Clean Sweep 8

A round-up of recent news in clean technology and cleantech investment.

Deals
Germany's solar giant Q-Cells has taken a step deeper into the US market by increasing its stake in Californian PV cell producer Solaria. Q-Cells upped its stake from 12.39% to 33% in a $50m third round for Solaria, alongside existing Solaria investors Sigma Partners, NGEN and Moser Baer.
Q-Cells also sealed a supply agreement with Solaria for up to 1.35GW worth of cells over 10 years. Solaria's production tech promises to double or treble the efficiency of silicon use in PV cells - basically, they divide standard crystalline cells into thinner strips and package them in optical concentrators. Although the efficiency gains are a lower multiple than other techniques under development, Solaria's solution should be much easier to integrate into existing production lines.

At the smaller end, high-efficiency engine start-up LiquidPiston has secured $1.25m seed funding from Adams Capital Management and Northwater Capital. The MIT spin-out is developing a novel internal combustion engine, based on a patent-pending 'High Efficiency Hybrid Cycle' thermodynamic mechanism, which promises to have half the CO2 emissions of a comparable diesel engine.

In a deal I just missed last week, US biofuels group Gevo raised an undisclosed second round from Virgin Fuels and founding investor Khosla Ventures. The Gevo site is, as yet, rather skimpy on details of what it actually does, but the firm is known to have exclusively licensed technology from Caltech to produce butanol from biomass. Despite the lack of detail, the deal seems to have generated a lot more publicity than others, presumably because of the high profile backers.

A quiet week otherwise, especially given the riches announced last week. Everyone on holiday?


Further reading
EE Times reports on warnings from Dave Raval of Cambridge-based tech developer TTP that European VCs aren't putting enough into early stage cleantech:
British and European VCs need to do more now and capitalize on the low carbon industry's relative youth — or face being the last port of call for emerging technologies in just five years[...]
He said the reasons for this slip down the rankings are many: management teams not having done it before, long development times with large cash requirements and a propensity for European investments to be smaller versus the US and China. Also, the lack of understanding of the appropriate business models can lead to caution.

The Guardian reports on the National Trust's newly-stated mission to lead on climate change:
In what the conservation charity calls one of the most fundamental shifts in its 103-year history, the trust announced the intention to mobilise this vast public support "to drive conservation and quality of life agendas, and in particular to combat climate change".
From now on, said director-general Fiona Reynolds, the trust will advise people how to adapt their lifestyles to climate change and challenge government to be more ecologically aware.
This is potentially welcome news for cleantech companies targeting the consumer market - if the National Trust can give its seal of approval to domestic alt-energy systems, for example, it could help firms access a market that may currently be less amenable to such new-fangled ideas.

Jesse Ausubel of Rockefeller University's Program for the Human Environment argues that renewable energy sources will cause 'serious environmental harm' if deployed at a large scale. New Scientist takes a critical look at his argument. Ausubel, apparently, 'thinks he represents a silent majority of scientists concerned about renewables' - one might wonder whether this resembles the 'silent majority' invoked in other contentious areas which are generally neither a majority nor silent. Suitably heated discussion ensues. Meanwhile, back in the Guardian, physicist Jim Al-Khalili speaks up for nuclear power over renewables.

Mega trendy

Ernst & Young's latest Global Venture Capital Insights Report (released last week, and downloadable from here) includes a lengthy round-table discussion of 'Clean Technology Mega Trends'. It's based around seven key trends for 2007-08 identified by the Cleantech Network. These are, in short:
The ICT industry 'waking to both its environmental impacts and market applications and opportunities';
China 'both leading and lagging the world in use of cleantech';
Water scarcity to 'emerge as an issue equal in scale to energy';
Toxicity of industrial products, with rising public concern (again?) forecast, particularly in the EU;
'C-Suite' - senior executives 'taking direct line responsibility for the environment';
Carbon innovation - 'debate and action will increasingly focus on R&D, market creation and purchasing decisions; and
Policy, where 'governmental decision-makers are starting to see cleantech as a major source of new jobs, wealth creation and property value, as well as a solution to pressing energy and environmental problems'.

