleantech investing was largely the preserve of
venture capital firms. Clean technology, by definition, is often
about promising early-stage companies with new technology,
which may or may not become established.
however, there has been growing private equity
involvement in more mature cleantech sectors over the past
15 months. German offshore wind project Meerwind notably
received a ¤1bn investment led by Blackstone last year, and
more established player hgCapital’s ¤300m renewable
energy fund, with a strong focus on wind energy, invested in
three solar projects in Spain in March 2009.
Development finance houses with a pan-European focus
include Platina Finance and the Foresight Group, which invest
in both wind and solar projects. Good Energies is the most
stage-agnostic investor of all, with a solar, wind and green
building focus, branching out from venture capital through
to established businesses, and large-scale solar and wind
development internationally.
The number of investors in the space is also growing.
Waterland Private Equity, widely regarded as a generalist,
completed a cleantech double last month, following up a
¤50m capital increase in Belgian renewable energy developer
Enfinity Management with a ¤36m investment in Dutch
renewable fuel company BioMCn.
axa Private Equity, allianz and the Dutch infrastructure
Fund all actively invest in renewable energy, clean
technologies and the carbon market, and large US firms
now with offices in London include hudson Clean Energy
and arclight Capital Partners, which has a renewable focus
in addition to more traditional forms of energy.
“Most of the funds are relatively new, and there are a lot
of people getting interested in it,” says head of hgCapital’s
renewable energy fund Tom Murley. “We’re also seeing a
lot of large infrastructure funds now realigning their
interests, and saying, ‘we will also do renewables’.”
not only do private equity funds provide much needed
additional capital to the nascent industry, but their interest
could also provide an exit route for venture capital firms.
“once these companies are proven, and mainstream,
which is what we hope and expect, i can’t see any reason
why mainstream private equity wouldn’t want to invest in
companies that are going to continue to have long-term
attractive growth prospects,” says Climate Change Capital
partner alex Betts. This view is endorsed by Mark Davis,
head of private equity at Taylor Wessing, whose firm has
seen a significant rise in interest among private equity
houses for investing in cleantech opportunities.
While arguing that there have always been companies
that have gone from venture capital through to private equity
without an intervening owner, Murley believes this may be
on the rise. “i would be willing to bet there will be more of
that over the next few years, because public markets may
end up being a less attractive option.”
in addition to wind and solar, other areas potentially
ripe for private equity investing include recycling and
waste management, biogas and biomass, and increased
energy efficiency.
With access to project financing and debt obviously a
constraint, there will no doubt be a slowdown in larger,
infrastructure type deals in the short term, but governmental
and EU incentives and ongoing climate change targets, will
serve to fuel further investment in the space in the mid-term.
Private equity gets interested
� RealDeals May 2009
Thereisstillhopeforearly-stage
companies,however,notleastbecausea
largepercentageofcleantechactivityis
stilloccurringattheinnovative,early-stage
sectionofthemarket.
“Cleantechisallaboutinnovation,so
itwouldnotbeagooddecisiontoonly
investinlater-stagedeals,”saysRobeco
partnerAndrewMusters,whosefirmboth
co-investsdirectlyincleantechcompanies
andmakesallocationstospecialistvehicles
throughitsfundoffunds.
Capricorn’smanagingpartnerJos
Peetersalsosoundsanoteofcautionover
VCs’shifttolater-stagedeals:“Therecould
beatendencytosafety,butmyworryis
thatthiscouldaffectmultiples.”
The exit environmentAsinotherareasofventurecapital,the
globaldownturnhasmassivelyaffectedthe
exitenvironmentforcleantechcompanies.
However,moreattractivecompany
valuationsmeanutilitiesmaybemore
willingtosplashthecashthanpreviously,
thoughthethirsttoacquirewillobviously
bedependentonhowaffectedpotential
acquirershavebeenbyevents.
“Smartcorporateswouldbuynow,atlow
valuations–butmostofthemhavetrouble
oftheirown,”saysSETVenturePartners
managingdirectorWouterJonk.“Butif
you’reasmartshareholder,you’renotgoing
tolookforanexitatthemoment.”
Regardlessofshareholderdesiretowait
forbettertimes,corporatesandutilitiesare
alsomorecommittedtothesustainability
causethanbefore.“Ifyoulookoverthe
pastdecade,therewerealotoflarge
corporatespayinglipserviceto
sustainability,andthathaschanged
dramatically,”saysEmeraldTechnology
VenturesmanagingpartnerGinaDomanig.
“Todayyouhaveaverylargenumberthat
actuallyhavestrategiesabouthowthey’re
goingtogetintocleantech.Acquisitions
willbeoneway,providedtheyhavethe
moneytodeploy.”
“Iwonderwhattheyarewaitingfor,”
addsGoodEnergieschieftechnology
officerSvenHansen.“IfIwasautilityandI
seethatmypowergenerationintoEastern
Europehastogointorenewables–there
isn’tanyotherwaytodoit–thenI
wouldn’twaitanylonger;Iwouldbuynow,
beforesomeoneelsebuysanicecompany.”
Somearepredictingthatthecleantech
sectormayevenleadthewayoncetheexit
environmentatlargestartstoimprove.
“I’mnotsuretherewillbemuchofan
exitmarketforanysectoroverthenext
yearortwo,butIthinkcleantechcouldwell
beoneoftheearliersectorstocomeout,
withsomeexitsthataresurprisinglygood,”
saysSheehan,whoaddsthatalotofM&A
activityintheshorttermmaywellbe
relativelydefensiveonthepartofinvestors.
“TheM&Amarketislikelytocomeback
wellbeforetheIPOmarket–indeedthe
frenziedIPOmarketof2005to2006on
AIMmaynevercomeback–butthenthose
IPOswerenevertrueexits,”saysSimon
Walker,headofthecleantechgroupat
TaylorWessing.
The futureDespitereservationsfromsomequarters
aboutapotentialover-relianceon
governmentsubsidies,therenewable
energysectorisstillpredictedtocontinue
toattractthegreatestpercentageof
ventureinvestmentinthemonthsahead.
“Cleanenergywillcontinuetohogthe
limelight,”saysMcNaught-Davies.“Ithink
somepeopleget
dazzledbythe
technologyandthe
promiseofstate-
supportedfeed-intariffs
andsoon,andmaybe
willingtooverpay.That’s
whywe’vebeenalittle
cautiousaboutclean
energy,thoughwe
remaininterestedinit.”
Thecost-saving
benefitsofenergy
efficiencycompanies
andtherelatively
economicalnatureof
thebusinesses
themselvesarealso
particularlyattractiveatthisstageinthe
economiccycle.Thistrendalsoplaysinto
asubtlediversificationawayfromapurely
renewableenergyfocus.
“Thefirstwaveofinvestmententhusiasm
forcleantechwasforthingsthatlooked
obviouslygreen–andthey’reactually
relativelydifficult,intermsofcapital
requiredandtherealityoftheenergythey
produceversustheenergyconsumedin
makingtheproduct,”saysSheehan.
“Iliketothinkthatnowwehavea
secondphaseofcleantech,wherethere’s
morethoughtabouttherealitiesof
environmentalimpact.”
Whilethefundraisingenvironment
remainsbleak,cleantechfundsarestillthe
mostlikelyvehiclestosecurecommitments
frominstitutionalinvestors.This,combined
withincreasinginvolvementfromgeneralist
VCsinthesector,wouldindicatethat
investmentfiguresoverthemid-termlook
settogrow,though2009itselfisnot
expectedtosetanyrecords.
Thelong-termdriversfortheindustry
arealsointact,withconcernsoverclimate
changeandnaturalresourcesencouraging
governmentstobecomemoreactively
involved.Fearsthatgreenissueswould
playsecondfiddletoeconomicstimulus
packageshaveprovedtobeunfoundedthus
far,withtheelectionofeco-awarePresident
BarackObamafurthercementingcleantech
asakeyindustrysectorinthefuture.
“Thekeyareasofspeculationnoware
notcentredonwhetherhugedollarswill
getspent,buthow,andhowsmartly,when,
andhowrapidly,andwhogetstheirhands
onthecash,andwhy,”saysYoungman.
“Thecleantechcommunitycannotaffordto
bedormantinthisprocess;itisindustry-
anddecade-defining.”
Source: Cleantech Group*Chart is based on total amount of investment received so does not include deals of undisclosed value
2008 investment distribution by country and sector in Europe and Israel*
Water & wastewater
Transportation
Recycling & waste
Materials
Manufacturing/industrial
Energy storage
Energy infrastructure
Energy efficiency
Air & environment
Agriculture
Energy generation
Ge
rman
y
UK
Isra
el
Fin
lan
d
Fra
nce
Sw
ed
en
Ne
the
rlan
ds
No
rway
De
nm
ark
Sw
itze
rlan
d
Sp
ain
100%
80
60
40
20
0
May 2009 RealDeals �
Ph
oto
gra
ph
y:Alamy
SolarInvestment trendsSolar investments comprised around 40 per
cent of cleantech deals globally in 2008,
and took up five of the top ten deals in
Europe, according to the Cleantech Group.
These included a mammoth ¤85m funding
round for German thin-film photovoltaic
(PV) manufacturer Sulfurcell – led by Intel
Capital – and a ¤40m funding round –
involving Doughty Hanson Technology
Ventures and AGF Private Equity, among
others – for Odersun, another German thin-
film solar company.
As a result of the heightened interest,
many deals and company valuations,
particularly in the US, were seen as
overheated. “The Nanosolars of the
world went out with a valuation of
$1.8bn in the US – that’s just silly,” says
one cleantech investor. “I think this will
hit the wall.”
The Cleantech Group believes that the
thin-film solar industry got particularly
overheated during the first three quarters of
2008 in the US. Meanwhile, although thin-
film solar firms such as Sulfurcell accounted
for 53 per cent of total investment in the
European and Israeli solar sector during
2008, no thin-film solar deals took place
during the fourth quarter of that year.
Cleantech investors are now predicting
a shake-out of European solar companies,
with consolidation a word on many lips.
“It’s a classic industry evolution,” says
Climate Change Capital managing partner
Alex Betts. “When it grows substantially,
there has been a surplus of demand over
capacity – then lots of people jump in.
When that system contracts, weaker
players will either go to the wall or merge.”
There is potential for picking up assets
and consolidating them, adds Good
Energies chief operating officer Sven
Hansen. “We see opportunities, though
consolidation was going to come anyhow.”
Owing to the capital-intensive nature of
thin-film solar companies, capital is now
expected to be much harder to come by for
early-stage solar businesses. “We want to
see revenues and companies that can
produce 24/7,” says Zouk Ventures partner
Felix von Schubert. “In thin-film there are a
lot of greenfield projects – it takes a long
time for these things to develop.”
