Kachan: 2014 Cleantech Investment Predictions

It’s good news for cleantech investors in 2014, according to advisory firm Kachan & Co, which has just published its predictions on where cleantech money will be – or should be – going next year. After a couple of years of pessimism, Kachan says things are looking up for 2014 and here’s why:

– Sustained, quiet recovery:
 The slow recovery that started this year will continue into 2014, even gaining some momentum. The advisor’s white paper, Cleantech Redefined: Why the next wave of cleantech infrastructure, technology and services will thrive in the twenty first century, compares the cleantech wave to other technology booms and found a number of hopeful parallels. After waves of enthusiasm, busts, corrections, and resetting expectations, or “hype cycle” good technologies climb out of the foxhole and that’s where cleantech is right now. The downturn in VC investing in cleantech is less threatening when viewed from the perspective of other technologies that survived and thrived such normal cycles and as the industry develops, refines, and advances. Kachan says don’t pay too much attention to the lack of VC investment as an indicator of the health of cleantech because it’s just a partial picture. Look for upward trends in corporate, private equity, and family office investment, venture debt, project finance, M&A, innovation, and new product announcements.

– “Cleantech” remains in the lexicon: 
Even though some have called for the term “cleantech” to go away – because all tech products should be “clean” – the firm says both investors and service providers who may have distanced themselves from the phrase may have been too quick to do so because it still resonates with the largest companies in the world and their consumer base, who continue to demand more and better clean, green products and services. Search traffic reveals the word is popular, and investments in the space will likely to continue to be categorized under the name cleantech.

– Crowdfunding still viable:
 Look for equity and debt-based crowdfunding platforms as legitimate ways for cleantech vendors and project developers to raise modest capital – AngelList or FundersClub, or industry-specific debt and equity portals like Mosaic, SunFunder or a host of other emerging platforms will remain players. Under current regulations, such crowdfunded raises may ultimately be feasible up to $1 million per company per year in the U.S, making crowdfunding less appealing or feasible for big, capital-intensive cleantech projects.

– Underperformance in EV sales:
The future of transportation will not be electric. EVs are selling much more slowly than expected, with only 150,000 expected sold worldwide in 2013. Even thought most EV sales will be spurred by government subsidies of both cars and infrastructure (free parking, charging stations) in 2014, fuel cell approaches may undermine aggressive acceptance of EVs – not a bad thing, since the power required to drive EVs often comes from dirty sources.

– Rare earth profits come from unexpected sources:
 Reconsider buying rare earth element mining companies and related funds. If you are holding rare earth mining investments, consider getting out of them.  Instead, consider recycling as one of the few rare earth plays gaining momentum quietly, which will accelerate in 2014.  Brussels-based company Umicore is at the forefront of recycling technologies for critical metals. Japanese car company Honda has developed its own in-house recycling program for metal hydride batteries.  The Critical Materials Institute of the U.S. Department of Energy is developing a method that would melt old magnets in liquid magnesium to tease rare earths out. Many more companies will introduce other innovative rare earth recycling strategies.

 

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