Algae biofuel outfit GreenFuel Technologies has laid off 19 people, or about half of its staff, another sign of the difficulty that fledgling alternative fuels face.
A company representative confirmed the staff reduction on Monday and said one of GreenFuel's two major customers--the Aurantia cement factory in Spain--remains a customer.
An algae bioreactor from another algae fuel firm, PetroAlgae.
(Credit: PetroAlgae)GreenFuel has developed a method for growing and harvesting algae in a greenhouse. The idea is to locate the greenhouses near a large carbon dioxide emitter, like a cement factory or power plant, to "feed" the algae. The algae is then harvested, dried, and turned into biodiesel or feed food.
Company CEO Simon Upfill-Brown, who was recruited last year from Dow Chemical to head the 8-year-old firm, told Xconomy that the engineering for its Spanish deal, previously estimated at $92 million, will be outsourced.
"We've got to weather this economic storm as best we can," Upfill-Brown said. "This is the right thing to do."
A person claiming to be a former contract worker at the company said GreenFuel's Aurantia customer was dissatisfied because of several months of delays.
GreenFuel was one of the first companies to get funded to commercialize algae farming, and there are now several companies and researchers studying methods for turning algae into fuel.
But the company has had its missteps. Its first test facility at an Arizona utility produced too much algae, making the harvesting very manual and driving up the cost of operation. It replaced its CEO, putting investor Bob Metcalfe in charge for several months.
GreenFuel isn't alone in running into stumbling blocks, though. Many clean-tech companies are hunkering down, seeking to preserve cash so they can finish developing products.
Biofuel firms seeking to commercialize their technology are particularly vulnerable to the financial industry meltdown. Demonstration plants require large amounts of money to build. But investors have become more risk-averse, making it tougher for relatively unproven firms to demonstrate and fine-tune their technologies.
Amid the carnage of last year's stock-market performance, shares in clean-energy firms fared worse than others, according to data published Wednesday by researcher New Energy Finance.
That dramatic decline--at one point going below 2003 levels--was despite some of the most advantageous political and economic factors for clean technologies in years.
At its low point in November, the WilderHill New Energy Global Innovation Index (the ticker is "NEX"), which tracks 88 clean-energy global stocks, fell over 70 percent. The index then enjoyed an "Obama bounce" after the presidential election, to end up at a 61 percent decline in 2008.
For comparison, the S&P 500 index fell 38.5 percent last year and the U.S. Nasdaq Composite was down 41 percent.
The downbeat news from the public markets comes on the heels of the year-end data about clean-tech venture capital, which saw funding peak in the third quarter of 2008 and then finished the year sliding down.
Among public companies, the two hottest--and some argue overinflated--sectors within clean tech battered the worst were solar and biofuels. On average, solar shares plummeted 75 percent; biofuels and the biomass sector plunged 68 percentl; and wind fell 56 percent.
The poor performance reflects the fact that the energy business is very capital intensive and sensitive to fluctuations in fuel and commodity prices.
The price of oil plummeted from over $140 a barrel in July to under $40 in December. Meanwhile, the credit crisis made financing harder for projects such as wind farms or manufacturing plants.
The overall clean-energy sector, which has been exploding over the past three years, was also due for a correction, New Energy Finance CEO Michael Liebreich said in a statement.
Yet the demand for clean-energy products and services is still strong, making the long-term outlook good, he argued.
"Worries about climate change and energy security are still on the political agenda, and indeed the latter issue has become even more topical with the dispute over gas supplies between Russia and Ukraine and the conflict in Gaza. And Obama is not the only leader seeing clean energy as an important element in the programs they are planning, to help stimulate economic activity," Liebreich said.
Meanwhile, the level of venture funding in 2009 could potentially drop after three years of rapid growth, said Brian Fan, senior director of research at the Cleantech Group.
Still, he said, the "fundamental drivers" of energy scarcity amid growing demand and of climate change policies are intact, which should attract more investors.
SAN DIEGO--People in the solar industry are hopeful that the sun is a good place to put money these days.
To be sure, the financial crunch is rippling through even the fast-growing solar business: With falling house prices and general belt-tightening, consumers may be more reluctant to purchase solar panels, even if they want renewable electricity. And less available capital makes it difficult to finance large-scale projects, like corporate rooftop arrays or solar power plants.
But even with the gloomy economic outlook, the mood at this week's Solar Power International 2008 conference was decidedly upbeat.
The solar industry scored a major policy win, getting an eight-year extension to federal tax credits that tacked on more generous terms for homeowners.
And in a volatile investment environment, solar looks solid, purely from a financial point of view, many executives argued.