Good Energies thinks it “not very smart”
to build new companies in the solar space
at the moment, adds Hansen. “You have
perhaps ten amorphous players already,
and some of them are three years ahead;
they have better technology and
agreements with suppliers. Why would you
want to build a new company if you didn’t
have at least that, if not more?”
This situation provides those with funding
the runway and the opportunity to get
ahead, says Richard Youngman, European
MD of the Cleantech Group. “Crises provide
unfair advantage to some. These are the
times investors make the decisions that
dictate their returns medium- to long-term,
and that
entrepreneurs
found
tomorrow’s hits.”
However, the cost of
all aspects of the solar
industry needs to be driven
down to reach grid parity, and this process
will still require innovation and technology
development. Norwegian silicon recycler
MetallKraft is one cost-saving company to
receive funding in recent months, taking on
¤22m in financing from investors including
Capricorn and Black River in October 2008.
Pricing readjustments to solar
companies may also start to coax hype-
wary investors back into solar deals, if
significantly differentiated new technology
can be found. “We’re starting to look at
solar deals again for the first time since
2004-05,” says James McNaught-Davies,
a managing partner at WHEB Ventures.
OpportunitiesDespite short-term concerns about recent
over-valuations in this sector, Ash Patel,
managing director EMEA for Intel Capital, is
positive about the longer-term prospects.
“We continue to be bullish about solar-
related intellectual property generation in
Europe. The region has a significant
knowledge bank, which will continue to
pump out innovative ideas. Moreover, we
believe Europe has accepted clean energy
as a social requirement. So even though
energy prices have dropped, there is a
fundamental driver for solar and other
renewable energy development.”
Regardless of the tougher investment
climate, “the right ideas, with strong
entrepreneurial talent behind them, will
continue to get funded”, Patel says. “It’s the
big, overpriced ventures that can’t deliver
ROI that will see the pain.”
He adds that solar and other forms of
alternative power generation also remain
attractive to Intel Capital because they
make economic as well as environmental
sense in emerging markets. “For example,
they can provide power in areas where
there is no existing energy infrastructure.
A huge part of the global population is
energy-deprived, and will continue to
require energy regardless of the global
economic climate,” Patel says.
Solar technology offers the great merits
� RealDeals May 2009
Sector trendS
section 2
Source: Cleantech Group
Solar investment in Europe and Israel
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2004 2005 2006 2007 2008
Data in $m
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Concentrated PV
Concentrated solar thermal
Systems
Thin films
May 2009 RealDeals �
of being low-capital
and fast to bring to
market, adds Claude
Fussler, programme
director for Caring for
Climate, the United Nations
Global Compact’s climate
change initiative. “I believe that
solar will develop much faster than the
International Energy Agency predicts.”
Eric Emmons, investment partner at
Siemens Venture Capital, agrees that solar
holds substantial long-term potential.
“Although we will see moderate price drops
and consolidation, I think we will see this
industry reach its tipping point,” he says.
The tipping point will come when solar
energy generation is price-competitive in
northern Europe, and other areas that
receive only moderate solar radiation,
without the need for public support, says
Nikolaus Meyer, CEO of Sulfurcell. This is
likely to happen “in the range of four
years”, he believes.
Following its financing round in Q3
2008, Sulfurcell’s priority is to start mass
production of CIS/CIGS-based thin-film
solar modules, he says. “Parallel to that,
we are investing further in research and
development to increase the efficiency of
solar modules from eight per cent to 14 per
cent, based on a detailed five-year plan.”
Meyer claims European solar firms enjoy
a tangible lead over their US competitors. “I
have just returned from a trip to California,
and I did not get the impression that PV
manufacturers had made as much progress
as many German firms,” he says.
Germany is Europe’s, and arguably the
world’s, leader in solar technology. During
2008, Cleantech Group data shows that
German companies received 44.7 per cent
of total European funding into solar.
However, Meyer says Germany’s – and
Europe’s – lead in solar is something that
policy-makers, investors and executives will
need to fight to retain. “Many US firms have
strong management and good access to
capital,” he says. “There is a risk that they
could become superior. To keep our lead,
we need strong support.”
Looking ahead, Asia will also challenge
Europe’s solar supremacy, says Meyer.
“We [in Europe] need to retain
technological leadership. Manufacturing
has never been Europe’s first strength.
We need to invest in our science and
engineering research bases.”
Germany, and Europe generally, may need
support to help them maintain their position,
says Carsten Bartholl, Taylor Wessing’s head
of cleantech in Germany. “Germany is often
looked at as the country that has given solar
PV technology the chance to prove the
concept. This may continue for the following
years in light of the country’s feed-in tariffs
for solar PV generated electricity, its green
building concepts and so on. But it will be
necessary to focus on how to further develop
the technology and thus help existing
German – and European – producers of
modules, and researchers, maintain or
strengthen their market position. The same
may apply to project developers that have
assembled experience in projects worldwide.”
Meanwhile, some in the European
cleantech sector see the emergence of low-
cost Asian solar firms as an opportunity.
Indeed, Chris Wright, co-founder of Moixa
Energy, the UK-based renewable energy
and portable power technology developer,
says his firm is already working with a
Chinese company that is “tooling up to
undercut” the PV market. “They started in
1995 with 20 people and now have 130,000
employees,” he says.
Moixa sees a substantial opportunity in
taking cheap solar cells and applying them
to “any DC device – mobile phone chargers,
burglar alarms, baby monitors and so on,”
says Wright. “These are all ripe for being
taken off the grid.”
ChallengesWhile investors worry about over-valuations
in this sector, solar companies themselves
are most concerned about reducing the
cost of solar energy generation.
“The challenge for the solar sector is to
reach competitive levels of costs and prices
so that this market can develop without
public incentives,” says Meyer at Sulfurcell.
Achieving price-competitive solar power
is an especial challenge in northern Europe
and other moderate climatic zones, where
harvestable sunlight is scarcer than in
southern Spain or North Africa, for
example. “Overcoming this challenge will
enable us to grow and contribute to energy
generation,” says Meyer.
Innovation can help to overcome this
hurdle, he says. “We still need technical
innovation in the PV industry. Therefore,
investors should look for companies with a
strong technology base; with an innovative
approach; and with managers who are
experienced in manufacturing and
transferring new techniques into industrial
applications. There is still much to do.”
A specific short-term challenge for
Europe’s solar firms has been the Spanish
government’s decision to cap its public
incentive programme for solar at 500
megawatts. “Last year, 3,000 megawatts of
solar was installed in Spain,” says Meyer. “A
huge part of the global manufacturing
capacity cannot be carried to Spain any
more – and other markets are smaller. The
only one of a similar size is Germany.”
The global economic crisis has affected
the sector. “We do have a strong price drop
in the solar industry right now,” admits
Meyer. However, he adds, “the solar business
is always weak in winter, so it is hard to say
if the current problem is caused by the
global crisis or seasonal events.”
The downturn is certainly leading to a
near-term slowdown in the adoption of
large project-based solar and wind
technologies, says Emmons at Siemens
Venture Capital. However, his long-term
predictions for the solar sector are bullish.
“The underlying economics of these
businesses suggest this will be a more of a
short-term disruption than a long-term
challenge,” he says. “It’s hard to argue with
a free energy input such as solar or wind.”
WindInvestment trendsVenture investments in the relatively
mature wind energy sectors are largely
centred on innovative businesses that seek
to improve on current turbine technology,
such as Northzone, Statoil and Hafslund
Ventures portfolio company Chapdrive.
The latter, which is developing technology
that will enable lower-weight and more
cost-efficient wind turbines by reducing
weight in the nacelle, received NKr52m
(¤5.86m) of extra funding from existing
investors in February.
Chart-topping wind deals in 2008
included a $176.5m (¤132.7m) investment
from the Masdar Cleantech Fund in
Finnish turbine developer WinWinD
and a $48m funding round for Dutch
turbine and wind farm developer
Emergya Wind Technologies.
OpportunitiesDenmark is the world leader in wind energy.
The statistics are impressive: wind already
provides around 20 per cent of the
country’s power, while turbines produced Ph
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by Danish manufacturers generate around
half of the world’s installed wind energy.
“Growth expectations for the wind
industry are greater than those for the
Chinese economy,” claims the Danish
Wind Industry Association. “In 2008,
Danish cleantech exports amounted to
about DKr60bn, which is almost ten per
cent of total Danish exports,” adds Finn
Mortensen, executive director of Climate
Consortium Denmark.
Cleantech Group data shows that wind
saw three out of the top ten cleantech
deals in Europe during 2008, including
the largest deal of the year. “As the wind
sector has matured, the financing of wind
farms has increasingly become the
preserve of project finance, with venture
and growth capital investment now
focused on advancements to turbine
technology,” says Andrew Thomson, senior
analyst at the Cleantech Group.
Despite the downturn, the small-scale
wind industry is performing particularly
well, according to Steve Mahon, chief
investment officer at Low Carbon
Accelerator. “We’ve got a small wind
turbine company in Scotland called Proven
Energy. Its order book is larger than it’s
ever been,” he says. “The weakness of
the pound, alongside new state-level
renewable-energy regulation in the US, are
beneficial for the company. We suspect it
will grow by at least 50 per cent this year.”
On 1 April, all UK renewable energy
generators under 50 kilowatts became
eligible for two renewable energy
certificates (ROCs) per megawatt-hour.
This is good news for small-scale wind
companies such as Proven Energy and
Quiet Revolution, another UK-based
operator. “It makes small-scale wind an
attractive proposition,” says Mahon.
Meanwhile, Proven Energy’s small-scale
wind technologies have also aroused interest
among Indian mobile phone networks, which
are keen to use turbines to power their
masts, Mahon adds. Ash Patel, managing
director EMEA for Intel Capital, sees similarly
significant opportunities in India and other
emerging markets for the solar sector (see
page 8 for more on this topic).
Quiet Revolution is also expanding, and
secured a £7m (¤7.85m) investment round
from RWE Innogy and several private
investors in September 2008.
Martin Billhardt, chief executive of
Germany-based large-scale wind farm
developer Plambeck Neue Energien, sees
opportunities for his business in France,
which carries relatively low development
risks since it is in the eurozone. “There
are around 2,500 megawatts of wind
developed in France. By 2017, this is
targeted to grow to 20,000 megawatts,”
he says. “Countries outside the eurozone
need to be looked at carefully, as there
may be currency and other risks
associated with wind farm development.”
Romania, however, has “one of the best
tariff systems in Europe” for wind power –
so the advantages of development in the
country may well outweigh the risks,
Billhardt adds. “This should be a focus for
the next 18 to 24 months – and there is
already a lot of activity there.”
Norway, meanwhile, boasts excellent
winds but a poor tariff system for wind-
farm development. Yet Billhardt is
monitoring the regulatory environment,
and will move quickly if incentives improve.
