CAMBRIDGE, Mass.--Self-described "Internet tycoon" and venture capitalist Bob Metcalfe said that the world can solve global warming by transferring Silicon Valley-style entrepreneurship to the plodding energy field.
Metcalfe on Monday reprised his EnerNet talk where he draws on the history of the Internet to challenge today's thinking on energy. The co-inventor of Ethernet and current clean-tech investor at Polaris Ventures spoke at the Lux Research's Executive Summit here.
Bob Metcalfe
Overall, Metcalfe is optimistic that technology can solve the problem of global warming, either through through new technologies or geoengineering.
But he argues that many people are operating with the wrong assumptions of how the energy business works. Extrapolating today's energy technologies--the floor--on tomorrow's energy problems is the wrong way to look at the problem.
Instead, people should expect energy to change like the development of the Internet, where there were a number of disruptive technology introductions that were built on top of each other over time.
"If the Internet is any guide, it's going to take us decades to solve energy," Metcalfe said. "The fact that we are looking at long times suggests we should look at 'ceilings' (of technologies' potential) rather than floors (today's technology)."
Also, there are many business fields, or categories, that are now considered separate but do indeed overlap, the way that data, voice, and video eventually converged online.
In energy, government mandates favored the production of corn ethanol, which has created a food versus fuel debate that has brought criticism of biofuels. "When you muck with fuel markets, you are mucking with feeds and fuels also, we just found out," he said.
With the influx of venture capital going to fund clean, or green, tech start-ups, many people are concerned that there is an investment bubble.
Metcalfe sees a bubble forming around global warming, where there is a movement of consumers and businesses to address the problem. But bubbles are a good thing, Metcalfe said.
"From Internet history, we know that bubbles are normal. Bubbles are an accelerator of technology progress. Bubbles go against the status quo. We should encourage bubbles," he said.
Another against-the-grain view that Metcalfe likes to voice is that conservation, or efficiency, is not the best target when it comes to policy and investment.
The early scientists who worked on the precursor to the Internet decades ago designed networking protocols to operate on the existing copper-wire network. But technology advances and an infrastructure build-out proved that approach to be misguided. And the abundance of bandwidth and computing power led to more innovations like the World Wide Web, he said.
"Conservation should not be our goal," he said. "The goal should be to light up the whole world, not make the United States dark.
The topology of the Internet can also serve as a guide to the electricity distribution grid, Metcalfe said.
Much like workgroups formed in companies when local-area networks and PCs came about, the electricity distribution grid should develop to accommodate more distributed energy.
Several homes, for example, could share energy produced from a shared fuel cell. Energy should be exchanged along the "edge" of the network, rather than simply distributed from central stations. Energy storage, too, is essential to greater use of wind and solar energies, he said.
He suggests that research universities take the lead in energy innovation, where small teams of researchers and entrepreneurs compete against each other. As an example, he cited Web content-distribution network Akamai Technologies, which was created by people from the Massachusetts Institute of Technology.
Some conference attendees challenged Metcalfe's parallels between the Internet and energy, noting that efficiency technologies cut waste and that solar, for example, has not had rapid innovation because government funding is very small compared with other technologies like nuclear.
Metcalfe's response was that getting Internet tycoons into the energy field will bring surprises, just the way they came to the Internet.
"It's easier to teach Silicon Valley innovation to energy than to accept energy's bad technology assumptions," he said.
CAMBRIDGE, Mass.--It's fashionable these days to ponder whether there's an investment bubble in clean tech. But I believe this discussion obscures a bigger problem for the clean-tech crowd: not enough money.
A panel of venture capitalists at the Technology Review EmTech 2008 conference on Thursday took the bubble question head on. The response from investors tends to be nuanced: no, there isn't a bubble, but there are some silly company ideas getting funded.
Before I delve into the details of the bubble debate, let me say that focusing on venture capital deals is a myopic view of the market that could ultimately give the "clean-tech revolution" a bigger black eye than just a few failed start-ups.