"I think there's a flight to quality and we believe there's a flight to solar because of that," said Tom Werner, the CEO of California-based solar panel manufacturer and installer SunPower. He noted that big solar projects over the past three or four years have created a track record of delivering expected financial returns.
"Now having said that...the credit markets are different and more measured. Banks are studying things more--the risk profiles and the balance sheets of companies," Werner said.
Long meetings with bankers
Discussion of the impact of the credit crisis and an economic slowdown at the conference alternated between "glass half full" and "glass half empty" perspectives.
The returns on solar projects for utilities and corporations have the advantage of being predictable and thus low-risk, said Bill Gross, CEO of a tech incubator called Idealab, which has spawned two solar companies targeting utilities--Energy Innovations and eSolar.
New technologies are bringing the cost of solar electricity closer to fossil fuel generation. And policies that encourage clean-energy production improve the financial return on big projects.
"It's so tight trying to beat the price of fossil fuel electricity. If you can cut the price at all with totally green energy, that's awesome," Gross said.
Sempra Energy, which builds and operates natural gas power plants, plans to invest billions in solar power plants in the coming years and expects to get about the same 10 percent return on the capital it typically gets, said Michael Allman, president and CEO of Sempra Generation. Because of the credit crunch, other firms may have a harder time than Sempra launching large projects, he said.
Matt Cheney, CEO of solar financing firm MMA Renewable Ventures, said solar company executives should expect to have long meetings with financial analysts and bankers as they seek to clamp down on risk and get better terms.
Click on the image to launch a photo gallery of products and solar installations from this week's Solar Power International conference.
(Credit: Martin LaMonica/CNET News)"Historically, with respect to an impact, a shock like we've just experienced...takes about four years for things to settle down to the point where we can access capital at a rate that we were getting just six months ago," Cheney said during a CEO panel at the conference.
Other executives were more sanguine about the commercial market, noting that many funds set up to invest in renewable energy projects already have the money to invest.
Large deals are still "financeable" because the government incentives are generous and the demand strong, said Steven Chan, chief strategy officer at solar cell and panel manufacturer Suntech Power. Financiers, however, are likely to shift terms around.
A recession in the general economy can put a damper on solar in another way. If corporations see their tax bills drop because of falling earnings, they are less likely to purchase a rooftop solar array because they won't have the "tax appetite" to benefit from government incentives.
For solar companies themselves, the financial turmoil can stall plans to expand. Raising money on the stock market to build a new manufacturing facility, for example, is likely to be delayed as there are few initial public offerings.
Residential looks strong
For consumers, meanwhile, solar power looks more attractive than ever.
That's helped by the recently changed federal policy that gives homeowners a 30 percent tax credit on solar electric panels. Before, that credit was capped at $2,000.
"Without that cap, an average suburban home system could probably get a $9,000 tax credit on a system that might cost $30,000," Chan said. "It's real money now. The economics have gotten a whole lot better for the residential homeowner."
Significantly, the tax credits, which go into effect next year, were extended for eight years, a relatively long period for people to take advantage of them. Also, because solar cell efficiency continues to improve, homeowners can purchase more productive panels for about the same price, Chan said.
For a business that caters to environmentally minded consumers, talk at the Solar Power International conference was laced with hard-boiled financial terms like "tax equity investors" and "internal rate of return."
(Credit:
Martin LaMonica/CNET News)
Shifting to an economically driven business is a very deliberate attempt to scale up solar adoption rapidly in the next five years, according to Julia Hamm, executive director of the Solar Electric Power Association.
Technology enhancements are helping bring the price of rooftop solar panels closer to the retail electricity rate, or "grid parity."
To lower the upfront cost barrier, start-ups like SolarCity and SunRun are offering financing options, such as leases, for consumers and small businesses. A handful of utilities, too, are getting into solar as well, a move that could make it more accessible.
All the numbers talk, though, is not to say that the environmental attributes of solar energy are insignificant. On the contrary, the existing federal and state policies place a value on renewable energy, executives said. The industry is lobbying for more policy initiatives, such as plans to modernize and bulk up the electricity grid.
Sempra Generation's Allman said that policies like a renewable portfolio standard, which mandates a certain percentage of renewable electricity generation, act as a market signal.
"Nobody would sign up for solar power today without the environmental attributes it offers. It's just too expensive," he said. "I think of it as two separate markets--one for brown power and one for green power."
Today's economic and political environment favors a push toward energy independence and environmental protection. For that reason, most solar company executives are bullish when they take a long-term view.
What's still unknown for solar--or other industries--is how badly the bruising from the current financial crisis will be.
"The price of electricity is determined in large part by the cost of capital," said Michael Ahearn, CEO of First Solar, which is recognized as having the cheapest solar panels. "We're in a temporary state where there is no real market functioning. The question is, where does the market reset?" he said during a panel.
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