Emmons at Siemens Venture Capital
believes offshore wind has a particularly
bright future. “It enjoys better wind flow
and doesn’t have as many siting issues
when you move into deeper water,” he
says, referring to the planning permission
disputes that can blight onshore wind
projects (see Challenges, below).
Challenges Local government red tape and onshore
planning permission disputes present
problems for the deployment of wind
power, argues Tony Lodge, energy
research fellow at the Centre for Policy
Studies, the UK-based think tank. “For
example, we’ve got around 11 gigawatts of
wind development stuck in the planning
system in the UK.”
Lodge points out how small the wind
power base is in countries such as the UK.
“During the cold snap in early 2009, wind
provided between 0.3 and 0.4 per cent of
the UK’s electricity, compared with 50 per
cent coal, 36 per cent gas and 15 to 16 per
cent nuclear. The potential for the installed
wind energy base is six per cent. But it is
delivering less than half a per cent,” he says.
Because of this, Lodge sees tidal stream
as important for the UK. “In light of the
regulatory issues surrounding wind, I think
there must be wider support for tidal
stream energy, as it doesn’t affect the ‘Not
in my back yard’ brigade,” he adds (see
page 11 for more on tidal stream energy).
The absence of viable grid-scale energy
storage technologies means that wind
power cannot supply base-load power in
any country, says Dieter Helm, professor of
energy policy at the University of Oxford.
“Wind is intermittent, so it doesn’t solve
the capacity problem,” he says.
Marine energyInvestment trendsCompanies operating in the fields of current,
tidal and wave power received a substantial
portion of capital in 2008. Notable events
included a $24m investment round for UK-
based Orecon involving Wellington, Advent,
Venrock and Northzone in March, and the
launch of three Pelamis Wave Power wave
turbines off the coast of Portugal.
However, cleantech investors generally
remain wary about investing in marine
energy, not least owing to the capital-
intensive and very early-stage nature of
companies in the space. “We are cautious
section 2: sector trends
Source: Cleantech Group
Wind sector investment in Europe and Israel
Components technology
Farms450
400
350
300
250
200
150
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Data in $m
10 RealDeals May 2009
about investing in wave energy,” says
one investor. “It needs ten to 15 years,
and strong government support, to
flourish in the UK.”
The sea current corner of the sector
may be safer, suggests SET Venture
Partners managing director Wouter
Jonk. “If you look at marine technologies,
perhaps sea current technologies are less
risky. If you put a device in the waves, it’s
asking for problems.”
Others, such as the venture syndicate
that is backing Orecon, are bullish about
the technology in which they’ve invested.
“There is little question that wave energy
is going to be there, though it’s not going
to be there this year,” says Wellington
partner Bart Markus.
“There’s a couple of people with metal in
the water, such as Pelamis* and OPT. We’ve
chosen a different approach with Orecon,
to take our time to engineer a solution so
that once you put it in the water, and prove
that it works, you can produce energy at a
competitive rate.”
*On March 22 2009, Pelamis admitted
that “some work is being undertaken” to
resolve a technical problem relating to the
location of its wave machines’ bearings in
their housings at the firm’s Aguçadoura
wave farm off the coast of Portugal.
However, “this solution has now been fully
tested and is ready for deployment with all
material having now been ordered”, the
company added.
OpportunitiesCleantech Group data shows that an
impressive 72 per cent of worldwide
investment in the marine energy sector
during 2008 was channelled to European
companies.
This sector presents a particularly strong
opportunity for the UK, which is “leading
the world in the development of marine
energy”, according to Tom Delay, chief
executive of the Carbon Trust, a UK
government-backed organisation that
works with companies to reduce carbon
emissions and develop commercial low-
carbon technologies.
The UK’s 11,072-mile coastline boasts
some of the most powerful waves and tidal
streams on the planet. Harnessing this
power through wave and tidal devices
could generate up to 20 per cent of the
UK’s electricity needs, according to Dr
Stephen Wyatt, marine energy accelerator
manager at the Carbon Trust. “This is a
tremendous market opportunity for the
companies that get this right,” he adds.
The UK and Ireland’s Atlantic coastline
could produce around 50 gigawatts of
electricity if it could be captured, says
Professor Francis Farley, a former Cern
physicist and co-inventor of the Anaconda
wave power technology (www.bulgewave.
com). “The Atlantic coast of France also
holds enormous power,” he adds.
Wyatt says another key differentiator is
the UK’s “world-class” academic marine
energy research groups. “The UK has the
expertise to fabricate and build wave and
tidal energy devices, because we have a
strong oil, gas and ship-building heritage.”
The UK accounts for around 50 per cent
of global wave and tidal power activity,
says Wyatt. Canada, the US, New Zealand,
Australia, Taiwan, Korea and several
Scandinavian countries are also active in
the area. “Wave power is starting to
become significant in Denmark,” adds
Mortensen of Climate Consortium Denmark.
Despite the challenge of developing
devices strong enough to withstand the
ravages of the ocean (see Challenges,
right), several projects are already making
headway. UK-based marine energy
technology developer Pelamis has installed
wave power devices off the coast of
Portugal, deployed in partnership with
Portuguese energy company Enersis. This
represents the world’s first multi-unit wave
farm and the first commercial order for
wave energy converters (though there have
been recent reports of short-term technical
problems – see left, this page). In addition,
UK-based Marine Current Turbines installed
the 1.2-megawatt SeaGen tidal energy
convertor in Northern Ireland’s Strangford
Lough in April 2008.
Although investment activity in this area
has been dominated by corporates rather
than venture capitalists (see section three
of this report), Oxford Capital Partners
sees tidal power as an exciting emerging
investment opportunity. “It’s an area we’re
keen to see deals in,” says David Mott,
investment director at the firm. “You can
predict tidal power in 25 years’ time: you
know how many centimetres the tide will
rise. This is not the case for wave power.”
Lodge at the UK’s Centre for Policy
Studies agrees that the predictability of
tidal movements means tidal power should
have a bright future. “The closest you come
to a base-load renewable is tidal stream,”
he says. “The grid knows when it can rely
on it, right down to the minute. You don’t
get that with any other renewable.”
ChallengesThe nascent wave and tidal power sectors
face formidable challenges. The first is the
location of marine energy sources far away
from areas of high population density.
“For example, in the UK, tidal power is tied
up in the Pentland Firth in Scotland, while
wave resource is strongest off the coast of
Cornwall, Devon and the Western Isles of
Scotland,” says Wyatt at the Carbon Trust.
“These are all away from the UK’s most highly
populated areas. So grid connection and
energy transport are the first barriers for
marine energy to overcome.”
Resolving these challenges will require
“a hefty investment in grid reinforcement,
in areas of Scotland in particular”, he says.
The second challenge is a technical
one. “Harnessing wave and tidal energy
isn’t easy,” says Wyatt. “Building anything
that goes out to sea and survives is
tricky – particularly when you are up
against a budget.”
Developing wave energy devices strong
enough to withstand the harsh environment
of the open ocean is proving a hurdle.
“Wave machines up to now have been
rather fragile,” says Farley. “The challenge is
to make a device that will survive and
produce power at a reasonable cost. We
haven’t crossed that threshold yet.”
Indeed, producing wave energy at a
competitive price is the biggest challenge
of all, says Wyatt. “At the moment, the
Carbon Trust estimates that wave energy
costs something like 25 pence per kilowatt-
hour. Offshore wind is something like 11 or
12 pence per kilowatt-hour, while coal and
gas costs around five pence per kilowatt-
hour. So you can see the magnitude of the
challenge that wave energy faces.”
The relatively high costs associated with
early marine power development are
putting off venture capital investors, Wyatt
admits. Yet he says the UK government is
stepping in to help marine power firms
through the crucial, yet expensive, pilot
stages. “Initiatives such as the European
Marine Energy Centre (EMEC) in Scotland
are set up just for this purpose,” he says
(EMEC provides marine energy firms with
berths for their prototype devices, plus
cable connections to the mainland).
Farley is critical of the UK government’s
lack of support for marine power. “The
government’s policy of supporting
innovation is chaotic and contradictory,”
he claims. “It could do much more to
support promising ideas with money.”
Martin Wright, managing director of
May 2009 RealDeals 11
Marine Current Turbines, is equally
disdainful of government policy towards
marine energy. “You get an attitude in
Whitehall: ‘why are we developing this?
Why don’t we let someone else do it and
we’ll buy it later’,” he says.
Lodge at the Centre for Policy Studies
agrees that more UK government support
is needed – adding that because such
support is lacking, the country’s marine
energy innovators are looking to Asia to
get their technologies off the ground. “For
example, Hull-based tidal power firm Lunar
Energy plans to install a 300 tidal-stream
turbine field, generating 300 megawatts,
in Korea in partnership with Korean
Midland Power,” he says.
However, further UK government
support for marine energy may be in
the pipeline. The Scottish Assembly is
proposing to grant five ROCs for wave
energy and three ROCs for tidal energy,
says Wyatt. “That level of support will give
the market confidence – and all indications
suggest that this will go through,” he adds.
BiofuelsInvestment trendsBiofuels had a tough year globally in 2008,
with a growing awareness of the negative
impact of biofuel cultivation on food prices,
particularly for the developing world.
“People in the US have been throwing
money at first-generation, corn-based
biofuel production,” says WHEB Ventures’
McNaught-Davies. “It’s cannibalised what
would otherwise have been edible food.”
(See Challenges for more on the biofuels
sector’s problems.)
As a result, first-generation biofuels –
predominantly a US VC preserve anyway –
are even less likely to receive investments,
though there is still appetite for second-
generation fuels that do not affect the
food chain.
Biofuel deals in 2008 included
Capricorn’s investment in Netherlands-
based Avantium, which is building a
consortium to accelerate the application of
high-throughput R&D in next-generation
biofuels and biomass-based industrial
chemicals; and an ETF-led $20m
investment in Chemrec, a Swedish
developer of energy and chemical recovery
systems based on gasification of the
papermaking by-product black liquor.
The sector has also already seen a large
deal in 2009, with Waterland Private Equity
making a ¤36m investment in Netherlands-
based BioMCN, which last month began
production of biomethanol, a second-
generation biofuel, for use in petrol.
“Because it’s a green version, you can
use it in reaching the targets that are set by
the EU directives to get to ten per cent
biofuel use in transport by 2020,” says
Waterland principal Lex Douze. “It’s an
important driver for growth – not only for
this company but for all green biofuels.”
OpportunitiesDespite recent setbacks for the biofuels
sector, Sean Sutcliffe, chief executive of
Green Biologics, the UK-based bio-butanol
business, says it is still early days. “The
biofuels sector is still in the ideas formation
stage. Each developer has its own angle on
the winning technology,” he says.