Nicholas Parker of the Cleantech Network, Stephen Dolezalek of Vantage Point Venture Partners, Heinz Haller of Dow and Jeff Lipton of the Jefferies investment bank kick those round the table. There's nothing radically new comes out of it, but it's a decent overview of (US-centric) thinking on the state of play.

The article also includes a handy graphic of 'Global energy technology venture backed companies', showing 100-odd such companies arranged by sector and sub-sector, which is now pinned over my desk.

As for the trend in the other sense of the word - ie, fashionability - I had an interesting chat recently with a prominent tech corporate finance specialist for a piece I'm writing on the broader resurgence of early-stage VC. He noted, in response to a question about hot areas, that cleantech is a place where a lot of cash is currently being generated: "Everyone is redefining their funds as cleantech - when you talk to guys like Esprit or August they say 'We have 15 cleantech investments, we just didn't call them that at the time'[...] We've got a couple of things we're doing at the moment in cleantech, and we're having people knocking on the door because they've got cleantech funds to invest."
Let's hope that appetite isn't followed, as it so often is in hot areas of tech, by too much indigestion.

Clean Sweep 7

A round-up of recent news in clean technology and cleantech investment.

Deals
Environmental Technologies Fund has made its first investment from its Euro150m pot, backing speciality metals group Metalysis in a £13m round. Defence tech group Qinetiq also broke the ice on its own new tech fund, joining existing investors 3i, Seven Spires, Chord Capital and Cambridge Capital Group.
Rotherham-based Metalysis is commercialising a patented electrolytic method for producing speciality metals (including tantalum, titanium and high grade alloys) from metal salts in a more financially and environmentally cost effective process. The firm is working with industrial partners including Rolls-Royce and BHP Billiton.

Think Global (aka TH!NK, gratingly) has completed a $60m private placement. Following a $25m round earlier this year, the firm plans to start production of its battery-powered cars this autumn. The round brings US cleantech big shots DFJ Element and RockPort Capital Partners on board, along with the UK's Hazel Capital and Norway's CG Holding. Existing investors including Canica, Capricorn Venture Partners, Wintergreen Advisers and a string of individual investors also joined in.
In May, Oslo-based Think announced it would be buying batteries from the much-favoured Tesla Motors, backed by DFJ and a who's who of US investors. In contrast to Tesla's racy designs, Think is going squarely for the city runaround market.

French waste-to-energy company Naskeo has secured Euro2.6m from Oddo Asset Management and XAnge Private Equity. Naskeo sets selected bacteria munching on food and pharmaceutical waste (anaerobic digestion, to use the technical term), to produce a burnable biogas of methane and carbon dioxide.

In another interesting early-stage deal, Germany's Clean Mobile has raised Euro650k from state-backed High-Tech Gründerfonds. The company has developed a pat-pending fuel cell drive system for electric bicycles and rickshaws.

In the US, industrial waste gasification business Ze-Gen has closed a $4.5m first round from Flagship Ventures and VantagePoint Venture Partners. It's a small first step - the company faces substantial project finance demands as it approaches commercialisation.

Another couple of thin-film solar developers have secured funding. California's SoloPower landed a $30m second round led by new investor Convexa Capital, while Ohio's MWOE Solar (NB - it's another of those annoying browser-resizing websites) raised a $7m first round from Emerald Technology Ventures and NGP Energy Technology Partners. A busy space to be in, with a host of companies trying to differentiate themselves - SoloPower boasts of significant cost advantages for its CIGS fabrications, while MWOE has an exclusive licence on production tech developed at the University of Toledo.


Further reading
Another new cleantech blog, this one rather better resourced than most. Earth2Tech comes from the GigaOM family of tech news sites, with a core of full-time writers. According to their welcome post, green-focused web sites are getting about as trendy as celebutante DUIs. Which is nice.

