The Week In Green Energy: 'Plug The Damn hole!'

Week of May 24 - to - May 28, 2010

Eager to place a containment dome over a media cycle that was drawing uncomfortable parallels with the Bush White House’s botched Katrina response, President Obama yesterday held his first press conference in 10 months. During the hour-long media grilling, the President defended his administration's and the federal government's handling of the 6-week old oil spill. He again vowed that BP would be held accountable for causing what -- as of yesterday -- is officially the worst oil spill in U.S. history and announced a six months moratorium on deepwater offshore drilling.  Shortly before the press conference, word came that Elizabeth Birnbaum, the head of the embattled Mineral Management Service (MMS), had left the post. The MMS had been under fire for its cozy relationship with the oil and gas companies it regulates.

It was just a few weeks ago that the White House was toying with the idea of pushing through comprehensive immigration reform at the expense of climate change and energy. At the time Arizona had enacted a controversial immigration law that Obama said was "misguided."  But the BP oil spill is turning out to be a big problem for Obama and his administration.  Upon learning about the extent of the spill, he is reported to have told aides to "plug the damn hole!" Because of the events in the Gulf, alternative energy and green policies in general have once again become top priorities. Earlier this week, in a speech at a solar module plant, Obama (finally) pushed for immediate action on the Kerry - Lieberman climate change legislation. He said: "We’ve got to have a long-term energy strategy in this country." And added: "We’ve got to start cultivating solar and wind and biodiesel. And we’ve got to increase energy efficiency across our economy in our buildings and our automobiles."

But despite renewed interest by the While House, the question remains: Does Kerry-Lieberman have the votes to pass? Majority Leader Harry Reid (D-Nev.) has said he won't release the bill for a full floor debate if it doesn't have 60 votes coming in. The problem is, the American Power Act prescribes offshore oil and gas drilling. These provisions were included before the BP spill to sway senators who have little interest in climate change issues. But given what's happening in the Gulf, these could end-up torpedoing the legislation. Senators from coastal states (New Jersey, Florida) have said they would vote against the legislation if it expanded offshore drilling. In a recent podcast Michael Levi at the Council on Foreign Relations, said he has a "hard time” believing that bill authors Kerry and Lieberman could line up the 60 votes the bill needs to pass given what's happening in the Gulf.

 In other news, reverberations from the global financial crisis, which has sent the euro south, is seriously testing China's green aspirations.  This week, photovoltaic panel maker Yingli Green Energy said it would shelve its North American expansion because of the global financial instability. The news is a blow for Phoenix and Austin, which had been lobbying for the plant and the jobs and tax revenues that came with it. Yingli's decision underscores a more general concern with Chinese green energy companies which can produce cheap PV panels or wind turbines but do not have the deep IP knowledge-base that over the long-term can make their products competitive, in good or bad times.

After a record-breaking 2009, thanks to unprecedented stimulus funding, the U.S. wind sector is set to experience a soft-landing in 2010. A forecast released Wednesday by IHS Emerging Energy Research predicted a 40- to -60 percent drop in new wind installations in 2010, compared to last year. IHS blames the slowdown on the ongoing global financial crisis; record-low natural gas prices, and ongoing regulatory uncertainty. "Two thousand ten marks the first time since 2004 that the U.S. wind industry will not surpass the previous year’s growth level,” said IHS Senior Analyst Matthew Kaplan, one of the study’s authors.

VC and PE Watch

This week we learned that Energate, a Canadian developer of home energy management solutions, is looking to raise as much as  $14 million from current and new investors as part of a Series C that could happen in the next 12 months. On Thursday the company announced a $7.2 million Series B funding co-led by Montreal-based Cycle Capital’s Fund I and the Ontario Emerging Technology Fund (OETF).

Innova Dynamics, a developer of advanced materials that can be used in cleantech applications, raised $5.5 million in an inaugural financing led by Rho Ventures. MentorTech Ventures also participated in this Series A round.

Solar power plant developer SunEdison and energy-focused private equity fund First Reserve formed a venture to finance solar projects developed by SunEdison. The two companies will first invest an initial $165 million in the venture, which could eventually hold up to $1.5 billion in investment capital.

Former British Prime Minister Tony Blair joined cleantech-focused venture capital fund Khosla Ventures as a senior adviser.

Rambling

Could the tens - of - thousands of barrels spewing out every day out of the Deep Horizon well be a boon for cleantech? It's a controversial question but one worth posing. In the wake of the BP spill, what's for sure is that it will take a longer and it will be more expensive to develop offshore wells. Analysts predict that the six-month moratorium on deep water drilling announced yesterday could shave off 200,000 - to - 300,000 barrels per day from U.S. production by 2014. This expected tightening supply should make oil more expensive.  When oil prices went through the roof, a couple of years ago,  green investments peaked. The reality, though,  is that exports from Canada or even the Middle East will easily make up for any decline in U.S. production.  So, no the BP spill alone won't likely be a game changer favoring cleantech. It is, however, one more rock-solid argument supporting renewable energies over hard-to-access fossil fuels.

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