Clean tech cleans up

GELLERMAN: Well, China isn’t the only country in the world where investors are pumping billions into clean technology. Here in the United States, in 2000, the year when the dot com boom went bust, venture capitalists began funding clean tech big time.

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GELLERMAN: By 2005 clean tech investments had expanded by half a billion dollars.

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GELLERMAN: And the very next year, U.S. venture capitalists got even more serious, inflating their clean tech investment portfolios three fold.

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GELLERMAN: And by 2007, things got really big, especially for solar. Maybe too big?

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GELLERMAN: Market analyst Ted Sullivan says we’re in a solar bubble that could burst next year, as the supply of solar panels exceeds demand. Sullivan, a senior analyst with Lux Research, believes clean technologies have a bright future, but investors should prepare for a bumpy ride.

SULLIVAN: The way that we look at the mark is it’s a series of cascading boomlets, if you will. So the number of technologies which are taking their turn, kind of coming into vogue – and as they get bigger and as they scale, there’s more light shone upon them, and some of the key technology issues become very apparent, and at which point, um, they kind of come back to a base level.

GELLERMAN: Well, you spoke of boomlets in the different energy technologies. Where is the next boomlet?

SULLIVAN: Whereas in the past we’ve seen, first in 2005, 2006 we saw biofuels, today we’re kind of at the end of the solar boomlet, and things are coming back within rational bounds. The next two that we’re watching are really the energy storage sector – so new batteries, new battery technologies. The drivers of that are a few. The first is the shift towards plug-in hybrid electric vehicles. There’s been a lot of rumblings recently about the Chevy Volt, and we’re watching Boston-based A123Systems as being really kind of the lead-off IPO that will announce the emergence of the energy storage space. A number of prominent venture capitalists who we talked to are beginning to, and have been for the past year or so, been hungrily scavenging deals in the energy storage space, in order to get a play there.

GELLERMAN: Well, how much of the clean energies and environmental technologies is real, and how much is mania, particularly in terms of money?

SULLIVAN: I would argue that things are pretty real, and the reason that is, is because compared to the dot com boom, you really need to have some technology there. You can’t just put a couple kids in a warehouse and have them program night and day for a couple of months and turn out a product that has questionable value. In order to get, build up solar installations, wind turbines, in order to produce batteries and actually get them installed in plug-in hybrid electric vehicles, um, there’s some real technology there, and so for them actually to get built out, there needs to be a real value proposition there.

GELLERMAN: Now, as the price of oil goes up and up and up, doesn’t it make alternative energy technologies more attractive?

SULLIVAN: Certainly. That is the large-scale driver behind solar or wind, biofuels, etc. And that’s really why these technologies are here to stay. The higher that oil and natural gas prices are for longer, the more incentive for start-up companies, for innovators to jump into the market.

GELLERMAN: One of the big investors in wind power is T. Boone Pickens. And he’s gonna start building the world’s largest wind farm in the world, in Texas.

SULLIVAN: Yeah, I think it’s very interesting to see a Texas oilman finally wake up and realize that there really are some forces at play here. If you look, too, T. Boone Pickens is starting to get into the water market. He’s buying up aquifers in the Texas and the Southwest, and in addition to energy storage, we’re looking at water as being one of the next of these little boomlets. All these energy technologies to some degree either require the use of water – so basically parts of the greater renewable energy system, um, that need to come on line and be viable in order for the entire system to work.

GELLERMAN: Well, Mr. Sullivan, thanks a lot.

SULLIVAN: Thank you so much, Bruce.

GELLERMAN: Ted Sullivan is a senior analyst with the market research firm, Lux Research.