Green Biologics uses fermentation
technologies to convert biomass into fuel.
During 2008, Cleantech Group data shows
that 64 per cent of total investment into
European biofuels went into biomass-
related businesses.
The most significant emerging
opportunities for Green Biologics lie in
China, where the government has made a
strong commitment to biofuels. “If you
take bio-butanol, in Europe we are talking
about it. In China they have supported
investment in 300,000 tonnes of bio-
butanol capacity, with a target of
achieving one million tonnes by 2010. Our
main market is China, because that’s where
the investment is going in and where the
technical support is,” says Sutcliffe.
Green Biologics completed a funding
round in February 2009, proving that investor
appetite for biofuels has not dried up. “This
provides us with funding for 2009. We have
achieved this without a dip in valuation. Our
existing investors – the Carbon Trust and
Oxford Capital Partners – have continued
to support us, and we’ve brought onboard
Morningside Ventures,” says Sutcliffe.
“We wanted someone such as
Morningside to support our position in
China, as opposed to a more traditional
European VC,” he adds.
A broader long-term goal for the
biofuels sector is finding lower-cost
feedstocks. For Green Biologics, this
means investing in sugars in Brazil and
India. “That’s where the market is growing,”
says Sutcliffe.
Mott at Oxford Capital Partners, an
investor in Green Biologics, says that many
of the future opportunities in biofuels will
lie in niche, non-food feedstocks. “We’ve
been looking at businesses that grow
elephant grass, for example.” Another non-
food feedstock creating interest is jatropha,
though it can take years before the crop
reaches its first harvest.
Much of the future success of biofuels
will come from processing specific types
of waste streams, Mott adds. This is one of
the key attractions of Green Biologics,
since its technology takes a waste stream
derived from sugar production and turns it
into biofuel.
Challenges“The biofuels market has been hit hard,”
says one European cleantech investor.
“We always thought that a lot of the
economics around biofuels production
did not make sense.”
Concerns over the potential link
section 2: sector trends
Biofuels investment in Europe and Israel
0
20
40
60
80
2004 2005 2006 2007 2008
Algae biodiesel
Biodiesel
Biogas
Biomass
Cellulosic & grain ethanol
Data in $m Source: Cleantech Group
12 RealDeals May 2009
between rising food prices
and biofuels production,
along with a falling oil
price, have caused
particular problems for
the sector, with many
European governments
reviewing and reducing
targets for first-generation,
food crop-based biofuels.
Meanwhile, ethanol producers,
particularly in the US, have been hurt by the
recent rise in the cost of capital. “People
have also underestimated the volatility of
cost of the raw biofuels material, such as
corn and wheat,” adds one investor.
Moreover, a regulatory loophole has
enabled US biodiesel firms to drastically
undercut their European rivals. “Large
sections of the European biodiesel industry
have been destroyed by unfair US imports,”
says Sutcliffe. “US biodiesels receive EU
renewable energy subsidies, plus
production subsidies.” The hope is that the
EU will soon act to rectify the situation.
Fuel cellsInvestment trendsThough fuel cell technology has made
some investors substantial returns during
the past few years, VCs generally remain
sceptical about developments in the sector.
“The hydrogen economy is not
happening,” says Robeco investment
director Andrew Musters. “It may happen in
ten to 20 years’ time, but those are not the
opportunities that people are looking at
now. They want concrete technologies that
do not require a lot of capital to scale.”
(See Challenges, right, for more on the
hydrogen economy).
“We would be cautious about fuel cells,”
adds Jonk at SET Venture Partners. “We’ve
seen interesting companies, but it would
have to be a convincing story.”
Nevertheless, businesses continue to
catch the eyes of investors. The UK’s
Carbon Trust has made the sub-sector a
speciality, most recently leading a £3.3m
first round of funding for Runcorn-based
Acal Energy in January.
Although fuel cells can be used in
several ways – including remote and
distributed power, residential cogeneration
and mobile applications – one reason
given for a drop-off in
enthusiasm has been an
inability to efficiently
harness the technology
for automotive
applications.
As a result, companies
with stationary applications,
such as Acal’s, which is initially
focused on providing support for
telecommunications base stations, are most
likely to receive funding in the near future.
OpportunitiesEurope represents 57 per cent of total
global investment in fuel cells, according
to the Cleantech Group. This puts the
region in a strong position to lead future
growth in the sector.
Although investors remain sceptical
about the short-term potential of fuel cells
as vehicle power sources, many experts,
including analysts at the Cleantech Group,
believe the prospects are brighter for fuel
cells designed for other applications.
These range from levelling the load of
power grids, via firming up capacity for
renewable energy generation, to providing
decentralised heat and power generation to
homes and businesses.
UK-based Ceres Power is an example of
a “stationary” fuel cell company that is
already gaining significant traction. “We are
transitioning from pilot scale to mass
production, and as of the last two deals
we’ve cut – with British Gas and Calor Gas
– we’ve flipped from product development
to serious commercial engagement,” says
chief executive Peter Bance. British Gas
has invested £20m in Ceres Power, and
placed a forward order of the company’s
combined heat and power fuel cells worth
around £100m, he adds.
Bance says that the high costs and
long timeframes involved in fuel cell
development mean that the key to success
is understanding the requirements of the
customer from the outset. “You have to
make sure that the product is tailored to
the market need, so you know it will sell.”
Crucially, Bance believes that fuel cells
can play a vital role in the decentralised
energy infrastructure model, which is
gaining increasing support in both Europe
and the US (see section five). “Power
stations have historically been a one-off
project business. Distributed generation is
the opposite – massive house-by-house
deployment and maintenance,” he says.
Although Bance concedes that the
global economic turmoil is making it
tougher for many cleantech firms to raise
capital, he also believes that the crisis
presents opportunities for companies on a
“growth trajectory” such as Ceres Power.
“The assets that you need for growth –
whether it’s recruiting people, buying
machinery or leasing factory space – are
cheaper than they once were,” he says.
ChallengesThe much-vaunted hydrogen economy – in
which a network of hydrogen filling stations
deliver power to fuel-cell-based vehicles – is
falling out of favour with many investors and
analysts. Cleantech Group figures indicate
that investment in fuel cells in Europe
dropped from $75.8m in 2004 to $29.2m in
2007, with a slight increase to $31.0m in
2008. The number of deals followed a
similar trend, falling from 15 in 2004 to seven
in 2007, with an increase to nine in 2008.
One European cleantech investor says
VC firms’ problem with fuel cells in vehicles
is the timeframe involved. “The scientific
consensus is that we need a significant
impact on reducing carbon emissions
within ten years. When I look at a ten-year
horizon, I can’t see a hydrogen economy
making a major impact. So our fund has not
invested in the hydrogen economy because
the timeframes are too long.”
Bance at Ceres Power agrees that the
fuel cells industry is a long game. “The
journey of getting a new product launched
is both extensive and expensive. It’s a
capital-intensive industry with long
development cycles. So you need to get
it right first time; rework is costly.”
Energy efficiencyInvestment trendsFirms based on greater energy efficiency, and
offerings that can provide customers with a
rapid payback on their initial outlay, are
predicted to receive a significant proportion
of available capital in the near future.
Indeed, Cleantech Group data shows
that energy efficiency was the second
largest cleantech sector after generation in
Europe in 2008, by both deal number and
amount invested during the year. The
sector has seen a year-on-year increase
from 2006 to 2008, in both the number of
deals – from eight to 31 – and proportion of
May 2009 RealDeals 13
deal number in Europe – from seven per
cent to 15 per cent.
“Energy efficiency is a big sector,” says
Emerald Technology Ventures managing
partner Gina Domanig. “If you can sell
somebody something with short payback,
that’s very attractive.”
Such offerings include those that
provide greater awareness of energy
consumption at home and at work, and
anything that falls under the banner of
smart grid technology. Recent deals include
Climate Change Capital’s ¤10m investment
in Power Plus Communications, a German
provider of broadband powerline
communication systems, in November.
Power Plus’s technology enables the
quick and efficient transfer of current
consumption in real time from the
electronic meters to the energy provider.
The uptake of smart grid technologies
will certainly be helped by President
Obama’s drive for them in the US (see
section four of this report), but anticipated
energy shortages in Europe are also likely
to push energy efficiency up the scale of
importance on this side of the Atlantic.
“We won’t build enough power stations
in time to meet the growth in demand
that is forecast, so we have to persuade
businesses and consumers to reduce
their demand,” says WHEB Ventures’
McNaught-Davies.
As well as smart grid and smart
metering technology, ways to make
industrial processes more efficient will
also be increasingly in demand.
Green building technology, too, is an
area of energy efficiency that attracts
investment interest, though the sector
has been affected by the worldwide
construction slump.
“Though there are interesting green
building technology companies, I think in
the short term they’ll have a difficult time,”
says Domanig (see Challenges, below, for
OpportunitiesInvestors, entrepreneurs and corporates
operating in the cleantech arena agree that
energy-efficiency technologies will flourish
in the current global economic environment.
There are two main reasons:
Energy-efficiency technologies can
reduce costs as well as carbon
emissions.
These technologies tend to be
significantly less capital-intensive than
energy generation and other areas of
cleantech, and can be brought to market
more rapidly.
“Large wind, solar and power plants are
capital-intensive,” says Steve Mahon, a
board member at Rltec, which develops
“dynamic demand” technology enabling
electricity grid operators to balance
demand from domestic and industrial
consumers with supply from power
generators. “In the next 12 to 24 months,
capital for these areas will be less widely
available, and will come at a higher price. In
contrast, energy-efficiency technologies
tend to be retro-fittable, with low capital
intensity and shorter payback times. This, if
anything, is more attractive in this climate.”
Emmons at Siemens Venture Capital
agrees. “With energy-efficiency
technologies, you are not building a power
plant; you are putting into place distributed
solutions that tend to be lower-cost, even in
aggregate. What makes this area exciting
for us as investors is that there is a hard
ROI that you can realise in less than 12
months – sometimes less than six months.”
Mahon gives Rltec as an example. “What
this firm produces is effectively software.
You don’t need to build big factories to
produce this. And with a relatively small
investment, you can grow a big business
quickly,” he says.
And Emmons cites one of Siemens VC’s
portfolio companies – chilled water cool-
storage technology firm Beijing PowerU
Technology. “It allows you to store water
chilled at night, so that you don’t have to
spend as much on air-conditioning during
the day. You can realise fast ROIs with the
right customers.”
Germany-based EnOcean – another
Siemens VC portfolio company – is a
further example of an energy-efficiency
business with low capital intensity and fast
potential returns, Emmons adds (see below
and facing page for more on EnOcean).
“Anything that improves energy
efficiency is seen as beneficial today –
because the driver is not environmental,
it’s economic,” adds Bance at Ceres Power.