Cleantech Network has released its first report on cleantech VC in China: the self-explanatory China Cleantech Venture Capital Investment Report: 2006-Q1 2007. The key numbers: $420m went to cleantech companies in China in 2006, up from $170m in 2005. The first quarter of this year saw another $154m, with $580m forecast for year-end. Energy generation took the bulk, with $439m total, including $403m for solar; water treatment took $90m. Eight businesses went public over the same period, including six venture-backed.
Further investment opportunities will rapidly grow as international pressure on climate change increases and CDM projects become more obviously attractive, the report concludes.

On a related note, the Economist reports that people in developing countries are more concerned with climate change than in the rich developed ones:
Only 22% of Britons thought climate change was one of the biggest issues the world faces, whereas 60% of Indians and 47% of Chinese did. And the countries with the largest proportions of people ranking climate change as the world’s most worrying issue were Mexico, Brazil and China. Attitudes in Europe in particular were marked by pessimism. In Britain, 5% of respondents thought people and organisations (and according to most, that means governments) were doing what was needed to combat climate change. The figures were similar in France and Germany. In China, an extraordinary 41% did—which may say more about the Chinese people’s faith in government than about effective action against climate change.

Are biofuels clean? Not if it's corn-based ethanol, according to a report from US thinktank Network for New Energy Choices:
Corn – now used to produce 95 percent of U.S. ethanol and the only commercially viable ethanol feedstock prepared to capitalize on refinery subsidies in the Farm Bill – is the least sustainable biofuel feedstock of all raw materials commonly used.

The Observer notes a worldwide shortage of wind turbines, thanks to a subsidy-backed surge in demand in the US and rising material costs (blame the Chinese, as usual). It'll take two or three years to catch up with current UK demand, predicts Gordon Edge of the British Wind Energy Association.

No boom today

A new report* from US tech consultancy Topline Strategy Group drops some cold water on the hype around cleantech venture investment. By Topline's figures, VCs invested $1.3 billion in North American cleantech in the year from April 2006 to March 2007. That's less than half the $2.9 billion totted up by the industry's own Cleantech Venture Network over 2006, but more than the $883 million identified by Ernst & Young (Topline ascribes the difference with E&Y to a different accounting period and a broader definition, but can't fully explain the gulf with CVN's figures).

The report scorns the hoopla to note that total investment and deal numbers have remained pretty flat each quarter, and that the sector (or investment theme, or whatever you want to call it) represents a mere 3.7% of deals and 4.9% of capital. The mainstream investors, with the exception of DFJ and Kleiner Perkins, have generally left the market to the specialists. It's all a long way from the dotcom boom/bubble - probably no bad thing.

As Topline partner Jon Klein notes in his blog:
What does this mean? From a venture capital perspective, we have barely left the starting gate of a 30 year project to build a sustainable economy and that this project is so different than what VCs have become accustom[ed] to in high tech and life sciences that it is going to take a while for them to figure it out.

The report also looks at some of the particular challenges in cleantech investment - the breadth of the sector in industrial and technological terms; the geographical diffuseness, with no dominant clusters yet emerging (probably even more of a factor in Europe than the US); and the heavy capital demands of growing companies in many areas. All of which are already familiar to the cleantech VCs I've talked to, and which would seem to reduce the likelihood of a real boom (or even bubble) at the venture level.

In the public markets, there are still some concerns about irrational exuberance in some clean sectors. Nick Bruse over on the Cleantech Blog uses the Topline report as a springboard to ponder boom dynamics from a behavioural finance viewpoint:
The other aspect that i think we have to be concerned of in this sector is the sources of information driving the belief cycle of what is really going to happen with energy markets. For many people understanding the reality of what is occuring in the main drivers [climate change awareness, peak oil and energy security] is all too hard. Most people would struggle to digest the stern report or IPCC report in its details. So there is a reliance on the sound bytes of reporting in the media, and from professional analysts on the sector. Or from reading opinions on blogs - an information source that wasn't around in the dotcom boom.
Are people really making investment decisions based on blog posts? A worrying thought...