Clean-, or green-tech, venture capitalists will tell you times have never been better if you judge by the number of business plan proposals crossing their desks and their ability to raise funds. Many an entrepreneur and investor sees energy and environment as a ripe area for technology innovation.
What worries me is whether the hundreds of newly formed energy tech companies will have enough capital to actually succeed--and change the world as they all set out to do.
Insiders have been fretting about the dreaded funding gap, or "Valley of Death," for years. It's the stage a company must cross to take its technology to commercial scale, such as building a manufacturing plant. In energy-related businesses, it usually take lots of money.
Now the financial crisis could actually make that gap tougher to bridge, given the difficulty in the public markets and the projected cost of an anticipated Wall Street bail-out plan.
Spending hundreds of millions of dollars for say, a solar manufacturing facility, is outside the range of most VC funds. To some extent, project finance can fill in the gap, said CMEA Ventures investor James Kim.
... Read more
The crisis rocking the U.S. financial sector is rippling into the clean-energy business, bruising more mature industries like wind while leaving young start-ups relatively untouched so far.
The unraveling of debt-heavy investment banking firms--including the demise this week of Wall Street icons Lehman Brothers and Merrill Lynch--means that financing for large-scale renewable energy projects will get harder and more expensive, according to analysts.
"This isn't good news for anybody--it's going to have an impact economy-wide," said Ethan Zindler, head of north American research at New Energy Finance.
New Energy Finance's clean-energy stock index is down about one third so far this year--lower than the Dow--and the sector has been volatile, Zindler noted.
Lehman and Merrill Lynch were involving in financing clean-energy deals, but to a far lesser extent than Goldman Sachs, JP Morgan, and General Electric's renewable-energy financing arm.
"If you look at the other investment banks, their survival is probably more critical to clean energy," Zindler said.
Because it is the most mature, wind energy will likely get hit hardest by a squeeze on credit. Wind farms rely on project finance from banks or other institutions to fund construction and development.
But with fewer investment banks offering financing amid strong demand, wind project developers may get less favorable terms, ultimately making the energy from those projects more expensive.
Solar and geothermal projects often use the same funding mechanism of project financing and a government tax credit. That subsidy program is set to expire at the end of this year, creating more uncertainty.
At an event to announce a Google-General Electric energy policy and technology partnership on Wednesday, GE CEO Jeffrey Immelt said that the financial crisis may affect the company's energy interests, which includes a multi-billion dollar wind turbine business.
"People need to be concerned. This needs to be worked through and resolved because it's hard to have a springboard to do other things when everything intersects with financial services," Immelt said.
VCs still flush
Whereas companies that rely on public markets for financing have less attractive options, the private equity side of the business hasn't yet shown the same signs of distress.
Energy technology companies and projects typically require a lot more capital to develop and commercialize than, say, a software venture. Several start-up biofuels or solar companies have raised tens or hundreds of millions of dollars to scale their technology to commercial level.
As a result, those companies that need late-stage financing could have trouble going from product development to commercialization. Rather than try to tap public markets or investment banks for capital, clean-tech companies may look to other sources like hedge funds or large corporations.
But so far, the main funders of early-stage companies have not hit the brakes.
In fact, over 90 percent of venture capitalists and investors expect investment in green technology to increase in 2009, according to the results of a KPMG survey of 301 VCs scheduled to be published next week.
About two thirds of respondents said that the green tech investment cycle is sustainable, and not a bubble as many fear.
In general, early-stage investors say long-term trends point to demand for clean technologies and supportive government policies.
The same is true for the clean-energy sector, overall, even for those companies now vulnerable to the public-market turmoil, Zindler said.
"If you take the long view, the sector is a good place to be," he said. "But the big caveat is that we're just in the third or fourth inning of this."
NEW YORK--You can't avoid the bubble question when it comes to clean-tech investing. Get used to it: with a massive movement of capital into the sector projected in the future, people are bound to fret.
It's understandable. Billions of dollars worth of venture capital have gone into this sector, which wasn't on the radar screens of most Sand Hill Road venture capitalists just a few years ago.
