Statoil is making a $3 million investment in a small New York-based wind company. It’s the first of what the Norwegian oil giant expects will be many such investments made through a new venture capital fund it set up to make plays in the renewable energy space. And Statoil is not the only oil company that’s looking to make VC investments in alternative and renewable energy companies.
Statoil announced the creation of its Statoil Energy Ventures fund in February, saying it would put up to $200 million into renewable energy through the new vehicle. “The transition to a low carbon society creates business opportunities, and Statoil aims to drive profitable growth within this space,” Irene Rummelhoff, Statoil’s executive vice president for New Energy Solutions, said in the announcement. “Through the new fund, we look forward to investing in attractive and ambitious companies and contribute to shaping the future of energy.”
The fund’s first move is the new $3 million investment in United Wind, a company that is “driving the growth of the distributed wind market in the United States,” according to Gareth Burns, a Statoil vice president and managing director of the new fund. United Wind offers a leasing option, similar to a solar leasing model, through which clients can install a wind turbine on their property and get the energy savings without upfront costs.
The company was founded in 2013 through the merger of two smaller wind companies — small wind turbine distributor Talco Electronics and Wind Analytics, which offered a third-party verified remote wind speed analysis tool. The new United Wind says it offers the “first ever little-to-no money down leasing option to small wind customers in the United States.
For Statoil, the new fund is part of the company’s efforts to diversify its business line. While oil and gas will remain its focus, renewables are expected to playing a growing role in the company’s business, according to Burns.
“We do anticipate a number of changes will come into the energy space over the course of the next 10 to 15 years,” he tells CleantechIQ. “We believe some of those will be profitable, and will want to try to participate,” Burns says.
Among the sectors that Burns and his team will consider investing in are solar, energy storage, onshore and offshore wind, transportation, and energy efficiency.
Burns says he’s open minded in terms of specific technologies within those sectors. For example, within the wind sector, he has looked at a company that offers maintenance software that could reduce a wind farm’s operating costs by 10 percent, and another that says it can cut the weight of wind turbines in half. He’s also looked at a company that wants to improve the foundations of offshore turbines.
As for transportation, “We’ve seen a ramp-up in penetration of electric vehicles, and Norway has been at forefront of that,” Burns says. “Over the next 10 to 15 years, electric vehicles have the potential to revolutionize the transportation market. We will evaluate all of the EV value chain to see if there’s somewhere we could position ourselves for the future.”
The fund will target companies “that are in a market large enough to grow to be a significant size, with committed management with entrepreneurial experience, and the drive to build a world class company,” Burns says. “We want to invest in companies that have a competitive advantage, and can sustain that advantage over a number of years.”
He will look at both early and growth-stage companies, and the fund’s hold periods are likely to be four to eight years. Statoil hopes to co-invest along with other venture firms as well. Burns expects the fund’s investments to average around $10 million, but they will range from $1 million to $20 million. “Our expectation is that we will take a minority equity interest, and support the company actively through its growth phase,” he says.
In the case of the United Wind deal, Statoil Energy Ventures is taking a seat on the company’s board of directors.
With its new fund, Statoil joins a small but growing number of oil companies that are making VC investments in alternative and renewable energy.
French oil giant Total, for instance, has its Total Energy Ventures fund, which has invested in 20 start-ups since its formation in 2008, according to its website. Investments have included biofuels, waste-to-energy, water treatment, energy efficiency and energy storage. In February, the fund took part in a $15 million Series B venture financing round by Sunverge Energy, the developer and manufacturer of distributed energy management systems. Last year, the fund invested in distributed “behind the meter” energy storage firm Stem Inc’s Series B venture funding round.
And in January, two Canadian oil companies — Suncor Energy and Cenovus Energy – – along with the BC Cleantech CEO Alliance, announced the formation of Evok Innovations. It’s a new cleantech fund intended to “accelerate the development and commercialization of impactful energy solutions to address the most pressing environmental and economic challenges facing the oil and gas sector today,” the companies said in the statement. Cenovus and Suncor each committed C$50 million in funding over the next 10 years.
Evok is “looking for a range of technology solutions that will address the most pressing economic and environmental challenges of the oil and gas industry from production to end use,” CEO Marty Reed tells CleantechIQ. The fund will focus on four areas, he says: reducing greenhouse gas emissions, cutting down on water use, eliminating marine and land disturbances, and “creating the next generation of low-carbon energy products.”
The fund will invest in early-stage technologies. “Our goal is to support these companies from the pre-revenue stage all the way through to sustainable operations,” Reed says.
Evok hasn’t yet announced any investments; Reed says the fund will disclose its first round of investments in the second quarter of this year.
Statoil has another venture fund, Statoil Technology Invest (STI), which has a focus on early-phase investments in upstream oil and gas. STI has invested $135 million since its creation in 2000, and has returned a multiple of 2.5 on its invested capital. Burns says STI’s experience and know-how will help the new fund as well.
The new Statoil Energy Ventures has a staff of six investment professionals in London and Oslo, led by the London-based Burns. It has the ability to invest anywhere in the world, though Burns says its focus is likely to be in the West, like its first investment in New York-based United Wind.
“If you look at where the deal opportunities are, 90 to 95 percent of the investment opportunities tend to originate in North America and northwestern Europe, so we expect the majority of our deals to be in those regions. But there could be some elsewhere as well,” he says.