Back in January 2014, the CBC aired “The Cleantech Crash,” which highlighted the difficulty of operating in cleantech in the past few years. The documentary revealed how much the mood had changed since John Doerr’s now-famous March 8, 2007, TED talk on climate change and renewable energy.
Following the talk, and caught up in the hype, Washington and Silicon Valley poured into cleantech more than $100 billion — but instead of breakthroughs, the industry suffered setbacks, with investors now scaling back financial support.
Venture capitalist Rob Day, earlier last year, pointed out how the cleantech industry got overhyped and VCs are now more cautious in investing in technologies, which may or may not, generate attractive returns.
Fast forward to Paris, where governments from nearly 200 countries recently came together to agree for the first time on a universal agreement to cut greenhouse gas emissions and create a legally binding process for reviewing national emissions targets every five years.
The strong consensus from COP21, which also included Bill Gates’ announcement of the Breakthrough Energy Coalition, was positively received by clean energy investors and venture capitalists. The International Investors Group on Climate Change, a network managing €13 trillion in assets, said the decision would help trigger a shift away from fossil fuels and encourage greater investments in renewable energy.
So with the cleantech crash, and now, the Paris Climate Change Deal, the question remains: Are we going to see a cleantech revival? Or will the Paris summit result in an another bubble? When asked, well-known investors are confident that cleantech will deliver in the near future.
Venture capitalist Nancy Pfund, the founder of DBL Partners (who has supported some of the most successful modern clean energy companies, including Tesla, SolarCity, PowerLight, BrightSource and NexTracker), seems confident that the sector will see a turnaround following COP21, and investors will again support cleantech entrepreneurs.
“You are seeing renewed interest from venture capitalists, corporate investors and foundations in recognizing that we have a significant problem to solve. Where there are big problems to solve, there is opportunity for successful investment,” says Pfund.
On the prospects of cleantech in the coming years, Pfund goes onto add that, “We have a very informed group of people keen to invest in cleantech; and we also have many high-quality entrepreneurs coming into the sector.”
Clean energy investor Jonathan Silver, also agreed that the Paris Climate Change Deal was a step forward and should encourage cleantech investment.
“The world community is coming together in support of a clean economy and this should encourage further investment,” says Silver. “I suspect we will see a number of new sector-specific funds raised soon” he says.
Silver is the managing partner at Tax Equity Advisors, which invests in clean energy projects and the CEO of Greenbanc Global, a clean energy investment/consulting firm. He previously headed federal government’s $50 billion clean energy investment fund and has been named one of the country’s top 10, greentech “influencers.”
Paul Straub, Partner at Claremont Creek Ventures, adds that the outcome from Paris is unlikely to play directly into specific investment decisions, but, instead, provide a degree of stability regarding the regulatory and policy environment from various levels of government.
“From COP21, I expect policy and regulatory decisions that are created to provide a more certain environment which can allow entrepreneurs to operate,” says Straub.
Government support for cleantech remains important
Historically, the U.S. government has played an important role in supporting energy transitions within the economy. Following COP21, in an Op-Ed, World Bank Group President Jim Yong Kim highlighted the need for a clean energy transformation and an ambitious global transition toward renewable energy.
Much of President Kim’s vision will depend on government policies to support this transition. Andrew Beebe, Managing Director at Obvious Ventures, agreed that policy and regulatory decisions will play an important part in meeting COP21’s commitments. He suggests that carbon pricing is the most effective way to support the transition, and federal programs have an important role to play.
“A carbon tax or a real cap-and-trade program at the national level is going to be the most cost-effective method for us to make this transition,” says Beebe. “Federal programs like the ITC, PTC and DoE SunShot are excellent catalysts for different forms of growth and will help people focus on the right solutions for the long term.”
In June 2015, the International Energy Agency (IEA) also echoed the need to implement strong domestic policies, such as carbon pricing, to meet COP21’s commitments. The IEA went on further to suggest that governments should gradually phase out of fossil-fuel subsidies to end users by 2030, and increase investment in renewable energy technologies.
The Breakthrough Energy Coalition initiative will play an impactful role
Bill Gates’ announcement of the Breakthrough Energy Coalition came prior to the agreement in Paris. The public-private partnership between governments, investors and academia will likely have a significant impact, because the synergy of each party will be able to provide value-added input in scaling cleantech products, from research to deployment.
The coalition, which aims to provide money for research, startups and deployment, has talked about a “dramatically scaled-up public research pipeline” and will provide “seed, angel and Series A investments” in order to support the deployment of technologies developed at scale.
Therefore, with such a global consensus on climate change, and a collaborative push to scale cleantech products, I think the Paris Climate Change Deal will prove to be the much needed catalyst in reviving cleantech.