A panel of private equity and venture capital investment pros addressed the bubble question at the Renewable Energy Finance Forum here last week. In general, the response was that there is not an over-investment. In fact, investors are just getting started.
Bill Green, a panelist from VantagePoint Venture Partners, had a chart that made the point in a compelling way.
On one side was the market capitalization of the top 10 companies in energy, chemicals, auto, materials, and water--a whopping $3.5 trillion. Venture capital investment in the clean-tech sector--which sells into all of those industries--was about $2.2 billion last year.
Meanwhile, the market capitalization for the top 10 IT firms is $1.5 trillion. Venture capital investment into all IT-related sectors was $16.4 billion.
So in the scheme of things, private-sector money going into the industrial energy market, which includes clean tech, is relatively small, he and his colleagues asserted.
"Remember, even though you've heard about these technologies for decades, we really only had spotty R&D funding until recently," said Nancy Floyd, an investor at Nth Power, one of the oldest energy-technology venture capital firms. "Venture capital is the funding mechanism to take new products to market."
Green argued that consistent government policies, such as setting targets for renewable energy at utilities, will send far more money into "green" ventures.
A good example of inconsistent policy is an existing investment tax credit for renewable energy, which is set to expire at the end of this year, a situation that is hurting the industry, say people in the business.
"The amount of money that is still on the sidelines because we as an (investment) community don't have the regulatory visibility in this country is unfathomable," Green said.
Green said that if more companies go public, the sector could attract more money from people or funds that want to hold stock in, for example, an electric-car company.
Although the stock market is not particularly receptive to initial public offerings (IPOs) right now, there have a been a number of IPOs of clean-tech companies in solar and energy efficiency over the past few years. In 2004, the solar market was worth $1 billion; now it's worth more than $100 billion.
Ira Ehrenpreis, a partner at venture firm Technology Partners, predicted that there will be 10 to 20 clean-tech companies worth a billion dollars by 2010 or 2011.
Big numbers
Projections for the amount of money that will go into clean energy over the long term are staggering.
The International Energy Agency (IEA) recently estimated that $45 trillion worth of investment is required to halve carbon emissions by 2050 by cutting down on fossil fuel use.
The number of clean-tech deals broken out by sector.
(Credit: PricewaterhouseCoopers and the National Venture Capital Association)Research firm New Energy Finance said that number is not at all far-fetched, pointing out that the clean-energy sector is already on its way to delivering the necessary technologies.
Its research shows that new investment in clean energy worldwide was $148 billion in 2007, up 60 percent from the previous year and five times higher than in 2004.
It estimates that by 2030, $10 trillion must be spent to create a "low-carbon energy industry."
But even though the forces driving clean tech--high energy prices, a push for energy security, and concerns over global warming--are strong, the sector has been hit with some rough patches.
A credit crunch has hurt energy projects that require financing, and high commodity prices have made everything in a capital-intensive industry, from ethanol plants to wind farms, more expensive to build.
Scaling up
And amid it all, there is some actual bubble behavior, according to venture capitalists.
The sectors of clean tech that are getting the most attention--solar energy and biofuels--are bound to have some unfulfilled promises, as ventures fail for various reasons.
That high pace of start-up creation and questions over policy make limited partners, the investors in private equity funds, hesitant, said Neil Auerbach, managing director at private equity firm Hudson Clean Energy Partners.
"Many limited partners are very quizzical about the bubble issue, and they are cautious about investing in a subsidy-driven industry," he said.
At the same time, clean energy is showing signs of maturity. Auerbach's firm, like others, is involved in funding projects to commercialize technology.
For example, a cellulosic ethanol company could spent a few years developing its core technology but then need potentially hundreds of millions of dollars to build a plant to produce fuel on a large scale.
The amount of equity put into energy-related projects, such as constructing an ethanol plant or solar power plant, is four or five times the amount going into funding start-ups, he noted.
"The consequences of scale in our industry are starting to show," Auerbach said. "The clean-tech space will be the single largest wealth creation opportunity in the world."
