Sorry for the late post, the cocktail reception and after party got in way of my blogging time. Anyhow, wow, that was an amazing session! Our moderator, Armond from the Clean Air Task Force provocatively kicked off the panel discussion. He challenged the panelist with the gleam outlook of the clean energy sector. He pointed out that:
- Renewable energy is growing but overall size is tiny compare to conventional sources. Why are we focusing on renewables?
- Carbon dioxide emissions continue to grow even after Kyoto Protocol. What’s wrong?
- China has built a ton of renewable generation capacity, but even more coal plants. Is that green?
- Clean energy investment dropped significantly recently. Is it still wise to invest in this industry?
- Renewable levelized cost of electricity is not competitive with conventional generations like coal, combined cycle gas or nuclear. What is the business justification for renewables?
With that stage set, the panelists discussed their views of the outlook and their short-term and long-term strategies given the industry situation.
The panelists all agreed that technology cost is definitely one of the biggest challenges in renewable energy space. But there has been significant cost reduction recently and the progress will continue to make renewable more and more competitive.
Seth Dunn from GE indicated that his firm has been investing heavily in increasing efficiencies in areas such as wind/gas turbine, solar module, production process, and construction cost. Reliable project cost will minimize development over-run and deliver immediate results to GE’s clients. Technology investments are long-term plays to make renewable more competitive. In addition, GE is also looking into innovating business models to adapt to the diverse regulatory and economic environments internationally. Lastly, given the uncertainties in terms of which market will grow the fastest (residential vs. commercial; US vs. international) and which technology (Solar: Cad-Tel, Cry-Si, or CIGS) will eventually succeed, it is important to taken a “portfolio approach” to include investments not only in renewables, but also in nuclear, oil & gas, etc.
Daniel Hullah from RockPort Capital offered a very optimistic view of the renewable / clean tech industry. He said that despite the complications and challenges in the industry, the size of energy market is gigantic and problems are huge; therefore, it creates opportunities. But he is less optimistic about renewables being the resolution for climate change, mainly because renewables are only a small fraction of the overall pie and likely to continue to stay in the same order of magnitude in near-future.
Given the nature of a VC, RockPort is looking at shorter investment-return time horizon. With that said, RockPort understands the implication of the industry subsidies very well and seeks to invest in firms that can be successful even if stand-alone. RockPort is also cognizant of the industry’s cyclical nature and make investment accordingly – not only in renewable generation (supply), but also innovations in agriculture, water, material science, transportation, demand-side management (efficiency), and oil & gas. Lastly, VC’s look for disruptive innovations that can shift the cost curve downward. There are plenty of pockets of area where solar can provide very competitive if not cheaper electricity than conventional sources.
Sienna Rogers from PG&E indicated that regulations play a significant role in California, where PG&E operates. The 33% renewable portfolio standard (RPS) by 2020 poises a tremendous challenge. Given the price of natural gas in the near-future, combined cycle plant seems to be the natural fit to replace coal generation as they go offline. But, PG&E is constantly seeking to procure renewable generation that can be competitive. Currently, many purchasers’ decisions of renewables procurement are mandated by regulation, renewables needs to become competitive on its own in order to incentivize organic growth.
Overall, the panelists and Armond, agreed that energy R&D investment is significantly lower than other industries. Not only additional R&D investment is needed, transfer of knowledge from healthcare, aviation, material science is also needed to enhance innovation. They also agreed that current regulations for this industry are mainly set at the state-level –a coordinated decision making effort is needed at the national level to guide US towards the right direction. Furthermore, energy efficiency needs to be re-examined and perhaps be looked at as a "source” of energy.
Lastly, career advices! The panelists and moderator advised that we should follow our passion! Paraphrasing a few things they said:
- Don’t just focus on pure-play companies. A lot of companies are just dipping their toes in the water right now and may go into renewables in the future – Seth from GE
- Do entrepreneurial things, whether it is in a small company or a big company. Make friends with engineers – Daniel from RockPort
- This is an industry that takes a long-term approach to tackle complex, challenging problems. It is a balance of innovation and affordability. Join a utility if you want a stable career! – Sienna from PG&E
- Work in the private sector first before joining a NGO or government. You need to build technical understanding and know the economic realities – Armond from CATF
Alright, that’s enough writing. Thanks for coming!
-The Energy Panel Organizers
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