Another advantage of energy-efficiency
technologies is that they don’t require a
behavioural change, says one European
investor. The consumer will simply find that
their laptop uses less energy, for example.
The area of “green IT” – making
computer processors, server farms and
other IT systems less energy-intensive –
holds particularly substantial future
promise, the investor adds.
Challenges (and more opportunities)Despite the attractiveness of energy-
efficiency technologies in the current
economic climate, technologies focused on
improving the energy efficiency of buildings
have been hurt by the recent downturn in the
property and construction sectors.
One European cleantech investor says:
“We don’t know when the property markets
will come back, so we have redeployed
capital to areas likely to see a stronger
performance over the next two years.”
But not everyone in the green buildings
space is gloomy. Germany-based EnOcean
produces battery-less, wireless radio
sensors designed to automate heating,
lighting and other systems in buildings.
“We supply suppliers to the construction
industry,” says Markus Brehler, founder and
chief executive of the company.
Although he admits that falling energy
prices may move building efficiency “a little
down the agenda”, he says that he has not
section 2: sector trends
Source: Cleantech Group
Energy efficiency investment in Europe and Israel
Deal number (left)
Investment (right)
2004 2005 2006 2007 2008
Data in $m
40
35
30
25
20
15
10
5
0
160
140
120
100
80
60
40
20
0
14 RealDeals May 2009
yet seen a fall-off in demand from
EnOcean’s customers.
Recent research by Taylor Wessing into
sustainability issues relevant to construction
and development found that “75 per cent
of respondents [representing investors,
developers, contractors, architects,
commercial agents and many others]
believe that a renewable/sustainable
energy source is likely to be an element
of property development that they would
be involved in”.
The report concluded that “the
sustainability challenge will not go away,
which means that the economic downturn
cannot be allowed to obstruct the solution –
indeed, it could and should focus our
response with ever greater intensity.
Sustainability should be embraced as one of
the big growth sectors of the future, as the
recent rise in ‘green collar’ jobs suggests.”
Indeed, Brehler sees opportunities in the
downturn. “A crisis is always a time for
innovation. For example, our customers in
the UK tell us that their standard line of
business is going down, but their EnOcean-
based business is going up.” He adds that
the Obama administration’s initiative to
promote the development of green
buildings presents further opportunities for
his firm (see section four of this report for
more on the Obama stimulus package).
However, Brehler says that the “invisible”
nature of buildings efficiency technologies
means they get less political support than
technologies such as solar panels or wind
turbines. “It’s more attractive for politicians
to support solar cells or wind farms,
because there is something tangible to
show the public,” he says.
He also believes that green buildings
development may progress faster in the
US than in Europe, because building
energy efficiency in the US is “so bad,
that now they have an awareness of the
need to do something, they will leap
from the beginning of the twentieth
century to the beginning of the
twenty-first century.”
It is crucial, therefore, for
European firms in the green
buildings sector to make
inroads into the US market.
In May 2008, EnOcean
entered into a partnership
with US giant Masco
Corporation, which
manufactures brand-name
consumer products for the
home improvement and new
home construction market. In December of
that year, it also partnered with Leviton, the
US wiring accessories firm. “In the US, they
are more ready to try new things, which
gives us a chance as a new company,”
Brehler says.
However, regulations covering building
efficiency are “tightening fast” in Europe,
according to Claude Fussler, programme
director for Caring for Climate, the UN
Global Compact’s climate change initiative.
“That will create a lot of new market
prospects for energy-efficiency
technologies,” he says.
Brehler adds that the “sweet spot” for
EnOcean’s green-building technology is
“a combination of high energy costs, the
political will to bring down carbon dioxide
emissions, a high level of industrialisation
and high labour costs.” (High labour costs
make EnOcean’s wireless technology
attractive because it is less labour-
intensive to install). As a result, Japan and
the Middle East, as well as Europe and the
US, are “very interesting” to EnOcean.
Recycling & wasteInvestment trendsIn the face of tough market conditions, a
spate of waste and recycling deals have
been made over the first quarter of 2009.
While UK waste management business
New Earth Solutions received £4m of
expansion capital from the Impax Group
in February, as well as securing a £50m
Nord LB facility to roll out its plants
throughout the UK, WHEB made its own
growth capital investment in Limerick-
based AMCS, a supplier of waste-
management and recycling technology
to the public and private sector.
One main driver for companies in
the sector is EU legislation on
reducing waste-to-landfill.
Many such businesses are
also generating revenues,
attracting venture
capitalists into the space.
In March, the Foresight
Group invested ¤5.6m
in Vertal, which has
developed technology that
converts food waste into
fertiliser. Mirroring the tactics
of other venture investors in
waste-management businesses, Vertal’s
equity investment will largely fund the
construction of the company’s first plant,
with the firm hoping to refinance at
favourable terms at a later date.
The lack of project financing available
from the banks is therefore providing a
string of such opportunities for venture
funds willing to pursue this strategy. “In a
way it’s a necessity, but it means we can
guide projects more profitably,” says
Foresight partner Matt Taylor.
OpportunitiesThe waste-treatment and waste-to-energy
sectors hold substantial potential, says
Mott at Oxford Capital Partners. “The
sector has been hurt hard by the collapse
of the economics of the recycling sector
[see Challenges, below]. But we’re running
out of landfill sites, so other solutions need
to be found.”
Mott sees particularly strong
opportunities in niche waste-to-energy
applications. “For example, we have an
investment in Inetec, which turns food and
packaging waste into a stable biofuel. Lots
of companies deal with food waste, but
most cannot deal with food and packaging
combined. So Inetec is interesting.”
Another of Oxford Capital Partners’
portfolio firms, Microbial, turns
metalworking fluids into grey water.
ChallengesInternational prices for recycled materials
such as metals, paper and plastic have
recently collapsed. Prices for aluminium
cans, for example, fell from £770 per tonne
in 2004 to £425 per tonne in 2008. Prices
for plastic bottles more than halved during
this period. This means that local
authorities and their waste-management
partners, which once made a profit from
recycled materials, face making a loss.
Many experts are concerned that if
prices for recycled material remain low,
the market for recycling services and
technologies may deteriorate.
Advanced batteries and other energy storage technologies Opportunities“The opportunities in this area are vast,”
says Andrew Loyns, chief technology
May 2009 RealDeals 15
officer at Atraverda, a UK-based company
that uses a conductive ceramic to make
lead acid batteries smaller, lighter and less
harmful to the environment (Atraverda
raised £10.4m in a series B financing round
in October 2007).
Emmons at Siemens Venture Capital
agrees. He says his firm “spends a lot of
time looking at companies in the energy-
storage space”, because storage
technologies are crucial for managing the
future supply of wind, solar and other
forms of renewable energy that are
currently non-storable.
Energy-storage technologies that
Siemens has evaluated include flow
batteries (such as those provided by
Israel-based Enstorage), and hydro/
compressed air energy storage. “The key
to investing in these areas is understanding
where we will see utility participation, and
where the economics will work out – and
this may be assisted by regulatory policies,
for example.”
Although he has yet to see a proven
energy storage solution for grid-sized
applications (see Challenges, below),
Emmons says that residential-level energy
storage technologies are already making
headway. “We are watching this area with
some interest,” he says.
Meanwhile, Wright at Moxia Energy
believes that the entrance of Chinese
companies into the advanced batteries
market will contribute to the drop in prices
necessary to get new energy storage
technologies into the mass market. “For
example, we are working with a Chinese
company that is creating a heavier but
much cheaper form of lithium battery for
electric vehicles. Battery packs for electric
cars can cost $30,000. So step changes
in price are important,” he says.
SET Venture Partners’ business Epyol
represents another breakthrough for
electric vehicle industry. The company, in
which SET invested an undisclosed amount
in mid-2008, has developed technology
that can recharge electrical car batteries in
a fraction of the time it normally takes.
Challenges“The issue for any new battery is getting
adoption by the customer base. When the
economic climate is difficult, pressures on
timescales and so on are greater,” says Loyns.
The US boasts an overwhelming lead
over Europe in the advanced batteries
sector. Indeed, Europe accounted for only
five per cent of total global investment in
this area during 2008,
with North America
accounting for 89 per
cent, according to
Cleantech Group data.
This may be because
the US has focused more
on energy storage,
suggests Loyns. “The
emphasis on energy storage
perhaps hasn’t been as strong in
Europe. Within the lead acid battery sector,
a lot of Europe’s manufacturing has gone
to Asia. The US has tended to keep its lead
acid battery industry – although most
lithium manufacturers are now in Asia.”
The energy-storage industry in the US
is set to receive a further boost from the
recent Obama stimulus package, which has
earmarked $2bn for the advanced batteries
sector, Loyns adds. “There doesn’t seem to
be any such activity in Europe, and we
probably don’t have the manufacturing
infrastructure to deal with it in the short
term anyway.” (For more on the Obama
package, see section four).
Meanwhile, the biggest challenge for
those working on large-scale energy storage
systems is making the technology viable in
the first place. “Many energy storage
technologies have not yet demonstrated
that they economically scale to ten to 50
megawatt-hour or larger systems, which is
what a grid-sized energy storage solution
would require,” says Emmons.
“The prices for energy storage are just
too high for the benefits they bring,” adds
Alan Gooding, managing director of smart
grid technology firm Smarter Grid Solutions.
Energy infrastructureOpportunitiesIn February 2009, the Obama administration
earmarked $11bn to support the
development of smart grid-related
technologies (see section four of this report
for more on the Obama stimulus package).
This, combined with the fact that investment
in smart grid firms grew considerably in
2008, points to a bright future for this
energy infrastructure sub-sector.
The smart grid model encompasses a
range of new technologies that manage
electricity supply and demand more
intelligently and efficiently. Bance at Ceres
Power believes that
a smarter grid is
synonymous with a
decentralised energy
infrastructure.
“Centralised generation
models waste over two
thirds of total energy, either
up the power station chimney
or down the wire. Distributed
generation uses 90 per cent of the
energy resource, so it is three times more
efficient than the centralised model,” he says.
Bance says that such a big efficiency
gain will prove impossible for political
leaders to resist. “Because the distributed
power model is so much more efficient, it is
probable that governments will eventually
deem it uneconomical and unethical to
continue with a centralised power
infrastructure as it is done today,” he
says. “So over the next five to ten years,
distributed power units could credibly
become the standard fit in every home.”
In Europe, the opportunities for smart
grid and smart metering companies will
increase over the next few years as the
region faces a “gap” between energy
generation and demand, adds Joel Hagan,
chief executive of UK-based energy
display technology firm Onzo. However,
he adds that improving the energy
infrastructure is higher up the agenda in
the US. “They have a much greater
imperative because if they don’t do
something now, they will have brownouts
and blackouts. It will be several years
before European countries are in a similar
‘must-do’ situation.”