With oil prices over $120 per barrel comes a venture capital report entitled "Cleantech Come of Age" from PricewaterhouseCoopers.
The upbeat survey finds that venture capitalists put $2.2 billion into clean tech companies last year and that prospects look good.
"There is huge enthusiasm taking place in the cleantech industry and as consumers and corporations increasingly seek new ways to become environmentally responsible, interest and funding directed towards the sector will only continue," Tim Carey, leader of U.S. clean tech at PricewaterhouseCoopers, said in a statement.
According to the press release, the study finds that:
• 40 percent of senior executives surveyed feel that reducing greenhouse gas emissions and/or waste and pollutants over the next five years is a leading or important priority within their company.
• 64 percent of CEOs are concerned about rising energy costs.
• 45 percent of these same CEOs are concerned about the potential threat to their businesses' growth prospects as a result of energy security.
Investment in clean tech continues to rise. This chart shows the correlation with rising oil prices.
(Credit: MoneyTree report from PricewatersCoopers via VentureBeat.)PricewaterhouseCoopers anticipates sales growth across the subsectors of clean tech, including renewable energy, biofuels, and recycling and pollution.
Reality check
The report doesn't identify any dark clouds on the horizon but you don't need to look very hard to find some.
Oil prices have risen rapidly over the past two years, helping make more clean tech ventures financially attractive. But fuels and electricity are extremely price sensitive, as biodiesel producers have found, which means that a drop in oil prices could make some business models less viable.
Although venture capital-backed companies can generate a lot of excitement and buzz, the amount of money that goes into start-ups is very small compared with corporate labs.
The ability of companies like Shell, BP, Dow, and General Electric to innovate and make money in clean tech will go a long way to deciding whether these technologies--be they solar panels or biofuels--become cost-competitive with fossil fuels.
The other big spender on energy-related research and development is government.
Experts have long complained that funding programs for clean technologies is inconsistent, too small, or misplaced. In a recent interview, clean tech expert Peter Fusaro, the chairman of Global Change Associates, called the billions spent on the stalled FutureGen coal carbon storage project a "boondoggle."
Already, we are seeing that it will be rare to find a technology that won't have some trade-offs. Witness the growing concern over the relationship that biofuel mandates have with food prices.
In the past few weeks, several Republican senators, including presidential contender Sen. John McCain have called on the U.S. to ease the mandates that are driving the ethanol market.
Finally, the energy sectors is highly regulated and capital-intensive, which poses challenges that small companies and their backers must contend with.
Even with these caveats, the overall sector does have strong fundamentals.
The sharp uptick in innovation related to energy and the environment is fueled by more money pouring into the field, which is backed by consumers who've gone green, businesses adjusting for climate change, and concern over energy security.
In a statement, Mark Heesen, the president of the National Venture Capital Association, called on policymakers to do their part in supporting the budding industry:
It is imperative that (venture capitalists) work hand in hand with the Congress, the administration and the regulators to enact public policies that are conducive to research and capital investment in this sector. The venture capital industry, as evidenced by growing investment levels, is committed to bringing to market state-of-the-art technologies that conserve energy and natural resources, protect the environment, and reduce harmful waste for years to come.
BOSTON--Bob Metcalfe thinks we'll solve global warming if we take our cue from the Internet.
Metcalfe, best known as a co-inventor of the Ethernet and now a venture capitalist at Polaris Venture Partners, on Wednesday laid out his vision of the "EnerNet," the concept of applying the lessons of building the Internet to the energy business.
Speaking at the AlwaysOn East conference here, Metcalfe said that, despite concerns of overinvestment, the growing energy technology bubble is a good thing.
"There will be many decades of bubbles ahead," he said. "There are people out there trying to outlaw them, particularly the sore losers. But they are accelerators to technology innovation."
He argued that the history of technology is marked by bubbles of overinvestment, from the PC to the Internet, voice over IP, and others.
The same is happening in global warming. Concerns over global warming have spurred billions of dollars in investment from venture capitalists and government research to create low-polluting alternatives to fossil fuels.
