Are Venture Capitalists Starving Clean Tech Innovation?

July 22, 2010

Clean-tech investing is a top priority for venture capitalists. But a big chunk of their money is avoiding the tiniest, early-stage start-ups with the most ambitious plans for innovation in favor of more established, later stage businesses.

The result could be a dearth of innovation several years from now, when a new generation of companies might be expected to fuel growth in the industry.

The trend toward later stage investing appears to have been gathering steam in the past year. In 2008, 197 follow-on investment deals were sealed in the United States compared with 93 first-round financings, a 2-to-1 ratio of later stage versus early stage.

In the first quarter of this year, the ratio was closer to 3-to-1, with 85 follow-on rounds completed compared with 31 first fundings.

“There are too few start-ups,” complains long-time industry insider Mark Jensen, managing partner for national venture capital services at Deloitte & Touche.

This shift comes amid a clear sign that clean tech is a growing venture capital priority – both domestically and abroad. A recent study from Deloitte & Touche and the National Venture Capital Association found that 80 percent of general partners plan to increase their clean-tech investing over the next five years. The commitment was far ahead of their number two priority, health care services, which 63 percent said they would fund more actively.

The survey contacted more than 500 venture capitalists in nine countries, including the United States, China, France, the United Kingdom, Brazil, Canada, Israel and India. And it found the intentions were pretty uniform country to country. Clean tech was the top focus for VCS in the United States, China, India, the United Kingdom, Germany, Canada and France.

And yet in countries such as the United States and Europe, money is flowing most readily to later stage businesses where partners hope for a big kill if a high profile Better Place or Amyris goes public.

The fallout is that early-stage entrepreneurs are forced to seek money from angel investors for seed and sometimes first rounds. In some cases, angels have begun playing the role of venture capitalists, but with less cash to deploy.

This was clearly the case in the second quarter. Venture capitalists in the United States set a quarterly record by investing $1.47 billion in clean-tech start-ups, a 107 percent increase from the first quarter.

But the number of companies receiving money remained almost unchanged at 71, compared with 70 in the first quarter.

Large deals dominated. Better Place raised $350 million, BrightSource collected $150 million and Boston Power added $62 million to its bank account.

Experts such as Jensen say they don’t expect the trend to reverse itself any time soon. At least not until VCs start making some money on clean-tech and become more comfortable taking on risk.

Until then, early stage businesses are likely to find money hard to get.


Clean Tech Investments Hit Quarterly Record

July 16, 2010

Clean-tech investing set a record in the second quarter led by a handful of large deals.

The up tick by venture capitalists suggests investment levels should remain strong through the rest of the year.

But there is caution in the figures released by the National Venture Capital Association, Thomson Reuters and PricewaterhouseCoopers. The number of companies receiving money remained largely unchanged from the first quarter, indicating that the investment surge is confined to a relatively small group of start-ups.

The quarterly MoneyTree survey found venture capitalists invested $1.47 billion in clean-tech start-ups during the three months, a 107 percent increase from the first quarter of 2010. (The increase was an even greater 198 percent from the second quarter of last year, when the recession gripped the economy.)

Seventy-one companies received money in the quarter, compared with 70 in the first quarter.

The MoneyTree numbers are the second set of figures to confirm the quarterly investment trends. Earlier this month, the Cleantech Group found a 65 percent quarterly rise with big deals leading the way. The Cleantech Group measures investments worldwide, which partly explains the differences. The MoneyTree surveys focuses on the U.S.

Among the top deals, electric-car battery-swapping company Better Place raised $350 million, the fourth largest deal in the past 15 years.

Also in the top ten, solar plant developer BrightSource raised $150 million; solar technology developer Stion raised $70 million; lithium-ion battery maker Boston Power raised $62 million; electric-car maker Miles Electric Vehicles raised $57 million and solar system financer SunRun raised $55 million.


Is Ivanpah The World’s Most Efficient Solar Plant?

June 21, 2010

BrightSource Energy’s planned Ivanpah plant will be one of the world’s largest solar farms and possibly its most efficient.

When the solar-thermal plant is built on the edge of the Mojave National Preserve (construction is expected to start this year), it will operate at 18 percent efficiency and earn a capacity factor of 30 percent.

BrightSource boasts of 18 percent plant efficiency and a 30 percent capacity factor.

This performance should make the 392-MW facility more efficient than plants with crystalline-silicon panels, thin-film cells or rival thermal technologies using parabolic mirrors, according to analysts.

The plant is to be laid out on three nearby tracts covering 3,500 acres of desert and should run at full capacity 10 to 11 hours a day. The company says a back-up natural gas system will aid performance during its long hours of operation, easing power fluctuations on cloudy days. This consistency of power should put electricity costs on par with natural-gas plants, something photovoltaic plants will take another two years to achieve, some analysts say.

