IMPASSE? MARKETS ACT ON NEW ENERGY, WHY CAN’T CONGRESS?

Article after article like The Next Generation of Alternative Energy...(July 25, U.S. News & World Report) highlights the growing rush of venture capital funding to New Energy.

Solar power plant technology, algae-to-liquid fuel technology and ocean energy electricity-generation technology are the “fav raves” that a recent report from Cleantech Group described as leading a record $2 billion second quarter 2008 surge in New Energy venture investment. (See NEW ENERGY VENTURE INVESTMENT HITS NEW HIGH)

Think about it: While the economy floundered and then fell in the first half of the year, risk-taking capitalists set a RECORD for putting money into New Energy. And they haven't been putting their money into quaint, arcane anti-technologies like “coal-to-liquids” or unproven technologies like “clean” coal but into exciting, cutting-edge, CO2-defeating ideas.

And what news of national political leadership follows this news of an uplifting commitment to tomorrow? Impasse.

Republican leaders believe they have convinced the public more oil drilling will somehow miraculously affect pump prices. They refuse to move forward in the Senate with energy legislation that does not include amendments for new drilling. They are willing to go into the fall election season on the strength of their commitment to oil.

Senator Pete V. Domenici (R-NM), senior Republican on the Energy and Natural Resources Committee: “Give us a week to present issues that the American people will understand…And let’s vote on them. That’s what this is about.”

In the face of the Republican demand to include drilling in any legislation considered, Democrats will reportedly forego needed oil market speculation regulation legislation. They are ready to take their stance against feeding the U.S. oil addiction to voters in the upcoming campaign.

Senator Chuck Schumer (R-NY), on the Senate floor, July 25: “Republicans: Big Oil, The Past. Democrats: Alternative Energy, The Future.”

July 28 is the first day of the last week of Congressional activity before the summer holiday and the presidential conventions. Although compromise measures are still in play, including an idea to allow more drilling but dedicate royalties to New Energy development, insiders do not expect legislation to emerge.

If Congress goes on vacation without passing anything, it will be leaving a host of important measures on the table. By failing to extend New Energy production tax credits (PTCs) and investment tax credits (ITCs), legislators are leaving wind, solar, geothermal and electric transportation innovation hamstrung until a new Congress can undo the harm.

By failing to reach compromise on a national Renewable Electricity Standard (RES), they are bowing to the influence of the fossil fuels industries and fossil fuel-burning utilities and failing to incentivize the growth of the future’s New Energy in deference to the power of Old Energy.

By failing to reach compromise on a global climate change measure instituting a national cap-and-trade system, they are leaving all of U.S. business in limbo about the nevertheless inevitable coming price on emissions and failing the rest of the world in its fight against the rapidly changing climate.

By failing to implement all of these, they are making it harder for U.S. New Energy entrepreneurs to fulfill their potential and take the world lead in New Energy technologies.

The race to November is going to be interesting. There is no doubt about that. But there is a much more important race going on right now, a race for every vital emissions-free gigawatt that can be generated. Congress is simply not in that race right now.

As legislators go into their last week of action, they should remember one thing: Voters will get the opportunity in November to vote for further impasse or for marketplace-like action.

Solar power plants are one of the 2 hottest bets. (click to enlarge)

Senate Energy Debate at Impasse
Carl Hulse, July 26, 2008 (NY Times)
and
The Next Generation of Alternative Energy; Venture capitalists flirt with solar thermal, algae, and wave power
Katy Marquardt, July 25, 2008 (U.S. News & World Report)
and
Cleantech investments hit a record high
David Ehrlich, July 8, 2008 (Cleantech Group)

WHO
Cleantech Group LLC (venture capital firms, investment banks, other investors); Kleiner Perkins Caulfield & Byers, Foundation Capital, Quercus Trust, Khosla Ventures, Draper Fisher Jurvetson

WHAT
New Energy venture investment was a record-setting $2 billion in the second quarter (Q2) of 2008.

The other hot bet with venture capitalists. (click to enlarge)

WHEN
- From Q2 2007 to Q2 2008: New Energy venture investment up 58%
- From Q1 2008 to Q2 2008: New Energy venture investment up 48%
- Solar power plants are already in operation and more are being built around the world
- Airbus/Honeywell are co-developing an algae jet fuel and predict it will fuel a third of commercial aircraft by 2030. Others beginning algae fuel development: Boeing, Virgin Atlantic, Chevron, and Royal Dutch Shell. It will take at least 3 to 5 years to get to market.
- Ocean energy development in Europe is ahead of the U.S. Utility-scale production is still some time off.

WHERE
- Areas leading increased venture investment activity: (1) solar power plant technology and (2) next-generation biofuel technologies.
- U.S. companies: 74% of the $2 billion
- European companies: 13% of the $2 billion
- Chinese companies: 12% of the $2 billion
- Solar power plants operate in the California deserts and in Spain and are being built throughout the U.S. southwest, in Spain and in North Africa. They are being planned around the world.
- There are reportedly 20 companies around the world developing algae fuels.

WHY
- Previous single quarter high for New Energy venture investment was $1.8 billion in Q3 2007.
- Top New Energy venture investors: Kleiner Perkins Caulfield & Byers, Foundation Capital, Quercus Trust, Khosla Ventures, Draper Fisher Jurvetson.
- Top solar power plant technology money winners ($278 million): BrightSource Energy, SkyFuel, Infinia and Sopogy.
- Top next-generation biofuel technology winners ($280 million, $136 million to cellulosic ethanol and $84 million to algae): Range Fuels, Sapphire Energy, Mascoma, EdeniQ, Amyris Biotechnologies, Greenline Industries, Fulcrum Bioenergy, Gevo, GreenFuel Technologies and Aurora BioFuels.
- The attractions of solar power plant technology: It is proven and it generates solar energy-produced, emissions-free electricity at utility scale.
- The attractions of algae fuel: It in no way impedes food crops, all water used is recycled, it is energy dense, unlike AGROfuels it can be refined into high octane fuels and it consumes dirty power plant greenhouse gas emissions to grow.
- The attractions of ocean energy: It is regular, predictable, 24/7, emissions-free energy, it is on every coast, lake and river (in varying abundance and in the varying forms of wave, tide and current) and it is immensely abundant.

A favorite longshot. (click to enlarge)

QUOTES
- Cleantech Group: "[R]eflecting strong potential for future growth in the Chinese cleantech sector [was $6.9 billion of venture investments to Chinese companies]…"
- Brian Fan, senior director of research, Cleantech Group: "The actual technology itself may not be the sole important determination in who wins this game. Whoever gets to scale first has a much better chance of becoming a dominant player in the space."
- Ed Guinness, Guinness Atkinson Alternative Energy fund, on algae: "You've got to grow it at a low enough cost so that you can take advantage of the high yield…"
- John Balbach, managing partner, Cleantech Group: "Silicon Valley is going through yet another transformation…"