"There is definitely a global warming bubble and one of the ways I know that is because the name Al Gore (is present)," Metcalfe joked. "Al Gore inflated the Internet bubble and now he's inflating the global warming bubble."
For the record, Metcalfe does not like to use the term "clean tech" because energy needs to be clean and cheap. Nor does he like the color green, as in "green tech," because political greens are anticapitalism and antitechnology, he said.
As a writer for CNET's Green Tech blog, I take issue with the idea that environmentalists can't be capitalists--we're seeing them every day. But Metcalfe has a point about extreme green politicos.
Metcalfe's EnerNet seeks to apply Internet principles to the energy business.
(Credit: Martin LaMonica/CNET Networks)Metcalfe's preferred colors for the EnerNet are black and blue. Black is the color of oil, coal, and silicon (the main ingredient in solar panels). And blue is the color of water, which covers most of the Earth.
In addition to touting the global warming bubble and the companies he has invested in--he is now interim CEO of algae fuel company GreenFuel Technologies--Metcalfe sought to dispel some myths, again taking his lessons from the Internet.
There's an oft-recited view that there is no silver bullet to mitigate climate change--there needs to be a "silver buckshot" approach by which many technologies are pursued.
But Metcalfe said that in the growth of the Internet, there were several silver bullets, from technologies to make bandwidth use more efficient to punch cards.
He also showed no sadness over the demise of Bell Labs and other monopoly corporation-funded research. Government-funded research is wasted because it rarely leaves the labs, he said.
Instead, the place to do research is in university labs. "The best vehicle for technology innovation is not patents, it's students," Metcalfe said.
He said the same cast of characters that built the Internet--scientists, students, businesspeople, and investors--are the ones to build the global warming bubbles on the way to solving the energy crisis.
Metcalfe has only been investing in the energy field for a few years--of course, he's learning a lot about the algae industry in his current role.
But his comparisons are instructive. Like the Internet, energy will be distributed; there will be a layered architecture that provides flexibility; and energy should be cheap and abundant like bandwidth is becoming.
As for the desirability of a global warming bubble, I'm less convinced. Business disasters could turn investors and entrepreneurs away from the energy field, when they are clearly needed. But then again, it sure makes for a good speech--and headline.
The most vexing problem facing the solar electric industry the past few years has been a shortage of silicon, the most common material used to make solar cells.
But once that silicon shortage eases, prices for products could start drop significantly--and dig into solar companies' profits.
Lux Research on Thursday published a summary of a report that predicts that the solar bubble will burst next year.
An oversupply of silicon won't be the only reason that prices will fall, according to Lux's report.
Several other solar technologies are emerging that will give incumbent solar photovoltaic providers more competition, including thin-film solar cells made from materials other than silicon.
"The market is now approaching a tipping point: We project that the supply of solar modules will exceed demand in 2009, leading to falling prices and a shakeout among companies that aren't prepared to thrive in this new environment--particularly crystalline silicon players that haven't invested in new thin-film technologies," said the report's lead author, Ted Sullivan, in a statement.
Traditional panels will also get a run for their money from concentrating PV systems, solar thermal, and organic solar cells, which are all maturing, said Lux Research.
The findings from the company, which specializes in nanotechnology, are consistent with what many people in the solar industry have been saying for some time.
The constraints on silicon supply are easing, which should put more price pressure on manufacturers in the coming years.
However, the overall solar industry is expected to continue to grow rapidly. Even Lux forecasts that the annual growth rate will be 27 percent over the next five years--becoming a $70 billion market by 2012.
As a result, what's likely to happen is that there will be consolidation among the several existing solar suppliers and the dozens of start-ups that have entered the field over the last few years.
A sampling of green-tech news this week, with an emphasis on how the financial market turmoil may impact ongoing investments in clean energy.
- Investor Eric Janszen Says Clean Tech Is Only Hope for the Collapsing Economy - Wired talks to Eric Janszen about his Harpers article on how a clean tech investment bubble is the best thing for the U.S. economy's pattern of credit-driven financial bubbles.