While comparing plants is complex and imperfect, the newly available figures from BrightSource make the exercise a useful chore. Sun intensity, atmospheric moisture levels and power transmission costs of course differ plant location to plant location.

But determining who holds the industry’s bragging rights – as well as who deserves project investment dollars – is a task utilities attempt everyday, despite the difficulties.

In an interview, BrightSource Product Manager Andy Taylor described Ivanpah’s efficiency as a sunlight-to-electricity calculation based on two years of testing the company’s Luz Power Tower 550 in Israel’s Negev Desert. At the top of the towers, boilers absorb sunlight reflected from 7-square-meter ground-mounted mirrors and heat water to more than 1,000 degrees Fahrenheit, the highest temperature in the industry. The super-heated steam drives turbines.

The company says a back-up natural gas system permits the long operating hours and the ability to run most of the day at full capacity. The gas is used to warm boilers in the morning and augment solar power on cloudy days to keep output high.

“We’re pretty much a sun-up-to-sun-down resource,” Taylor says.

BrightSource, which has so far raised more than $300 million in financing, expects the plant’s efficiency to rise as the company moves beyond its first-generation technology. Higher-efficiency turbines are already in the market, and additional mirrors, or heliostats, can be deployed. Water temperatures also will rise to above 1,100 degrees.

In contrast to Ivanpah’s 18 percent efficiency, the efficiency of utility-scale crystalline silicon and thin-film plants is likely less than 12 percent. Solar-thermal plants with parabolic mirrors also have difficulties keeping up. Ivanpah’s higher boiler temperatures give it an advantage, and dual-axis tracking can more accurately follow the sun through the seasons. The average efficiency of other solar thermal plants is 13 to 15 percent, says Cara Libby, project manager at the Electric Power Research Institute.

That doesn’t mean Ivanpah won’t have competition, One crystalline-silicon vendor, SunPower, with industry leading 18 percent efficient solar cells, could give BrightSource a run for its money, says Travis Bradford, president of the public-policy think tank, Prometheus Institute. A SunPower farm with a single axis tracking could have an efficiency of 15 percent, maybe slightly higher depending on the location, he says.

Broader competition will come with falling solar-panels prices, unless a stronger Chinese currency slows the trend. Panel prices tumbled about 40 percent last year and, while they are more stable this year, they continue to decline more rapidly than solar thermal efficiency is improving.

BrightSource responds that plant efficiency is only one measure of performance, and not necessarily the best. Capacity factor, a calculation of a farm’s ability to deliver full power over time, may be more important, the company says.

Ivanpah’s capacity factor (including the use of natural gas) should be 30 percent, Taylor claims. A wind farm in an ideal location (think Tehachapi) can have a factor of 40 percent. Photovoltaic plants generally are lower. A Carnegie Mellon Electricity Industry Center study estimates a PV plant in Arizona should be closer to 20 percent.

Another useful metric is the delivered cost of electricity. BrightSource claims this measure makes Ivanpah “extremely competitive,” but declines to release figures to back up the claim. The calculation looks at plant output versus costs and factors in development and financing charges.

An examination of California Public Utilities Commission documents shows only that expected delivered costs are to be less than 12.5 cents a kWh. It doesn’t state how much less.

Nevertheless, Nathaniel Bullard, a solar analyst at Bloomberg New Energy Finance, calculates that the cost of Ivanpah’s electricity will be lower than photovoltaic power and about the same as natural gas. Of course no one knows for sure until the plant is built. “We’ll see if they can meet the targets they have in place,” Bullard says.


Solar The Contrary View; BrightSource, Too

May 20, 2010

Many analysts anticipate a solar market slump later this year after the world’s largest market, Germany, cuts its feed-in tariffs.

But not all. In fact, at least one is predicting a surprising up-tick in the market this year and next. Apparently, some vendors agree.

Solar termal company BrightSource raises $150 million to build 14 plants in the Southwest.

On Thursday, BrightSource Energy, a builder of large solar thermal power plants, said it raised an additional $150 million in financing. This brings its recently concluded series D round to $300 million.

The company plans to use the money to build 14 solar plants in the Southwest United States by 2016 for California utilities Pacific Gas & Electric and Southern California Edison.

The towering round underscores the notion that solar is on a long-term vector of expansion. This vector also could be in place for the short term.

German consumers are presently in a rush to add rooftop solar ahead of the July cut, expected to be 16 percent or so. But the surge of installations should continue in the second half of the year, forecasts Henning Wicht, principal analyst at iSuppli.

Wicht on Thursday said he sees German installations rising 71 percent this year to 6.6 GW and then climbing another 44% next year to 9.5GW.

Third quarter activity will slow following the tariff reduction, but the fourth quarter will be busy again before another cut in 2011.