Meanwhile, the downturn is presenting
new opportunities. Hagan adds: “What
previously for the consumer market
was a disposition towards ‘green’ has
become a mainstream desire to save
money. The recession is an opportunity
for us to turn our service from a niche
to a mainstream offering.”
ChallengesThe complete smart grid concept,
characterised by a truly decentralised
energy generation and storage
infrastructure, will take decades to become
a reality, admits Hagan.
“Electric hybrid vehicles – which could
form part of the energy storage system of
the home – could take 20 years to achieve
substantial penetration in the market,
especially now that car companies are
having such a tough time.”
section 2: sector trends
16 RealDeals May 2009
Gooding at Smarter Grid Solutions
agrees that the smart grid will not appear
overnight. “You’ll never go out and buy
a smart grid. A series of new technologies
will make the grid smarter. At some point in
the future, we will achieve a smart grid, but
no one knows where that boundary is.”
Even elements of the smart grid
model, such as smart meters, will take
around a decade to become ubiquitous,
Hagan says, because even mandatory
rollouts take time to be completed.
Meanwhile, a volatile regulatory
environment is hurting parts of the smart
metering sector. Hagan adds: “Two years
ago, the UK government announced that
it was thinking of mandating the provision
of a couple of million energy displays.
Several companies popped up to serve
that need. The government then reneged
on that initiative, and those companies
will probably struggle to survive the
current period.”
MaterialsOpportunities“Novel materials and nanotechnology
is a sector that has taken a long time
coming, but the number of potential
applications are growing all the time –
from self-cleaning glass, via fuel catalysts,
to plastics that last longer,” says Mott at
Oxford Capital Partners.
Emmons at Siemens Venture Capital
agrees, adding that the current global
economic woes are unlikely to hamper
activity in this area. “I don’t think that
we are going to see a drop-off in the rate
of new material innovation as a result of
the downturn – whether it is in new
catalysts, new membrane technologies
or different methods of pre-treating or
post-treating fuels,” he says.
Indeed, as many large-scale construction
projects are postponed owing to the
current climate, many firms will take the
opportunity to focus even more on R&D in
several cleantech sub-sectors, he adds.
ChallengesThis is a diverse sector, with each specific
technology characterised by specific
strengths and weaknesses. In general,
however, European investment in the new
materials sector remains lower than in
most other areas of cleantech, including
energy efficiency, recycling and waste,
manufacturing and industrial, energy
storage, and air and environment.
“It surprises me that there haven’t been
more investments in new materials, though
I think that’s in part because it’s outside
people’s comfort zones. I think you’ll see
that area start to grow,” says Environmental
Technologies Fund partner Patrick Sheehan.
Manufacturing/industrial In 2008, $51.4m was invested across six deals in european
manufacturing/industrial companies, with $26m across
three deals in smart production; $17.5m across two deals
in monitoring & control companies; and one deal worth
$7.9m in advanced packaging.
this represented a 42 per cent decrease in investment
from the 2007 value of $88.2m, and a drop from 11 deals
to six. However, 2007 itself saw a large increase from
2006 and 2005 figures, so the 2008 investment figure
remains 91 per cent more than the 2006 investment total.
Water and wastewaterInvestment opportunities based on the theme of water –
including storage, transportation and desalination – are
expected to see more investment, though so far such deals
have proved hard to come by for venture firms. “distribution
seems to be a huge challenge for most companies we’ve been
looking at there,” adds Wellington partner Bart Markus.
the most prominent recent deal in this space involved a
Zouk Ventures-led ¤10.4m growth capital investment for
Hamburg-based triton-Format, a provider of water solutions
for the maritime, industrial and small municipal sectors. the
company designs, assembles and installs water treatment
modules ranging from low-energy desalination to water
management and waste water systems.
during 2008, the water and wastewater sector recorded
its highest ever level of investment in europe, with 16
deals and $43.1m invested in europe during 2008, up
from 11 and $33.8m in 2007. two thirds of these deals
(ten) were focused on water-treatment companies, as was
$29.7m of the investment. Five deals and $12.4m went
into wastewater treatment, with the rest going into water
conservation.
on a global level, europe accounted for around 55 per
cent of the deals (by number) made into the water and
wastewater sector.
(See section five of this report for more on the future
potential of the water sector)
Air and environment In 2008, $41.2m was invested in 12 deals across european
air and environment companies, with $31.4m across seven
deals in clean-up/safety; $2.4m in one deal in emissions
control; $3.5m across two deals in monitoring/compliance;
and $4.9m across two deals in carbon trading and offsets.
Investment in the sector increased by 54 per cent from
2007 and from seven deals to 12.
Agriculture In 2008, $26.7m was invested in european agriculture
companies, with $11.6m across three deals in land
management, and $15.1m across two deals in natural
pesticides.
Transport In 2008, $19m was invested in european transport
companies across five deals, with one deal of $8m in
fuels; $3m across two deals in logistics; and $8m across
two deals in vehicles.
Other Sectors
May 2009 RealDeals 17
combined heat and power units (CPUs)
over four years.
Under the agreement, British Gas has
the exclusive right to supply Ceres Power’s
CHP units to the residential UK market,
while Ceres retains the right to supply them
anywhere else in the world, as well as the
right to exploit its fuel-cell technology in
other applications globally.
For Sam Laidlaw, CEO of British Gas’s
parent company Centrica, the deal makes
clear strategic sense. “Fuel-cell technology
has the potential to transform the domestic
central heating market, enabling our
customers to generate cheap, reliable and
low-carbon electricity in their own homes,”
he said when announcing the 2008 deal.
A fundamental future trend across
cleantech, adds Bance, will be “a proliferation
of corporate marriages between small
innovators bringing solutions to the market
and large incumbent companies that have
either the manufacturing horsepower or the
sales, marketing and distribution muscle to
provide scale”.
Mutual benefitsA corporate brings a huge amount of
credibility and management experience to
a cleantech proposition, agrees David Mott,
18 RealDeals May 2009
corporate engagement in cleantech
section 3
Plugging the investment gapPeter Bance, chief executive of UK-based
fuel cells developer Ceres Power, believes
that strategic partnerships between
cleantech firms and large corporates will
proliferate in the wake of the recent drop-
off in private equity and venture capital
firms’ appetite for risk.
“Strategic investors, such as energy
companies, are plugging the gap by
providing companies such as ours with the
financial fuel for growth,” he says. Ceres
Power, for example, moved from first- and
second-round VC funding, via an AIM
listing, to a growth capital deal with British
Gas. “We’re going to see more activity
from corporate strategic investors that
have an interest beyond the financial
returns in this sector, because late-stage
equity investment doesn’t really exist in
the UK for cleantech industries,” he says.
British Gas originally partnered with Ceres
Power in 2005, to develop domestic boilers
that produce electricity as well as heat. In
January 2008, British Gas entered a new
agreement to pay Ceres £5m (¤5.6m) in
installments to fund field trials and other
development activities, and placed a
forward order to purchase at least 37,500
While utilities, chemicals groups and large corporates in other
sectors are deepening their involvement in cleantech, the first
quarter of 2009 saw evidence of a scale-back in renewable
energy investment by the world’s oil and gas giants.
For example, Bp recently cut its 2009 investments in
renewable energy and other non-core business divisions
by almost 30 per cent. meanwhile, linda cook, head of
gas and power at Shell, said at the company’s annual
strategy presentation in march: “Wind and solar are
interesting [but] we may continue to struggle with other
investment opportunities in the portfolio, even with big
subsidies in many markets. We do not expect material
investment [in wind and solar] going forward.”
Biofuels, rather than wind or solar energy, were the closest
fit with Shell’s current strategy, cook added.
Why are the energy majors retrenching their positions in
the cleantech arena? many believe that the primary reason
is the recent fall in oil prices and its detrimental impact on
oil companies’ cash flows. as cook admitted: “We are
businessmen and women. if there were renewables [that
were profitable] we would put money into it.”
in other words, wind and solar technologies simply cannot
deliver the short-term returns that Shell and Bp’s shareholders
are looking for in the current climate.
The energy majors: a cleantech retrenchment?
investment director at Oxford Capital
Partners. “In the tidal space, we’ve seen
Rolls Royce stepping into a tidal energy
project. It wouldn’t surprise me if an
increasing number of others got stuck in.”
Existing partnerships between utilities
and capital-intensive marine energy
technology developers highlight the benefits
of corporate involvement in nascent clean
technologies, says Dr Stephen Wyatt, marine
energy accelerator manager at the Carbon
Trust. “Most of the leading marine power
developers have received a reasonable
amount of VC money. But we’re seeing
utility companies investing at an earlier
stage than they traditionally would for other
technologies. This reflects the levels of
investment needed for marine energy test
programmes. It gives stability to marine
energy companies’ business plans. They still
raise VC money, but if they’re backed by a
major utility, it gives quite a bit of comfort to
potential investors. After all, the utility is an
ultimate route to market.”
A growing number of large
corporations view clean technologies as
not only an important component of their
future strategies, but core to it. Siemens
is a case in point.
“Over the next 20 to 30 years, the global
community is going to be remaking the way
it uses energy,” says Eric Emmons,
investment partner at Siemens Venture
Capital. “I think Siemens AG is going to have
a large role there. If you look across our
industry sectors – energy, industry and
healthcare – about 25 per cent of what we
do, about ¤17bn in the past fiscal year,
would roughly be categorised as cleantech.”
Siemens is interested in several areas of
cleantech. Water desalination, wastewater
May 2009 RealDeals 19
treatment and industrial water
technologies are one area (see section
five of this report for more on the water
sector). Energy transmission, energy
efficiency and power generation are
others, says Emmons.
“Our agenda to build our solutions and
product portfolios in these spaces is pretty
aggressive – and you should expect to see
a significant increase in what Siemens as a
corporate entity is doing in this area in the
future,” he adds. “It fits our vision of helping
the world to cope with increasing
urbanisation, demographic trends and the
growing environmental challenges we face.”
Meanwhile, the partnership between
energy-monitoring display technology
developer Onzo and power company
Scottish & Southern Energy illustrates the
benefits that both start-up and large
corporates can reap from such a marriage.
“We get a first contract with a large
number of unit orders, making us one of
the biggest energy-display manufacturers
in the world,” says Joel Hagan, chief
executive of Onzo. “And we get the
opportunity to work closely with the utility
to make sure the solutions we are
developing map to their business needs. In
turn, Scottish & Southern Energy gets
exclusivity to that solution in the UK and
Ireland, though we remain free to retail
that solution direct to consumers.”
