Time for the Cleantech Industry to Get Lucky?

A strong strain of Optimism was evident at the Annual Cleantech Innovation Summit held last month in Newport Beach, Calif.

A bit of luck would still go a long way, too, however.

During his keynote address, before corporate executives, venture capitalists and entrepreneurs, Summit Chairman Wal Van Lierop, president and CEO of Chrysalix Energy Ventures, set the tone by playing a few bars of the Daft Punk song, “Get Lucky.”

“Cleantech 2.0” has begun, Van Lierop said. The industry is now exploring how clean technology augments the core business today rather than paying a premium for its potential to replace carbon-based fuel sometime in the distant future.

“What we’re talking about with cleantech 2.0 is sustainable innovation for large industries in transition,” he said. “It’s about technologies that can simultaneously reduce cost, can reduce energy intensity and can improve the environmental footprint.”

This potential market’s size is “staggering,” he said. But to tap into this potential $4 trillion business, corporate investors need a homerun: one major venture that will simultaneously—and meaningfully—reduce costs and energy usage, as well improve businesses’ environmental impact.

A little luck here wouldn’t hurt, said Van Lierop.

CleantechIQ, along with the Cleantech Innovation Summit, has compiled a roundup of noteworthy moments from the conference.

Where Are Corporate Investors Focusing?

Water is a key focus for corporate investors.

Water is, in fact, the oil and gas industry’s biggest focus, according to conference panelists.

Most companies are searching for a water-related sustainable innovation strategy that can become part of their regular businesses.

In addition, with fracking (the hydraulic fracturing of rock with a pressurized  water-based mix) now consuming huge amounts of water, concerns are arising about cleaning the water used in this process—as well as recycled water in general.

With oil and gas companies seeking to better emphasize energy and water efficiency, oil recovery and achieving higher yields in the mining sector are two other areas ripe for innovation.

At GE Ventures, specifically, energy storage and distributed generation are the two main areas of focus for 2014, said Colleen Calhoun, senior executive director for the company.

Calhoun says the halls of GE are abuzz with how to stay involved in the energy storage space, which  is set to grow from $30 billion to $50 billion in the industrial sector over the next few years.

Distributed generation also is of interest to GE because it’s so disruptive, she said.

“Solar is freaking us out.”

Changing the Utility Paradigm

The utility industry is in the midst of a transition that has upended the traditional role of the utility company as a low-cost, reliable, sustainable service provided to consumers.

One potential way to lessen the strain on utility companies is to unbundle utilities so that they can charge more accurately for their services.

In addition, utilities are debating distributed generation, automated demand-response and energy storage.

Plus, utilities, growing increasingly “pro solar,” are integrating solar energy into their business models.

Panelists noted that the new competitors in the utility industry are Google, Verizon and Apple. All three have platforms that can leverage how utilities are currently situated to disrupt the space.

Rebranding: A Terminology Shift

At Khosla Ventures, no one says “cleantech” anymore. They’ve replaced it with “sustainability,” said Andrew Chung, a partner at Khosla and a panelist at the summit.

Chung explained that the term is broader and encapsulates cleantech, renewable food and agricultural technology, LED lighting, 3D printing and energy storage, among other categories.

“Look at a company like Nest, and the question of what sector it belongs in,” said Brook Porter, a partner at Kleiner Perkins Caufield and Byers and another panelist. “I think it’s an example of the fact that, really, cleantech is not a sector.”

The venture capital panelists discussed the continued shift towards “capital efficient” investing and an emphasis on companies with corporate partners that only require modest amounts of capital and expect to see results quickly.

New investment themes highlighted by the VCs included collaborative consumption, new clean energy financing models, agriculture, and transportation, an area being driven by big trends in urban mobility.

Just don’t call it “Cleanweb,” according to both the panelists and VCs in the audience; the term doesn’t seem to resonate quite yet with their fund’s limited partners.

A Changing of the Co-Investor Guard

High-net-worth investors, family offices, and sovereign wealth funds are increasingly stepping in to fill the void created by VCs that left the space.

And corporates are also more boldly entering the cleantech fray, said many VC panelists. Many companies are stepping forward to provide a higher level of corporate strategic support for cleantech companies—especially those that have a manufacturing component and see new technologies solving a mission critical problem.

Khosla’s Chung said he’s working with a number of VC firms in China to bring them up to speed on cleantech. Extensive clean infrastructure is needed in China, he explains, because of pollution problems there, but many corporate investors and others have been hesitant to invest there because it remains an unfamiliar area. He says he’s hoping to create “pockets of corporate venture activities in new geographies where the local need for these technologies is so high.”

Areas Ripe for Future Innovation

ARPA-E Director Cheryl Martin pointed to major breakthroughs in energy storage and carbon capture under development by the agency. “One of the most important things that I’m excited about is our carbon capture portfolio,” she said.

The conversion of waste materials into energy and “value-added chemicals” was an investment theme also with large potential; both VCs and corporates mentioned it during several panel sessions.

“Big data,” also hot, will play another huge role as information on end users accumulates and sensors advance through the creation and utilization of more-intelligent energy control systems.

Energy efficiency, demand-response, smart grid, and agriculture production were among several other areas highlighted during discussions regarding where data will be disruptive.

To watch the full videotaped panels on the Cleantech Innovation Summit website, click here

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