Renewable energy is at a turning point in its young history. While companies in the sector are struggling now to compete with lower prices for traditional fuels such as oil and natural gas amid the tightest credit market in years, the Obama administration promises to make developing renewable sources a priority, which means more tax breaks and investment down the road.

Standing at that juncture is John Breckenridge, a managing director at Good Energies Inc., a unit of Swiss retail, real estate and financial services giant Cofra Holding AG. Thanks to its deep-pocketed parent, Good Energies has $500 million per year at its disposal to invest in renewable-energy companies. Its focus is on technologies that reduce the world's carbon footprint, so it concentrates on solar, wind and energy-efficiency devices and avoids biofuels such as ethanol.

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Breckenridge joined Good Energies a little over a year ago from CCMP Capital Advisors LLC, formerly known as J.P. Morgan Partners LLC, where he served for seven years as operating partner and managing director in Tokyo and New York. While there, he was involved in the $1 billion acquisition in 2006 of a majority stake in Generac Power Systems Inc., a Waukesha, Wis.-based company that makes standby power generators for home, light commercial and industrial use.

Since joining Good Energies, Breckenridge has been involved in investments in Sage Electrochromics Inc., a Faribault, Minn., maker of energy-saving glass for buildings ($16 million); Ice Energy Inc., a Windsor, Colo., energy-storage and cooling developer ($33 million); Microstaq Inc., an Austin, Texas, maker of flow-control valves that save energy in air conditioning and refrigeration ($12.5 million); SolarReserve, a Santa Monica, Calif., large-scale solar power plant and storage developer ($140 million); 6N Silicon Inc., a Mississauga, Ontario, maker of cheaper silicon for solar power ($20 million); and Second Wind Inc., a Somerville, Mass., developer of wind-data-collecting devices ($4 million).

Breckenridge, a 47-year-old mechanical engineer by training, recently spoke with The Deal's Claire Poole from his office in New York.

The Deal: What are you looking at funding now?

John Breckenridge: The investment world in renewables has gotten very complicated. The idea that a rising tide will lift all boats is probably not going to hold today. In both solar and wind, we are in the process of seeing significant cost reductions after having very high prices. The costs are coming down faster than traditional energy. At the same time, we're going to get help from the new administration, so we're going to see growth. We're very bullish. You have industries going through dramatic transition. You have to pick the winners. We're spending a lot of time sorting through all the opportunities. Before, if a company got to a certain cost level, they'd be OK. Now you have to pick the company with the very best technology. The market is going to go where the leader is, and if you're not the leader, you're not going to survive.

What are you excited about?

We continue to believe the [photovoltaic] market is going to be a very long-term growth sector, and we believe the crystalline silicon and the thin-film markets are going to do well, so we'll be focused on that. We think there will be growth in the downstream, or services, business. In the wind market, we're investing selectively, going through a transition that's painful for a lot of people. In addition, we're investing in companies in the energy-efficiency sector. 

What are you not excited about?

We never really were focused on the fuel-cell market, and we don't do biofuels. On fuel cells, there have been a lot of business starts in that market, and it's not clear when that market will take off. If you use hydrogen as fuel source, that's still very expensive. Good Energies' commitment is to only making investments in which we're convinced that it's good for the planet, and in terms of carbon footprint, biofuels are controversial. They've made some improvements, but we're not focused on it.

Can you walk us through one of your recent investments?

We had been looking at where is there a problem in terms of energy efficiency. Air conditioning is one of them, making up 40% of power usage. We thought this is an area where we would like to have an impact. But the problem has been that it's populated by big companies that do their own R&D. Yaletown Venture Partners, which had co-invested with us in 6N, had an early-stage investment in Microstaq, so we went to Austin and visited them. They had a technology that could have a major impact on potential energy footprint and a defended position from an IP standpoint. The company was looking at other investors, but we're a single, long-term investor with a lot of money, so we tend to be attractive to target companies. So we made that investment and are very actively involved in the company.

What's the typical size of your investment stakes?

We invest $500 million per year, with the equivalent of a $2.5 billion fund, which makes us one of the largest investors in the sector. The difference is, we invest at all stages, from very early venture stage, $1 million to several millions, to growth equity, $50 million or larger. We're very focused on the sector but not the stage.

How do you finance deals?

Our parent, Cofra, has made a long-term commitment to renewable energy. I was in the traditional private equity world, and one of the big advantages we have is that we don't have funds. We have a long-term commitment, and our investor is very supportive of us. We have money this year when a lot of others don't.

What's your exit strategy?

We don't have one exit strategy. The IPO was an exit strategy for a time. It will come back, but right now there aren't any opportunities. In the wind business, once plants are built, we can sell them to [independent power producers] and to utilities. In solar, you're looking at either an IPO or to sell to an industrial group.

So is Cofra interested in saving the world or making money?

It's a little bit of both. We as investors are held to return requirements like any other investor. We focus on things that are moving the world forward in terms of our overall carbon footprint and make good investments in that area. We don't talk about our returns, but we do have targets.

Do you think we'll see some renewable companies struggle this year, even go bankrupt?

I think we will. I don't want to point to any specific companies, but in general, in the solar market, the prices have been historically high and going up all the time because of a shortage of supply. That's flattened out, which has brought prices down. It's put pressure on companies but created more demand. You have to be much more cost-competitive. Companies buying when prices were artificially high are not going to survive.

How about in wind?

In wind, the tax financing market has dried up, and companies committed to high-priced turbines are going to be in a real bind. They may not survive. Financing has evaporated. The administration is focused on this, but it may be too late for some companies.

Do you think their troubles will spawn M&A in the sector?

There's going to be M&A in the wind market because there are very attractive projects out there with financial troubles. In solar manufacturing, there are some large companies, and as they become troubled, they'll be acquired. We're looking at a shift from building companies to consolidation.

What's your outlook for renewable energy in general?

We're going to see a somewhat painful year this year, but underlying it will be very steep demand growth globally. As the industry straightens itself out, winners will emerge in a much healthier environment. We're looking at investing in companies that are troubled that may need to be recapitalized. There may be some bargains.

Is there anything the alternative energy industry has learned?

Maybe the whole industry was overexuberant versus the realities of the way it would go. The whole industry has been sobered by what's gone on, and it's a much stronger industry. We see very fundamental growth in demand in a sober and smart industry.