- SEIA - Solar Energy Industries Association - The Solar Energy Industries Association picks apart a University of California study that says solar electric panels are an economic "loser."
- Corporate Sponsorship for a Wind Farm - New York Times - Naming rights of football stadiums is so 20th century. The New York Times reports on the idea of corporations sponsoring wind turbines.
- Grid Parity For Solar...Sometime? « Earth2Tech - Earth2Tech queries people in the solar business on what "grid parity" means and when it's likely to (ever) happen.
- BP dismisses Alternative Energy sale speculation - 17 Mar 2008 - BusinessGreen - This is worth watching because BP is an incumbent fuel producer that is perhaps the most diversified into renewables.
- Experts warn Bear Stearns crisis could curb cleantech growth - 17 Mar 2008 - BusinessGreen - The melt-down in financial firms could impact clean tech firms, particularly those looking for project financing. But there's no overall consensus on how a recession might affect the sector.
The numbers are in on clean-tech investing in 2007 and, once again, the direction is way up.
Dow Jones VentureSource on Friday said that venture capitalists plowed a record $3 billion last year in clean-tech companies, a 43 percent jump from the year before. The number of deals rose from 173 in 2006 to 221 last year.
The median deal size in the U.S went up slightly to $8 million, which is a bit higher than all industries.
The biggest raising last year was $200 million for Project Better Place, the Shai Agassi-led company to set up a network of services stations with batteries for electric cars.
U.S.-based firms caught the lion's share of the money, with 83 percent of the global total. The total in the U.S. was $2.52 billion in 2007, a 79 percent increase.
Europe, led by Spain and Germany, saw a 27 percent increase to $360 million in venture capital. China, meanwhile, saw venture investing fall nearly 70 percent to $129 million, although four venture-backed companies went public.
So is this outpouring of venture dollars all good news for energy and environment entrepreneurs? Not entirely.
There is ongoing concern that certain areas within clean tech, notably solar and biofuels, are becoming an over-heated financial bubble that cannot sustain the influx of new companies.
This is a typical pattern of large investment waves, which are often followed by consolidation among companies and company failures.
More specific to clean tech is a funding gap, sometimes referred to as the "Valley of Death."
Unlike software or medical devices, energy-related companies require large amounts of capital to prove out their technology as cost-effective. A biofuels plant, for example, can cost more than $100 million--beyond the funding venture capitalists are able to do. Project financiers typically back only well proven technologies, as a report by Ernst & Young noted. Click here for PDF.
Ernst & Young recommends looking to government sources of money, reducing technology risk, and using debt selectively for financing.
Despite this funding challenge and regulatory hurdles, Dow Jones VentureSource sees significant potential. Both consumers and businesses are interested in buying eco-conscious products and, because the energy business is so big, gaining a small amount of market share from incumbents can be very profitable.
"The biggest factor driving investment in clean tech today is the huge consumer outcry for change," contends Canning from Dow Jones VentureSource, who projects more favorable policies for renewable energy after the fall national election.
BOSTON--Even with positive long-term trends at their backs, a huge wave of newly created clean-tech companies will have to navigate a tricky business and regulatory environment to succeed.
At the MIT Enterprise Forum's "Power, Drugs, and Money" conference last Thursday, financiers and business people offered alternating upbeat and cautious advice on the prospects in clean tech, which has become one of the hottest areas for entrepreneurs and investors.
The positive scenario was summed up by Dennis Costello, an investor at Braemer Energy Ventures: the energy field is a great business to be in now because it is changing rapidly--a situation that favors small companies over incumbents.
Still, executives from both new and established clean-tech companies say that energy is complicated by politics, regulations, and large capital requirements on a scale that other industries don't have to contend with.
The question over green-tech start-ups' success--and the role they play in the massive energy industry--is worth tracking closely.
Thousands of new companies have been funded and formed in the past few years. But how and whether new technologies will be adopted is still unclear in many cases--a factor that can make or break new ventures.