David Gardner, head of ventures at
Scottish & Southern (SSE), said when
announcing the deal last year, “Energy
customers have a growing expectation
that their supplier will provide new ways
to help them reduce their energy
consumption, and in the future this
could become an important service
differentiator. This partnership with Onzo
will give Scottish & Southern access to
leading-edge technologies that will help
us provide a new level of support to
customers who want to reduce their
energy consumption.”
The deal “demonstrates that SSE
is prepared to invest in any strong
proposition that directly supports our
strategic aim of ensuring that Scottish &
Southern plays a major part in the long-
term transformation of the production and
consumption of energy,” Gardner added.
Recent investments illustrate the kinds
of clean technologies that are of growing
interest to corporates (see Partnership
hotspots, right).
recent investments by large
companies in clean technologies:
Siemens (through Siemens Venture Capital) Beijing powerU technology
limited cooperation (efficient
water cool-storage technology)
enocean (self-powered wireless
sensor technology for building
efficiency systems)
inge water technologies
(ultrafiltration technology for
water treatment)
maxxtec (renewable energy-
related heat-transfer
technology)
SmartSynch (smart metering)
Zolo technologies (sensor
and monitoring technology to
improve the efficiency of large
combustion sources)
BASF (through BASF Venture Capital) heliatek (organic solar cells)
luca technologies (energy
creation and production through
farming natural gas generated
by microbial activity in organic-
rich hydrocarbon deposits)
Ultracell (high power density
fuel-cell system for portable
electronic applications)
RWE
(via RWE Innogy) Quiet revolution (small-scale
wind)
topell (manufacturer of
torrefied pellets, used in the
production of biocoal)
reVolt (rechargeable zinc-air
batteries)
Voith hydro (hydro power)
Scottish & Southern Energy Smarter grid Solutions (smart
grid technology)
onzo (smart metering display
technology)
Partnership hotspots
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copenhagen and beyondPolicy, government stimuli and the prospects for a green recovery.
section 4
“The world is definitely a tougher place,
but if you look hard enough, there are
going to be areas of cleantech that present
great investment and growth opportunities
– and a lot of that will be driven by
government regulation,” says one European
investor. “We continue to see governments
around the world harnessing the economic
opportunities around cleantech: that is just
what the Obama administration has done.”
The Obama effectThe Obama administration’s American
Recovery and Reinvestment Act,
implemented in February 2009, presents
opportunities for cleantech investors and
entrepreneurs on both sides of
the Atlantic. This broad
stimulus package earmarks
$43bn (¤32bn) for
cleantech support and
investment. Specific
objectives include
doubling the current
level of alternative-
energy generation to
50 megawatts by 2012,
and retrofitting public
buildings with energy-
efficiency technologies.
Steve Mahon, chief investment officer
at Low Carbon Accelerator, sees particular
opportunities for European companies
developing smart grid-related
technologies, such as Rltec, in which his
fund invests. “The US is talking about
spending $11bn on this area,” he says.
Markus Brehler, founder and chief
executive of German firm EnOcean, which
provides battery-less, wireless sensors for
use in “green buildings” systems, also sees
opportunities springing from the Obama
stimulus package. “Everybody knows that
energy is a scarce resource and that costs
will rise in the future. But while it seems
important, it is not viewed as urgent. I
believe there is a need for stimuli and
regulation to accelerate the process of
increasing energy efficiency,” he adds.
Joel Hagan, chief executive of UK-
based energy monitoring display
technology developer Onzo, sees
opportunities too. “It’s good for us; I
certainly see us participating in trials and
pilots in the US, some of which will receive
funding from the Obama package.”
Although he agrees that the Obama
stimulus package is “good news for the
entire cleantech industry”, Eric Emmons,
investment partner at Siemens Venture
Capital, adds that the specific implications
of the package are yet to become clear.
“We will be waiting to see what it means in
practice – whether it means tax incentives
or subsidies for installing energy-efficiency
technologies, for example. It will be a
question of how it is implemented – though
all indicators suggest that the areas of
investment are in line with what we hoped.”
George Polk, executive committee
chairman of the European Climate
Foundation, also highlights the current lack
of detail in the Obama stimulus package. “A
lot of money is promised, but it is not clear
how that money will be spent,” he says.
“The lesson for Europe is that people
need visibility over the longer term about
what the financial incentives are going
to look like,” he adds. “They also need
regulations to be carefully thought
through in advance – ideally in
consultation with industry.”
The European landscapeAre European governments following the
Obama administration’s lead, or will they?
Polk says that even if EU policymakers
were willing to do so, they cannot commit
to cleantech spending on the scale
recently seen in the US: “The Americans
are spending money without regard to
whether they have it or not – and the US
economy is structured in a way that makes
that possible. The EU cannot print money
in the same way,” he says.
Many in Europe, including Onzo’s Hagan,
are now concerned that the region is at risk
of being left behind as the US embraces
the cleantech agenda with renewed vigour.
“This is similar to the current situation with
stem cell research. If I was a European
scientist who has been making headway in
this area, I would be concerned about the
unleashing of American research and
development in that sector,” says Hagan.
However, Peter Bance, chief executive of
UK-based fuel cell developer Ceres Power,
believes that Europe still has one significant
advantage over the US and the rest of the
world. “As a continent, both governments
and consumers are more environmentally
aware than anywhere else in the world. This
is a key differentiator, and provides a local
market for cleantech products. Having a
local market on your doorstep is hugely
helpful to any growing cleantech business.
It gives you an excellent platform from
which to grow across the world.”
Yet European cleantech firms do not
have as large a local market as their US
Is the scope of UK cleantech policy too narrow?david Mott, investment director at
oxford capital partners and chair
of a british Shadow cabinet
working group on supporting
cleantech enterprise, believes that
current UK government support for
cleantech innovation, primarily
delivered through the carbon
Trust, is too narrowly defined.
“The carbon Trust is very
focused on carbon reduction. That
ignores a very large part of the
broader sustainability environment.
Recycling, water-related
technologies, novel materials, air
purification technologies and
others are not covered by the
carbon reduction agenda,” he says.
Widening the scope of clean
technologies eligible for
government support “has the
potential to have significant and
dramatic results in increasing the
UK’s competitiveness in the
cleantech sector”, Mott wrote in
a december 2008 report.
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counterparts enjoy, says Brehler at EnOcean.
“In Europe, we do not have one harmonised
market, especially in building technologies,
wiring accessories and so on. So the US has
the advantage of having one large, more or
less consistent marketplace.”
A global frameworkThe UN Climate Change Conference in
Copenhagen this December will shape the
long-term framework for future cleantech
policy across the world.
The Obama administration’s active
support of the cleantech sector “makes
a tremendous difference” to the prospects
for success at this conference, says
Claude Fussler, programme director for
Caring for Climate, the UN Global
Compact’s climate change initiative:
“Obama has surrounded himself with a
staff who are vocal about what needs to be
done to address environmental issues. I
think we will get something good out of
Copenhagen: not in detail but in the
principles and cornerstones. Then there
will be a lot of hard work during the two
following years, and there may be some
backpedalling. But in December, heads of
state will have to come out and say they
want something done. They won’t be able
to hide behind the economic crisis. They
will want to support a green recovery.”
Yet Dr Nikolaus Meyer, chief executive of
Germany-based solar developer Sulfurcell,
is concerned that the political fallout of the
global financial crisis will scupper attempts to
reach a meaningful deal. “There is a risk that
politicians will put priority on employment
rates and the economy, and delay policies to
develop cleaner technologies,” he says.
Yvo de Boer, executive secretary of the
UN Framework Convention on Climate
Change (UNFCCC), has admitted that
every detail of a new international
agreement on climate change is unlikely to
be agreed in Copenhagen. But he hopes
that a clear consensus can be reached in
the following areas:
The extent to which industrialised
countries are prepared to reduce
greenhouse gases.
The steps that India, China and other
emerging markets are willing to take to
reduce their emissions.
A framework for financing assistance to
emerging economies in their efforts to
reduce emissions.
A strategy for managing this financing
process.
“If Copenhagen can deliver on those
four points I’d be happy,” de Boer said in
March 2008.
Success in Copenhagen could provide a
particular boost to government funding of
nascent, highly capital-intensive clean
technologies such as carbon capture and
storage, says Fussler (see section five for
more on carbon capture).
“Policy innovation is so much more
important for the future of cleantech than
technological innovation,” he adds. “We’ll
get the technology if the political will is
there to get carbon out of the economy.”
Navigating the mazeHow can investors factor the uncertainties
surrounding future regulatory
developments into their strategies? “What
we do is focus on technologies with global
reach: we are never looking at just one
jurisdiction,” says one European investor.
“But more importantly, we always ask the
question: ‘on a five- to seven-year horizon,
can we get cost-competitive with fossil
fuels?’ If this is achievable, then to some
extent government regulations are there
only to accelerate that process. We would
never make an investment solely based on
a piece of government legislation.”
Bance agrees that any cleantech
business must ultimately stand on its own
commercial feet, but adds that government
support is still crucial in the short term.
“Early government intervention is essential
to get across the ‘valley of death’ through
to true scale,” he says.
Meanwhile, Polk argues that the
cleantech sector would be much more
effective at influencing future policy
decisions if it lobbied in a more coherent
fashion. “The sector needs to express
itself clearly to government about which
regulatory models work and which do not.
At the moment, the wind guys are saying
one thing; the solar guys are saying
another; and the geothermal guys are
saying something else. This is confusing
for government.”
on 9 March, danuta hübner, european
commissioner for regional policy,
announced that ¤105bn will be invested
in the “green economy” through the
eU cohesion policy. The commission
says that the funding, which represents
more than 30 per cent of the regional
policy budget for 2007-13, “offers a
solid platform for job creation and a
significant boost for regions and cities
in their quest to maintain europe’s
global leadership in the field of
green technologies”.
Specific funds will be allocated to
the following areas:
¤6bn for clean urban transport
¤23bn for railway development
¤4.8bn for renewable energies
¤4.2bn for energy efficiency
¤28bn for improvement of water and
waste management
¤3bn for SMe development of green
products and services
elsewhere, recently announced
government support for cleantech
includes the following:
China Total: $221bn
Focus: rail ($99bn); grid ($70bn);
water and waste ($51bn)
Spending timeframe: 2009 to 2010
US Total: $112bn
Focus: renewable energy ($33bn);
building efficiency ($31bn); water
and waste ($16bn)
Spending timeframe: 2009 to 2019
South Korea Total: $31bn
Focus: water and waste ($14bn);
rail ($7bn); building efficiency
($6bn)
Spending timeframe: 2009 to 2012
Germany Total: $14bn
Focus: building efficiency ($10bn)
Spending timeframe: 2009 to 2010
France Total: $7bn
Focus: grid ($4bn)
Spending timeframe: 2009 to 2010
A new EU boost for cleantech
Source: European Union, HSBC, Reuters
22 RealDeals May 2009
the Long view
section 5
investors and entrepreneurs? “The energy
system is going from dumb to smart,” says
Bance. “This means that there will be an
enormous amount of data flying around the
energy world, because instead of dozens of
generating assets we will have millions of
generating assets. Monitoring, measuring
and billing for these assets will become a
much more data-rich environment.” All this
means that data, software, communications
and metering firms enjoy enormous
opportunities. Indeed, companies such as
UK-based Onzo are already making
significant inroads (see page 19).