In the same vein, France and Italy face feed-in tariff cuts of their own in 2011. Consumers may rush to put in equipment ahead of the deadline.


BrightSource Wins $1.37B In Federal Loan Guarantees For Massive California Solar Plant

February 22, 2010

Days after scaling back a massive Mojave Desert solar plant, BrightSource said Monday it won $1.37 billion in Energy Department loan guarantees for the project.

The planned 392 MW Ivanpah solar thermal plant is among the world’s largest, with 3,500 acres of mirror arrays on three separate sites concentrating solar heat for steam generators. It is expected to nearly double the amount of solar thermal generation power generation in the U.S.

The loan guarantees, still subject to negotiation, should help BrightSource obtain financing for construction. The guarantees provide vital support for project, noted Peter Darbee, CEO of PG&E, which will purchase about two-thirds of the electricity generated by Ivanpah.

Ivanpah Valley in southern California could be the site of one of the world's larges solar plants

The plant is a key first step toward California’s ambitious renewable energy target. The state has mandated that a third of its power come from renewables by 2020.

It also appeared to spark interest in neighboring Nevada for similar solar thermal plants. “I look forward to BrightSource and other solar companies putting more Nevadans to work by building major projects like this sin Nevada very soon,” said Senator Harry Reid.

In a press release, BrightSource reaffirmed its intention to begin construction in the second half of 2010, with San Francisco-based Bechtel serving as construction engineers. The project is using soalr-powered steam turbines from Siemens on the first of the three sites. One thousand construction jobs are expected to be created.

Ten days ago, BrightSource said it would scale back the overall “footprint” to the sprawling facility by 12 percent. Environmental groups, including the Sierra Club, had worried the plant would curtail habitat for an endangered desert tortoise.

The number of towers, which collect heat from the ground mounted mirrors, were cut to three from seven.

The project is one of small number of fast-track plants earmarked by the Department of the Interior. It would be the first solar plant built in California in two decades.


BrightSource Scales Back Massive Mojave Desert Solar Plant

February 12, 2010

BrightSource, pushed by environmental complaints, scaled back a massive solar plant planned for the Mojave Desert to ease its impact on an endangered tortoise.

The company said Thursday it would reduce the overall “footprint” of the three-part Ivanpah project by 12 percent. Environmental groups, including the Sierra Club, had worried that 3,500 acres of mirror arrays at the solar thermal farm would reduce habitat for the turtle.

The size of the Ivanpah Valley plant will be reduced 12 percent.

That will cut the number of towers to three from seven and the number of tortoises expected to be relocated by 15 percent, according to a press release from the Oakland company. Generating capacity will fall to 392 MW from 440 MW.

The plant is one a small number of fast-track projects earmarked by the Department of the Interior and is expected to double the amount of solar thermal operating in the U.S. It would be the first solar plant built in California in about two decades.

Environmentalists want the entire plant moved a short distance away to avoid the turtle’s habitat. As many as two dozen are expected to be moved from the site.

The company hopes to start construction late this year.


Tough Financing Market For Solar Farms May Ease Next Year

October 15, 2009

The economic collapse of 2008 turned the credit market for large-scale solar farms into a financial desert.

Capital was simply not availability through much of the year. The constraint eased modestly in recent months. Now there are suggestions money may begin to flow again next year

Solar projects are bankable because investors are seeking safer returns, says Martin Roscheisen of Nanosolar

Solar projects are bankable because investors are seeking safer returns, says Martin Roscheisen of Nanosolar

Industry executives say market conditions remain difficult. “Lenders are holding onto their money much more tightly,” says Dan Judge, general counsel of solar thermal company BrightSource Energy. “The market is not what it was in 2005 and 2006.”

But there are signs that investors and banks have shifted their focus from risky financial derivatives and complex Wall Street instruments to the relative safety of long-term energy projects. There also are suggestions new banks from Europe and Asia may begin lending for solar construction, expanding a small field of only eight to 12 banks working on projects today.

Next year should see significant growth in solar projects between 10 and 50 MW in size, says Ban Jacoby, managing director of energy investment consultants CP Energy.

The rise in competition for deals also may lower expected investment returns, which by some estimates have reached a percentage in the mid teens, compared with a more traditional single-digit rate.

Already an easing of credit hurdles is aiding wind power developers, where less risky deals are getting done.

At present “there are (solar) deals getting done, but there is not a lot of liquidity in the market,” reports Tom Glascock, a partner at the San Francisco law firm of Orrick Herrington & Sutcliffe.

Yet despite the difficult environment, thin-film solar projects are “bankable,” says Martin Roscheisen, CEO of Nanosolar. Capital is seeking safe returns and solar projects fit the bill because they are backed by electric rate payers, he said.


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