For example, bringing energy efficiency technologies to household appliances has been considered "low hanging fruit" for 10 years but there's still much more than can be done, said Stephen Connors, a director at the Massachusetts Institute of Technology's Energy Initiative who spoke at the conference.
"These things are on the ground rotting at this point," he said. Connors also argued that many green-tech products are still not "plug-and-play" easy for consumers.
Financing is a challenge faced by a number of companies. Despite a lot of venture money going into the field, crossing from technology demonstration to a pilot project or commercial plant is referred to as the "Valley of Death" because there's a lack of funding for large-scale projects.
"There's a huge funding gap that exists," said Bill Davis, the CEO of Ze-Gen, which is developing a gasification process for turning municipal waste into electricity. "It's the defining challenge of this company going forward."
Ze-Gen needs to negotiate financing from people who are not necessarily familiar with the energy field or his company's new technology, he noted.
Nimby
Actually finding sites for some projects can also be burdensome because of environmental reviews or local opposition, Davis added. That sentiment was loudly echoed by Jim Gordon, the CEO of Cape Wind, a controversial wind project off the coast of southern Cape Cod.
That project--a proposed 420 megawatt off-shore wind farm, which would be the first in the U.S.--has faced intense political and local opposition. Gordon said wealthy Cape Cod residents, who don't want the wind farm to spoil their view of the ocean, have spent $25 million fighting the project.
Also in the cautious camp is Scott Anthony, the CEO of business consulting firm Innosight. In an interview with CNET's Green Tech blog published Monday, Anthony said many green-tech companies are falling into the trap of expecting too much from their technology.
"When entrepreneurs or an industry frame a problem purely in technological terms, often times they miss the mark and end up creating over-engineered products or solutions that never connect with the market," he said.
But for all the hurdles, the long-term trends are pointing in the right direction. Energy prices are expected to stay high, and countries are more willing to mandate regulations that favor energy security.
And even though the energy industry tends to be dominated by giant corporations, those incumbents are looking to academia and private sector start-ups for innovation.
"Energy is a huge industry. Most start-ups don't even to begin to comprehend that it will take decades for it to change," said Justin Adams, director of long term technology at oil giant BP, which is diversifying into renewable energy and biofuels. BP is very much looking outside the company for new technologies.
"Innovation in the energy industry from small companies is changing on the periphery at a pace that's unprecedented," he said.
Massive build-up predicted
If you're looking for another indicator of the inevitable "cleaning" of the energy business, check out what Daniel Yergin has to say.
A well-known author and prognosticator of world oil reserves, Yergin is chairman of CERA (Cambridge Energy Research Associates), the granddaddy of energy research firms which advises the world's incumbent oil and gas producers.
CERA earlier this month published a report titled "Global Climate Change Response Can Spur $7 Trillion in Clean Energy Investment by 2030." It's certainly not the first study to forecast a massive build-up of clean energy businesses, but it's significant coming from CERA, which predicts that oil production will increase over the next decade.
Among it's more provocative conclusions is the potential for "disruption" in energy, some of which could presumably come from industry upstarts.
From its study:
Clean energy technology could have disruptive rather than incremental impact. Modular and distributed PV could disrupt traditional central-station models of electricity production and distribution. Breakthroughs in cellulosic ethanol can disrupt the traditional vehicle fuel system if scale, logistics, and costs prove manageable. Conventional biofuel feedstocks, such as grains and oilseeds, may also produce serious unintended consequences such as disruption in global agricultural prices as well as land and water use patterns, as well as a policy backlash.
It's hard to draw a sweeping conclusion from all the discussion surrounding the green technology wave.
It's clear there's a lot of money being put behind new ventures and odds are that many of those won't work out. That's simply how the venture capital industry works: potentially big pay-outs but big risks as well.
But countering that exuberance is an understanding that the energy business is capital-intensive and extremely cost-competitive.
After all, a solar or biofuel company is delivering a commodity product in the end, no matter how sophisticated the technology is. The innovation lies in either novel business models (like renting solar panels) or how clean the technology is.