“We believe that energy efficiency is
strongly linked to smart systems,” says
Markus Brehler, founder and chief executive
of Germany-based EnOcean, which sells
such devices. “All those systems will need
smart, wireless sensors.” He adds, however,
that before the grid is made smarter, the
most sensible step is to increase efficiency
to reduce usage, with savings of 30 or 40
per cent easily possible through buildings –
the largest consumers of energy.
The transition to the smarter grid will
lead to a transformation of energy firms’
business models, says Bance. “Today, energy
companies make more money by selling
more energy. This is misaligned with what
society wants. Instead of a utility selling
the homeowner the commodity of gas or
electricity, they will own the distributed
generating assets, where suddenly gas or
electricity turns from a revenue item to a
cost item. In essence, utilities will shift from
selling commodities, such as electricity or
gas, to services, such as heat or lighting.”
Water technologiesAccording to Goldman Sachs, global
demand for water is doubling every 20
years. By 2025, one-third of the world’s
population will not have access to adequate
drinking water. Goldman has dubbed water
“the petroleum for the next century”. This
means that companies coming up with more
efficient ways to purify, distribute and use
water face a bright future.
Echoing Bance’s predictions for the
energy sector, Hans Enggrob, head of
innovation at Danish water, environment and
health consultancy DHI Group, says that as
with telecoms before it, the water industry is
ripe for decentralisation. “There used to be a
Survival of the fittestSteve Mahon, chief investment officer of
Low Carbon Accelerator, believes that the
recession will have a Darwinian effect on the
cleantech sector. “Just as in the Asian crisis
in 1997 and the tech boom of a decade ago,
the cleantech businesses that do survive the
current global downturn are likely to be the
strongest of their kind. They will enjoy rapid
growth when the global economy recovers.”
Moreover, says Simon Walker, head of
Taylor Wessing’s cleantech group, “many
of today’s leading cleantech investors were
active during the technology boom at the
beginning of this decade and, chastened
by that experience, have been more
circumspect about their investment
activity this time around.”
“There is a lot of optimism about the
ability of cleantech to withstand the crisis,”
adds Finn Mortensen, executive director of
Climate Consortium Denmark.
Evolution of the cleantech landscapeMany clean technologies proving successful
today have a long and bright future: after all,
most are in the early stages of development,
and their full potential remains largely
untapped. But which technologies are set to
dominate the cleantech sector in the longer
term – and which new technologies are
starting to appear on the horizon?
The smarter, decentralised grid“A massive long-term trend will be energy
moving from the exclusive realm of the large
to the realm of the small,” says Peter Bance,
chief executive of UK-based fuel cells
developer Ceres Power. “Historically, the
energy sector was characterised by massive
power stations, massive capital budgets,
massive government plans and massive
networks. What we will see in the future is
small energy companies with small products
in their millions, distributed everywhere.”
Bance says that this trend has already
occurred in other sectors: “We used to
have mainframe computers; now we have
personal computers. In healthcare,
centralised labs have been replaced by
point-of-care devices by the bedside.”
What long-term opportunities does this
trend in the energy sector present to
centralised telephone switchboard. Now
there is a diverse range of mobile and fixed-
line services. The same will occur with
water,” he says. Water innovation will
encompass biotech, nanotech, ICT and
other disciplines, he adds.
Finding lower cost and less energy-
intensive ways of desalinating water is a
particularly hot area, says Enggrob. Some of
the most advanced research in this area is
taking place in Singapore and parts of the
Middle East. Energy use and water use are
tightly linked, Enggrob adds. “Last autumn in
California, for example, up to 25 per cent of
total electrical power was used just to pump
and treat water. Water and energy are not
mutually exclusive issues.”
Liberalised water markets, which are
crucial for establishing a true economic
price for water, are key to further investment
into the area, argue investors specialising
the water sector.
Eric Emmons, investment partner at
Siemens Venture Capital, says that water
technologies are of great interest to his
parent company, which has long been
heavily involved in desalination, waste-water
treatment and industrial-water processes.
“We see opportunities in all three of those
spaces. Water is the world’s next pending
shortage, and it is inextricably connected to
oil and gas production, as well as food and
most of our infrastructure,” he says. “This is
a challenge that is not going away.”
Andrew Thomson, senior analyst at the
Cleantech Group, agrees. “The global water
crisis is more acute than investment levels to
date suggest, and we expect that investors
will begin to respond to this as the situation
becomes more dire. Europe and, particularly,
Israel have developed strong capabilities in
water and water-related technologies.”
Carbon capture and storage“Anyone interested in solving the problem
of climate change must be deadly serious
about carbon capture and storage,” says
Dieter Helm, professor of energy policy at
the University of Oxford. “China plans to
build 1,000 gigawatts of new coal power by
2030. Without a solution to coal, we look to
a path towards a 50 per cent increase in
carbon dioxide emissions by 2030.”
Yet Mahon believes that the current
thinking around carbon capture technology
is misguided. “We need to find ways not just
to capture carbon in the atmosphere, but
also to make it useful,” he says. “So I think
it’s all about ‘carbon capture and use’, not Ph
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‘carbon capture and storage’.”
New types of carbonate-based cement
are one potential application, Mahon adds.
“Once you can put an economic value on
captured carbon, you will see solutions start
to develop more rapidly.”
Artificial photosynthesis“Plants use sunlight to split water and
produce hydrogen. This application could be
harnessed to produce hydrogen fuel,” says
Francis Farley, a former physicist at Cern
and co-investor of the Anaconda Wave
Power technology. The foundations of
artificial photosynthesis technology are
already falling into place. In 2008, Daniel
Nocera, professor of chemistry at MIT,
created a catalyst that can produce oxygen
from a cup of water by splitting water
molecules. The process frees hydrogen
ions to make hydrogen gas.
Wind to hydrogenIt is now possible to link wind turbines to
electrolysers, which pass wind-generated
electricity through water to split it into
hydrogen and oxygen. The hydrogen can
then be stored and used later to generate
electricity from an internal combustion
engine or fuel cell. Such a project is already
under way at the National Wind Technology
Center in Colorado. “This would go a long
way to silencing the critics of wind power,”
says Tony Lodge, energy research fellow at
the Centre for Policy Studies.
The hydrogen economyAlthough most investors and analysts are
sceptical about its ability to make an
impact in the short term, many agree that
over the next 30 to 40 years, hydrogen is
likely to become a major source of power.
This will present opportunities for
companies developing the components
for a workable hydrogen infrastructure,
from storage and distribution systems to
fuel cell-powered vehicles.
Despite the nascent state of the
hydrogen economy model, Honda is
already leasing a few fuel cell-based FCX
Clarity cars in the US and Japan.
The intersection of food, water and energyThe Cleantech Group points to an increased
awareness of the interconnectedness of
energy, water and food as an important
long-term trend. The cleantech sector will
increasingly see companies and solutions
addressing all three of these resources,
rather than one at the expense of the others.
The forerunners of this trend can be seen
in second- and third-generation biofuel
companies, and in companies such as
UK-based Aquamarine Power, which is
developing near-shore, bottom-mounted
wave energy converters and desalination
modules. Meanwhile, in Oregon, General
Electric has developed a system at a dried
food processing plant that extracts methane
gas from waste water and turns it into
energy, purifying the water at the same time.
Geo-engineering and other big ideasThere are many other embryonic concepts
for addressing the world’s environmental
challenges, which, though seemingly
outlandish today, may gain traction over
the coming decades. For example, several
scientists are looking at ways of tackling
climate change by engineering alterations
to the planet itself, says Jamais Cascio,
research affiliate at the Institute for the
Future. “One example is pumping sulphur
dioxide into the stratosphere to block out
one per cent of incoming sunlight,” he says.
Another recent geo-engineering
proposal, from Gaia theory pioneer James
Lovelock and head of the British Science
Museum Chris Rapley, is to install millions of
pipes in the ocean to pump cold water from
near the sea floor to the surface, thereby
increasing the carbon absorbed by algae.
Another big idea, from atmospheric
physicist John Latham and professor of
engineering Stephen Salter, is to use remote-
controlled yachts to spray seawater into
the air to increase cloud cover. Even more
unusual is a proposal to launch mirrors into
space to deflect a portion of the sun’s rays.
“These kind of ideas are risky, because if
you screw it up, you screw it up a lot,” says
Cascio. “At the same time, they are attractive
to people who think we have already passed
the point of no return on climate change.”
Cleantech: here to staySociety’s efforts to remove carbon from the
global economy have only just begun. Much
of the potential for new, environmentally
friendly manufacturing and construction
processes, distributions systems and
business models is largely untapped.
At the same time, the evidence
surrounding climate change continues
to build, while the early effects of the
phenomenon are being increasingly felt.
Whatever the future holds, the cleantech
sector will loom large in it, says Bance, who
believes that the energy sector alone holds
vast unexploited potential. “Energy is the
world’s biggest industry. The cleantech
energy boom will make the IT boom and
the biotech boom look tiny in comparison.”
Alan Gooding, managing director of
smart grid technology provider Smarter
Grid Solutions, sums up the challenge, and
the opportunity, for the cleantech sector:
“Smart grids, solar, wind and other energy
deployments will work when they are the
cheapest option for the consumer. That
day has got to come.”
The shorter view:Cleantech Group’s predictions for 2009 (made in 2008)
1the energy-efficiency
infrastructure boom will continue
to gain momentum owing to its
combination of economic and
environmental benefits.
2global climate talks risk getting
bogged down, with no serious
deal until 2011/12, owing to the
distractions of the global financial
crisis and the intrinsic complexity of
the climate change agenda.
3wind stocks will come back;
thin film photovoltaics will
experience a shakeout.
4Cleantech venture is likely to
stabilise at $7bn globally;
private equity will become more
active in the sector.
5the failure rate of cleantech
start-ups is likely to double, as
investors focus on their most
promising companies and allow the
weaker or cash-constrained ones to
merge, be acquired or fail.
6the it industry will seize
energy as a significant revenue
opportunity.
7R&D will stagnate; corporates
will continue to acquire green
growth assets.
Cleanthinking,clear results.
For further information contact:
Simon WalkerEmail [email protected] +44 (0)20 7300 4745
Berlin Brussels Cambridge Dubai DüsseldorfFrankfurt Hamburg London Munich ParisRepresentative offices: Beijing Shanghai
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