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— Venture Well —
 "A green renewable energy economy isn't some pie-in-the-sky, far-off future -- it is now," Barack Obama, then a Democratic presidential hopeful, said on the campaign trail last summer. "We are going to get this right."This was music to the ears of investors and entrepreneurs in the clean technologies arena, which by some counts attracted nearly $8 billion in investments last year. They are hoping that President-elect Obama's campaign promises can turn into tangible government initiatives that help simulate the green economy. The good news is that the core of Obama's energy plan entails eliminating U.S. dependence on foreign oil, investing $150 billion and creating 5 million jobs. Even better, after the financial meltdown and his victory in November, Obama is still talking about it.
When he outlined an economic recovery plan in late November that would create 2.5 million jobs by 2011, he specified boosting employment in areas such as development of wind farms, solar panels, fuel-efficient vehicles and other alternative energy technologies. Obama detailed the plan again, Jan. 8, highlighting plans to double the production of alternative energy in three years. This stimulus plan could be a boon for venture-backed startups and the cleantech industry in general, but another area critical to young energy technology companies, project finance, faces big challenges entering 2009 and will need further assistance to recover, says Erik Straser of MDV Mohr Davidow Ventures. Capital that would go to project finance "is repairing other parts of the financial system or sitting on sidelines," he says, estimating it could be late 2009 or early 2010 before lenders are comfortable enough to jump in again."It is a problem right now; banks aren't lending," adds Chuck McDermott of RockPort Capital Partners. Financing is available to some projects, but others are on hold. Initiatives generated by the new administration, he says, may help "prime the pump" and bridge the gap until credit markets normalize. Right now, the lack of credit is forcing some energy projects to be scuttled or at least delayed. Recently, oilman turned energy independence advocate T. Boone Pickens shelved plans to build a massive wind farm in Texas for at least a year because of the tight credit markets. Pickens argued that the government must take steps to maintain momentum in alternative energy development. For all projects, energy investment bank Cascadia Capital LLC's Michael Butler says project finance "is the most vulnerable piece of the capital structure." Initiatives to make it more palatable are essential "for that not to be a complete black hole in the next year." Despite the broad promise of clean technologies, young companies in this area are not immune to the challenging funding environment. Jim Imbler, CEO of Lakewood, Colo.'s ZeaChem Inc., counts himself lucky. The company, which makes cellulosic ethanol, closed a Series B round last summer. "We slid in kind of before the crisis hit," Imbler says, noting that by late 2009 or early 2010, they aim to have their first plant up and running, prove it out and then scale up from there. He hopes that when the company gets to the point where large-scale project finance can take over, credit markets will have thawed and, if not, a U.S. Department of Energy loan-guarantee program could provide an option. If the markets are open, he says, they'll tap them. If not, "we lean more on strategics." For companies trying to raise venture dollars, he says, the environment now is probably as bad as ever. Overall though, Butler calls cleantech the "only industry where people have a little bit of a bounce in their step," given what seems a friendly administration and Congress. When he unveiled the energy plan pre-crisis, Obama said that to mitigate risk, his administration would direct "billions in loans and capital" to entrepreneurs creating cleantech and businesses and U.S. jobs. Among the initiatives: extending the production tax credit to encourage renewable energy production (part of the bailout package); targeting, through tax incentives and government contracts, a goal of 6 billion gallons of U.S. fuel to come from sustainable biofuels by 2022; increasing fuel mileage standards and pushing for 1 million plug-in hybrid cars on the road; boosting energy efficiency; and, with new sources of power, modernizing the utility grid. Congress understands that the key is moving fast, targeting action this year, McDermott says. He acknowledges that this is warp speed in government time but also mentions a saying floating that has become popular these days: "A crisis is a terrible thing to waste." |
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