On 1 Jul 2006 15:40:40 -0000, solarpowersatelliteplace@yahoogroups.com <
solarpowersatelliteplace@yahoogroups.com> wrote:
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> There is 1 message in this issue.
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> Topics in this digest:
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> 1. VCs Bet on Solar, Biofuel Money-Losers in Green Energy Frenzy
> From: markreiff
>
>
> Message
> ________________________________________________________________________
>
> 1. VCs Bet on Solar, Biofuel Money-Losers in Green Energy Frenzy
> Posted by: "markreiff" no_reply@yahoogroups.com markreiff
> Date: Thu Jun 29, 2006 8:51 pm (PDT)
>
> FYI,
>
> "VCs Bet on Solar, Biofuel Money-Losers in Green Energy Frenzy"
> Bloomberg
> http://www.bloomberg.com/apps/news?
> pid=20601109&sid=a9wBJqPgMUT8&refer=home
>
> : SolFocus sounds like a typical Silicon Valley startup: Eight
> : employees, big ideas -- and zero profit. Yet in mid-May, the
> : phones at the eight-month-old company wouldn't stop ringing.
>
> : The callers were venture capitalists, and they were dangling
> : millions of dollars in front of the Palo Alto, California-based
> : solar panel maker. Ty Jagerson, vice president of business
> : development, says as soon as he'd start talking to one VC, another
> : would call offering money.
>
> : ``It was completely insane,'' Jagerson, 35, says.
>
> : Up and down Sand Hill Road, the venture capital hub south of San
> : Francisco, the financiers who bankrolled the technology boom of
> : the 1990s are chasing their next big thing: alternative forms of
> : energy.
>
> : As oil and natural gas prices climb, venture capitalists are
> : investing hundreds of millions of dollars in young, often money-
> : losing companies that hope to harness the power of the sun or the
> : heat inside the Earth.
>
> : In all, U.S. VC funds invested a record $739 million in renewable
> : energy in 2005, up 36 percent from 2004, according to Cleantech
> : Venture Network LLC, a research group based in Ann Arbor,
> : Michigan.
>
> : VCs haven't buzzed like this since the Internet captured
> : investors' imaginations in the 1990s. Alternative energy stocks
> : have surged the way dot-com shares did in 1999 -- before the
> : bottom fell out of the Nasdaq Stock Market.
>
> : Investors Rush In
>
> : The 40-stock WilderHill Clean Energy Index has rocketed since its
> : August 2004 debut, rising 90 percent to a record 251.17 on May 5.
> : Since then, the index has fallen 23 percent to trade at 194.21 on
> : June 28.
>
> : As they did in the late 1990s, stock investors are baying after
> : companies that have yet to turn a profit.
>
> : Erik Straser, 36, a partner at nearby Mohr Davidow Ventures who
> : once worked at the top-secret Los Alamos National Laboratory in
> : New Mexico, says the cure to our energy ills is right over our
> : heads. New solar-power cells may one day reshape the global
> : electricity industry, he says.
>
> : ``A lot of VCs have woken up to the sheer magnitude of opportunity
> : in the energy markets,'' says Ira Ehrenpreis, a partner at
> : Technology Partners, a Palo Alto-based VC firm.
>
> : Venture capitalists could use a winner. Many of them are still
> : nursing losses from the Nasdaq bust. After that rout,
> : institutional investors pulled back, and VCs' money dried up.
>
> : Investment flows into venture funds plunged to $4 billion in 2002
> : from a record $106 billion in 2000, according to the Washington-
> : based National Venture Capital Association. VC funds posted a
> : negative return of 6.8 percent from 1999 to 2005.
>
> : People have dreamed of finding cheap, clean sources of energy
> : since the oil-price shock of the 1970s. So far, the hopes for
> : alternative energy have far outstripped the reality.
>
> : Green power is expensive. Even now, after oil and natural gas
> : prices have surged to record highs, it's still usually cheaper to
> : generate electricity by burning fossil fuels than it is by using
> : solar panels, wind turbines or underground steam.
>
> : In May, Rosemead, California-based Southern California Edison
> : agreed to pay 6.15 cents per kilowatt-hour for electricity from
> : renewable sources, plus an additional, undisclosed rate to ensure
> : energy would be available during peak hours.
>
> : Power produced by natural gas-fired plants costs 4 to 6 cents per
> : kilowatt-hour. Solar power costs U.S. homeowners as much as
> : 30 cents per kilowatt-hour -- double or even triple the price of
> : gas- or coal-generated electricity, according to Jefferies & Co.,
> : a Los Angeles-based investment bank.
>
> : Subsidies
>
> : Strip out state and federal incentives designed to promote
> : renewable power -- subsidies that might disappear when the
> : political winds shift -- and the economics of green look even
> : worse.
>
> : Because it's relatively expensive, green power has never really
> : caught on. In 2005, wind turbines, solar panels and other
> : alternatives to fossil fuels generated about 357 billion kilowatt-
> : hours of electricity, or 9.4 percent of the juice used in the
> : U.S., according to the U.S. Department of Energy. That's down from
> : 11 percent in 1989.
>
> : `Just Around the Corner'
>
> : ``Alternative energy has been just around the corner for
> : 20 years,'' says J. Stephan Dolezalek, a partner at San Bruno,
> : California-based VantagePoint Venture Partners. Once a green-
> : power doubter, Dolezalek is now backing clean-energy startups.
>
> : Institutional investors that invest in VC funds are warming to
> : clean energy, too. The $130 billion California State Teachers'
> : Retirement System, for example, is investing $250 million in
> : alternative energy through VC and private equity funds.