* - Cleantech and Venture Capital: A Whirlwind Romance or Just Dating?

Clean or green?

Over on the Cleantech Blog, Neal Dikeman of Jane Capital Partners ponders nomenclature - should 'the industry' be called Cleantech or Greentech?
When I asked my friends Keith Raab and Nick Parker who cofounded the Cleantech Group to comment on why they coined the term "cleantech" - Keith Raab said ""who wants green air or green water"? The greentech term (and we use small caps unless referring to an org) is very retro[...]
As you know, often cleantech is purchased primarily for non-environmental reasons even though it may offer significant environmental benefits. While some media outlets may be using the greentech term, just about all corps, Wall Street players and VCs who are active in the area use the term cleantech[...]
[F]rom a capital markets perspective it's important there is one term so that a defined asset (allocation) category emerges."

Cleantech definitely seems to dominate in the UK, being adopted by such players as 3i, Library House, Forum for the Future and the new Cleantech Magazine. It just seems a shame that the first result Google.co.uk throws up for 'cleantech' is a Scottish firm selling window-cleaning equipment...

Clean Sweep 6

A round-up of recent news in clean technology and cleantech investment.

Deals
Zouk Ventures has led a Euro10m round in wireless tech developer Nanotron, investing from its Cleantech Europe fund. The Berlin-based business produces RFID-based data transmission systems for the manufacturing, logistics and healthcare sectors. Previous investors including Polytechnos, Danfoss, and (deep breath now) IBB Beteiligungsgesellschaft VC Fonds Berlin also joined in the round, Nanotron's fourth.
It might seem a bit of stretch to call this a cleantech deal, but Zouk's PR is playing up the energy-efficiency of Nanotron's tech. According to the company's website, their products have a battery life measured in years rather than the months of conventional RFID systems.

Swiss investment network BrainsToVentures (b-to-v) has backed innovative energy company Rabtherm (NB - website in German). The Zurich-based company has developed a patented heat exchanger technology which, when deployed in sewers, generate heat and energy from the passing contents (further proof to the old saw that where there's muck, there's brass). Investment details were not disclosed.

Canada's 6N Silicon has raised C$6m funding in a round led by Ventures West and Yaletown Venture Partners. The firm is commercialising its proprietary process for purifying cheap silicon into the high-quality feedstock required by solar panel manufacturers. Toronto-based 6N has also secured funding from Sustainable Development Technology Canada to develop a pilot manufacturing line.

Concentrating solar power is still hot, with New York start-up SkyFuel raising $1.6m from angel investors. The firm is a spin-out from Columbia Business School, and is headed by solar guru Arnold Leitner. SkyFuel plans to build its first manufacturing facility in New Mexico.


Fund news
Spanish mid-market house Qualitas Equity Partners is reported to be marketing a new Euro300m fund, Q Energy, to invest in wind energy projects.


Further reading
The Economist presents an overview of China's growing energy demands. Many cleantech investors see China as a major market for alternative energy systems, but the Economist is less optimistic:
Given China's apprehensions about import-dependence and its colossal pollution problems, the prospects for China's fledgling alternative energy industry should be bright. In reality, however, the government's targets will be difficult to achieve, and the industry faces so many impediments that even its most ardent advocates are at best only cautiously optimistic about its future. The main hurdle continues to be cost. Although technologies needed to generate electricity from alternative energy sources are getting cheaper and more efficient in China, production remains relatively expensive, particularly when compared with coal-based energy[...] Meanwhile, the central government will continue to face difficulties preventing local authorities and township enterprises from building cheap, inefficient coal-fired power plants.

Cleaner policy, please

British businesses, it seems, want to clean up their act, but want the government to take the lead. So finds PwC in a new survey, modestly titled Saving the Planet, of UK corporate attitudes to climate change policy.

