June 7, 2012
Energy is one of the biggest industries on the planet. Innovation at this scale doesn’t happen at the rate VCs typically expect, but once it takes effect, the results can be profound. What are the opportunities and challenges competing for a piece of the energy pie? What role should government play?
- Dan Adler, president, California Clean Energy Fund (CalCEF)
- Jeff Byron, vice chair, Clean Tech Open; former Commissioner, California Energy Commission
- Matt Scullin, founder and CEO, Alphabet Energy, Inc.
- Cathy Zoi, partner, Silver Lake Kraftwerk; former Assistant Secretary for Energy Efficiency and Renewable Energy at Department of Energy
According to Dan Adler, president of the California Clean Energy Fund (CalCEF), energy is the largest and most complicated thing that society undertakes. “It’s fundamental to everything we do,” he said. This translates to the need for scale capital the likes of which we’ve never seen.
Matt Scullin, founder and CEO of Alphabet Energy, Inc., sees the overall energy industry as a textbook commodity market driven by very basic economics. Innovation comes mostly from technical advances rather than product markets. Silicon Valley is a great place for technical innovation to happen, but here we’re a bit spoiled by industries like semiconductors, biotech, and software, where technical innovation can translate into rapid societal change. A key challenge is in “managing expectations around innovation cycles and how those can be linked between Silicon Valley and other areas that are very conservative and don’t adopt technology very quickly.”
Following that, Cathy Zoi, partner at Silver Lake Kraftwerk, stated that an energy pilot project has to run for a number of years, go through approvals—something for the smart grid, for example, could have an eight-year sales cycle. Unlike an iPhone, “it has a different time horizon because it’s an essential service that you can’t mess up.”
Jeff Byron, vice chair of the Clean Tech Open, pointed to government regulations. “Everything having to do with energy has a regulatory aspect to it,” he said, adding, “The institutional incumbents really do control the game.”
“The last wave of venture interests, starting in the last decade, was the non-specialist venture capitalist,” said Adler. “Now we’re coming back to the specialist investor who actually understands the dynamics of this industry best.” The innovation piece is essential, but we have to get to infrastructure scale.
Zoi sees a great future for the sector because of vital international markets, particularly emerging economies such as India and China. “In China they view this as a strategic competitive investment.” Byron added that it’s not just the institutional policies of China, but also the climate policies of Europe.
Whether the markets are here or there, Zoi pointed out, there are around 135 U.S. companies in this sector advertising for jobs, “and if they hire all those people, there will be 46K new jobs.” To that, Adler added, “Nationally, over the last seven years, there’s been a 12% increase in employment in clean tech. Compare that to job development and job growth at the macro level. Pretty astounding.”
What’s hot today? Adler sees energy storage as “the holy grail for clean energy.” Particularly batteries, he said. For Zoi, solar is exciting. She pointed to Germany’s recent news that half of the electricity that entered the market the last weekend of May was from solar.
Regarding the rapid entry of cheap natural gas onto the market, Adler provided a long-term view: If you’re a utility planner and you have to build something that will last, are you going to bet on today’s $3 natural gas, or are you going to bet on free, renewable resources?
Photo: Ed Ritger
Climate One, The Commonwealth Club HQ, San Francisco (June 4, 2012)
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