>
> : ``We're not head over heels in love with this sector, but we're
> : moving prudently to invest in it,'' says Margot Wirth, a money
> : manager at the teachers' pension fund.
>
> : To green-energy skeptics, VCs have a familiar reply: This time,
> : things are different. The economic, environmental and cultural
> : stars have finally aligned for a new era of alternative power,
> : they say.
>
> : `Birkenstock Set'
>
> : ``Something has really changed,'' says Floyd of Nth Power, which
> : has invested solely in alternative energy since 1997. ``This
> : industry isn't just for the Birkenstock set anymore; it's got
> : serious capital behind it now.''
>
> : That includes corporate cash. General Electric Co. has made wind
> : turbines since 2002 and solar systems since 2004. Now, its GE
> : Energy Financial Services arm plans to triple its renewable energy
> : fund to $3 billion by 2008.
>
> : ``The growth opportunity is so apparent, so we're going after
> : it,'' says Kevin Walsh, managing director of GE Financial's
> : renewable energy unit.
>
> : `Move the Cost Needle Down'
>
> : At a restaurant near his office, Straser pushes aside his stir-fry
> : and grabs a pencil to diagram how rising energy costs are pressing
> : companies to seek alternatives like solar power.
>
> : ``Solar is all about cost performance now, and those companies
> : that can move the cost needle down, that's the only goal that
> : matters,'' Straser says, scribbling on the butcher paper covering
> : the tabletop.
>
> : In early 2005, Straser met with Martin Roscheisen, 37, a fellow
> : Stanford-trained engineer, who'd assembled a team of
> : 30 Ph.D.- level scientists and engineers in an office park in Palo
> : Alto. They were developing a new type of solar technology that
> : cost less to produce than typical silicon panels. Google
> : co-founders Sergey Brin and Larry Page were early investors in the
> : company, called Nanosolar Inc.
>
> : A few months later, Mohr Davidow led a $10.5 million round of
> : financing for Nanosolar, which included Benchmark Capital, the
> : Sand Hill Road VC firm that funded EBay Inc.
>
> : Nanotechnology
>
> : ``Given that we invested in the company before the product was
> : developed, there was a technical risk,'' Straser says of
> : Nanosolar. ``But we dove in deep on the technology, and we could
> : see how a breakthrough manufacturing process could unlock a huge
> : economic advantage.''
>
> : For 30 years, solar cells have been fashioned from silicon wafers
> : similar to the ones that semiconductor manufacturers like Intel
> : Corp. use to manufacture computer chips. The rigid, delicate
> : panels are expensive to make, costing customers about $5.40 per
> : watt, and must be mounted in modules on rooftops or other exposed
> : surfaces.
>
> : Using nanotechnology, the science of building microscopic
> : materials from single atoms and molecules, Nanosolar's scientists
> : created a ``photovoltaic ink'' that converts sunlight into
> : electricity. The ink is coated onto flexible, foil-like strips
> : that wind through roll presses similar to those that print
> : newspapers.
>
> : The thin film of ink, which is 1/100th the thickness of a silicon-
> : based solar cell, can be attached to walls or any other flat
> : surface or integrated into roofing material. Roscheisen says this
> : process will enable Nanosolar to make solar cells for as little as
> : a 10th of the cost of silicon panels.
>
> : Bay Area Factory
>
> : Roscheisen says he doesn't aspire to replace existing electricity
> : sources with his PowerSheet-brand solar cells.
>
> : ``Solar is fundamentally about peak power availability and
> : value,'' Roscheisen says.
>
> : Growing Pains
>
> : Right now, many solar companies are feeling growing pains.
> : Worldwide sales of solar panels more than doubled to $11.2 billion
> : in 2005 from $4.7 billion in 2003, according to Clean Edge Inc., a
> : Portland, Oregon-based research firm. Solar cell makers that can't
> : buy the silicon they need face backlogs of as long as two years,
> : says Jeffrey Bencik, an analyst at Jefferies in New York.
>
> : Nanosolar confronts commodity risks of its own. The company uses
> : copper and indium, both of which have undergone volatile price
> : swings during the past year. Indium, a metal as scarce as silver,
> : swung from $950 a kilogram in June 2005 to $1,035 in September, to
> : $797.50 on June 5.
>
> : An even bigger challenge is that Nanosolar's ``thin-film cells''
> : are less efficient than conventional solar panels. They convert
> : 14 percent of the sunlight that strikes them into electricity,
> : whereas silicon cells convert about 20 percent.
>
> : Then President Jimmy Carter jump-started the renewable power
> : industry with tax credits. Floyd was hooked.
>
> : ``There were a lot of new technologies coming on line, and there
> : weren't many entrepreneurs, so it was a market where you could
> : really make a mark,'' she says.
>
> : ``These are huge issues that have to be grappled with,'' he says.
> : ``We're talking about a transformation of the global energy
> : infrastructure over the next few decades.''
>
> : Time moves fast in Silicon Valley. In 1999, VCs were the heroes of
> : the New Economy. By 2002, many of them looked like goats. What
> : many investors seemed to forget during those dark, post-bubble
> : years is that, sometimes, the dreamers are right.
>
> : In less than a decade, a seemingly quixotic startup with a goofy
> : name -- Google -- has become one of the most valuable companies in
> : the world. VCs who can find a Google or Amazon or EBay of green
> : power will make a fortune. And if they happen to save the world
> : along the way, well, that's fine, too.
>
> Mark Reiff
>
>
>
>
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