The good news is that virtually all say it's important for them to reduce the environmental impact of industry, an aim that's only realistically achievable through the deployment of the diverse goods and services which fall under the cleantech banner. Over two thirds say that climate change and other environmental issues are already affecting their business.

Less happily, a small majority say they are not confident in making long-term investment decisions due to uncertainty about the current environmental tax and regulatory framework. Most aren't confident about the effectiveness of government policy, and current tax incentives are seen as unclear, unnecessarily complex, and unlikely to motivate any meaningful change in behaviour. To quote one respondent: "Government needs to find a way of getting companies to do the right thing, but in a way that doesn’t penalise companies."

On the other hand, straight tax schemes such as the landfill tax and climate change levy are actually among the most popular policies. The CCL in particular appears to be a significant driver of investment in renewable energy sources.

The survey also shows significant concern over whether the revenues from environmental taxes are ring-fenced for environmental initiatives, or subsumed into general government spending. Environmental tax revenues, by PwC's measure (which does include fuel duty and other taxes of a less than entirely environmental focus), currently total around £35 billion, or 7.7% of total taxes and social contributions. If even a few percent of these revenues could be directed towards developing and investing in new clean technologies, what would be possible?

Clean Sweep 5

A round-up of recent news in clean technology and cleantech investment.

Deals
In the first of three deals for European university spin-outs, London-based photovoltaic developer QuantaSol (NB - nowt at the company's website as yet) has secured a £1.35m investment round. The round is led by by Imperial Innovations Group, the tech transfer wing of London's Imperial College, which takes a 24% stake in the company. AIM-listed specialist investor Low Carbon Accelerator, private investment fund NetScientific Ltd and and broker subsidiary Numis Corporation also took part in the round.
QuantaSol is based on 'Quantum Well Photovoltaic' tech developed by Prof Keith Barnham of Imperial and colleagues in Sheffield and Italy. The cells use gallium arsenide and other III-V semiconductors to improve photovoltaic efficiency, for use in utility-scale concentrating PV power generation.

Dresden-based Heliatek has secured financing of at least Euro3.2m from corporates BASF and Bosch, plus venture investors Wellington Partners and the state-backed High-Tech Grunderfonds. Heliatek, a spin-out from the Technical University of Dresden and University of Ulm, is developing solar cell technology based on organic semiconductors. The company says the cells can bring energy costs down to Euro1 per peak Watt, opening a subsidy-free market for solar energy.

Norwegian wind power developer ChapDrive has secured NKr14.3m (Euro2.25m) funding from NorthZone Ventures, Hafslund Ventures and Statoil New Energy. ChapDrive is developing a patented hydraulic transmission mechanism to make off-shore wind turbines more efficient, based on research at the Norwegian University of Science and Technology. The company has a 300kW prototype operating near Trondheim, with support from Shell, Norsk Hydro and others.

Solaire Direct (NB - website en Francais) meanwhile raised a Euro6.1m round from investors including TechFund, Schneider Electric Ventures, and Demeter Partners. Founded in late 2006, Solaire Direct claims to be the first photovoltaic specialist dedicated to France, designing and managing PV installations from the domestic to the utility level.


Further reading
Red Herring reports from the GreenVest 2007 conference in San Francisco, where the VCs are still bringing the buzz: What emerged from GreenVest was overwhelming enthusiasm for the sector, tempered by a sober assessment of the challenges of slowing climate change, dealing with mixed signals from policy-makers, and revolutionizing a decades-old energy infrastructure.

FT environment editor Fiona Harvey takes an overview of 'sustainable entrepreneurship' for Forum for the Future's Green Futures magazine, including caveats about taking 'dumb money' from less talented VCs.


And finally
Irish tech developer Steorn raised eyebrows last year when it announced, via a full-page ad in the Economist, that it had come up with a free energy device. A crack team of 22 volunteer scientists have been examining the claims since January, but Steorn is now offering its tech to the public eye. For one week only, the Kinetica gallery in Spitalfields market is exhibiting Steorn's 'Orbo' device as it perpetually spins a clear polycarbonate wheel with absolutely no supply of external energy or power supply attached. A live webcam feed is promised on Steorn's site here. More at Steorn's press announcement here.
So can this really be the holy grail of cleantech, a source of free and pollutionless energy, working on some as-yet-unexplained magnetic principle? This Barnum-like exhibition will hardly quell the sceptics, I fear. Meanwhile, the world eagerly awaits the findings of Steorn's appointed experts.
[Update, Fri 6th - Steorn's demo has been indefinitely postponed thanks to "technical problems [...] primarily due to excessive heat from the lighting in the main display area". Whoopsie.]

'Clean Tech Revolution' review

This timely tome from Ron Pernick and Clint Wilder of the Clean Edge research firm provides a handy reference for pretty much all things cleantech*, as of early 2007. There's a decent overview of the state of the market in eight key areas, plus general advice and comment.

The book's introduction sets out the stall for the cleantech opportunity, emphasising that it's already happening. Pernick and Wilder spell out what they call the six Cs that are driving investment - Costs (falling as production scales up); Capital (big influx from public and private sectors); Competition (as national and local governments try to develop sector clusters); China (demand for resources, and need to deal with development problems - India etc also count here); Consumers (demanding cleaner products and services); and Climate (with the evidence very much on the side of anthropogenic global warming, businesses are taking action now to reduce the threats and mitigate the costs).

The bulk of the book then details eight major clean technologies: solar energy; wind power; biofuels and biomaterials; green buildings; personal transportation; the smart grid (ie, microgeneration and related tech); mobile applications (ie mobile and off-grid power sources); and water filtration. The authors explicitly exclude "clean coal", with the possible exception of coal gasification, and nuclear power, on the basis of long-term costs.

Each tech gets a dedicated chapter, starting with a little real-world scene-setting, followed by a reasonably thorough rattle through the latest technologies, applications and investment and commercialisation issues, wrapped up with a list of ten companies to watch from around the world. It's a fine set of primers on the various areas, reading like a series of features from one of the better US business magazines.

There's then a couple of chapters on general cleantech issues - nothing really new here, but a handy addition. First comes a chapter on developing a local cleantech cluster, with advice for both public and private sector players, and a brief look at some emerging centres (including, outside North America, Freiburg, Copenhagen, Shanghai and Hyderabad) - one could do worse than slap this onto the desks of the UK's various development agencies. Then there's "five key lessons" in cleantech marketing, focusing on selling a once-niche proposition to the mainstream - all pretty common-sense stuff.

The book wraps with a potted return to the introduction's argument, adding a six-point action plan for investing to build a secure and sustainable cleantech future. The plan includes calls for more venture investors to join the fray, a greater shift of public subsidy from conventional to clean energy sources, and the foundation of a major global fund to support cleantech in the developing world.

Overall, The Clean Tech Revolution is an important contribution to the developing cleantech sector (or investment theme, or whatever you want to call it). It's a very smooth read, written in a good plain journalistic style throughout. I suspect it'll be an increasingly well-thumbed presence on my desk for some time to come.

Any criticisms are very minor and personal. The book does show signs of being rapidly put together (no pictures or illustrations, and a boilerplate-ish design), though that's a fair trade for the very contemporary content. I'd have maybe liked a little more technical detail on some of the technologies discussed, but that might have turned off the investment-oriented readers, who seem to be the prime target audience. It is rather US-centric (I suspect the closing inspirational quote from Ronald Reagan won't have the intended effect outside the States) but it would be unfair to demand otherwise - it's still a valuable read for interested UK and European investors and other cleantech players.

For more info and excerpts, see the authors' dedicated site. For UK buyers, Amazon UK is probably your best bet.


* - do people use "clean tech" as in this book, or "clean-tech" as on the Clean Edge site, or "cleantech" as here and elsewhere? It's like the dotcom (or "dot-com", or the horrible "dot.com") era all over again...